I caught up with Collin from Palisade Global Investments and we talked about Uranium, Bitcoin, the gold and silver miners, and the future of the Nickel market.
Hey Collin, thanks for joining us again at The Next Bull Market Move for our end of the year review. So let’s start with Uranium. At the beginning of the year everything was going up, then we retraced most of those gains, and now the space is gaining signs of life again. What can we expect for 2018?
Kerem, thank you for having me back on the show and it has been enjoyable watching The Next Bull Market Move grow throughout 2017.
I believe that 2018 will bode well for the uranium stocks, at least initially. The significance of the cuts that happened from both Cameco and Kazatomprom cannot be overlooked or downplayed. Whether this was a concerted effort or if these decisions were reached independently is irrelevant. These two groups control roughly 50% of the world’s uranium production and these cuts confirm the thesis of uranium investors – the price of uranium is too low for producers to make money.
The cuts are being made for one reason only – to drive uranium prices higher in hopes of returning to profitability. And that means investors across the uranium space are bound to benefit. The question becomes how much? Will this produce a short term bounce or create a long-term recovery similar to what kicked off in 2002? And the answer will only be realized in time. The good thing is that positive price action for uranium in 2018 is almost a certainty.
We have talked about bitcoin and blockchain before, but I wanted to find out what your thoughts are regarding this sector now? You could say we are in a bubble but you could also say we are still at the beginning of a cycle for a new asset class (more people have heard of bitcoin but how many people know how to buy one and have a digital wallet? Still not many I suspect). Your thoughts?
I like the way that you posed this question Kerem; we asked the same exact question a couple months ago and our investment thesis in the blockchain space has been driven by this all-important query.
Certainly all the buzz surrounds crypto currencies at the moment. Cryptos are exhibiting price action that has not been seen in an asset class since the dotcom days. But how many people are equipped to actually own digital currencies? Well, we know that Coinbase, the dominant crypto site in the US, achieved 13 million accounts as of last month. That is a large number but not the type of participation necessarily indicative of a mania. Stepping down, the amount of investors playing in ICOs and token-based assets is a mere fraction of those invested in cryptos. After all, one must own a crypto to purchase a token.
That leaves your standard investor who has an E*Trade account. They are aware of the space, but have not yet participated. And how do they play? Well, we saw what happened when the first widely known crypto deal listed on the Canadian market. HIVE shot to the moon and then the stars! And now, an onslaught of companies is rushing to market to meet the demand of hungry investors. We believe that getting positioned in the companies that have a true understanding of blockchain coupled with a viable business plan are worth investing in, if nothing more than for the momentum.
Nobody wants to miss these kinds of gains and a move like this becomes self-fulfilling. The higher these crytpos go, the more people that will jump on the bandwagon until there are no outsiders left. I believe you are right in your assertion that there are plenty of people left on the sidelines who can still enter the trade.
Detractors have compared the crypto space to the tulip mania, a suggestion that I find preposterous. In particular, there is a sentiment in the gold market that is very condescending towards cryptos. That is probably driven out of loser mentality. Sure, I am a gold investor and it is difficult to watch cryptos explode while gold sits idle. But I take away several positives from this.
Firstly, as a resource investor, let this be a reminder of how much the resource stocks can move when the market begins to go. Secondly, the crypto space is educating an entirely new generation of investors about the fallacy of fiat money – an investor base that will find similar attraction to gold.
Finally, while gold is a barometer for government stupidity, cryptos represent a nascent technology that could unchain humankind from the control of its captors. So why would I not take joy in bitcoin and the blockhain expanding at this rate? It’s the most amazing thing I have ever seen. And while individual investors may not be profiting from the speculative mania, everyone aside from the parasites of the world will benefit if cryptos succeed. I have always said that the reason I seek wealth is so that I can attain freedom. Freedom for all sounds pretty good to me!
It seems to me that tax loss selling is hitting the gold and silver miners again, making everything cheaper. Is this another buying opportunity for this sector?
I do not know if it is possible to pinpoint what is causing this December sell off. Certainly tax loss selling is a culprit. Another suspect that has been identified is cryptos stealing the thunder from miners. I don’t buy that narrative. Let’s face it… there was little to no money going into these miners 6 months ago, so all the money pouring into crypto did not come from mining.
The fact of the matter is that the action in mining stocks right now is not unusual. But its times like these when gold stocks become hated and extremely oversold that bottoms occur. When it comes to market moves, I know no more than the next guy, but my guess is that 2018 will be a fantastic year for resource stocks.
What has surprised you the most in 2017?
The action in crypto currencies was the most surprising and exciting thing to see. Specific to the mining sector, I was surprised to see the foundations of a bull market being formed across the field of commodities. You wouldn’t know it from looking at the resource stocks, but almost every commodity has formed a strong base or is already moving higher.
What are your views on the battery metals, and Nickel in particular?
I have to credit Mike Beck and Anthony Milewski for bringing the nickel story to our attention. It is one of the most compelling commodity stories around and we believe possesses explosive potential over the next twelve to twenty-four months.
Electric Vehicles are here to stay. EVs represent just 1% of global car sales in 2017, but are conservatively projected to reach 25% by 2025. The market recognized this through lithium and then cobalt, two commodities that are integral in building batteries. But, nickel has been left out of the equation, despite the fact that nickel is the largest component of these batteries.
The nickel market must double by 2025 to meet the needs of auto manufacturers, but the story is even more exciting when you consider that the nickel market is bifurcating. Battery makers require tier 1 nickel derived from nickel sulphide, which currently represents just half of the global nickel market. And therefore, the market for tier 1 nickel must triple by 2025. For a market as large as nickel – 10x the size of lithium and 20x the size of cobalt – that is a massive move coming.
We have identified two companies that we believe are poised to be home runs – Giga Metals (TSX.V:GIGA) and Mustang Minerals (TSX.V:MUM). Giga owns the second largest nickel sulphide/cobalt deposit in the world, located in B.C. Our internal research has shown that Giga will likely move to the number one position next year with a new resource model. And yet, the company is trading at just a $25M market cap! Mustang does not hold title as the second largest, but its property is also in Canada and holds significance as a world-class deposit. Both of these companies represent optionality plays with a real chance of becoming mines. If nickel prices double from here, these companies will go ballistic. And I have no doubt that nickel prices will double. Tartisan Resources (CSE:TTC) is a third company to add to the watch list. Palisade is the largest shareholder of Tartisan and the company is in the midst of acquiring a substantial nickel project in Ontario.
It is worth noting that we are very bullish on lithium and cobalt as well, not just nickel. LSC Lithium (TSX.V:LSC) is the largest landholder of lithium rich brines in Argentina, and without a doubt is the cheapest company in the space for investors looking to get exposure to lithium. Cobalt 27 (TSX.V:KBLT), which just raised $85M to forge into the streaming space, is the second largest holder of above ground physical cobalt in the world. I do not have time to get into the details here, but if you want a surefire way to play cobalt, Cobalt 27 is the best way to do it.
And finally, what does Palisade Global have planned for 2018?
Palisade Global started off as an idea less than five years ago and has grown into a truly incredible brand and business. My partner Sean Zubick and I are both humbled and in awe when we look at what Palisade has turned into, but also realize it is a testament to the hard work put in. This month, we brought on additional team members – Adem and Ghalib – two individuals we are excited to work with. In the New Year you can look for the following –
Goldspot Discoveries Inc., the machine learning/AI company that we incubated and remain the largest shareholders in just completed a financing that included Eric Sprott and Hoschild Mining. We are now working on developing our Research Quantamental Tool, which will bring AI assisted investment to the resource sector. This was one of the biggest financial themes of 2017, but of course, mining has remained absent of the trend. We anticipate an IPO in early summer of 2018.
New Found Gold Corp., previously named Palisade Resources, has now successfully partnered on the last of its five cobalt mines. A portfolio that cost $300,000 to acquire has been monetized for over $5,500,000 for our shareholders in less than two years. That will allow us to focus on our core gold holdings which includes district sized projects in the Battle Mountain Trend in Nevada, a large project in Kirkland Lake, and an 86km long trend in Newfoundland, a Province where we are proudly the second largest landholders. Palisade remains the largest shareholder of New Found and we anticipate an IPO in better market conditions, likely in 2018.
Mexican Gold Corp (TSX.V:MEX) and Triumph Gold Corp (TSX.V:TIG) both made major new discoveries in 2017. The market does not yet appreciate those findings, but we certainly do. Both companies are in an enviable position with plenty of cash for next year’s exploration. We own 17% and 15% of these companies, respectively.
On the private side, we are extremely enthusiastic about both EZC Pak and Pavilion Water, two companies we funded this year. EZC Pak is a profitable company run by Dr. Sarath out of New York and brought to us by our good friend Ali Zamani. The company has developed a natural product to fight the common cold, while also dealing with overuse of antibiotics. Pavilion Water is a water purification company run by genius inventor Ian Roos and is in the final stages of completing its first water purification plant in the U.A.E. It will be cash flow positive by first quarter 2018 and is very exciting in its potential scope.
The list could go on, but as you can tell we are thrilled by the progress and believe 2018 will bring great things!
Many thanks Collin.
Thank you Kerem. Best of luck in 2018 and I look forward to meeting up when I make it to the UK this Spring!
I would recommend everyone to check out Collin’s show at http://palisaderadio.com/ as he constantly interviews the best people in the resource space.
Collin can be reached at http://palisadeglobal.com/
Disclaimer - Interviews are conducted in the name of research and learning from the best. Only you can decide what makes a good speculation/investment.