Just before the Fed announcement and dot plots created market mayhem last week, I had the opportunity to speak with 321gold founder Bob Moriarty. We discussed great drill results from E79 Resources, seasonality in junior mining, a bubbly market environment, why Bob thinks we are going to have a market crash in the next 3-4 months, and several individual companies including NuLegacy Gold, Eloro Resources, Banyan Gold, and NEO Battery Metals. Without further ado, Energy & Gold’s June 2021 conversation with Bob Moriarty….
Goldfinger: Bob, it’s great to speak with you today. There is so much to discuss, where should we begin?
Bob Moriarty: Here’s what’s funny. I read your article today on E79, and those were superb results. Good job being early on that one.
Goldfinger: Thank you Bob, E79 drilled into a jewelry store! 2,400 grams per tonne gold over 0.6 meters, and four separate bonanza grade intervals in the same hole. The only other company I’ve seen that drill grades like that this year is another one you own, which is New Found Gold (TSX-V:NFG).
Bob Moriarty: I’m going to tell you something. I can’t prove that it’s true, but I believe that it’s true. There are a number of companies like Great Bear, like Amex, like Sokoman, like E79, like Labrador Gold, Tectonic in Alaska. They’re all coming up with some great results.
Goldfinger: In Newfoundland, it seems like we have a little bit of a gold rush, or a lot of a gold rush. And this area of Australia, which is a country that you know a lot about, the Victorian Goldfields is becoming a really exciting area for gold exploration. This is near where Fosterville is, Kirkland Lake’s mine which is the highest grade gold mine in the world. This area where E79 has drilled these ultra high grade intercepts has had a lot of historic gold mining, much of it is alluvial gold. This is an area of Australia in the province of Victoria where you could walk a couple miles through the countryside and you might stumble on a five ounce gold nugget. This is really the area of Australia or one of the areas of Australia, which has made the country known for its really, really high grade gold.
Bob Moriarty: Yeah. Absolutely. Well, I’m thrilled to see it, because it helps investors. They got a shot, a real shot. You know exactly how I feel about Bitcon, but this is real. There are some good shares that are just doing some exceptional things.
Goldfinger: Absolutely. Let’s talk a little bit about gold and the juniors… I did an interview with Trevor Hall of Mining Stock Daily last week, and we talked about junior mining seasonality. There’s a few seasonal patterns that this sector follows almost every single year. One of them is this concept of sell in May and come back in late August. What are your thoughts on the summer doldrums in the junior mining sector, and how would you recommend a smaller investor, somebody who’s maybe new to the sector, play some of these seasonal trends?
Bob Moriarty: Well that is absolutely accurate, but there’s something missing. You’ve been around long enough that I don’t think you’re going to miss it. If you were going to invest on a single day every year, what would it be?
Goldfinger: Tricky question. If I were to invest on a single day every year, what would it be? I’m not sure.
Bob Moriarty: It would be at the end of tax loss selling season. Every year people clobber all of the stocks that have gone down, and anywhere from December 15th to about December 22nd or 23rd, if you invest in the stocks that have gone down the most and you hold them for six weeks, you will be profitable just about every single year.
And that’s true at Bear Markets and it’s true in Bull Markets because people get carried away. They sell too many shares and the shares recover. Now I do agree that there are usually two periods a year, one in December, and one in June or July where you tend to have a low. So the seasonality is true, but the tax loss selling season is a license to steal.
Goldfinger: Okay, so there’s a couple of key trends. So there’s tax loss selling season, which usually reaches its climax at some point in December, and that’s usually a really good time to buy. Then there’s the seasonal trend of exploration companies in the far north that drill during the summer. So they are buying in anticipation of drilling starting in May and June, and then there’s some selling on the news three or four months later in some of these drill plays like the Yukon or the Golden Triangle stocks.
Would you also say that in the summer, so as these companies are drilling, as people are traveling, going on vacations, they’re not spending as much time focused on the market. There are some opportunities to put in some stink bids during these summer doldrums where markets are a little thinner and maybe they would, if somebody sold a lot of shares, it would cause an outsized move and maybe a buying opportunity. Is that something that you would look to do?
Bob Moriarty: Yes. Absolutely. The other side of the picture, let’s talk about the Yukon stocks, because they’re a perfect example. People get very eager to buy into them in April, May and June, because they can see them starting to drift, and then they tend to sell off after October, November when all the results come out. But if you go into January, February, March these guys have gone for no news for up to six months. Everybody’s bored. If you put in stink bids, you could get some great executions.
Now I say it in my books, and I believe that nobody’s ever tried to argue that to me. Because investors can go in and buy $500 or $1,000 worth of stock, they have an absolute advantage over the funds. It’s the only area that I’ve ever heard of that small investors have an edge. You go in a stock that’s trading at eight cents, you put a bid in at 5 cents. You don’t care if you get it or not. If you get it, you just bought it almost 50% cheaper, and if you don’t get it, you don’t care.
So small investors have a tremendous advantage, and I think you pointing out the seasonality and trends, say for the Yukon stocks, can be very valuable. And tax loss selling season can be very valuable.
Goldfinger: Some excellent points there on seasonality. We also obviously have talked a lot about sentiment in the past, and I know that sentiment is something that you follow very closely. Where do you get the sense that sentiment is in gold and silver, copper, oil, the broader stock market? Are you seeing anything in terms of market sentiment that stands out to you right now?
Bob Moriarty: Yes, absolutely.
Goldfinger: And what is that?
Bob Moriarty: Okay. If you went to New Zealand and you bought the most expensive house plant they’ve ever sold, how much do you think that would cost?
Goldfinger: A house plant?
Bob Moriarty: House plant.
Bob Moriarty: About $19,200.
Goldfinger: For a plant?
Bob Moriarty: For a plant. For a fucking house plant.
Bob Moriarty: Let me read it to you because it’s so funny. A house plant with just nine leaves has sold for a record breaking $19,297 on a new table in the auction site. And it works when you realize that somebody just paid 20 grand for a plant with nine leaves, you wonder, you know, if it had like 20 leaves, would that be like a $50,000 plant?
One of the things, and strangely enough, I’m always looking for sentiment, and sentiment can be measured in a lot of ways. When an NFT of a fart sells for $89, and an NFT of a photograph sells for, I think it was $69 million. Now remember the NFT of the dog meme, the dog that was in the doggy coin?
Goldfinger: Right. Yes.
Bob Moriarty: That went for $4 million.
Goldfinger: So what is this all telling you about market sentiment?
Bob Moriarty: It tells me that people are dumber than they’ve ever been in the history of the known universe. Okay. Somebody just sold an imaginary statue. Did you follow that?
Goldfinger: I’ve given up on following all these stories because they just get crazier and crazier.
Bob Moriarty: Strangely enough, they do. You can sense something that’s really important. They get crazier and crazier and crazier until when?
Goldfinger: Until the bubble pops. Right?
Bob Moriarty: Thank you. Thank you. Okay. So what I’m looking for is how stupid is it going to get, and I’ll be candid. I never dreamed of people selling imaginary statues for millions of dollars, or NFT’s of a dog for $4 million, or NFT’s of farts for $89. Your house plants for $19,000. We are at peak stupidity. We are in the greatest bubble in world history. We have people betting on absolute stupidity, and the bubble’s going to burst very soon.
Now I’m going to tell you something that’s my opinion. I do not want you coming back and holding my feet to the fire. I’m serious. It’s an opinion and I can easily be wrong, but I believe that we’re going to see a peak in the stock market in the July, August, maybe early September area, and we’re going to have the biggest crash in history in October. It could easily take gold, silver down with it in the same way that they got crushed last March, March of 2020, and that it was not a sell signal. That gives a signal that bad shit is going to happen soon, and you need to figure out what you’re going to do about it.
Now by and large, I’m just going to sit through it. Okay. I’m going to keep some cash handy for plucking some low hanging fruit, but I think that we have reached peak stupidity. I think the bubble’s going to burst, and I think bad things are going to happen in the next 3-4 months.
Goldfinger: Okay. So hold on a second. You know that if you tell me all that in an interview, that’s going to be published. If you’re right, I know we’re going to talk about this. Just like when you were right in March of 2020. We’re going to talk about it, and if you’re not right, we’re going to talk about it too, because that’s only fair, right?
Bob Moriarty: Yeah, but Robert, here’s the problem. We have never talked about me being wrong.
Goldfinger: (laughs loudly)
Bob Moriarty: I will pat myself on the back a little bit. You can go back to 2008 at the Gold Show in Vancouver in January. Joe Martin required everybody to give their speech a title, and I don’t do that. I think what I really want to do when I speak in those shows is I want interaction with the audience. I want to know what they’re thinking. But I went along with it.
So I titled the speech “The Crash of October, 2008” That was the day, I think it was the MLK Day Holiday, something like that, that was a day that there was a mini crash in the market. So I got up to speak and I did okay. I told Joe that my title is, “The Crash of October, 2008”, and if you don’t believe I’m correct, get up, walk out of here, go home and turn on your fucking television and you can watch it.
And of course I was absolutely correct. And in December and January of 2019, I said we were going to have a massive crash, and I repeated that in February, and of course we had that crash in March. I was pretty accurate. My feeling now that’s very important to understand is I absolutely could be wrong. I don’t think that I am. I think we have very bad times coming.
Goldfinger: Okay. So you see this environment of speculative froth, the speculative fervor, all of these weird assets, all these Pokemon cards, Beanie Babies, Doge Coins, Safe Moon, CumRocket, house plants, baseball cards, Wayne Gretzky rookie cards, 1933 gold double Eagles, all these, everything you could possibly imagine that somebody can claim has some rarity value is being bid up to insane prices.
But we must know that prices are priced in fiat currencies like the dollar, and we know that the government has created an incredible amount of currency of dollars out of thin air in the last year and a half to fight the pandemic and what they perceive to be an economic crisis. So isn’t all of this craziness just a by-product of fed monetary policy and government passing stimuluses where they send people $1,200, $1,400 checks all the time?
Bob Moriarty: Yeah, absolutely. That’s a very valid point. My rejoinder to that would be, okay, you got the world’s largest balloon. What happens if you keep blowing into it, of course the obvious answer is it blows up. The secondary thing is you go out, you go to a hardware store, you buy the most powerful bow and arrow that you can buy, and you go out and you shoot it at a 45 degree angle. The one thing that you can guarantee is no matter how high it goes, it is going to come down, and yes, absolutely the federal reserve pumping money into the system, we have gotten to the point of stupidity when the government’s bringing in $3 trillion in taxes and it’s got a budget of $6 trillion. That’s just peak insanity.
So we’ve got a bubble. The bubble’s going to blow. It’s only a question of when it blows. Markets like to crash in October. We got an October coming up this year, so that would be a good time for a crash.
Goldfinger: I think this market environment is very weird. It’s very unusual. I can’t necessarily exactly articulate it all, but just in the last week or so, the S&P 500 has essentially traded in a half a percent range. The VIX is down to 15 again. We have some sectors like homebuilders rolling over and looking like they put in a major top while other sectors are making new highs. It’s a very odd, unusual market environment.
I can’t say that there’s anything in my memory that reminds me of this market. It’s like nothing I’ve ever seen before. Then as you mentioned, all of this speculative madness and all these different assets and what have you, it’s a very unusual situation, but I think it’s all underpinned by the prospect of easy money, and more and more easy money for a long time to come. I don’t think that’s going to change, because what would happen if the fed were to sell off some of its asset holdings and raise interest rates?
Bob Moriarty: When you say that, that’s exactly what you’re doing. When you raise the next important issue, what happens when they are reversed? And we’re about to find out because that’s precisely what they’re doing right now.
Goldfinger: But can they reverse it, Bob? We’re talking about an $8 to $9 trillion balance sheet. Maybe they’re selling $10 or $20 billion of corporate bond holdings, a very tiny sliver, but they can’t reverse quantitative easing, not in any meaningful way.
Bob Moriarty: Yeah, they can. Okay. But what it’s going to do is it’s going to blow the whole system sky high. The feds have painted themselves into a corner. Biden and the fruitcakes who are running the government now, these guys are utterly clueless. I can’t imagine they could be even dumber than they are, even the feds. Oh yeah. There may be transitory inflation. Really?
Goldfinger: Yeah. So that’s a big question. How are bond yields still so low? The 10 year Treasury note yield is at 1.5%. How is it at 1.5% if we’re seeing all this inflation in all these input costs like lumber, copper, widgets? The price of everything has gone up a lot in the last year. So how is the 10 year yield only at 1.50?
Bob Moriarty: Well it’s because people want a guaranteed outcome. Now, when you and I go buy a stock, what are the only two things that can happen?
Goldfinger: It can go up or go down.
Bob Moriarty: Exactly. But we’re not sure which one it’s going to do. The beauty about going out and buying a bond now is you know exactly what’s going to happen.
Goldfinger: You’re going to lose money over time,
Bob Moriarty: Duh.
Goldfinger: But why are people still buying them?
Bob Moriarty: Did I mention peak stupidity? Did I throw that into the conversation? Should I have covered that a little bit more deeply?
Goldfinger: I know. It’s crazy. Okay. So let’s wrap up with a couple of specific conversations about some junior mining companies. I know you don’t like this question, but I’m going to force your hand here a little bit, because I really want to hear what Bob Moriarty’s top two or three favorite stocks are, two or three stocks right now that you’re really excited about?
Bob Moriarty: Okay. I need to know the timeframe, because if I were investing for two years and just going to sit on stock, I’d buy one thing. If I was going to invest for the next, say, three months, I would buy something else.
Goldfinger: How about 12 months?
Bob Moriarty: My number one stock would be NEO Battery Materials (TSX-V:NBM), and here’s why. The state of batteries, lithium batteries today really sucks. The electric cars don’t go very far. It takes a long time to charge. They’re very inefficient for a lot of reasons, and the only reason they sell at all is because the government is subsidizing them. What I didn’t realize was if you could put a silicone coating on an anode, you can get a charge that’s five times faster. You can get a thousand cycles out of the battery, and you get 20% more range. It’s one of those magic things for somebody who’s at exactly the right place and the right time.
The key is, at the very least, in nine years, batteries are going to be a trillion dollar market. So something as simple as an anode, it might cost you a dollar to manufacture and you could probably sell for a hundred. That could be a giant winner.
Goldfinger: So that’s one company. Do you have another one?
Bob Moriarty: The biggest project that I ever bought into is in Bolivia. It’s called Iska Iska and it’s owned by Eloro Resources (TSX-V:ELO), and it’s going to be a billion tons, or two billion tons, or three billion tons. It’s going to be enormous, and it’s not a low grade deposit. It’s a relatively high grade deposit at surface. It has gone from a $.14 stock in early 2020 to a $6 stock earlier this year.
Goldfinger: Eloro is an exciting story. One of the best performing junior mining stocks over the last year. Seems to have definitely gotten some attention now. But when you think about the size that this project is and the depth extent that this could be, and the fact that they may not have even drilled into the highest grade feeder system zone yet. The potential here is really enormous, and they’ve been kind of hampered by, well, they’ve definitely been hampered by the COVID situation in South America, and the labs have really, really slowed down.
Have you heard any updates on the timing of, you know, assays from Eloro, and are they drilling with three rigs now or have they expanded to a fourth rig?
Bob Moriarty: I’m pretty sure they have three rigs. I hold conversations with Tom Larson all the time. I told him twenty times he really should have 15 drills turning. The issue is the length of time that it takes to get assays. Quite bluntly, because COVID in South America and because of the Canadian government and US government paying people not to work in the US and Canada, every mining company in the world is trying to operate with their hands cuffed behind them and a weight put on their feet, and they’re thrown into a 20 foot pool. It’s very difficult to be running a mining company right now, but at the end of the day, the silver and tin, it’s going to be there, and I think it’s going to be a giant success.
Now there’s other companies that I haven’t mentioned, like Sokoman, like Labrador Gold, like New Found Gold, who have done extraordinarily well. However, they’re not cheap, and if you’re going to make money, you have to be buying stuff when it’s cheap and selling it when it’s expensive.
I’ll give you one more that’s kind of a crap shoot, but it’s NuLegacy (TSX-V:NUG) and they are at $.14 per share now. If they hit, they go to a buck of share, and if they don’t hit, 7 cents a share, From a mathematical psychology point of view, that’s a good bet.
Goldfinger: That is a good bet. I don’t know if you’ve been following it, but one of the better performers of 2021 is a Yukon gold producer, Victoria Gold (TSX:VGCX). They are producing about 200,000 ounces of gold a year, and one of the neighboring companies is Banyan Gold (TSX-V:BYN). So Victoria is being hunted essentially as an acquisition target by Coeur Mining (NYSE:CDE), a pretty large mining company that’s taken a large stake (17%) in Victoria in the last few months, and the stock of Victoria Gold keeps going up. It’s risen as high as $22 a share recently, about a C$1.3 billion market cap. Victoria owns a nearly 10% stake in Banyan Gold. Banyan is working hard, drilling with 2 rigs to expand their gold resource at the AurMac project, about 20 miles away from Victoria’s Eagle Gold Mine. Banyan is well on its way to have a 2+ million ounce resource at AurMac and it currently has about a C$55 million market cap.
So I think that’s something that readers should maybe pay attention to and look into, because there is a big difference between a $55 million valuation and a $1.3 billion valuation, and Victoria is an example of what could be possible in the future for Banyan.
Bob Moriarty: Let me give you an analogy. I’m really glad that you mentioned both those companies, because I know them intimately. Victoria Gold, it’s run by Tara Christie’s husband and Tara Christie runs Banyan Gold. While Victoria Gold has done extremely well this year, it’s only up a hundred percent.
When you buy a stock, it’s not a question. Well, gee, it’s got a $2 billion market cap, like New Found Gold, but when you’re buying New Found Gold, the problem with it is, what are the odds of it going from $2 billion to $4 billion? Now, I absolutely think it’s going to go for $4 billion or $6 billion or $8 billion or $10 billion, but it’s not going to do it this week or next.
Banyan on the other hand, at C$55 million, could Banyan go from $55 million to $550 million? Absolutely. That’s why I love different stocks like New Legacy, because I’m looking for something that will increase in percentage return. And one thing, Victoria doesn’t have that much potential any longer but Banyan and a New Legacy do.
Goldfinger: Fantastic, Bob, thanks for your time today. I think we’ve had a really worthwhile conversation and there were a lot of gold nuggets of wisdom here today.
Disclosure: Author owns shares of Banyan Gold and Eloro Resources at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Eloro Resources Ltd.
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