In this month’s conversation with 321gold founder Bob Moriarty we discuss the negative investor sentiment in the junior mining and commodities sectors. Bob also believes that investor sentiment on the US stock market has reached frothy levels, and the broader stock market is set up for a crash as soon as September. We then delve into Eloro Resources’ MRE announcement and discuss why the market reaction was so negative. We conclude by discussing a company that Bob says has been generating the best gold drill results he’s ever seen in his life. Without further ado, Energy & Gold’s August 2023 conversation with Bob Moriarty…
Goldfinger:
I think the first order of business is to talk about the overall market environment and the end of August. In fact, I think you probably read the blog I wrote yesterday called “The State of the Junior Mining Sector: 2018 Redux”. And the point I made was, gold is holding above $1900. In fact, it’s actually above $1970 this morning, and companies are putting out good exploration news on a pretty regular basis across the sector. Yet the junior mining sector has had horrendous sentiment for the last couple of months. This is some of the worst sentiment I’ve ever seen. A lot of companies are cutting back and not attending conferences, they are preferring to wait and see how things play out after Labor Day.
What’s your take on this current market environment?
Bob Moriarty:
Well, strangely enough, what we should have done is you put out that piece under your name and my name, but I didn’t have to contribute anything because you pretty much nailed it. As you know I’m a contrarian. And believe me, when everybody hates commodities, when everybody hates junior mining companies, the sentiment is horrible and people don’t want to advertise and they don’t want to spend money on conferences, that’s the opportunity of a lifetime. We’ve discussed this literally for months, I believe the general stock market is on the edge of a cliff, and I’ve said so publicly, and we’ll know in the next month.
Goldfinger:
So the general market is on the edge of a cliff. What could push it over the cliff?
Bob Moriarty:
The internals of the market are horrible. And there are so many things going on, like the Chinese property fund (Evergrande Group) that’s failing, and high interest rates, and the Fed saying they’re going to continue to raise interest rates, commercial real estate and homeowners are waking up for the first time in 20 years to how important the cost of interest is on a 20 or 30 year mortgage. So there are so many internals that are collapsing that I personally just can’t see any alternative other than a massive crash.
Goldfinger:
One of the ideas that I’ve read recently that could play out is the situation where the labor market is starting to finally show some cracks. We’re starting to see employers pulling job openings and employees not being as choosy in terms of taking jobs and asking for wage increases. So we’re starting to see some cracks in the labor market. But the economy overall seems relatively strong. I mean, it’s held up so far. This idea of a 70s U-turn in inflation where the Fed pauses for six months or so and inflation comes back and it creates an even bigger mess.
If inflation goes from 3% back to 5% or even higher, and the Fed has to do a lot more tightening. A scenario like that is going to be way more painful than the first set of rate hikes that got us up to 5.5%. What are your thoughts on this idea of a 70s repeat?
Bob Moriarty:
Well, strange enough, because I lived through the 70s and I watched it play out, I’m convinced there’s an 80% or 90% chance of that happening. Did you happen to see what the latest contracts for UPS drivers total?
Goldfinger:
No, I didn’t see that.
Bob Moriarty:
A UPS driver without a college education can make about $170,000, $100,000 in wages and $70,000 in benefits. And there are airlines that are negotiating a 40% increase in wages over four years. I don’t believe for a minute that inflation is dead.
We’ve just got so many bad things coming. I have to say, I’m convinced we’re going to have a crash. And strange enough, you can go back to 2001. I’ve made a lot of accurate predictions and we’ll just have to see if I’m correct this time. But I absolutely believe the next move in the major stock market is down. But I will give credit to gold. Gold and silver have done very well and I think they’re headed higher. And one day soon somebody’s going to wake up to the opportunity in commodities and resource stocks.
Goldfinger:
Yeah, I mean, this is a very strange environment with gold actually really trading well. And if we keep it simple, gold is in an uptrend. Gold is above its 200 day moving average. Yes, it’s down from its May high, but it’s still close to $2,000 an ounce. And yet the daily sentiment index for gold was as recently as last week down to about 20. Have you ever seen anything like this where the gold price is actually trading pretty well, but the sentiment is so negative on it?
Bob Moriarty:
No, I haven’t. The Dailly Sentiment Index for gold actually got down to a low of twelve a couple of weeks ago, but the price wasn’t bad at all. But I am a believer in sentiment. Sentiment says gold and silver are going higher.
Gold (Daily – One Year)
Goldfinger:
Yeah, it’s true. And there’s a lot of reasons why gold shouldn’t be going higher, including positive real interest rates. But something seems to be driving it and holding it up. Do you think that part of the explanation could be central bank buying and China really loading up here?
Bob Moriarty:
That’s certainly true. Now, you know, 95% of what I pay attention to is sentiment, but obviously there are other factors. And I think central banks realize the trouble the west is in financially. This just isn’t the dollar. I mean, Europe is collapsing. There have been 500,000 bankruptcies in Germany alone. And it all goes back to the sanctions a year and a half ago, which were economic suicide.
Goldfinger:
It’s interesting that we had all those sanctions and natural gas soared and the cost of heating a home in Europe soared. But we had a mild winter, and the natural gas price has cratered since. Do you see that as being a problem again this winter, or does Europe have this situation all figured out now?
Bob Moriarty:
Well, I think the leadership in Europe overall is so poor, they’re totally clueless. The sanctions were stupid. There was no purpose to them whatsoever. They hurt Europe without hurting Russia. They hurt the United States as well. I mean, the IMF just came out with a report on the total. Let me think about how they put it. The total decrease in economic capacity for the United States and Europe. And it was down, like, $6.9 trillion, and it was actually up for Russia. The sanctions were stupid. It was part of this plan by the United States. Like, we control everything. We make all the decisions. And I think one of the things we need to talk about is BRICS. I think the meeting that just concluded was one of the most significant economic events in 500 years.
Goldfinger:
So tell us about the meeting in South Africa. What happened? And is there going to be a new BRICS currency coming about?
Bob Moriarty:
Well, that’s a really good question, and someone slipped in a mickey and said they were going to go to a gold currency and announce it at the show. But the problem with it is India’s dead set against, and I was fairly certain in advance they would not be announcing a currency. What was significant was they had five members, they’re adding six more, and they’ve got 30 people who have applied. When you look at the numbers, the people in bricks now control, or will control, 80% of the oil market in the world and about over 55% of the world’s economy. The United States and Europe is ignoring BRICS, and I think they’re ignoring it to their peril.
So while BRICS has not announced a currency, I think down the road, when things come unglued, people are going to realize the only solution is to go back to a gold based currency, because it works. Now, India has just announced that they’re going to be trading for oil with rupees. And that’s just not going to last very long. I mean, rupees? They print rupees on used toilet paper.
Goldfinger:
They could have a common currency for trading purposes, to settle trade between countries, right?
Bob Moriarty:
Well, the problem with that is, yes, they could. However, everyone is trying to defend what they perceive as their self interest. So I don’t think they will come up with a common currency. There is no simple common currency. However, what any country could do immediately is announce their time, their currency, to gold. If they did that, they would be the richest country in the world.
Goldfinger:
And how could that happen? I mean, tying it to gold, that means they would have to continue to hoard gold as the supply of the currency expands over time, right?
Bob Moriarty:
No, not at all. That’s a mistake that everybody makes. You don’t need a single ounce of gold to have a gold based currency. The only thing that gold does for currency is give discipline. Now, if you had discipline, which governments never do, you wouldn’t need the gold. Okay? So inevitably, yes, you need gold. But the question is, how much discipline is there? Now, we had discipline in 1944 because literally, we controlled, I think, 80% of the gold reserves in the world. But through Korea and Vietnam, we squandered all our gold, which is really stupid. And France realized, hey, wait a minute, the US. Is running out of gold. So literally, France started to run on gold, which started the gold going up from 35 to 42 and then being totally uncontrolled.
However, if you go back to the French revolution, starting in 1789, when Napoleon took over 1796 and the currency was totally out of control, he said, it’s bullshit. Okay? And he went back to gold and silver. Any country in the world could go back to gold or silver right now, and everyone would want to trade with them. But you don’t need gold. You need discipline.
Goldfinger:
Discipline, that’s something in short supply these days, especially when it comes to government spending.
Bob Moriarty:
Nah, nah. It’s always been in short supply.
Goldfinger:
Let’s turn to junior mining. So one of the companies that we have talked about many times is Eloro Resources (TSX:ELO). Eloro put out a maiden resource for their flagship project, Iska Iska. Now, the resource size is very impressive. We’re talking about over a billion pounds silver equivalent, 670,000,000 tonnes in total. However, this is a unique maiden resource estimate. I haven’t seen one like this too often. Usually the average resource grade would be in grams/tonne (for gold and silver) or a percentage for base metals, this sort of presentation of net smelter values is more common in a PEA or feasibility study. Did you have a chance to look at the news this morning?
Bob Moriarty:
Yeah, I sure did. It’s interesting, and I’m glad that you brought it up. What’s happening is the typical buy the rumor, sell the news. But when it sinks into investors that a 670,000,000 ton resource is a big deal, and 1.15 billion oz of silver equivalent is a big deal. However, the resource is five months late, and people got pissed off, and they’re taking the opportunity to turn it into a liquidity event. They’re taking the opportunity to sell. And I feel bad for Eloro, but they did it to themselves.
Goldfinger:
They did it to themselves because they gave guidance to a date and then had to extend that date six months.
Bob Moriarty:
Correct.
ELO.TO (Daily)
Goldfinger:
Now, in terms of the numbers in this resource, it’s kind of hard to understand because previously the drill intercepts were presented in silver equivalent values, and this is not in silver equivalent values. This is breaking down the different metals in terms of grade and then putting it into a Net Smelter Return value (NSR), which is something that most investors aren’t used to. The NSR values represent the net revenue that the owner of a mining property receives from the sale of the mine’s metal products less transportation and refining costs. Now, the open pit inferred resource at Iska Iska is a net smelter return value of $20.32 a ton. That seems like it’s much different than the $90/tonne rock that we were looking at previously. Investors have responded by selling their shares and asking questions later. Obviously, metal recoveries and transportation costs play a role, but it still seems very low. Why is this number so much smaller?
Bob Moriarty:
That’s a good question. And I not only don’t have a good answer, I don’t even have a bad answer.
Goldfinger:
It’s a very large deposit with a low strip ratio, but it’s hard to figure out exactly what the economics of this are going to look like. Eloro says it will begin making preparations for a PEA (preliminary economic assessment) and that will include infill drilling, as well as additional exploration drilling to test this large intrusive body at depth that extends to the south of the Santa Barbara Area towards Porco and Mina Casiterita. Do you think that is going to be something that the company is going to focus on?
Bob Moriarty:
It’s going to be icing on the cake. One of the things that investors are simply not aware of and it’s because there are so few projects that have these kind of numbers. When you get into 500, 600, 800 million tons, the cost of mining goes down a lot. Another important thing to note is the strip ratio for the open pit is 1:1, that makes the economics much better than a mine with a 4:1 or 5:1 strip ratio.
I’m well aware of what the cost of mining is at St. Cristobal and it’s under $4/ton. So you can have $10 a ton ore and it’s economic. Now their cut off grade is $6 a ton. So really people are underestimating it. I don’t think the values reflect what they really have. I think it’s much higher than that.
But this is the kind of thing that there will be three or four companies in the world that could take on a project like this and they’re going to look at it and they’re going to be quite impressed. From a major’s point of view, this is a hell of a MRE.
Goldfinger:
What other companies are you looking at here in the junior mining sector? What has your attention?
Bob Moriarty:
Everything has my attention because it’s so absurdly cheap. Now when you talk about really wonderful opportunities to invest, you’ve got Snowline, you’ve got New Found Gold. I mean, New Found Gold (NYSE:NFG) keeps coming out with intercept after intercept of high grade, big dimension intercepts of gold.
Who knows? Are they talking 30 million ounces? Are they talking 50 million ounces? I don’t know. But I know that New Found gold has done one of the best jobs coming from scratch exploration to raising money to drilling to reporting. I’m just really impressed with the team’s newfound gold. Now Snowline has really excellent results, but one of the things nobody talks about is that it’s in the middle of nowhere in the east Yukon. So it’s going to cost a lot of money to get to Snowline. But they’ve got some absolutely fabulous intercepts as well.
But you’ve got dozens and dozens of companies that are selling at giveaway prices and I think that anyone that invests now is going to do very well. Not just in the long term, but in the medium term.
Goldfinger:
One of the points I made in my post yesterday is that it’s a stock pickers market, that there’s going to be winners and there’s going to be losers. And a lot of it’s going to have to do with how well companies are able to finance and then obviously the quality of their results. So are you saying that this is more of you can buy almost anything here and it will move up.
Bob Moriarty:
You could go into a room with a three inch dartboard and you could stand 15 feet away from it and pick up a dart and get ready to throw it and then turn off the light and still hit it. If a company is in business three months from now, it’s going to be a good investment.
Goldfinger:
Have you followed the Aston Bay thing at all? The storm copper deposit in Nunavut. Have you followed that one?
Bob Moriarty:
Just barely, because it’s too popular. I’m not a group follower. And everybody jumped on that story and the stock ran from $.04 to $.34 in two weeks. And I never like those really popular stories.
Goldfinger:
Okay. And then Mr. Trump was arrested last week and got a mugshot taken of him. And he became even more popular as a result of the mug shot, Trump raised even more money for his 2024 presidential campaign. Are we going to have another Trump presidency?
Bob Moriarty:
The real question, I think, should be, is there going to be an election in 2024? There is serious, credible evidence with documentation that the Biden family has taken $50 million in bribes, and it’s not news. Okay. Now, we know the FBI had Hunter Biden laptop prior to the 2020 election. We know that they knew it was real. We know that the person who not Secretary of State National Security Advisor Jake Sullivan, was the guy who prompted 51 intelligence professionals to call it Russian disinformation. We know the whole Russian collusion thing about Trump was a lie, and the FBI knew it and the DOJ knew it. We’re going to have either civil war or revolution. The essence of the charges against 19 people in Georgia was they believed it was a stolen election.
And of course, the only reason they believed it was a stolen election was because, of course, it was a stolen election and the epicenter was in Georgia. So I think this proves two things. It proves, one, that there’s a God, and it proves two, she has a sense of humor because every time those idiot Democrats turn around and indict Trump on more stupid charges, he gets more popular. After Democrats figured it out, they’d say, we need to leave this guy alone. He can do enough damage to himself.
Goldfinger:
It’s like his legend is growing the more times they bring him into court. I am not a Trump fan at all, but at this point a part of me is rooting for him because he’s the underdog.
Bob Moriarty:
Exactly. That’s like the sanctions, if the sanctions don’t work, then stop. Okay? If indicting Trump doesn’t do anything for you, then stop doing it.
Goldfinger:
Is there any precedent for a president having pending criminal charges? I think this is going to be really interesting because it’s unlikely these cases are going to be resolved by next November. So there’s a possibility of a sitting president having felony charges pending against him.
Bob Moriarty:
Now, are you talking about Biden or Trump?
Goldfinger:
Well, I don’t think Biden’s going to get reelected, so I’m talking about Trump.
Bob Moriarty:
Let me tell you something. If Biden isn’t in jail a year from now, there’s something wrong with our legal system.
Goldfinger:
That’s only a year from now. The legal system doesn’t move that fast, Bob.
Bob Moriarty:
Well, it could if it wanted to. It certainly moved that fast when they wanted to make Trump look like an idiot. We’re in an area we’ve never been before. The corruption is total and absolute. Some of this stuff are you familiar with the nuances of appointing a special counsel?
Goldfinger:
No.
Bob Moriarty:
According to the DOJ regulations, you appoint a special counsel and he has to be one from outside the DOJ and two, more or less honest. Okay, so they appointed somebody from inside the DOJ who had already been covering up for Hunter Biden for five years. Okay? And to say David Weiss is honest. He’s not honest. He’s a crook. Okay. There was so much evidence against Hunter Biden. Somebody did a count and it was somewhere 288 Felonies or 588 Felonies. I mean, the guy smoking crack and taking pictures of it and hiring hookers, and he’s being guarded by the Secret Service at the same time. Now, was it some kind of mystery to the FBI and to the DOJ that he was dirty? Had they not figured that out? He left a crack pipe in a rental car.
Goldfinger:
Ok, but these are relatively petty charges. I mean, you know how many people are smoking crack in this country every day, right? So he’s taking pictures of himself smoking crack. So what?
Bob Moriarty:
$50 million in bribes is relatively minor?
Goldfinger:
At this point it’s an accusation that is not proven, they need to go into the banks and find the paper trail.
Bob Moriarty:
They have already done that. The committee that’s investigating Biden, a woman came out who’s on the committee and she said, look, I cannot give you the specific details of the reports that were filed with the treasury, but it appears that the total amount of bribes to the Bidens was $50 million. And that included evidence. 17 phone calls from the head of Burisma to Hunter Biden and Joe Biden. Joe Biden was on two of the phone calls, and the FBI had phone calls for years, and he was an informant for the FBI. I mean, what do these guys need to realize? It was a crime. I mean, the only thing you can say about Biden is that as far as taking bribes, compared to the Clintons, he’s a piker.
Goldfinger:
All right. Let’s return to the stock market, you’re forecasting a market crash in September. So is this going to be a market crash where gold and silver hold up, or is this going to be a market crash where gold and silver gets sold off, too?
Bob Moriarty:
What scares me and this is the bad news, what scares me is that in a general market crash, a major market crash, everything gets taken down. The number one gaining stock in the 30s during the Depression was homestake. But even Homestake Mining got taken down in October of 1929. So what I fear is gold and silver being taken down, and what I hope is they don’t.
Goldfinger:
Yeah. Because it’s interesting to hear you say you can buy any junior now, but there’s going to be a market crash, because my experience is the juniors are going to get flattened like a pancake in a market crash.
Bob Moriarty:
They already have been.
Goldfinger:
Yeah, but it can get worse. I remember October 2008.
Bob Moriarty:
That’s true. That’s a really good point. I am not uncomfortable, I don’t care if the stock price goes down. I look at it as such a tremendous opportunity. I don’t give a damn what the total value of my shares is tomorrow or next week or next month. I believe they will be much a higher a year from now.
Goldfinger:
Final question: how much value do you give to insider buying? Like, for example, in New Found Gold? You have Eric Sprott buying pretty regularly and continuing to accumulate that stock. Does that make you very bullish, or is it something that you don’t really pay attention to?
Bob Moriarty:
Their assay results are so outstanding, that they’re the best I have ever seen. No one I know is smart enough to even guess at how much gold New Found Gold has. But there’s a reason Eric Sprott is a billionaire. Eric Sprott made $2 billion when his company bought the Fosterville Mine. He made $2 billion on that trade (Crocodile Gold later became Newmarket Gold and then Kirkland Lake Gold, Agnico Eagle now operates the Fosterville Gold Mine)
New Found Gold (AMEX – Daily)
Goldfinger:
So he’s betting big again on this one. I think his position is almost $200 million worth. He’s definitely over 10%, right?
Bob Moriarty:
Yeah, but $200 million is nothing for Eric Sprott.
Goldfinger:
Well, I think it’s something to everybody, right? That’s a lot of money.
Bob Moriarty:
Well, yeah, but the only thing is he doesn’t want to go over 20%, right?
Goldfinger:
Yes, he won’t go above 19.9%. I agree with you and Mr. Sprott and I bought my first New Found Gold shares last week. I can envision a scenario playing out similar to Great Bear at the end of 2021. There aren’t many gold projects with grades like Queensway, and with such a consistent hit rate.
I think that’s a perfect spot to wrap up, Bob. Thanks again for your time and insights, I look forward to a market crash in the next two months (laughs).
Disclosure: Eloro Resources and New Found Gold are advertisers on 321gold.com so naturally Mr. Moriarty is biased. Eloro Resources is a sponsor of Goldfinger Capital. Please do your own due diligence.
_______________________________________________________
Disclaimer
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. The companies mentioned in this article are high-risk venture stocks and not suitable for most investors. Consult company’s SEDAR profiles for important risk disclosures.
EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.
This article contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). Certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “believes”, “aims to”, “plans to” or “intends to” or variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed by such forward-looking statements or forward-looking information, standard transaction risks; impact of the transaction on the parties; and risks relating to financings; regulatory approvals; foreign country operations and volatile share prices. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. Accordingly, readers should not place undue reliance on forward-looking statements and forward looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.