In our first conversation of 2020, on the afternoon of February 4th, 321gold founder Bob Moriarty and I discussed a variety of topics ranging from precious metals to the Trump impeachment to Irving Resources and Tesla. Bob was unabashed in his view that Tesla shares were in the final stage of a parabolic blow-off move above $900 per share. So far his timing looks to have been on the money:
Without further ado here is Energy & Gold’s February 2020 conversation with Bob Moriarty…
Goldfinger: A lot has happened so far in 2020 it seems like a very eventful start to the year. And then we have this virus in China which has scared people and caused some market turmoil. It’s very interesting because gold, Sunday night, the futures traded up to almost $1,600 again and now we’re about $40 off those highs. It seems almost like traders said, “Well if this can’t get gold above $1,600 then it must be a sell.” And now they’re selling gold and silver back down and mining stocks are pretty red today. What are your thoughts on this virus and the price action in gold and silver?
Bob Moriarty: I think your read is exactly accurate based on the COTs and based on DSI. The healthiest thing we could have for the market would be a correction. However, that’s been true for a month or two and I’m not anti-correction, I’m very pro-correction, but I think the virus is a lot more serious than governments are willing to tell us. I for one am very concerned.
Goldfinger: Yeah, do you think we got a little overheated there with sentiment, daily sentiment index hit around 90 for a few days and the commitment of traders, that’s actually an interesting topic all by itself. What is your take? I know you say that the the speculators are the price makers in precious metals and it’s the hedge funds and the traders that create the prices. And the banks and the mining companies just take the other side of the trade. We’ve seen a pretty extreme level of open interest and speculative net length in gold and typically in the past this has usually coincided with a top but it so far it hasn’t at least so far.
Bob Moriarty: Well, maybe it has. If you go back to March of 2008 you remember what rhodium hit back then?
Goldfinger: I don’t remember. Was it $10,000?
Bob Moriarty: Yep. The interesting thing is we have a very similar situation to 2008. Silver hit 22, rhodium was 10,000. I can’t remember what the gold was, it wasn’t all that high.
Goldfinger: Gold was around $900, I think.
Bob Moriarty: Yeah. And then we had a big correction. I’m the opposite, I mean I’m a contrarian, I am always looking for the next trade and I love that when everybody gets really bullish because you know what’s going to happen next. It’s going to be a correction and it always happens.
Goldfinger: So you think that’s it? You think the gold $1,600 is sort of the peak for now and we need to pull back a bit for the next several weeks?
Bob Moriarty: Yeah, I would be happier with gold pulling back. It got way too frothy.
Goldfinger: The whole impeachment drama and the fact that the democratic primaries are starting in Iowa has really kicked off the election year, this is a big event this year that’s going to last for the next nine months. What are your thoughts on the whole impeachment thing? Which seems like it’s not really going anywhere but it has certainly created a lot of drama.
Bob Moriarty: For him to obstruct Congress, every president obstructs Congress. The deep state has been after Trump since before the election and there’s so much illegal shit going on. Here’s what’s funny, we know that Biden was crooked, he gets on television and brags about getting a prosecutor fired. They were investigating his son. So, the Democrats get away with murder and everybody’s badmouthing Trump? Now, I don’t like Trump. But the idea of a coup d’etat is far worse.
Goldfinger: Well, what do you think about, I mean, honestly, as an American, I believe in freedom and I believe in rule of law and having fair trials. The Republicans are blocking all witnesses in the Senate trial, which seems to me to be something that I would expect from China or Russia or a country that is not free. I mean, is this the new normal in the United States?
Bob Moriarty: I can prove exactly what you need to understand right now. Reach in your pocket and pull out a coin that has only one side.
Goldfinger: There’s no coin that only has one side.
Bob Moriarty: Exactly. Now you just pointed out something very accurate. You said Republicans refused to allow witnesses. Now what’s the other side of that coin?
In the House, when they were holding the impeachment hearings, they would not allow the Republicans to present witnesses. Now if it’s good for the goose, it’s good for the gander. And here’s what’s even funnier. Would you agree that the central issue over the Ukraine “scandal” had to do with Trump using his office for political purposes? Would that be an accurate statement?
Goldfinger: Yeah. I mean it’s clear that he withheld aid that was due to Ukraine because he wanted to get them to do something that would benefit him politically.
Bob Moriarty: Stop right there. You agreed with me that Trump was using his office for strictly political purposes, correct? The Democrats have accused Trump of using his office to affect an election, correct?
Bob Moriarty: What are the Democrats doing?
Goldfinger: Obviously they’re playing politics because both sides are playing politics, right?
Bob Moriarty: Yes, but here’s what’s really funny. They just impeached the President because they accused him of using his office to affect an election and then they turn around and admit, and of course, everything that we’re doing in the impeachment fiasco is 100% partisan, so we can affect elections. Here’s what’s scary. There’s been an ongoing coup d’etat against Trump for three and a half years. They’ve done so many things that were illegal. It’s just staggering to me. You talked about rule of law. You remember the FISA issue with Carter Page?
Bob Moriarty: They withheld the fact that that Carter Page was a U.S. intelligence agent. He was operating on behalf of the CIA and they withheld that and said that he is not an agent. Okay. My God, everything that Mueller was doing and Brennan and those guys were pulling so much illegal crap, it was so amazing. Now, the whole issue about Ukraine shouldn’t be about Trump withholding military aid because Obama did exactly exact same thing. Joe Biden was on television saying, “If you don’t fire the prosecutor in three and a half hours, my plane’s leaving and I’m taking the money with me.”
Now for Christ’s sake, say you cannot have a situation where you call one guy black and the other guy white when they’re the same color. Everything that Trump has done, the Democrats have done. It’s a fiasco. It will go down in history as really the end of the American empire when it was so corrupt that 100% of the impeachment issue was political in nature. They’re going to go after Presidents because they didn’t like them, and it didn’t work with Mueller, it didn’t work with Comey, it didn’t work with Brennan . The FBI couldn’t stop him. The DOJ didn’t stop him the CIA couldn’t stop him. The NSA couldn’t stop him. The FISA court didn’t work. So we’ll try impeachment.
Goldfinger: Okay. I see your views and fair enough. I think this is going to be a quite an eventful year and definitely as we get closer to the presidential election in November, it’s going to get quite heated in this country because I, in my 40 years as an American, I can’t remember politics being this extreme in this country. The separation between Trump and the candidates on the other side are so far apart there. There’s no room for compromise, it doesn’t seem like there’s really any compromise. It’s going to be winner take all. But obviously the House and the Senate might be split still. So we might have that sort of balance of power where the Republicans don’t dominate the House as well as the Senate and executive branch? But we’ll see. It’s scary. Especially when our President is acting extremely un-presidential and attacks people with personal attacks on Twitter, and bans reporters from his press conferences. It’s like something out of a Communist or totalitarian country. This is not the America that I’ve come to know and love.
Bob Moriarty: Well, you’ve got to understand, and again, this goes to the issue of there being two sides. Donald Trump’s been under attack since before the election, okay? Absolutely no question. The FBI and the DOJ was doing things, are doing things today that are totally illegal. There’s so much crap going on. The whole impeachment thing was a set-up and the guys who set it up, as soon as Trump was elected, said, “We got to figure out how to take this guy down.”
I totally approve of the voters selecting the President. But once they’ve selected the President, that’s it until the next election. Now, I couldn’t stand George Bush Jr, okay? We’re the same age, we graduated in Texas in 1964 from high school. He went to Yale and I went into the Marine Corps, I became a fighter pilot. He got out of Yale, he became a fighter pilot. I went to Vietnam, he went to Mexico to snort coke. The guy was a drunk until he was 40. If he had been in the Navy or the Marine Corps, he would have been court martialed for missing a movement by not showing up for his flight physical. He clearly was doing illegal things and he got away with it. He was a total jerk.
Goldfinger: What do Donald Trump and George W. Bush have in common, Bob? I want to see if you can get this right.
Bob Moriarty: They’re both draft dodgers.
Goldfinger: Well, rich daddies, both white men, both draft dodgers, and both born with a silver spoon in their mouth and both became President of the United States.
Bob Moriarty: Worse than that, they were born with a silver spoon up their ass.
Goldfinger: (laughs) So starting to turn to junior mining, I notice you’ve been covering some new companies lately. But I want to talk about Irving (CSE:IRV) because I have to give you credit here. I think from one of our first conversations, maybe all the way back to 2016, you pounded the table on Irving.
I think the first time we talked about it, it was about C$.90 per share and today it’s C$4.50. I didn’t listen and even though i’ve traded it a little bit here and there, I’ve missed out on a tremendous move here.
One of the things that I have trouble wrapping my head around Irving is the results, they haven’t really put out a lot of information. So, it’s up to the investors to sort of piece together the puzzle by reading you and some other commentators.
What do you think has caused this most recent move up from three dollars to, I guess, about four-fifty a share in Irving?
Bob Moriarty: Well, I’m going to disagree with you on one thing. The strange thing about the Irving is that all the information has been available to everyone right from some of the very first press releases. They put out a press release where they took grab samples at the Omu Mine that graded $25,000 per ton.
Now, you just simply cannot have that in a vacuum. You can’t pick up one rock that’s worth $25,000 a ton without there being a lot more like that, okay? And, Quinton’s theory was, hey, wait a minute. This is a lot richer, a lot deeper than the miners actually understood.
When they released the first near surface drill results from the mine, seven out of eight holes showed ore-grade material in economic quantities. This is one of the most successful programs I’ve ever seen. There was very little gold mining, or mining of any kind, in Japan from 1943 until about five years ago.
Goldfinger: It’s the last frontier in a sense because it really has been untouched for over 70 years. But, at the same time, the company now has a more than $200 million market cap, and while it has some sniffs that there’s something there, as far as I understand, they have not produced a drill intersection that would truly warrant a $200 million market cap. Is that wrong?
Bob Moriarty: Well yeah, of course it’s wrong. The price is always right. Opinions are often wrong.
Goldfinger: Okay, but I’m not mistaken in saying that they haven’t produced a drill intersection of something like 20 grams over 20 meters or something spectacular, right?
Bob Moriarty: That’s true. But let me read something to you here. The discovery hole at Hishikari was .15 meters at 292 grams, okay? That is 43.8 gram-meters, which is how geologists like to measure things. The second hole that Irving drilled was .32 meters times 135 grams. And that’s 43.2 gram-meters.
I think it was about 113 or 118 or 128 holes before they had the discovery hole at HIshikari, and the discovery hole at Irving was the second hole. This is the most successful drill program I’ve ever seen. Let me give you a good comparison. Who has come up with the best gold mine in the last 15 years?
Goldfinger: Fruta Del Norte.
Bob Moriarty: Exactly. They had to drill 140 holes before making the discovery at Fruta Del Norte. And if you look at Keith Barron’s current company, I think he’s done like, 10 or 15 holes and he hasn’t hit anything but just rock, okay?
So, most drill programs take a long time to accomplish anything. Irving has spectacular results in the second hole. It’s a drill program. They require patience. So, yes the stock is expensive. However, the market is always correct.
Now, the market is anticipating results out shortly from hole 10. All of the drilled holes to date were from very high in the system and they shouldn’t have hit anything at all. And the hole 10 is the first hole that actually got down to where the ore-grade materials should be.
Let me give you something else that’s interesting and has been public knowledge for years. Are you familiar with the concept of a sinter? Do you know what a sinter is?
Bob Moriarty: Okay. Sinters indicate the very top of a hot spring. But sinters never contain mineralization. It’s just silica. When Quinton tested the sinter, I think that it came up with three grams to the ton. He made a really interesting comment to me when we were in Japan last time.
He said, “If you could use cyanide in Japan – which we can’t do – if you could use cyanide, the singer material alone would make mine. And that prints money because you could mine it with nothing but a bulldozer.
Goldfinger: What are the results that we’re expecting? You said hole 10 from this first deep target. Is that coming?
Bob Moriarty: But it’s the first deep hole 10 where the highest grade and biggest intercepts should be. It’s the first deep hole.
They’ve got to get below 350 meters. Now, they have said in the press release that they’ve gone through multiple horizons of multiple veins because they could see it visually. So, I’m going to tell you, I think it would be very good. This isn’t rocket science, you can see where the gold is.
Now, a lot of people would be looking at it and saying is it going to be okay to buy the rumor, sell the rumor? And I think it will be for a very short period of time. Because one of the things that nobody understands except me, 90% of the shares are held in the hands of about a dozen people.
Bob Moriarty: You’ve only got five or six million shares in the trading float.
Goldfinger: And Newmont Mining is also a large shareholder of Irving as well.
Bob Moriarty: Quinton used to work for Newmont. And if he had stayed with Newmont, they wanted him to become Chief Geologist, and he said, “No, I got to go out and make some money.” But, Newmont loved him and Newmont’s a big resource as well.
Goldfinger: Okay. And so, I notice that you talked about a few new companies lately. Which ones really stand out to you that you’d like to talk about now?
Bob Moriarty: Well, it’s very interesting you’d say that because I’ve had easily done 15 conversations with Keith Barron. I’m very close to Keith and I’m very close to Quinton Hennigh. I’ve written two of my books when I was staying at Keith’s chalet in Switzerland and we had a lot of interesting conversations.
He mentioned the lost cities and it’s something he talked to me about, to me and Barbara about a dozen years ago. It’s not a new story. It’s a very old story. But when they were out doing the regional ground exploration they came across some oxide, copper, silver at surface. They did some looking into it, and it’s called a Kupferschiefer style of mineralization. It runs all the way from Columbia down to Chile, but I think Aurania found 23 kilometers by 4 kilometers of oxide copper on the surface.
I talked to him and said, I know you’re looking to those lost cities and it’s some gold that’s really interesting but a billion dollar gold company is a big company and a billion dollar copper company is a really small company. You may have something a lot bigger and send a Kupferschiefer style copper, silver system, and he said, okay. He actually came out recently and staked a lot of ground because he even ran into Northern Peru and he staked a lot of ground in Peru.
Well, I have been following a company that’s called Hannan. H. A. N. N. A. N for almost a year now. Quinton and I talked about it. He came up with it and said “you should take a look at HANNAN.” We didn’t think they understood the implications of it. I would buy the shares at whole share. Here’s one thing, it’s very important for shareholders to understand. NOVO would have a market cap recently of over 700 million. For NOVO to double, it’s very hard because you have add another 700 million in market cap. Irvinfs up to around 200 million, something like that. Irving could double by adding 200 million. But when you’ve got companies like Hannan – Hannan had I think a $3 million market cap when I was buying it. It’s really easy, for $3 million companies to double in fact I found shares for a nickel in August and Hannan’s shares are right now at $.27.
Goldfinger: So you know with Hannan, it’s cheap. I mean it’s a 15 million market cap or thereabouts now. What do you think the size of opportunity is here? What about the management team at Hannan, can you tell us a little bit about them?
Bob Moriarty: Michael Hudson runs it, he’s Australian. I talked to him and I emailed him. I’ve never met him, he seems reasonable. Quinton is with the company. As an advisor. Rick Rule of Sprott just put a bunch of money into it. I think it will be successful. They just raised money at 15 cents a share and they expect to stake a lot of ground and they will be drilling sometime in the next six months. Could they go from 15 million to 75 million? Very easily.
Goldfinger: Where are their projects located?
Bob Moriarty: In Northern Peru.
Goldfinger: Is there any update on Lion One?
Bob Moriarty: Lion One, it’s rainy season right now so there won’t be drill results coming out anytime soon, but it’s a fairly quiet period but everything the Lion One has done in the last six to eight months have suggested that Quinton coming onboard is helping move them forward rapidly. It’s been very beneficial to them. Here’s in essence what happened.
You have a serial entrepreneur who’s taken half a dozen companies from $10 million, got them up to 500 million or a billion and then he sold off and made bunch of money. He was running the company and he was trying to keep expenses down, not the issue in a lot of shares. They were calling it an epithermal system and from a technical point of view it is a totally different kind of system. It’s an alkaline system and they run much deeper than ordinary epithermal systems.
Alkaline systems run much deeper and I’m baffled as how they concluded it was epithermal because the Emperor gold mine is about 15 kilometers away and it was clearly an alkaline system. I don’t think they realized what they had, but they had actually got the permitted for mining and they were going to go into production at 75,000, a 100,000 ounces a year and they started construction and Wally got together with Quinton. Quinton says, “you need to stop everything that you’re doing because what you’ve got is so much bigger than you realize. You need to drill deep, you need to do a property wide BLEG survey. And they have come up with an enormous amount of data. Now the interestng thing is that Wally announced a private placement say two months ago, three months ago at 80 cents. The shares were about a $1.20 and typically the share price will drop down to the private placement price. People the free trading shares so they can get into the private placement to get the warrant.
And in fact they didn’t do it. It dropped back to about 90 cents and by the time that they closed the placement, the shares were $1.60. And the interesting thing is if they’ve got the ability to advance the exercise of the warrants, they can force the warrants. Okay. The placement price was for shares at 80 cents with the full warrants at $1.20. And if the shares trade over a $1.60 I think for 10 days or 20 days, they can for exercise of the warrants. So the interesting thing is, I think they took in 12 million, 15 million, something about that. But as soon as the shares get free trading, they’ll accelerate the warrants. So they’re going to bring in about $30 million. If they can’t find a lot of gold for $30 million they need to think about getting a real job.
Goldfinger: And those are very interesting companies, but larger market caps than a lot of juniors, that I follow. I want to transition to another subject, which is financing. Their financial risk. And I think this is an important topic that investors in the sector should understand and have some knowledge about. I mean, first of all, financing and the ability to finance is the life blood of the junior mining sector. If a company can’t raise money, they can’t pay their management, they can’t pay their employees, they can’t drill. They’re dead in the water. And so in their markets, only the past companies were the best management teams were able to finance.
And there’s a lot of companies that really can’t raise money in a bear market cause nobody’s interested in backing them and people were tired of losing money. We’ve seen a shift. Let’s say in the last six months or so, where pretty much any company can finance in the junior mining sector. The only difference is the terms of the financing. If a company has a great management team and a great project, they can raise money with no warrants and raise out the market or even above the market. Sometimes companies that don’t have as good management teams or as good projects, usually they have to price a private placement below the market and they might even have to give full warrants.
But I think it’s really important for when a company has a small market cap. I think that ‘small’ is under $10 million. When they’re able to finance and they have money in the treasury and they can actually go out and do some real exploration work, it gives a lot of potential upside when the financing risk is off the table, and I would like to bring up an example.
A company that I follow closely and own shares in is Argo Gold (CSE:ARQ, OTC:ARNGF), which is ARQ on the CSE, and they are about a C$5 million market cap. They were down to about $500,000 in the treasury, which is not really much, it’s just enough to run your day to day operation, but not to actually do much field work or drill. And they announced a C$1,080,000 financing with Eric Sprott – Eric Sprott has been prolific in terms of financing the junior mining sector in the last year. I think the amount of money he’s pumped into junior mining companies is now over C$200 million just in the last six or seven months. And the stock is up 30% on the back of this financing, even though the financing was done at 9 cents, simply because the company has money to explore and drill now. Instead of being dead in the water and not making much progress, Argo can be aggressive and really get things going at Uchi (Argo Gold’s flagship Uchi Project near Red Lake in northwestern Ontario). This makes a huge difference in terms of market/investor perception and in terms of news flow.
Once the financing risk is off the table, it’s almost like every junior, and I know I’m going to get some flack for this comment, but I really think this is true even though it’s a general statement that errs on the side of an exaggeration. Every junior should have a C$10 million market cap if they can get financed, because if they can finance and if they can carry out exploration work, the worst case is off the table. So when you have a $5 million market cap, a 10 cent share price, and suddenly they have $1 million or $2 million in the treasury, there’s no reason the stock shouldn’t double. Because now they can go actually do some real work on their project and advance things along. Am I crazy or is that a fair assessment?
Bob Moriarty: You’re correct, but there’s something you’re missing. You are absolutely correct that in a bear market, 950 of 1,000+ juniors couldn’t raise squat. You need $1 million a year to keep your telephone turned on and the electricity switched on. They would do a million and a half dollar placement and spend the bulk of it on administration. In fact, none of the money went into the ground, so nobody had any success. We’re in a transition period between bear market and bull market, now you can sort of raise money if you’ve got a really great story today. Companies like Novo and Irving and Lion One have been able to raise money.
We will eventually get to a point where anything with silver and gold in it, people are going to be throwing money at. We’re going to have the biggest bull market you’ve ever seen. How do I know that? Well, what is the most absurd valuation of any company in the United States today?
Goldfinger: Are you going to say Tesla?
Bob Moriarty: Bingo. They’ve got a market cap higher than Volkswagen or GM, Ford and Fiat combined. Okay. Now come on, guys. It’s a scam. I got involved in the stock market starting in 1970. As a stock market matures, you eventually get to the point where you’ve only got four or five stocks that are making all the gains. Now, do you remember ever hearing the term the nifty fifty?
Goldfinger: Yeah. I wasn’t born yet but I have definitely read about it.
Bob Moriarty: Yeah. Well, literally in 1969, the market topped and started crashing and the general word was, the theory was you can buy into the nifty fifty – IBM, AT&T, Avon etc…. Well, in fact, in the 1974 bear market they crashed and the nifty fifty became the not so nifty fifty. The breadth of the market today is worse. Every metric says we’re at a market top. I think the coronavirus just burst the everything bubble. I think it’s far worse than anybody realizes and I think we’ve seen a market top. We’ve seen the greatest consensus in history on January 2nd. If you use a fear and greed index, we’re the top. Okay? We’re going to crash from here. When that happens and when silver and gold have clearly turned the bottom after a correction, which we’re in right now, we’re going to have a market that’s going to blow the socks off every investor that’s has money in gold and silver.
Goldfinger: I wanted to bring up Tesla to you. Extremely controversial stock, extremely controversial company. I’ll sort of play both sides of it. I’ll make the bull case and the bear case. A bull case is Tesla’s cars are better than any GM or Ford or any of those other companies’ cars. They’re sort of reinventing the automotive industry. You’re driving an iPhone when you drive a Tesla. That’s the bull case and the bull case is, well, if the entire world is the market, $100 billion or $150 billion market cap doesn’t even scratch the surface of what’s possible. The bear case is, well, the valuation is unsupported by earnings to date, but that’s the way it always is with a growth company like Amazon or Apple. They grow into the earnings down the road.
Then the bear case is also that, well, competition. All these other car companies that are going to make the same products essentially, and they’re going to cut prices and eat into Tesla’s margins. But it’s controversial which case wins. Right now, the bulls are winning because maybe this is just a massive short squeeze. I see your point from a broader stock market perspective that maybe this is the last thing to suck in the retail crowd as they see Tesla’s share price skyrocket and they say, “Oh, I need to get into that now.” At $900 a share, the crowd’s going to chase in here at $900 a share because they don’t want to be left out. Maybe that will be the final milestone moment for the end of this bull market. It’s certainly quite surreal to see TSLA shares make new highs almost every day while we hear about 400 million in lockdown in China due this virus outbreak.
Bob Moriarty: Here’s what’s funny. You use fundamental and technical analysis arguments and I ignore those totally. The only thing I’m interested in is sentiment and all I need to see is this TSLA chart to know that this is a top:
This is not near the top, this IS THE TOP in TSLA. This is Bitcoin on December 14th, 2017 and this is silver in late April 2011. I called both Bitcoin and silver exactly right to the day, TSLA will be no different.
Goldfinger: So this is it? TSLA is trading $920 per share as we speak on February 4th, 2020 and you are saying this is the top?
Bob Moriarty: This the top and the herd is going to lose a fortune as this bubble unwinds.
Goldfinger: This conversation was interesting as always Bob, thank you for your time and insights. We will see how this Tesla story unfolds and brace ourselves for the election year ahead.
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