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KMW Blog Jul 26, 2018: INN's Priscila Barrera interviews John Kaiser at the Sprott Natural Resources Symposium


Posted: Jul 26, 2018JK: INN's Priscila Barrera interviews John Kaiser at the Sprott Natural Resources Symposium
Published: Jul 26, 2018INN: INN: How to Invest in a Bear Market and Top Stocks

On Thursday July 19, 2018 Priscila Barrera of Investing News Network interviewed me (John Kaiser) at the Sprott Natural Resources Symposium held in Vancouver from July 17-20 where I also gave a workshop (Stalking Elephants in Nevada, the Pilbara and ...). The direct link to the interview video at the INN web site includes a transcript but reading it makes no sense to me (it looks like it was computer generated) so I recommend listening-watching the interview (Direct YouTube link). In the first part I discuss the bear market and a possible scenario where the Trump driven fears about a global recession arising from a full-blown trade war and another financial crisis vanish after the November 6 mid-term elections. These have two possible outcomes. Either the Democrats seize control of the House the way the Republicans did in 2010 and but the brakes on Trump's agenda and set themselves up as scapegoats for the 2020 elections, or the Republicans retain control of both the House and Senate. The bearish outlook, so far manifested only in the resource equities and metal markets, seems to assume that if Republicans retain control of all branches of government, a global economic downturn is inevitable. But an alternative is that the Republicans, fearing an all out rout in 2020, put the brakes on Trump and force a return to a more pragmatic approach which allows him to dial back his extreme positions as just having been a negotiating tactic to shake things up and preserves his viability as the Republican presidential candidate in 2020. Now that is not what happens in the novel, "It can't happen here", published by Sinclair Lewis in 1935 where the author imagines the newly elected president Buzz Windrip taking America in the 1930's footsteps of Germany and the Soviet Union. The media discourse is certainly projecting a march into an authoritarian dystopia, which is the wall of worry engulfing the resource sector. Smoking weed and gambling in crypto-currencies makes a lot of sense in the face of such an apocalyptic outlook. But what if common sense makes a comeback after the election regardless the outcome? Could we have a sharp reversal of this resource sector bear market? Might it happen even before the election? When I observe the glee with which I see so many in the resource sector embrace Trump, his policies, lies and thuggery I am not quite ready to pound the table about a turnaround for this resource sector bear market. So when Priscila asks me for favorite picks, I hunker down and repeat my 3 favorities of the past 4 years because they can deliver big returns in any of the outcome scenarios except the extreme ones of social collapse and civil war.

Scandium Intl Mining Corp is my top pick because it is now the clear leader in making aluminum-scandium alloy supply a reality for end-users. It has its mining permit and is pursuing an offtake development strategy which reduces the risk to potential end-users that Nyngan might not deliver as expected, and which puts in place rapid output expansion once Nyngan has confirmed both its production capacity and ability to make a profit at the proposed selling price. A breakthrough offtake deal on 2-4 tpa could trigger similar deals with all the other end-user groups that are playing with Al-Sc alloy material supplied by SCY. With regard to a major global economic downturn, it doesn't matter if the $100 billion annual aluminum market contracts 20%. SCY is striving to enhance less than 1% of annual aluminum output with scandium. SCY is a market development-growth story that needs neither a "discovery" nor "higher metal prices" to succeed. Today the stock is a better value buy than it has ever been in its history thanks to the market's uncertainty about the timeline for funding $100 million CapEx needed to build the world's first primary, scalable scandium mine.

My second favorite is Nevada Exploration Inc about which I have been somewhat cool since my subscribers and I had to endure a 10:1 rollback in 2015. But NGE has made tremendous progress upgrading its South Grass Valley and Kelly Creek Basin targets in Nevada, under basin cover (Nevada 2.0), and, partly because it has been shunned by Bay Street and the big producers who prefer innovation in hindsight, is cheaper than it has ever been since the rollback. NGE is rolling up its sleeves to start drilling for discovery rather than just target development, either through a serious farmout, or a financing. Any success on a Nevada 2.0 target generated by hydrogeochemistry would qualify as proof of concept and NGE would become the hottest exploration junior in Nevada because it would have the key to finding Nevada's missing gold under cover. While gold is retreating today out of dread that an imminent equity market meltdown will create a liquidity crisis during which gold gets sold because there will be buyers at some level while stocks, debt and real estate go no bid, it does have a strong future in terms of real prices. While the House and Senate could theoretically put the brakes on Trump's policies, they cannot restore the world's acceptance of Trump's claim that America is no longer great and in its stress has become an untrustworthy thug on the global stage. Global demand for gold will rise and there will be a Back to America surge of interest in finding new domestic resources to offset America's isolation from global trade as the rest of the world makes the painful adjustment to weaning itself of US dependency. NGE already possesses a secret map of northern Nevada generated by past sampling where Carlin type gold deposits could be hidden under the gravels, though by no means is that map's coverage comprehensive. Once NGE captures the financial market's imagination it will become a Nevada 2.0 exploration juggernaut.

The Back to America theme also plays in my third pick, InZinc Mining Ltd, which is now awaiting results for its initial West Desert expansion drilling program in Utah. West Desert has an existing zinc-copper-indium skarn deposit in elephant country which initial reported results indicate will grow to the west while we are still waiting to see what lies to the east. The existing resource is in the money at current metal prices using the 2014 PEA assumptions. Zinc prices have weakened as part of market anxiety over the outcome of Trump's trade war policies, but none of this changes the underlying structural supply problem for zinc.

JK owns Scandium Intl, Nevada Expl, InZinc; Scandium Intl and InZinc are SVH picks; Nevada Expl is a bottom-fish pick

 
 

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