Hard Asset Digest March 2020

Hard Asset Digest March 2020

March 2020

brent cook
Brent Cook, founder
Exploration Insights

This month, I’m sitting down with Brent Cook — founder of the highly regarded mining stock newsletter Exploration Insights where the motto is and has always been… Turning Rocks into Money. Click here to go straight to the interview.

The equally experienced Joe Mazumdar has taken over the letter, and the geologic duo publish their thoughts every Sunday.

Brent is one of the most experienced field geologists on the planet having explored countless mineral properties across dozens of countries around the globe.

Brent and I discussed a handful of those experiences in our conversation where he paints a realistic picture of today’s mining sector from a truly global perspective — and I’m ecstatic to be bringing it to you!

Brent is an expert at navigating the high-risk/high-reward junior mining stock sector, which is a staple of Exploration Insights. It’s also typically where the largest percentage gains can be realized by those with the intestinal fortitude to venture into these sorts of “early-stage” speculations.

If the juniors are of interest to you, I highly recommend signing up for Brent and Joe’s complimentary Speculator’s Checklist for Investing in Junior Mining. Simply click the image below (then look for that same image; lower right corner of IE homepage) to sign up for this wealth of invaluable information for navigating the junior sector.

checklist iconSign up for our mailing list to receive the free Speculator's Checklist for Investing in Junior Mining report right away. Occasionally, we will also send you emails with links to interviews, articles, and more.
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A little more about Mr. Cook’s distinguished mining career… Brent is an independent exploration analyst with over 30 years of experience in both property economics and geology evaluations.

As a seasoned economic geologist, Brent's knowledge spans all areas of the mining business from the conceptual stage exploration through to detailed technical and financial modeling related to mine development and production.

Mr. Cook has worked in over 60 countries and in virtually all geological environments analyzing and providing commentary on proposed mine sites.

Brent received his BSc in Geology from Utah State University in 1978, and during his independent consulting service, he provided advice and analysis to several funds and major mining companies including Barrick, Newmont, Rio Tinto, and Freeport McMoran.

In 2008, Brent founded the now widely-circulated mining stock newsletter Exploration Insights. He began sharing editorial responsibilities with fellow geologist and mining analyst Joe Mazumdar in 2015 and has since transitioned to the role of senior advisor of EI.

Apart from writing and later contributing to EI, Brent is also the founder and author of Geo-Insights — an instructive compendium of excerpts and geological explanations he hopes will be a source of education for current and potential amateur investors doing their own due diligence in the mining space. Geo-Insights is available for free by clicking here.

Brent also jointly developed the Drill Hole Interval Calculator with Corebox — a powerful tool providing investors with a means of estimating the grade of drill hole intervals between the “highlights” of a longer assay interval. This online tool is available for free by clicking here.

As mentioned, Joe Mazumdar joined Brent as co-editor and analyst of Exploration Insights in 2015 and, a couple years later, transitioned to being the sole editor.

Joe has been a Senior Mining Analyst for some of the top resource-focused brokerages in Vancouver, Canada, and has held key positions with major mining companies including Newmont and Phelps Dodge (now Freeport McMoRan).

Like Brent, Joe has a passion for being in the field getting his hands dirty and has spent a decade-plus as an exploration geologist for a number of well-known mining companies.

Rounding out the EI team as administrator and copy editor is Silvina, Joe's wife, who is a geologist in her own right having worked for major firms such as Homestake and Rio Tinto.

If you’re looking for an experienced team of geologists that truly leaves no stone unturned in the global mining stock arena — look no further than Exploration Insights… and please enjoy my exclusive interview with Brent Cook.

Before we get to that…

The COVID-19 global pandemic is continuing to roil US financial markets sector-wide as the rush for liquidity takes down everything in its path including gold and silver.

This is an incredibly fluid situation as you well know. Expect a high degree of whipsaw action as the market digests the evolving data with respect to virus-spread and the strain on our healthcare system.

As astute investors… and as inhabitants of this planet for that matter… we need to prepare for things getting a lot worse before they get better. That will mean tens and perhaps even hundreds of thousands of new positive cases of COVID-19 in the near-term and, sadly, many more deaths as testing ramps up across the United States.

As of right now, there are over 360,000 confirmed cases of COVID-19 worldwide and 15,500+ deaths. Italy, one of the hardest hit areas, has gone from 400 confirmed cases to 60,000+ in just the last month and 5,500+ fatalities, placing an insurmountable strain on that country’s healthcare system.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Disease, has repeated that there is “no magic drug” for coronavirus.

Hence, while we need to prepare ourselves for a significant spike in confirmed cases here in the United States (currently 40,000+ confirmed cases and 470+ deaths), we must also hope and strive for somewhat of a flattened curve (see below) as opposed to a steep spike in occurrences such as what Italy is currently enduring and what China and South Korea recently went through.


Flattening the Coronavirus Curve

Each and every one of us must do our part to help flatten the coronavirus curve by following the social distancing recommendations of the CDC. These measures can work: China is currently reporting no new locally transmitted cases, although they’re finding dozens of new imported cases involving travelers arriving from abroad.

Turning to the US markets, we are now officially in a bear market with all three of the major US indices off by more than 20% from recent highs (approximately 30% lower across the board in just the last month).

As expected, the Fed quickly fired its initial printing press salvo by adding more than $198 billion to the financial system in a combination of overnight and longer-term offerings to help the short-term funding that banks use to operate. It quickly followed that up with a $700 billion quantitative easing program and slashed interest rates, again, this time by an additional 100 basis points bringing the federal funds rate to effectively zero.

The US central bank has now massively accelerated its rescue plans by announcing unlimited bond-buying, three new credit facilities, and an upcoming Main Street lending program. Crucially, the Fed pledged to buy bonds “in the amounts needed” to support markets, signaling there are no bounds to its rescue effort.

With literally nowhere to hide, gold futuresa traditional safe-haven during times of elevated uncertainty – have been sucked up into this massive liquidity vacuum caused by panicked, across-the-board selling.

At the time of this writing, gold is trading right around $1,500 per ounce or about 11% off recent highs.

1year-gold-usd-per-ounce

Silver has been absolutely clobbered... down a full third to around $13 an ounce.

Yet, that doesn’t mean people are dumping their gold/silver bullion and gold/silver coins. Quite the opposite actually!

If you haven’t already done so, I recommend giving Van Simmons of David Hall Rare Coins a call to go over diversification strategies in this very important hard asset category. Later, take a moment to review my in-depth interview with Van from December, which also includes his contact information.

The energy sector has been particularly hard hit with the collapse of the OPEC-Russia production-limiting pact resulting in the oil price being slashed from $63 per barrel just a few months ago to around $23 a barrel now.

Unfortunately, the biggest loser in the Saudi-Russian spat may well end up being the US shale oil industry. Many US shale producers have hedged their production, but if the current US benchmark oil price of around $23 per barrel persists for an extended time, there will undoubtedly be widespread bankruptcies.

1year-crude-oil-usd-per-ounce

In a sort of silver lining if you can find one… the oil-price rout will bring some temporary relief to consumers’ pocketbooks in the form of lower gas prices… but, in all honesty, what good are lower gas prices when you have far fewer places to go?!

All in all, we will get through this… just like the 2008 financial crisis. The Fed has already come in hard with a zero-rate policy and perhaps may eventually explore negative rates such as we’re seeing presently in Europe. The financial rescue programs have already begun and will continue to be massive… pushing an already out-of-control federal debt higher by perhaps as much as $3 trillion this year alone.

While we won’t see the effects right away – the end result of all of this stimulus, money printing, QE, or whatever you wish to call it – is going to prove exceptionally bullish for gold and silver bullion along with select gold and silver stocks.

It all comes down to negative real interest rates (where the inflation rate is greater than the nominal interest rate), which is what we have now and what we can reasonably expect for the foreseeable future.

Real interest rates are of keen interest to precious metals investors because of the very strong negative correlation between real interest rates and the price of gold. In essence, the gold price tends to move in the exact opposite direction of real interest rates as illustrated by the chart below.

sunshine-profits-gold-10year-inflation

With the total US national debt on an unsustainable path – ballooning to $23.3 trillion and accounting for more than 100% of GDP – there’s really no way to manage it without a significant depreciation of the US dollar.

Again… good for gold!

Nevertheless, a degree of caution is warranted as the world grapples with the uncertainty of the novel coronavirus and what our new normal is going to look like.

No need to be catching falling knives here!

We still don’t have anywhere near adequate testing in the US which means we have no idea what the current COVID-19 infection rate is nor what kind of spike lies on the near-term horizon. We also don’t know if the summer months will effectively kill off the virus nor is there any sense as to the level of resurgence we might anticipate in the fall.

Right now, the most important thing is your health and the health and well-being of your loved ones.

Seems oddly strange to actually say this but… stay calm and make sure everyone in your family is adhering to the continuously evolving social distancing recommendations as relayed by the White House Coronavirus Task Force.

We’ll get through this together and there’ll be some exceptional buying opportunities ahead.

Yours In Profits,

Mike Fagan, editor
Hard Asset Digest



Exclusive Interview with 
Brent Cook — Exploration Insights

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Mike Fagan: With me today is economic geologist Brent Cook who is also the founder of the highly acclaimed mining stock newsletter Exploration Insights where the motto is Turning Rocks Into Money.

Brent, thank you for taking the time today. I think I can safely say that no geologist has seen more mineral properties around the globe than you have. So, let’s start at the very beginning; where did this passion for geology come from?


brent cook

Brent Cook: Mike, great to talk with you. So I got into geology essentially by growing up amidst the spectacular geologic landscapes of Utah, Idaho, and Colorado and also spending summers traveling around with my father who was a traveling salesman.

I guess it always intrigued me as to how things got to be looking the way they looked, if you know what I mean.

Especially if you've driven through the deserts of southern Utah or the Rocky Mountains. So that piqued my interest very early on. I guess you could say I’ve always been interested in geology… and climatology for that matter.

I did my studies at Utah State where I majored in geology and minored in climatology. That was my focus. I really just wanted to understand how the earth worked.


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MF: Yeah, that makes a lot of sense growing up in places like that where the geology is so breathtaking and approachable. I imagine your interest expanded from that initial fascination with geologic landscapes toward metals and minerals…


brent cook

BC: Definitely landscapes initially but certainly hard rock geology as well. I found looking for metals a lot more interesting than soft rock geology where you’re looking for petroleum and that sort of thing.

With hard rock geology, you’re spending lots of time in the field, beating rocks, hiking the hills. To me, that’s far more pleasant than sitting in an office reading graphs on a computer screen wearing a tie.


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MF: No doubt! So how did Exploration Insights come about, and if you might also introduce Joe Mazumdar for those who may not know him?


brent cook

BC: Sure. It all started in 1997. I guess you could say I had the misfortune of working in Brazil with some sketchy Vancouver promotional company. They hired me as a consultant to go down there for two weeks and just evaluate all of their properties.

They were all crap!

At one of the projects, it was a pretty pathetic place. It was raining. There were a bunch of garimpeiros, which are the alluvial miners. They were all drunks. And this Vancouver company showed up with their promotional team and their backers.

They flew in via helicopter and spent half a day there with their promoter telling them how good the property was and such. Just as quickly, they flew out and went back to Manaus for a nice meal… leaving me and the alcoholics standing there in the jungle.

The stock subsequently tripled in price, and I got stiffed because my report wasn't what they wanted. All in all, a very unpleasant experience as you might imagine.

rick rule
Rick Rule, President & CEO
Sprott US Holdings, Inc.

Anyway, that took me to PDAC (Prospectors & Developers Association of Canada) where I met up with a friend who was an analyst, and from there he suggested I go talk to Rick Rule (of Sprott US Holdings, Inc.) in Southern California. So I visited Rick and came on with his firm as an analyst. I met a bunch of the newsletter writers and started helping them with the technical part of their reports.

I then joined up with Paul van Eeden in 2003 and started helping him with his newsletter while consulting to a number of major mining companies around the world. In 2009, I bought his letter, which I rebranded as Exploration Insights.

rick rule
Joe Mazumdar, Owner & Editor
Exploration Insights

In 2015-16, I convinced Joe Mazumdar to come onboard with the idea of him taking over the letter, and he is now the principal editor and owner. He writes the letter and decides what's bought and sold… so it's really his newsletter now.

But he and I work constantly together, and I still travel looking at projects and making evaluations as well. But I'm sort of, I guess you'd call it, a senior advisor now to Exploration Insights while Joe is the boss and stock picker.


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MF: And Joe is a highly regarded geologist and mining stock analyst as well…


brent cook

BC: Oh yeah! Joe's got way more experience than me. He studied in Australia and has worked for Newmont, Phelps Dodge, MIM Exploration... to name just a few. He's worked in various countries all over the world and has also been an analyst for Canaccord Genuity and Haywood Securities.

So he gets the business from the money side and the stock side… plus he has a very good understanding of how major mining companies function.

Additionally, he's a really good geologist.


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MF: That’s great. I imagine it allows you to sort of pick and choose where you want to be involved knowing the letter is in very capable hands.

So, most people only have the means of evaluating mining projects and mining stocks based on second-hand knowledge. They’re missing out on the insights of exploration, if you will.


brent cook

BC: Yeah, exactly.

I think last year Joe and I visited 33 projects scattered around the world.

It's quite often that what you end up seeing on the ground isn’t quite what you were expecting based on the company’s PowerPoint presentation and things like that.

I remember one particular South American project I visited where, on surface, the rock sampling and geology strongly suggested a large area of anomalous gold and copper mineralization. Potentially a nice gold system.

What intrigued me about it was all the grade – the good surface samples and apparent geological setting. It all occurred sort of on a plateau with a major drainage system cutting through it. However, it puzzled me why there were no samples in the drainage.

The company had never gone there and sampled down into it!

So I flew out to have a look. And what I realized was that there was a flat horizon, maybe 20 meters thick, of mineralization. But beneath that, and you could see this in the canyons, there was no mineralization.

So when they drilled it, they found virtually a little cap, if you will, and nothing beneath it. But had I not gone there and seen that firsthand, I would have probably figured it was a significant porphyry gold copper system that was worth speculating in.

Things like that happen all the time in the field. And, likewise, sometimes you go and it looks a lot better than what you expected. That's always a pleasure.


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MF: Brent, I’ve heard you talk about the fact that, globally, large economic mineral deposits are becoming harder and harder to find, which seems to suggest we’re going to have an increasingly difficult time replacing the minerals and metals that are being used up.


brent cook

BC: Yeah, and in terms of macro-scale ideas, that’s really our focus at Exploration Insights. We recognize that, for the most part, major mining companies are depleting their reserves faster than they're finding new ones.

And it's taking much longer to actually make a discovery, delineate it, do the technical studies on it, permit it, and get it into production. Large deposits now are taking 10 to 20 years from discovery to production.

And that's a big timeframe for a major mining company to have to figure things out and forecast metal prices on top of all the rest of the issues associated with building a mine.

So, you've got that timeframe… and you also have to consider that the earth has been looked at in a lot more detail over the last 20 years since we've really perfected satellite imagery and improving access.

Most of the near-surface or at-surface deposits have already been found. Certainly not all, but most… so it's a lot harder to find them these days.

So what we're primarily looking for today are buried deposits… anomalies that you can't really see from the surface that might be lying under post-mineral volcanics or gravels and that sort of thing. And again, if you're drilling beneath that, you've got much less information compared to a system exposed at surface.

You also have to consider that a 1 gram gold deposit at surface may make money – but at 200 meters depth, it may not make money.

The way the earth works is that for every, call it, two-and-a-half-gram deposit, there are 10 one-gram deposits. So we're going to be finding a lot more uneconomic deposits as time goes on while still spending a lot of money drilling those subeconomic deposits out.

That makes it much harder as well… if that makes sense to you.


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MF: Yeah, that’s really eye-opening and certainly adds risk to the equation. So, what techniques are mining companies utilizing these days to sort of look beneath the earth's surface?


brent cook

BC: Literally everything. They're using geophysics, geology, of course, geochemistry, and anything and everything possible to try and determine what's lying beneath the surface… and then, ultimately, drilling.

Again, let's say you're drilling through a barren post-mineral volcanic rock that overlays what you hope to be a porphyry copper/gold deposit at depth. Well, those drill holes are now essentially what used to be your rock chip samples at surface. Those drill holes are what's taking the rock chips to surface to determine what the geology is, the mineralization, that sort of thing.

So, a rock chip sample… what does it take, $5 to send somebody out and take one? Compare that to the expense of drilling, which again makes things a lot more difficult.


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MF: Looking at the current precious metals mining climate, we’ve got gold performing exceptionally well of late. That should translate to more money for exploration across the board and more drilling, right?


brent cook

BC: Certainly, more money is starting to come into the sector. Now, what I find most interesting, Mike, is that the major mining companies – for the last year, year and a half – have been stepping in, forming joint ventures, and doing private placements in the junior mining companies.

Just this week, we saw Rio Tinto come in and do a joint venture with Calibre Mining in Nicaragua, which is great news. And Barrick Gold has come in with Japan Gold in Japan in a strategic alliance.

We’re seeing that happen more and more, and it’s certainly a positive trend that will ultimately result in some new discoveries. We’re also seeing more money going into select juniors, which is also pushing things in a positive direction.

So while I do expect we’ll begin to see a few more economic discoveries being made, you’ve got to bear in mind that discoveries are becoming increasingly difficult to uncover, and it's going to take a lot more money to make them.


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MF: From a speculative viewpoint, does that make jurisdiction all the more important?


brent cook

BC: Without a doubt! It's a risk-to-reward ratio. For example, what might be economic or worth looking at in, say, British Columbia… that same sort of deposit, the economic hurdle in, for example, Turkey or Iran is much, much higher given the infrastructure, political, and numerous other issues you're forced to deal with.

So if you're venturing to a far out country, especially a sketchy country, your economic hurdle becomes that much higher.


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MF: What areas are you and Joe currently looking at as being worth the risk?


brent cook

BC: Well, I think certainly most of the Andes. I'm a bit leery of Colombia right now. Ecuador, I'm so-so on… but certainly the Andes, Peru, Chile, and Argentina are all worthy of exploration.

Moving up into central America — Nicaragua is fine. Guatemala, I think is getting better. Mexico is okay but unfortunately getting worse. The United States is okay but getting harder to explore because nearly every outcropping mineralization has been hit a few times… plus the majors own the best economic belts.

Canada is fine but if you're in the Yukon, your costs are going to be that much higher.

Alaska is just plain expensive but still prospective.

We're currently invested in companies in Japan, US, Canada, Serbia, South Africa, Chile, Argentina, Guatemala, Vietnam, and Australia. I was in Namibia last year where I looked at a very interesting project that we ended up not investing in.

Joe just returned from Guatemala, and there's a gold company there, Bluestone Resources (TSX-V: BSR), that he picked up probably four months ago that looks pretty darn interesting.

bluestone-resources

So we're all over the place, but we don't own anything in the Congo. Western Africa — Mali, Burkina Faso… that's all getting a lot more dangerous and it's probably not a region we’re interested in at this time.

We’re primarily interested in jurisdictions where major mining companies will go because that's ultimately who we want to sell our stock to.


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MF: Makes sense. Turning to commodities… precious metals are doing quite well this year, but the base metals are continuing to lag. What are you seeing in terms of the overall market for metals?


brent cook

BC: As you know, Mike, we're heavily focused on precious metals. I'm sure you've been talking to other people that get into the whole economic theory behind gold and what its value is going to be and continue to be.

And I think we're seeing a lot more generalists starting to look at gold as a safe place to be putting money and a good place to invest too. So I think that's going to continue.

Longer-term, I think copper definitely is going to do well given the green energy and electric vehicles and all that. It’s going to require a lot of copper to build that infrastructure and to keep it going.

1year-copper-prices
1-year Copper Price Chart

Likewise, nickel is something I think is going to be a lot more in use given the green energy push that's happening around the world… except for the United States — but that'll change hopefully!

We've invested in an Australian-listed company, Blackstone Minerals (ASX: BSX), which has a nickel project in Vietnam. So that's sort of where we're focusing.

blackstone-minerals
Symbol BSX on the Australian Stock Exchange

In fact, Joe was planning on heading over there next month, but we're having second thoughts about getting on a plane to Asia!


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MF: Yeah, or on a plane to anywhere for that matter! One more question about the base metals. Copper typically leads the base metals. So when copper finally does turn, is that when you sort of anticipate we'll see nickel and cobalt and some of the other base metals turning higher as well?


brent cook

BC: I would expect so. I mean, I don't think it’s going to happen in the short-term this year.

I'm not very keen on the copper price or base metal prices – but I think it's worth positioning yourself in base metals companies that have solid management, are able to finance, and have targets that will interest a major mining company.


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MF: And what about silver? Silver typically outperforms gold in an extended bull market, but it usually takes longer to materialize. So what's your overall take on silver and any particular silver companies you like?


brent cook

BC: I'm agnostic on silver. I know there are a lot of silver bugs out there. They can be rabid at times. I guess I look at silver as the poor man's gold.

I'll take gold!

I do recognize that there is a lot of leverage in silver and that there are a lot fewer silver companies out there to invest in. So when the silver people start putting money in, there are fewer pure silver companies to invest in — so it really ramps it up!

For instance, we own Pan American Silver (NASDAQ: PAAS); we have for about a year now. I think that's a good silver play.

pan-american-silver

Bluestone Resources (BSR.V) in Guatemala has a lot of silver. That's a good silver play. I think those are the only two we're invested in right now.


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MF: Brent, as part of Exploration Insights, you also publish Geo-Insights which educates your readers on the geological characteristics of mineral systems all the way from sampling to production. What inspired you to create Geo-Insights?


brent cook

BC: I’m glad you brought that up, Mike. Both Joe and I believe it's important to not just put out a stock pick and say we think it's going to go up because someone's backing it or the assets look good. I think it's important to us, given that we're scientists, to lay out the reasoning behind our picks.

So the letter itself can get pretty technical… our goal is to explain the technical side of minerals exploration and the economics behind it so that our readers not only get a sense of what we think of a particular company, but also the way in which we look at things.

The reader can then take that information and apply it to virtually any other mineral exploration company they’re interested in.

That’s really our goal — to educate people so that they understand what's going on in this industry, which is a very, very complicated industry.

What that breaks down to is that you don't need to know that much more than the average person to do better than average, I think.


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MF: Yeah, simply understanding how to read a drill result and things like tonnage and open pit versus underground can go a long way in that regard.


brent cook

BC: Exactly. And to put that in an economic context, again I could say… you have an underground vein deposit in Nevada running 30 grams per tonne, yet they actually lost money because it's a narrow vein and the rock fell apart inside, etc., etc.

Whereas I can point to a half-a-gram-deposit in Nevada that makes tons of money because it’s open and it’s oxidized making gold recovery very cost efficient — that sort of thing.

Those are some of the things we try to educate our readers on. It's never just grade. You have to look at the cost of getting the metals out of the rock.

I can tell you, Mike, every time I go to a property, the first thing I’ll do is pick up a rock, look around, and say to myself… What is it going to take to get there… What will it take to mine this thing… What are the implications of everything I’m seeing in terms of the ultimate question…

Is this thing going to MAKE or LOSE money based on the economic hurdles?

brent cook

So I think it's really helpful to have some sort of guidance if this is not your area of expertise. I think having a broker is much better than just trading an online account.

For instance, I use Sprott Global, Rick Rule’s firm, in Carlsbad, California, because most of their brokers are geologists or mining engineers. They've got the necessary background to make informed decisions.


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MF: To that same point, speculators often lose sight of WHY they bought a particular mining stock. So how can speculators sort of avoid some of those mistakes, or what are some of the missteps people make when speculating in these junior companies where things change and they end up holding on too long?


brent cook

BC: Well, I think you hit the nail on the head, Mike. It’s really difficult to do, but you need to go into a speculation with an investment thesis and then stick to it.

You need to understand what it is that you need to see in the results to make some sort of determination as to whether the company is succeeding or failing.

So again, you've got to go back to this economic deposit theory, if you will. I might say, I need to see in this drilling round something to suggest to me that one-plus gram per tonne gold is what they need to find because I know it's going to take X capex to build the thing and X dollars per tonne to mine it.

So as long as that keeps being confirmed with each successive round of drilling, you stick with it… but once that starts to fail, you need to become a seller.

All too often (and I've done this myself, I try not to anymore…) your thesis changes from what it was. It changes to… well I hope X, Y and Z happens. Or, I hope they do this, or I hope they do that. Once that happens, you've probably lost your money already and it's just best to take the loss and move on.

But too many people hang on… so the quicker you can recognize things the better. And I think also, too many people own too many of these junior exploration stocks. In our portfolio, we try to keep it at 20 stocks or less, which is more than enough to cover and follow.

And if we want to add a new one, we’ll go through the portfolio and say, "Well, this one's got to go… we’ve found something better!”

You’re always upgrading your portfolio that way… as opposed to getting bogged down with too many positions.


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MF: And the preservation of trading capital is really the key, right? If you lose that — you're basically toast!


brent cook

BC: Pretty much done, yeah!


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MF: Is Novo Resources (NVO.V) out of Australia a good example of that sort of changing narrative where you have to make a stay-or-go decision?


brent cook

BC: Yeah, great example, Mike. Novo is an incredible discovery. I give Quinton Hennigh really high marks for going to western Australia and figuring this deposit out. To me, the Karratha project looks to be some sort of offshore placer deposit that's about 2.8 billion years old.

I went there a couple of years ago to have a look. We initially bought into the stock at about $3 and I think we sold out around $5.

novo-resources-corp

And this goes back to what I said… you have a thesis, and if that thesis doesn't work — get out of the way!

My thesis for the Karratha project was that there was not just nuggety gold, but that there was fine grain gold in there as well, and that that would make for an economic deposit.

novo-karatha-gold-project
Novo’s Karratha Gold Project: In-situ gold nuggets frozen in matrix material from the Comet Well and Purdy’s Reward area.

What it has turned out to be is that there's basically just these nuggets. In my mind, what they've got to prove (and haven't proven yet, but they're working on) is that they can actually make money mining along a couple of horizons that aren’t very thick as alluvial deposits.

But you've got to crush the rock and grind it and selectively pull out the gold — and they're working on that.

But I don't see right now that it’s going to be terribly economic, and I have a hard time supporting their market cap right now. So we're out of it. I'm watching it.

But again, my original thesis didn't pan out — so we sold the stock.


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MF: There’s an interesting copper play I saw recently in your letter, Hannan Metals…


brent cook

BC: Yeah, we recently bought Hannan Metals (HAN.V). This is a company with a market cap of about $13 million. They've got $2 or $3 million in the bank. They were working in Ireland looking for zinc, which was a bit of a bust.

And we didn't have any interest in that… but they've picked up a large tract of ground in Peru, along the backside of the Andes, the tropical side, with a new deposit model for copper.

hannan-metals

And it's a sediment hosted setting that faces the backside of the Andes, and they're finding, across many tens of kilometers, copper mineralization in these specific horizons.

So the geologic setting is such that it's similar to the Zambian deposits or the Polish copper deposits, which are massive. It’s geologically similar to what Robert Friedland has going on over in the Congo with Ivanhoe Mines.

And so this is a new environment, a new theory, that offers a massive potential for discovery and upside to the share price. Right now, it's very early-stage. They're basically just prospecting.

So this is a stock we bought thinking that, if they're successful, the stock will do really well or should do really well and it should interest a major.

Now, what we need to see to confirm our theory is for their sampling to confirm economic grades over reasonable widths across a large area to support it. By economic, I'd like to see, oh geez, 1% to 5% copper over decent widths of 10-plus meters to confirm that the potential is there.

So that's what we're looking for. Again, it’s really early-stage; it’s real high-risk. But that’s what we like. At a $13 million market-cap, if they're successful, this is a ten-bagger. If they're not, well… we lost it all!


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MF: So what’s sort of your plan now that you've mostly turned the letter over to Joe? I’m guessing you’re somewhat cutting back on site visits?


brent cook

BC: Yeah, I'm certainly traveling less, and I'm only really interested in projects that I can see as being large enough and economic enough to interest a larger suitor to come in and buy it out.

Small deposits — I'm not interested in. So, that's kind of what I'm focusing on.

Naturally, Joe and I are still working together on a lot of things. I go to a number of mining conferences because it gives me a chance to meet up with people from around the world that I've worked with and see who's doing what and where and to get a bit of the inside scoop and rumors — all that sort of thing!


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MF: Brent, it’s been great catching up with you. I learned a lot and I’m sure my readers did as well. Real quick, how can people learn more about Exploration Insights including how to subscribe?


brent cook

BC: Mike, always great to chat with you. The newsletter, I should point out, is about what Joe is buying with his own money. We take no compensation in terms of writing things up from anybody except that they do cover our travel expenses to go and look at a project.

What you see is what you get at Exploration Insights.

Everything we've ever written about, bought, or sold is available on the website once you subscribe. So it's searchable. You can plug in names of companies and see where we talked about them for the last eight or ten years — to see how we've done.

It's a weekly publication that comes out every Sunday plus the occasional alert or comment if required. And there's a lot of free information on the website as well… things Joe has written, videos we've done with various companies, interviews, and the like.

It's all there. So it's worth going just to have a look to see what we do at ExplorationInsights.com.


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MF: Thank you for that, Brent.


brent cook

BC: My pleasure, Mike.



We have four reports now available highlighting several opportunities for investment in the resource space. 

Opportunities discussed in those reports and past issues include:

Issue Mentioned: Mentioned By: Opportunity:
February 2020 James Dines Agnico Eagle Mines (TSX: AEM)(NYSE: AEM)
February 2020 James Dines Kirkland Lake Gold (TSX: KL) (NYSE: KL)
February 2020 James Dines Pan American Silver (TSX: PAAS) (NASDAQ: PAAS)
February 2020 James Dines Lynas Corp. (OTC: LYSCF)
February 2020 James Dines Canopy Growth (TSX: WEED) (NYSE: CGC)
February 2020 James Dines OrganiGram Holdings (TSX: OGI) (NASDAQ: OGI)
January 2020 Mickey Fulp Ely Gold Royalties (TSX-V: ELY)(OTC: ELYGF)
January 2020 Mickey Fulp Trilogy Metals (TSX: TMQ)(NYSE: TMQ)
January 2020 Mickey Fulp Azarga Uranium (TSX: AZZ)(OTC: AZZUF)
January 2020 Mickey Fulp    Realgold (private)
December 2019 Van Simmons 1903-1926 Gold Commemorative Coins
December 2019 Van Simmons Pre-1933 Liberty, Indian, St. Gauden Coins
November 2019 Rick Rule Sprott Inc. (TSX: SII)(OTC: SPOXF)
November 2019 Rick Rule Alacer Gold (TSX: ASR)(OTC: ALIAF)
November 2019 Rick Rule Alamos Gold (TSX: AGI)(NYSE: AGI)
November 2019 Rick Rule Silvercrest Metals (TSX: SIL)(NYSE: SILV)
November 2019 Rick Rule EMX Royalty Corp. (TSX-V: EMX)(NYSE: EMX)
October 2019 Jeff Phillips Midas Gold (TSX: MAX)(OTC: MDRPF)
October 2019 Jeff Phillips Almaden Minerals (TSX: AMM)(NYSE: AAU)
October 2019 Jeff Phillips Revival Gold (TSX-V: RVG)(OTC: RVLGF)
October 2019 Jeff Phillips Azarga Uranium (TSX: AZZ)(OTC: AZZUF)