Last week I caught up with Collin Kettell and we talked about Bitcoin, Gold, Uranium, and a few companies that Collin is bullish on. Enjoy!
Hi Collin, welcome back to The Next Bull Market Move. In our last interview we briefly touched upon bitcoin, and with the recent run up in price it does start to feel that it is turning into a bubble. What are your thoughts regarding this? Personally, I’ve heard more people talk about bitcoin and buying bitcoin who have never bought any investments before and markets tend to always punish the latecomers looking for ‘quick easy money’. Perhaps if it’s not a bubble yet, then we are due a major correction?
Kerem, thanks for having me back. I always enjoy the opportunity!
You pose a great question. Unfortunately, I do not think the answer is so easy. On the one hand, you could certainly make the case that Bitcoin is a big bubble. The chart is moving upward in parabolic fashion; the backside of that curve can be just as violent .
Secondly, a lot of less-than-knowledgeable-money has begun to move into the space, hoping to capture an easy gain. I can think of a pool party I attended a couple weeks back, where I witnessed two people I’ve known for sometime discuss how they are starting to mine bitcoin. That is despite the fact they have never made an investment or financially intelligent decision before in their lives. Events like that do concern me.
On the other hand, cryptos remain generally inaccessible, particularly participation in distinct coins and ‘initial coin offerings.’ The classic characterization of a bubble top is when the taxi driver tells you its time to get in. Now maybe your Uber driver has made mention, but their lesser-evolved counterparts are not yet privy.
Furthermore, if you take the entire ‘crypto-sphere’, the valuation is around $150B. That is compared to global equities, real estate, and derivatives, which register in the trillions. Now, if cryptos are nothing but a tulip-mania, then certainly, this could be the top. If instead, cryptos, block-chains, and ICOs are the way of the future, we have a long way to go.
Either way, a pull back would seem to be in the cards. That pull back could be starting now with many cryptos off 5-10% the last two days. I maintain the position that I am not invested, I don’t have any immediate intention to invest, and I am happy to watch from the sidelines. Philosophically, cryptos represent one of the most exciting technologies of our generation. They possess the potential to undermine the existing power structure.
When looking at blockchain technology and bitcoin, do you envision a situation where the publicly traded blockchain companies (there are only a few so far) turn into a mania that could repeat the dot.com bubble of the late 1990’s?
Remember that during the dotcom bubble, which had its origins in the early 90s, there were several occasions when those stocks could have appeared parabolic. In hindsight we know that the final parabola did not come until 1999, in epic fashion. In my opinion, cryptos do not necessarily fit the normal model for a bubble, per se.
As cryptos are completely new, I look at their growth in more of an adoption rate rather than a traditional market analysis. Think of Facebook’s user rate. That chart has looked parabolic since day one. What if that is what happens in the crypto space? I simply do not have the answer, but its an interesting lens to observe through.
The question is, do cryptos and block-chain companies have the ability to outpace government control? Russia just came out against the asset base in an effort to “protect its people.” China just banned ICOs. Governments are not going to welcome a technology that undermines their control. Moreover, are cryptos accessible and understandable enough for the general masses to take hold? I think so, but I don’t know for certain.
So yes, this could be another dotcom bubble in the making. If so, we have a ways to go before reaching the ultimate highs. Following a bubble bursting, there will be a handful of winners and a sea of losers. In the interim, there will be just an ocean of perceived winners.
Let’s move onto another market that is not getting talked about too much anymore and that is Uranium. To me, it feels like the market is digesting the huge gains from earlier in the year and is weeding out all the speculators looking for a quick gain. The market is building, but slowly. What’s your current take on Uranium?
I would agree with you completely, Kerem. I continue to maintain a deep love for uranium. My resolve continues to grow each and every day that uranium prices stay depressed. I have never been one who likes to be in the camp of latecomers. Investing in bitcoin right now does not appeal to me for that very reason. It is crowded and common. Uranium is my kind of trade.
In 2002, at 12 years old, my Dad picked me up from school. On the car ride home, he told me that he had just bought a past-producing uranium mine for $100,000. Curious as I may have been, this did not make much sense to my sophomoric brain. Over the next five years, uranium advanced from a low of $7 per pound to over $150 per pound!
I watched my Dad quit his engineering job, raise $15M, and build a $70M uranium company. That experience attracted me to become an active participant in the junior space, and likely drove my later obsession with uranium.
The crazy thing is that I never thought I would be given the same opportunity to capitalize a short fifteen years later. Fukushima and a treacherous commodity bear market are to thank.
In December of 2016, Palisade Global called a bottom in uranium. Kerem, we discussed the reasons why in earlier interviews. I maintain that the 2016 bottom will likely hold, which was around $17 per pound. Uranium did witness a strong bounce from that December time period until early in 2017, reaching $26. It has now given up those gains and many uranium equities are back, bouncing along the bottom. Sentiment has returned to maximum pessimism.
So why am I so excited right now?
1. Commodities move in tandem. We are seeing that unfold right now where gold kicked things off last year, then came palladium, cobalt, and now industrial commodities including zinc, copper, lead, and nickel. This is characteristic of a commodity bull market. There are the sprinters and the laggards. Uranium is a laggard. A spring being wound tighter and tighter and tighter, waiting to be unleashed.
2. The world needs uranium. I won’t make the case here, but simply put, global demand based on the build out of future reactors paints a clear picture. Uranium is needed to drive global energy demand.
3. Commodity stocks are widely recognized as the most volatile sector in the public markets. Uranium, as a sub-set, is unquestionably the most volatile sector I have ever seen. 100% gains, month after month after month is not just possible, but normal during a uranium bull market.
4. As a commodity, the end users for uranium are almost completely price insensitive. If oil prices go up 100%, end users intuitively curb demand, seeking alternatives such as coal and natural gas. Yet, the cost of nuclear fuel for an operating reactor is merely a footnote in the overall cost of operating a plant. As such, when uranium goes from $20 to $100, the normal demand pressures do not come in to play. Uranium is unique in this regard. And when uranium prices witness that kind of move, a producer can go from losing money to making money hand over fist.
5. Finally, a six-year bear market is almost unprecedented across financial markets and that is where we find ourselves with uranium. Could it last longer? Yes. But when it moves, it is going to go completely nuts. We are talking life-changing gains. One only needs to consider the case of Energy Fuels, which increased 45-fold in value in 2006! Or Paladin, which went from $0.015 a share to $10 during the last cycle. It is worth noting that Paladin has just de-listed with its mine unable to continue production in current uranium environment – a sign of the times.
And let’s talk about gold. It looks as though gold is finally breaking through 1300 and is ready to climb higher. Would you agree?
Yes, absolutely. I am in full bull mode for the remainder of 2017 and into 2018. Gold has performed incredibly well this year. Other commodities like copper, zinc, and lead are breaking out into 52-week and multi-year highs. And yet, until a couple weeks ago, associated equities were poor performers.
I think a lot of investors were worried that the US dollar would rebound off long-term support at the 93 level, and deal a devastating blow to gold and other commodities. Low and behold, the dollar broke through to the downside setting a trend in motion.
I don’t subscribe to technical analysis too a heavy degree, but $1,300 represents a very important level for gold. The metal has tried to break $1,300 on numerous occasions in the past year, failing each time. Now that it broke through, the wheels are in motion. And a trend in motion is hard to break. I think you will see the commodities endeavor on a strong move, with the associated equities providing breathtaking returns. Think January 2016, only this is leg two of the bull market.
Circling back to the beginning of the interview, the crypto craze struck a certain chord with gold investors. People have been saying things like, “gold no longer applies” or “the new generation has adopted cryptos instead,” or “Gold and silver are dead.” Cryptos marked just one more sector on top of global equities, real estate, and bonds that blew up in value while gold investors got left behind. And that is exactly the kind of thing that excites a contrarian like myself. Moral of the story here is stick to your guns. Gold investors are going to make a killing. Maybe crypto investors will outperform, but I don’t understand the space enough to confidently deploy my capital there.
Finally, give us an update on Palisade Global and the conference you have coming up later in the year.
Palisade Global continues to invest heavily in the resource space. Bargains still exist in the junior sector and a game of catch up has just commenced that will see the mining stocks outperform commodities in the months ahead.
We have been heavily focused on two companies I will discuss here, and there are many more I wish I had time to address.
Firstly is Triumph Gold Corp (TSX-V:TIG), a company that owns 100% of the Freegold Mountain Project, located south of Kaminak’s Coffee in the Yukon. We own 15% of the company. The only larger shareholder is Goldcorp, which paid around $6M earlier this year to buy 19.9%.
Triumph has just broken through its 52-week high and with 16,000 meters of drill results pending in September, I don’t see much of a ceiling. I would qualify this as an immediate take over target.
The land itself is of supreme value to Goldcorp, as it contains a government maintained road – an access route that we feel is crucial for Goldcorp in developing the Coffee Project.
Last year, Goldcorp paid $520M to acquire the Coffee Project from Kaminak. Coffee hosts 5.5 million ounces, giving an implied value of around $100 per ounce in the ground.
Triumph Gold already has 6 million gold equivalent ounces. Granted, Kamanik had a feasibility study on its resource, and its doubtful Triumph will reach such detailed economics on its asset anytime soon. The key for Triumph is geography. Additional ounces will certainly aid in Goldcorp’s goal to become a district player in the Yukon, but the infrastructure and access alone are worth $100 per ounce to Goldcorp.
Triumph Gold currently trades at just a $33M market cap. A $100 per ounce take-over would imply a valuation 18X its current level. Like I said, no ceiling in site!
The other stock I will briefly cover is Mexican Gold Corp (TSX-V:MEX), a company we own 19.8% of. Mexican Gold controls 100% of the Las Minas Project in Veracruz State, Mexico.
The company recently released its maiden resource estimate, which boasts over 1 million ounces gold equivalent when considering the measured, indicated, and inferred categories. In addition, the grade is good at 2.1 g/t average.
The reason we are truly excited about this project is that the resource covers just two of eight known mineralized zones. Almost every drill hole ever drilled on the project has returned mineralization. That means with proper financing and drilling, ounces and grade will continue to grow. Follow up drilling has already commenced with results pending this fall. And with a $10M market cap, the stock is incredibly cheap when compared to peers.
Finally, in regards to the conference, I have to give credit to my business partner, Sean Zubick, for hatching such a brilliant idea. Jekyll Island has significant historical significance and is an ideal location to host a hard asset conference. The event is completely sold out. Eric Sprott will be our keynote speaker and will be hanging around the entire weekend to spend time with our attendees. Excitement level is growing as we approach the October 19th event date.
Many thanks Collin.
Thank you Kerem for having me back on the program.
I highly recommend all investors to check out Collin’s show at http://palisaderadio.com/ for great interviews and research.
The Next Bull Market Move
Go to The Next Bull Market Move for my interviews and analysis with Rick Rule, Collin Kettell, Nick The Mining Book Guy and many others.
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