Monday afternoon, I had the opportunity to speak with Bob Moriarty, founder of 321gold. Bob and I delved right into it with a wide ranging conversation focused on geopolitics, rigged trials of former Presidents, gold & copper fundamentals, and a number of junior mining companies that are offering enticing value opportunities. Without further ado, Energy & Gold’s June 2024 conversation with Bob Moriarty….
Goldfinger
So there’s a lot to discuss this morning, as always, Bob. I think let’s start with the broader market and what’s happening with gold. Just some pieces of news in the last three or four days. We’ve received a lot of economic data, and most of it generally has been weaker than our expectations. This morning in particular, we got the ISM manufacturing for May. And every single number was weaker. Prices paid. So prices paid are coming down. New orders were way weaker. Manufacturing sector of the economy continues to be soft.
Housing data was weak last week with more anecdotes of sellers lowering prices because buyers are simply not willing to pay the prices being asked. So you have that backdrop, and then you have very poor market technicals. Bank of America posted a graphic showing market breadth. So market breadth is a measure of the percentage of stocks rising or making new highs versus the number of stocks that are declining or making new lows. And this is the worst market breadth since the Global Financial Crisis. Yet the S&P is still about 5300.
And then I guess the last thing is this GameStop insanity, where a guy posts a tweet about his call options in GameStop and the stock jumps almost 100%. This is not a junior mining stock with a $5 million market cap. This is a $7 billion market cap company that almost doubled overnight because one guy posted a tweet. So what do you make of this whole thing? It’s quite a recipe we have here today.
GME (Daily)
Bob Moriarty
I think that along with the geopolitical environment, the legal system in New York City, the stock market, and the Chinese control of gold and silver, we are in a place of insanity. I have believed for the last year that the stock market was about to crash in a major way. And the last thing that it does before it collapses is make a big bounce up. But if you look at Nvidia and you look at GameStop, these are not rational markets. Now, I think gold and silver, you know how much I follow sentiment. We have not seen a top in gold silver measured by the DSI. And in fact, the US Mint is reporting lower sales, the Perth Smith is reporting lower sales, and coin dealers are reporting customers are coming in and selling rather than buying.
And that’s exactly the opposite of what you’ll see at a major top. So I’m quite encouraged. If you’re at your computer, put in Cabral, TSX-V:CBR, and take a look at the chart.
CBR.V (Daily)
Goldfinger
Oh, yeah, it had a big move last week.
Bob Moriarty
Yeah, what we’re seeing is signs of life in the juniors. And I think there’s going to be more of that and I think that it will be catching up.
Goldfinger:
Well, yeah, if you drill 11 meters of 33 grams per ton of gold, you definitely get some love. But that’s a pretty high bar for most companies to jump over to drill an intercept like that. But you know, it’s basically, unless you drill something world class like that, there’s still a lot of investors yawning at news these days.
Bob Moriarty
Well, let me give you one better. Pull up the chart of Labrador Gold.
Goldfinger
LAB
Robert Moriarty
They’ve got 20 million in New Found Gold shares coming to them, and they’ve got six and a half million in cash. And you can buy the whole company for $16 million. Now, tell me that makes sense.
LAB.V (Daily)
Goldfinger
Yeah, that seems like a real opportunity. So the market is saying that when they can sell the Newfound Gold shares, they’ll be worth less than they are today. And the company is going to spend all of its current cash and not really get anything for it. That’s basically what the market is pricing in now.
Bob Moriarty
I don’t think so. Can you pull up a three year chart of Labrador gold?
Goldfinger
Yeah, it’s down 90%.
Bob Moriarty
No, it’s down 95%. And here’s what I suspect it is. And if you go to CEO CA and look, you got a bunch of pissed off shareholders because they’ve seen a 95% decline in the stock. Now, I don’t care what a stock has done in the past, if you can buy 15.5 cents worth of assets for $0.09, that’s a good deal. And everything else is bullshit. So everybody’s pissed because they’ve gotten creamed. That’s a junior market. You’re buying a lottery ticket, okay? If you don’t hit on this, you’ll hit on the next one. So I think what we’re just talking about is sentiment, that sentiment towards juniors, it’s the worst I’ve ever seen, but it is starting to turn.
Goldfinger
I’m also interested in your thoughts on “selling in May and go away”. It seems to me being at this for as long as I have, that sell in May go away works more often than not. But when it doesn’t work, people really miss out on a good summer market. What’s your sense for selling in May and going away in the junior mining sector? And how has that adage worked for you over the last 20 years?
Bob Moriarty
Basically what you just said, it’s absolutely accurate and you presented both sides and there are two sides to the issue. I am not seeing any sentiment indicators other than price that say we’ve got a top in gold, silver, and frankly, with NATO moving tanks to the Ukraine border. We haven’t talked about this before, but do you know what Jim Rickards said when the US and NATO ran war games against Russia? Do you know what happened every single time?
Goldfinger
No.
Bob Moriarty
It went nuclear. So regardless of who’s the good guy, who’s the bad guy, this is the most dangerous thing that has happened in my lifetime. And a week ago, China said they were going to attack Taiwan this week. So from a geopolitical point of view, what’s going on in Gaza, what’s going on in Lebanon, what’s going on in Ukraine, what’s going on in Taiwan, we are at a very scary point in time.
Goldfinger
Yeah, I read an analysis of different scenarios in Ukraine. And basically the scenario he came up with was that the west is arming Ukraine a lot more, and they’re going to arm it a lot more in the coming months. This could create a change in the direction of the war with Russia getting pushed back.
Basically, this guy thinks that Putin will use a tactical nuke either on the border with Ukraine, on Russian territory, in an area that’s not populated, to basically let it be known that he’s willing to do that if Ukraine goes further and the west continues to arm them. Or he’ll just use a tactical nuke in Ukraine again in an area that’s more sparsely populated but still inflict some damage and say, that’s it, the war is over unless you want this to go nuclear. That’s a pretty scary thing to think about. And I don’t really think the world is prepared for that.
Bob Moriarty
I think that’s exactly what’s happening. Macron has said he’s going to send French troops to Ukraine. Biden has said it’s okay for Ukrainians to use long range missiles against Russia. They keep pushing Russia. And I think that’s a terrible mistake. And that has nothing to do with good guy versus bad guy. There is nothing in the Ukraine Russia war that is worth nuclear holocaust.
Goldfinger
Yeah, that’s true. I agree with that. Regarding last week. So I was sitting in a restaurant with some friends, and it was around five in the afternoon, and the Fox News came on with the Trump trial verdict. And then I opened my phone and pulled up Twitter, which always gives you the news faster than you get it on TV. And they came out with a verdict. And most people I was with were surprised that he was found guilty on all counts. I can’t say I was surprised either way. But I think what happens next is really the big thing. The fact that he’s guilty or been found guilty and now a convicted felon is not terribly shocking, considering the number of cases that were brought against him across the country. It was odds on that one of them would stick. What happens now?
The judge sentences him. The judge has a lot of latitude. It could be as little as probation to as long as four years in prison. This has never happened to a former president, especially a president that is running to be elected again in November. What, you know, how does this play out, Bob?
Bob Moriarty
Well, it easily could lead to civil war. Now, the serious legal authorities that I’ve read and understand, I’m a little biased, I don’t like Trump, but that’s probably the worst legal case brought in American history. And the amazing thing to me is, do you realize how much money he’s raised since the verdict?
Goldfinger
Yeah, I saw a number. It was $200 million.
Bob Moriarty
Yeah, exactly $200 million has floated into Donald Trump. So the judge, I think he’s going to slam it to Trump. Okay, the judge, he’s going to be disbarred before this ends. Okay? It was so illegal. His jury instructions were, okay, there’s three things that he could have done that are felonies. And it’s okay. You can agree on any one of the three. And that’s so outrageous. The 7th amendment says that you’ve got a right to see the evidence against you and to see what the charges are. And when the judge said, look, you know, pick up a dart, throw it, and if you hit the wall, okay, we’ll find him guilty. So it’s really embarrassing. Now, do you understand the appeals process?
Goldfinger
Not really.
Bob Moriarty
Okay. He was convicted at state court. Not a federal court. So the first appeals are to the state appeals court, the New York appeals court. However, because it’s such an important constitutional issue, there are also grounds for an emergency appeal to the Supreme Court. And it’s going to be interesting to see what happens. But this very easily could lead to civil war.
Goldfinger
Yeah. I mean, if this results in him not being able to fairly run for the presidency, then I think it’s a major problem for the country. And you’re right. I think that in some ways, Trump’s popularity went up last week. Now let’s see if that sticks. I mean, I’m familiar with the case, and I mean, technically, by the letter of the law, he probably did break the law, but, you know, he didn’t…….
Bob Moriarty
He was found guilty of affecting the 2016 election with actions that took place a year later. Okay? Now, you can’t do something today that affects an election that took place a year ago. Okay? This. This is when you actually get into the charges. You. You go, it’s bullshit. It’s total bullshit.
Goldfinger
Well, I think it is bullshit. no doubt. And it was brought for political reasons. And I was about to say, if you put every single human being under this level of scrutiny, everybody would be guilty of something. You know, they find something, you know, whether it’s tax stuff or parking tickets or jaywalking or whatever, he’s under a tremendous microscope. And the left decided, let’s attack him in every place we possibly can and see what we can make stick. And they managed to get a rigged trial in New York, which is the least friendly jurisdiction that he could possibly be in.
Bob Moriarty
Actually, you didn’t go far enough in what you just said. A federal judge wrote a book called Three Felonies a Day. Today you commit three felonies a day. I commit three felonies a day. Every American commits three felonies a day. You’re absolutely correct. I mean, state court or federal courts can charge anybody with anything and get a conviction. But that whole trial was so rigged that there’s going to be a lot of people, even people who don’t like Trump. And I don’t like Trump. Okay? I’m not going to say I’m a never Trumper. I’m not. I just don’t like the guy. I think he’s a narcissist. I’m not impressed with anything other than he does believe in defending the borders. However, what the courts are doing, it’s the destruction of the entire legal system. And I dead set against that.
Goldfinger
Okay, let’s talk about junior mining, because I think there’s a lot to discuss there. So the first one, Banyan Gold (TSX-V:BYN, OTC: BYAGF), put out a news release this morning. They started drilling up in the Yukon. It’s the first week of June, so usually Yukon companies mobilize at the end of May, early June. So it’s no different this year. And, you know, Banyan’s a unique situation because it is an exploration company. But it’s an exploration company that has 7 million inferred ounces of gold in the ground within 40 km of an operating gold mine. A pretty large operating gold mine. What do you make of Banyan, Bob?
Bob Moriarty
I’m very prejudiced because I happen to be good friends with Tara Christie, and I’ve known her for 15 years. And Tara Christie has done more for women in mining than anyone in Canadian history. I cannot say enough good things about Tara Christie. She’s just wonderful. And you’ve got this absurd situation where you’ve got a tiny market cap company that’s getting about $12 an ounce for gold. Now, it’s low-grade gold, but we got $2,300 gold. So I think Banyan is exceptionally well run. Tara is married to the president of another mining company. She’s a third-generation miner in Canada, and she’s one of the nicest, most qualified people that I know. So I think Banyan is especially cheap, and I think that you followed it before anyone else. Now, give me credit. You know, it’s this simple. It’s like Hercules. You nailed it with both.
You got it right just from the get go.
Goldfinger
Thank you, Bob. Yeah, I remember buying Banyan when it was four cents a share in 2019, and Tara was telling me about AurMac and why there was a lot of upside potential there. And for me it was one of those things where you bet on the jockey, not necessarily the horse, because you don’t really understand the horse as well as you do the jockey. So sometimes that works. Well, she’s drilled out 7 million ounces of near surface gold. And so now the question is, once you get 7 million oz, what’s next? Right? What’s next when you have that big of a resource. And so Banyan is doing the right things to get this ready to build a mine now, will she build it herself? Probably not. But, you know, could she?
Yeah, I think she could. I mean, with a big team. And Banyan has certainly assembled a pretty impressive team. In fact, today they announced the addition of another technical advisor to their team. So they’re definitely building out an all-star team to take this to the next level. Now, whether that’s acquired by a larger company or not, that remains to be seen.
Bob Moriarty
Well, here’s what’s happening. And you’ve been around long enough to know this. It’s true. The market crashed in 1996 because of Bre-X, okay? And it declined into a low price for gold in September of 1999. Like, I think it was $252 an ounce. It’s gone from $252 an ounce to $24 50. The majors fired all their exploration people back then. They cut back the market while gold started coming back in 2000 and 2001, and ran up to over $1900/oz in 2011. And meanwhile, a lot of juniors have done a lot of good work, but the majors have been consuming their young and we get $2300 gold, and the majors are going to be forced into a flurry of takeovers. And, you know, you’re buying gold for $12 an ounce. How can that be a bad deal?
Goldfinger
Yeah, the price is certainly right, and that’s really where the investment upside is. Right? It’s that it’s the potential for re-rating as the project gets further de-risked over the next year or two. That’s really where the potential upside is. And you’re also, you’re betting on the jockey still. You’re betting on Tara’s stewardship of shareholder capital and that her strong network and experience in Canada and the Yukon is a major positive for Banyan shareholders. Let’s talk about another Canadian explorer. Core Assets (CSE:CC, OTC: CCOOF). So I’ve turned into sort of a porphyry guy. I have become addicted to finding porphyries because of my copper and gold theme. And porphyry deposits are really good for finding large amounts of copper and gold in one place. Core assets in BC. It’s near Atlin, BC, sort of near the Alaska/BC border.
If you go to their presentation. Slide ten. This looks like a big porphyry system to me, and it’s just super exciting. The sulfide city target. I think that we’re going to get news later this week about the start of drilling there. And I’m really excited to see them put some holes into this thing this year, some deeper holes.
Bob Moriarty
Well, it’s funny you mention that because I had, I think, a 45 minute call with the head of Core (CEO Nick Rodway) this weekend and were talking about this. Exactly. The porphyry is interesting, but the money is the carbonate replacement system (CRD). And one of the things that we discussed, and I don’t think I’m saying anything that’s private. The best CRD guy in the world is Peter McGaw. And Peter McGaw retired from Mag Silver and that’s going to give him the opportunity to work with more juniors. And I really want to see if he can get Peter McGaw up on site, because the carbonate replacement system is far more important than the porphyry. The porphyry is the source of the metal, but you’ve got these hot fluids traveling up from the porphyry, carrying metal with them, and it percolates through limestone, and the metal separates out chemically.
And CRDs are really high grade, but they’ve got a really interesting deposit that you couldn’t have discovered 30 years ago because the area was glaciated. So this is a totally greenfields exploration, excellent management, near infrastructure. It’s right in the northernmost part of BC. You’ve got Atlin there, and then further north, you’ve got a major city in Whitehorse. So I like the company a lot.
Goldfinger
The CRD targets, there’s a number of them. There’s, like four or five of them. But the CRD mineralization, it could be a couple million tons. It could be 20 million tons. You know, it’s not clear yet how extensive it is, but if they tag into the porphyry intrusion, the source of it all, and that’s got some real tonnage, then suddenly this becomes attractive to a major mining company, right? Because the major mining company needs that really large scale to get interested.
Bob Moriarty
Well, it’s interesting you say that, because we haven’t really dived into this. I’m posting a piece tomorrow by someone who really knows metals, and he said, this whole thing with Net Zero CO2 by 2050, absolutely impossible. The demand for copper is going to be so high because of AI. Strange enough, we got a real problem with copper, a giant problem with copper. Now, I saw something yesterday. The biggest copper producer in the world is Chile, and the grade in Chile has gone from above 1%. I think it was 1.2% to 0.6% in the last 30 years. So it’s going to get a lot more expensive to produce.
So when you’ve got a CRD, the grades in that, okay, if they pop into the porphyry, that’s a good thing in terms of tonnage, but the CRD offers you a place to get started with mining. But everything that I see says that’s going to be a major deposit, and it will be a mine someday. Same thing with Banyan. You got 7 million oz of gold. You’re going to go into production?
Goldfinger
Yeah. It’s going to be a mine one day, just a matter of when and how much money to get there. You said something interesting about copper and I’ve noticed a lot of people trying to call a top on copper saying it’s way overdone. China’s got big inventories now. They’re going to be selling and it’s always dangerous to say this time is different and this does feel a little bit different. This doesn’t feel like the textbook “Oh, the large speculators are long, the commercials are really short. China has got some stockpiles. It’s a copper top” This feels like the demand for copper globally is more robust than we’ve seen in a long time, maybe ever, and that this demand could be persistent.
It’s not just going to tail off all of a sudden then China’s going to dump all their copper stockpiles. What’s your sense on this copper market? Is it different this time?
Bob Moriarty
It is. And you use the word persistent and that’s not accurate. The demand is exploding. Higher AI requires enormous amounts of copper. Certainly EV’s require a lot of copper and the whole green energy thing, most of which is nonsense. It’s all based around a lot of copper. So everything that I see is demand. It’s going to be far higher and the supply is actually going down. We’re so used to cheap copper that we see five and a quarter copper and everybody says, oh God, it’s too expensive. We can’t afford that. We’re not going to do that. Well, it’s like $2450 gold.
When you see the situation, the world’s financial system, it said, you realize that $2450 gold is actually pretty cheap and $5.25 copper is really cheap because everything says we are transitioning from an economy based on shuffling pieces of paper to actually producing something.
Goldfinger
Final topic, I had occasion over Memorial Day weekend to travel to Idaho, to visit Cambridge, Idaho, and Hercules Silver (TSX-V:BIG, OTC:BADEF). I’m 44, I’ve never been to Idaho. First visit out there to a company I’ve been following closely for the last eight months and it was a great visit. And my point of bringing this up is not so much to talk about Hercules, but to talk about copper mining in the US. So, you know, the state of Idaho has always been a silver state. You go back to the seventies, the eighties, there was Sunshine Mining, which was a silver producer, and now there’s Hecla is a silver producer with the Lucky Friday mine in Idaho, and it’s always been a silver state.
I never associated Idaho with copper, but then Hercules drilled this hole last year and made a deep copper porphyry discovery. Barrick gold made their investment, and I’m starting to see articles that big mining companies like Rio Tinto, like Barrick, are interested in finding copper deposits in the US. Now, look, Arizona is the copper state in the US. We’ve all known that, and it’s still that way today. 70% of US copper production comes from the state of Arizona. But are we really going to be developing big new copper mines in states like Utah, like Idaho? Is this actually going to happen? Or is this just a temporary blip where the EV revolution, AI data centers, reshoring/onshoring, and the copper price has gotten people to think, oh, we’re going to do more copper mining in the US?
Is this real or is this just a little fad?
Bob Moriarty
Well, it’s a fad of sorts, but it’s this simple. Here’s the equation. In 1929, at the time of the market crash, mining was 30% of the US economy. It’s under a couple of percent now, and it’s one of these not in my backyard kind of equations. Oh, I don’t want a nasty old copper mine or a nasty old silver mine or a nasty old gold mine, but what’s happening is actually two parts. The reason the majors are looking for copper now is one they see there’s clearly going to be a lot of demand in the future, but at the same time, they’re looking at the poor performance of gold stocks over the last 13 years and say, we don’t want gold. And of course, I’m a contrarian, so when these guys say they don’t want something, that’s when I get excited.
So I do see a big advance in demand for copper. And the majors are going to be forced into doing mergers and acquisitions.
Goldfinger
Yeah, I think that’s a good place to leave it. We’ve seen that with Anglo American. There’s an attempted takeover of Anglo American. So far it’s not happening, but I think we’re going to see more consolidation and more mining companies, even gold mining companies like Barrick, try to get more copper exposure. Bob, thanks a lot for your time.
Disclosure: Author owns shares of BYN.V CC.V and BIG.V at the time of publishing and may choose to buy or sell at any time without notice.
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