First up was John Kaiser. I really like this guy - he agrees with basically everything I say! Politics- and economics-wise, that is - I dunno much about exploreco investing.
His talk started out by identifying three different modalities for resource speculation:
1) Discovery - betting on the drill play.
2) Commodity price - the example he gives involved the recent reassessments of old deposits that once were uneconomic, but have changed to being economic with the advent of higher metals prices.
3) Security of supply - the whole REEs hubbub of 2-3 years ago.
His argument was that while the last speculation boom (and bust) has been based around 2 and 3, that's pretty much over now and speculation will return to playing point 1, the drill play bets.
Contradicting Mickey, Kaiser says the big insto capital is still on the sidelines. Meanwhile, financings have collapsed: he put up his newest masterwork, noted by Brent & Quinton recently, the chart that shows most companies on the Venture now have essentially zero working capital (when you subtract the cash already earmarked for CEO salaries and their hookers & blow).
He noted that the future expectations in the metals space are bleak - institutional consensus still calls for $1200 gold - and this is mainly due to doubts over China. Meanwhile, cost inflation in capex and opex is up around 10%/year. Thus, juniors are priced at a level he feels is far too low.
He thinks the EU sovereign debt crisis will take about a year to fix, and notes that the US economic misery is entirely the fault of gridlock in Washington - particularly the Rethuglicans.
And here's where he really impressed me: he's in a room full of crank lunatic right-wing extremist birther goldbug types, and yet he clearly and assertively stated that he feels if Obama wins and sweeps house & senate, the US economy will be fixed, while a Rethuglican win will drive the USA into a deep depression.
Mister Kaiser, you have a stunning pair of brass balls and I salute you.
He also noted 42% of world military spending is done by the US - and it can't continue.
Furthermore Mister Kaiser, your brass balls shine like mystical twin suns on an undiscovered planet's horizon, their bright light bringing warmth to my countenance as the dawn breaks through the cold gloomy night.
And the interesting idea put forth is that as US military hegemony is reduced, this will raise global uncertainty which will benefit the price of gold. Which... I don't get. The gold price is driven by consumer demand in Asia, not by fear. Mani Swaminathan in Bengal isn't going to buy more gold just cos the USA's military spending went down.
He used Geologix (what? huh? GIX doesn't suck?) as an example of the pessimistic market pricing of explorecos. His models for a fair GIX price were anywhere from $1 to something stratospheric like $50 - all depending on when the perception shift back to optimism happens in the exploreco space.
Anyway, I came out of the talk really interested in subscribing to Kaiser's service. The guy seems switched on. Unfortunately, I already have 4 subscriptions that I don't get enough use out of. What to do? Somebody wanna buy me a free 1-year subscription to Kaiser, please?
Next up was a smoke break, a bit of wandering around, leering lustfully at the gold and silver coins and bars at booth #630, and even bumping into the ever-beautiful Daniela Cambone setting up the gear to interview some newsletter writer or something who nobody really needs to hear.
Anyway, in a last-minute decision, I decided to forgo whoever it was I was originally going to see, in favour of Mickey Fulp.
Anyway, for the first while he chatted about his own picks. So go get your pencil:
1) Mickey likes Avrupa and Tarsis.
2) He expects very good things from Curis - he says they should be in production by 1Q13.
3) He's a permabull on U.
4) He calls Strathmore a "screaming buy" at 27 cents, nothing changed since Fukushima and they have millions in cash.
5) He says he thinks REEs might come back.
6) He also likes Quest Rare Minerals, Rare Element, and Tasman.
7) He's still nattering on about graphite after all.
8) He says Stupid Flanders Resources is "the best graphite play on the planet". To which I reply:
And then he had a rapid-fire Q&A session.
Mickey feels that until a new mining law is enacted in Colombia and somebody goes in and operates a showcase mine, he'll avoid investing there. He feels the Yukon is difficult, both with infrastructure and weather, and mining up there will be maybe 10 years down the road.
He doesn't follow Candente, but knows The Big Freeze, and feels the territory is too remote and rugged, and they won't be able to show enough copper to justify getting taken out.
He's not fond of zinc; it's difficult for new producers because the price of zinc keeps puking whenever a butterfly farts in the Takla Makan.
He fully expects Rye Patch to win over Coeur d'Alene, otherwise (good point) the entire mineral tenure system in the US gets destroyed and the country becomes another joke like Venezuela. However, maybe he should read what Denninger has to say about how the US court system has already destroyed chain of title in real estate. Sorry, but nowadays the foundation of law gets ignored whenever it suits big money. That's how the US is today. It's kleptocracy; look it up.
And he doesn't seem to know Lupaka very well at all - they didn't recently do a financing, they did a buyout of a cash-rich nobody. (though I guess that's six-of-one anyway.) And Otto hasn't sold off his Lupaka yet, he still owns it.
One guy in the front row managed to stump Mickey on three different juniors in a row, which was rather impressive.
Mickey disappeared right after his talk. I figure that since Daniela had been around, and Brent had also disappeared (Cookie had been out in public chatting with people for the entire two days, so his sudden absence was obvious), that perhaps the three of them had gone off to record yet another edition of "At the Bar with Daniela and Two Guys Mooching Booze".
So we'll probably see that come out this weekend. Let's see if Otto can beat me to posting the video.
I actually skipped out on Brodrick, who was going to talk in the same room after Fulp; frankly I don't know the guy too well, and wanted another smoke break and maybe a coffee. But I caught the tail end of his talk, and it seems he likes Silver Wheaton one heck of a lot and thinks the royalty companies are teh awesomez. I guess the chart is the chart, eh?
And finally, it was time for Jojo!
|Jojo (right) and someone who thinks my blog is awesome, but then again he owns Lupaka warrants (left)|
Jordan said he was very hung over from Thursday night, when apparently there was a big "anal yst dinner" of the overwhelmingly liquid hydrocarbon variety, involving lots of chatting with James West, Tom Calandra, and anyone else you'd ever want to meet. Nevertheless, he soldiered on.
He presented his thesis that the PM equities put in a major bottom this spring, per the Rydex PM assets chart, and per the spec silver positions having hit an 11-year low, and per the senior producers' valuations having dropped to a 6x/7x cash flow. From here on in, he thinks there can be a bull market of another 7-11 years; and not only will producer margins improve, their valuations should move up towards 10-20x cash flow over time as the market realizes that gold's going up again.
And everyone in the room who could follow the TA immediately spooged themselves at the very thought of it.
He's got a near-term target of $2350 for gold, maybe by end of winter (I think that fits best with the whole "sell at PDAC" thing, personally); his mid-term target is $4000 WTF, and then after a correction he thinks there'll be a parabolic move to something like $7000-$8000 OMG WTF LOL BRB STFU.
All this from waving a skull wand at a chart and speaking the magical chants! This TA stuff is teh awesome!
Seriously though, he does come at it from a historical analysis perspective, and it does all seem to be based on real TA, and he tries to ground it with a fundamental basis, and it does really seem to make perfect sense - when you're surrounded by smelly goldbugs at 4PM on a Friday afternoon, anyway.
I did have a big problem with his chart on funding needs of the US government over the next 3 years: the "fiscal cliff" will greatly reduce the deficit, and the foregone conclusion of an Obama/Democrat landslide should (if they're not dolts) also mean a return to Keynesian stimulus spending that will bring the US back into strong growth, which will further reduce deficits. I told him that afterwards, and yeah he agreed, but noted there remains the problem of rolling over a few trillion in existing debt over the next 3 years. OK fine.
I forgot to bring up that charting gold vs S&P is dangerous when your chart goes back to the period pre-Nixon when the gold price was repressed under Bretton-Woods: you're no longer charting gold there, you're charting USD. He should have damn well listened to that Marino Pieterse at PDAC. Pay attention to your elders!
Back to the talk: more concretely, he noted that the average exploreco doesn't rise for more than 1-2 years; as he said, "if your stock pops, sell it and get rid of it! They're not long-term holds under any circumstance." Which is useful to remember.
He suggested we were probably all idiots for buying junior stocks for the past few years when we should have been playing the warrants - just picking up the SSL, FNV and AR warrants would have been the brightest move. Well, if we're in another bull move equivalent to 2009, with gold going to $4000 in a couple years, maybe we should look at warrants again? Personally I've had great fun with my AR and FNV warrants. Lupaka warrants are a bit of a bitch though.
What are his big picks? He publicly mentioned Corvus, saying "it has huge room to move" (which the PEA definitely supports, as far as I'm concerned); and he also seems to like Northern Vertex. He also said Primero could be the next Argonaut.
Anyway, after he was done, we stuck around and chatted for a bit, but then I had to beg off to catch the train home. It really is a crush of humanity, all those people leaving Toronto at 5:30PM on a Friday - as VNV Nation once said, to "escape the sorrow and restraint of mortal cities".
So, there you go. I'll be at PDAC again next March, and then we'll go thru this whole business again of me reviewing a bunch of people who say stuff. In the meantime, we'll await the next issue of "Daniela at the Bar Plying Two Old Guys with Drinks".