Maurice Jackson: Welcome to "Proven & Probable," where we focus on metals, mining and more. Joining us for a conversation is Mickey Fulp, the Mercenary Geologist, to discuss trade wars and how you may benefit.
Mickey, the United States and China appear to be heading into a trade war, with both countries looking to impose tariffs on imports. What are your thoughts on the brewing tension between the U.S. and China? Is this more rhetoric, or do you see this as just the beginning?
Mickey Fulp: Well, I think it's both. It's rhetoric and the beginning, in the fact that Trump starts the war or the dispute, and China responds. I think at some point both countries will realize in some way, shape or form that they need each other, and they'll get down to business. You know, really what this is about, the U.S. is basically demanding equal access to Chinese markets as we provide to China now. It's about intellectual property theft, where anybody that wants to manufacture or put plants in China, U.S. has to give up its intellectual property, and that's really not fair. And so, Trump's began by drawing a line in the sand, and we'll see where it goes from there. We had a record trade deficit, $375 billion, with China last year, and that's not good for American or American consumers.
Maurice Jackson: Mickey, for those of us seeking to identify deep value propositions for our natural resource portfolio, what type of implications do you foresee the impending trade war having on base metals? Are there any that we should be paying particular attention to?
Mickey Fulp: I'm really not sure what's going to happen in that regard. We know that China is the biggest user of all base metals, of iron, steel, aluminum, copper, lead, zinc, etc. It has immediately affected the prices of base metals. Copper went below $3 for the first time since early December, so a three and a half month low for copper. About the same for zinc, about a three-month low for zinc at 1.46, and lead, which is below 1.07 right now, that's a six-month low. I'm not sure if the trade tariff talks and the bully pulpit going back and forth is all to do with those drops of metals, but we're looking at something on the order of a 10% drop over the last month and a half or so, so certainly has affected the metals markets. It certainly has not affected the oil market. Oil is at 65.40 as we speak this morning, and last time it got this high was probably six or seven weeks ago.
Maurice Jackson: Speaking of energy, how about uranium?
Mickey Fulp: Eventually, uranium is going to turn around, but we're still saddled with a $22 spot price. There was some very good news over the last couple of days, and that's DOE Secretary Rick Perry has determined that the U.S. will no longer sell its supplies of U308 into the spot market. During the Obama administration, they were selling $5-$7 million pounds a year into the spot market and totally disrupting the spot price when they did that. So that's going to end. There's rumors floating about that the DOE or President Trump may make an executive order that's going to require U.S. utilities to use some significant percentage of U.S.-mined uranium for their nuclear fuel sources, and certainly that would help the market too.
Maurice Jackson: Are there any base metal issuers that have your attention at the moment?
Mickey Fulp: I cover one company, Trilogy Metals Inc. (TMQ:NYSE.MKT; TMQ:TSX). Some people may remember it under its previous branding, NovaCopper, arguably two of the best undeveloped giant high-grade copper and other metal deposits in northwest Alaska. I'm very bullish on that company. And we've had some really good success on that company. Picked it about 10 months ago at 65, 66 cents, and it's been as high as a $1.64 since then. It's come off as the price as the price of copper has come down, so it could present a buying opportunity at this point.
Trilogy is listed on the New York American Exchange under the symbol TMQ, and it also has a concomitant listing on the Toronto Big Board, also TMQ. Bear in mind, though, it trades very little volume in Toronto; probably 90, 95% of the volume's traded in New York.
Maurice Jackson: Switching gears, how about precious metals? How do they fit into this narrative?
Mickey Fulp: Certainly, trade tariffs, a trade war specifically, would be good for gold because it will introduce a wild card into the economic equation, and people will go to gold as a safe haven or insurance policy, and perhaps we're seeing that today. Gold's up to almost 1,350 as we speak. So geopolitical risk, geopolitical turmoil, the threat or the idea of such is always good for gold.
Maurice Jackson: Can you share your thoughts on gold, silver, platinum, palladium and rhodium, and which ones are you buying right now?
Mickey Fulp: I'm not buying any right now, because I only buy when the prices dip or go lower. When gold was at $1,312 or $1313 over the last couple of days, it didn't reach my mark of the price I wanted to buy it at, so only buy on dips. Certainly, platinum remains undervalued, both with respect to gold and with respect to palladium. Silver is still being flushed down the toilet, and I'm not a silver guy, so I'm not very bullish on silver going forward.
Maurice Jackson: How about rhodium?
Mickey Fulp: I don't really follow the rhodium market. It's a very small market, hard to get a decent bid-asked on it. It's difficult to buy it. You can buy it in bars now. In previous years, you could only buy rhodium sponge. Rhodium really does not have a lot of demand. It's used mainly as a very minor component of catalytic converters, so it's very much dependent, I think, on platinum-palladium markets. It's a by-product of mining of both those metals. I do not own any physical rhodium.
Maurice Jackson: Are there any precious metal issuers that have your attention at the moment?
Mickey Fulp: Well, I can tell you the four that I cover, and this is as good a time as any to make a full disclosure. Every stock that I cover pays to sponsor my website, and I'm also a committed shareholder of those companies, so I have plenty of skin in the game. I'm putting my money where my mercenary mouth is. The companies I cover in precious metal space very much focused on U.S. advanced gold explorers, that would be Allegiant Gold Ltd. (AUAU:TSX.V; AZLLF:OTCBB), Integra Resources Corp. (ITR:TSX.V; IRRZF:OTCQB) and Ely Gold Royalties Inc. (ELY:TSX.V; ELYGF:OTC), and I cover one Canadian gold explorer, Eagle Plains Resources Ltd. (EPL:TSX.V).
Maurice Jackson: Mickey, you're a world-renowned speaker. Where will you be speaking next?
Mickey Fulp: I will next be speaking in New York at Mines and Money on May 8th and 9th, then I will speak at the International Mining Investment Conference in Vancouver on May 15th and 16th. And I will be speaking at the Sprott Conference, also in Vancouver, July 17th through 20th.
Maurice Jackson: Mickey, for readers who want to get some more information on your work, please share the contact details.
Mickey Fulp: I can be reached at MercenaryGeologist.com. If you want my stock picks, you need to become an email subscriber, but it's free, so the price is right. You go on the website, click on the box below my mugshot, and sign up and give us a name and an email address, and you can even fake your name, but you've got to give us a working email address. You'll get my stock picks. We also run a very boisterous Twitter feed, @MercenaryGeo, with 62,000 Twitter followers.
Maurice Jackson: And last but not least, please visit our website, www.ProvenAndProbable.com, where we interview the most respected names in the natural resource space. You may reach us at contact@ProvenAndProbable.com. Mickey Fulp, the Mercenary Geologist, thank you for joining us today on "Proven & Probable."
Mickey Fulp: Thanks a lot, Maurice.
Michael S. "Mickey" Fulp is the author of The Mercenary Geologist. He is a certified professional geologist with a Bachelor of Science in earth sciences from the University of Tulsa, and a Master of Science in geology from the University of New Mexico. He has 35 years of experience as an exploration geologist searching for economic deposits of base and precious metals, coal, uranium, oil and gas and water. Fulp worked for junior explorers, major mining companies and investors as a consulting economic geologist for 20 years, specializing in geological mapping, property evaluation and business development. In 2007, he went from the sell- to the buy-side as an analyst, writer and speaker.
Maurice Jackson is the founder of Proven & Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
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Disclosure:
1) Mickey Fulp: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Trilogy Metals, Allegiant Gold, Integra Resources, Ely Gold Royalties and Eagle Plains Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. The following companies mentioned in this article are sponsors of Mercenary Geologist: Trilogy Metals, Allegiant Gold, Integra Resources, Ely Gold Royalties and Eagle Plains Resources. I determined which companies would be included in this article based on my research and understanding of the sector.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Allegiant Gold. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Proven & Probable disclosures are listed below.
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