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Proven ProbableCategory: Precious Metals
In this action packed interview, Bob Moriarty the founder of 321gold and 321energy.com sits down with Maurice Jackson of Proven and Probable to discuss current events, companies that have your attention, and to discuss Amazon’s best-selling book right now, under Commodities Trading, which happens to be your book aptly entitled: “Basic Investing In Resource Stocks, the Idiot’s Guide”.
VIDEO
AUDIO
https://soundcloud.com/proven-and-probable/bob-feb-2019
TRANSCRIPT
Original Source: https://www.streetwisereports.com/article/2019/03/03/bob-moriarty-on-geopolitics-resource-companies-and-his-new-book.html
Bob Moriarty on Geopolitics, Resource Companies and His New Book
Contributed Opinion
Source: Maurice Jackson for Streetwise Reports (3/3/19)
Bob Moriarty of 321 Gold sits down with Maurice Jackson of Proven and Probable and sounds off about the state of the world, resource companies he is paying attention to, and what readers will find in his new book.
Maurice Jackson: Welcome to Proven and Probable, I’m your host Maurice Jackson. Joining us for a conversation is Bob Moriarty, the founder of 321gold and 321energy.com.
We brought you on today to discuss current events, companies that have your attention and to discuss Amazon’s best-selling book right now under commodities trading, which happens to be your book aptly entitled “Basic Investing in Resource Stocks: The Idiot’s Guide.” Bob, you shared with me on a number of occasions to be aware of political and geopolitical events as they have a direct influence on our lives and portfolio. Let’s begin with current events and there’s a number of them unfolding right before us. Beginning in the U.S., what has your attention and why?
Bob Moriarty: I don’t know a good term to use, but it’s almost a feeling of a sick desire to watch something obscene, the Cohen hearings are certainly interesting. It’s a measure of how far over the cliff the country has gone. It’s obscene. Why you would get a guy who is a felon and who’s lied to Congress, who has an agenda to testify in Congress is just amazing! We know the guy is a liar. It’s all political theater. Sadly, neither party, no one is trying to improve the country. They’re just trying to get even with the guys on the other side of the aisle. It’s sick okay, but it’s interesting to watch because it’s so sick.
Maurice Jackson: In previous interviews you referenced the Deep State/Shadow Government. For someone new to the conversation, who is the Deep State and what is their significance?
Bob Moriarty: I’m not sure that deep state is a good term. It’s really the Congressional Military Industrial Complex that President Eisenhower warned us about in 1961 in his farewell address. In his written copy, President Eisenhower called it the Congressional Military Industrial Complex. His political advisor said, “You can’t do that. You can’t criticize Congress, so remove that. Just call it the Military Industrial Complex.”
There exists within the United States a small subset whose economic welfare is based on constant war. We no longer fight wars to achieve peace. We fight wars to achieve war and it’s a transfer of wealth from the taxpayers, the United States to the Congressional Military Industrial Complex. Wars will destroy, actually it has destroyed the United States already.
The United States is bankrupt, it’s functionally bankrupt. There is nothing we can do about it. There is no savior that’s going to come along. There are no solutions, we’re bankrupt. The standard of living of most Americans is going to decline a lot more than it already has.
Maurice Jackson: Just for the record, is it the Military Industrial Complex or the Democratic Party, which one is it that really wants President Trump out and why?
Bob Moriarty: Both the Deep State and the Democrats, but only because they wanted Hillary Clinton in. She was supported by the Deep State. A couple of months ago I was writing and talking about there being a coup d’etat in the United States. Then Andrew McCabe came actually went on 60 Minutes and he admitted it. I mean this is bizarre. If you have a coup d’etat in any country in the world, the legal system should arrest these guys, give them fair trials and shoot them. We don’t do that. We admit, “Oh yeah, we attempted a coup d’etat, the Department of Justice and the NSA and the CIA and the FBI were all trying to overthrow the democratically elected president of the United States,” but who cares?
Maurice Jackson: Bob, I want to go back to my previous question, what will be the purpose or what is the ultimate intent? If they get President Trump out, then what?
Bob Moriarty: Well, see, that’s the problem. We talk about defeating the ISIS in Syria or we talk about regime change in Iran or regime change in Syria or regime change in Afghanistan or regime change in Iraq. We never have a plan B. We never have anything that we actually intend to do. The journey has become the destination and that is perpetual war.
Maurice Jackson: Let me ask you this here, what is Bob Moriarty’s assessment of President Trump?
Bob Moriarty: I think the man’s an idiot. You want to beat around the bush, he’s a blithering idiot. He’s a narcissist. He’s knowledge of things economic or historical are absolutely obscene. He’s most certainly a criminal, but when you say that you also have to say, well, his opponent was Hillary Clinton. If she had been elected president, there would have been four versions of air force one, three of them just to carry her baggage around.
Maurice Jackson: Therefore, in some regards the United States would have the same president in Trump or Clinton. Let’s expand the narrative to geopolitics here. Things are really heating up between India and Pakistan. What’s going on there?
Bob Moriarty: Let me back track a little bit. I think we’ve discussed the worldwide revolution before, but the population of every country on earth is upset because the power and the money is being transmitted from the 99% to the 1%. Everybody is upset, the Yellow Vest and Israel and Canada and Brussels and Spain and I’m certain that’s true in Pakistan as well. There is an area of disputed territory between Pakistan and India that’s been in dispute since 1948. There are people, there are terrorists, India calls them terrorists, but they’re supported by Pakistan who set off a bomb and killed 40 Indian policemen, military. India was naturally upset.
When you’re dealing with two parties who are equipped with nuclear weapons, you want to avoid that kind of stuff. Because one of the options is everybody keeps being stupid and you end up lobbying nuclear weapons at each other. I’m not going to say I’m predicting it, I don’t know what the possibility is. I know it’s a very dangerous time and I wish there was a way of sorting it out that made sense. Unfortunately, I mean the only sane political leader in the world today I think is Putin.
Maurice Jackson: Speaking of Putin, I want to address the situation with Russian, Ukraine as well. Before we do that, let’s move west and go and discuss the situation between the U.S. and Iran, what’s going on there?
Bob Moriarty: Well, here’s what’s funny. Israel has been advocating for a war against Iran since 1982. It’s in writing. They’ve said it many, many times. It has nothing to do with Iran and everything to do with Israel. Israel has convinced the United States to fight their wars for them. There is no Iranian nuclear weapons program period. It stopped years ago, all 17 U.S. intelligence agencies admitted and there is no nuclear weapons program period, end of story. Everything that has been said about Iran is something that has been made up by Benjamin Netanyahu and the Mossad. They’re trying to convince the Americans to go to war.
Now since Donald Trump was bought and paid for by Sheldon Adelson, he sold his soul for about $30 or $35 million in the presidential campaign. Benjamin Netanyahu through Sheldon Adelson literally tells the President of the United States what to do. I’m naturally against that, however, if Hillary Clinton had been elected she would have done the same thing. We need to stop fighting wars for Israel. I am not a pacifist. I am the opposite of a pacifist. I am a warrior and I fought in war and I know all about war because I’ve been there. I would defend my country and my family and my state in a minute against a true enemy.
We go out and create the straw enemies who are not the enemies of us on behalf of Israel. Then we attack them and we let a bunch of our kids get killed. We pay for the war and it’s bankrupted the United States. The United States can end up just like French empire, the Spanish empire, the Russian empire, the British empire, it’s going to bankrupt itself. The standard of living of Americans are going to go down substantially, fighting wars for a tiny meaningless country in the Middle East.
Maurice Jackson: You know what you say sometimes I know that others may disagree with you and say, “That’s a little extreme,” but the reality is, you’ve stated empirical evidence. Wars bankrupt nations and then they also devalue their currency and history does repeat itself. The United States currently is on that trajectory. Let’s move north here. You referenced Russia earlier, there isn’t that much news coming out from Russia and Ukraine. What’s the situation like there?
Bob Moriarty: Well, actually there is and again that’s a situation where the neocons who are under the control of Benjamin Netanyahu. I mean they’re traitors to the United States, but they would like to get into war with Russia and they’re using the Ukraine. It’s really funny because the Ukrainian government is supported by the United States, Poroshenko, they’re just as corrupted as they could be. It’s the worst possible thing in the world for the Ukrainian people, but we don’t give a shit, okay, as long as they do what the United States wants to do, which is to antagonize Russia.
Now everybody talks about Russia having invaded Crimea, but the Crimea was always part of Russian, been part of Russian since I think Catherine the Great. The Crimea only became part of Ukraine in 1954, because Khrushchev got drunk and he signed it over to the Ukrainians. Ukraine was part of the USSR back then, so it didn’t really change anything whatsoever. When the United States sponsored and paid for and admittedly paid $5 billion of American dollars to subvert the Ukrainian government and sponsored the coup d’etat in Ukraine against their democratically elected president. Then the thugs that are running Ukraine started stirring up trouble that was anti-Russian. The people in the eastern part of the country voted and said, “We don’t want to be part of Ukraine, we’re Russian. We’ve always been Russian and we want to be Russian.” Ukraine is kind of split in two.
Ukrainian Navy tried to force a ship through a very narrow straight and the Russians captured the ship and said, “No, you can’t do that. That’s illegal to do.” It’s a hot spot and it’s something that could go nuclear in very short order. We have a small group about 30 people who are at the heart of military industrial complex. They’re neocons, they’re dual nationals. They do not owe any loyalty whatsoever to the United States, but all of it to Israel who want to sponsor war between the United States and Russia. If we do, if we allow them to do that, it’s a war that’s going to last for about 30 minutes.
Maurice Jackson: Well, certainly it’s a war that we don’t want. I recall, Bob, you’ve referenced before in previous interviews it’s a fact that maybe most people aren’t aware of. You referenced that the United States does not engage in war with countries that have nuclear weapons. I’m I correct in my memory on that?
Bob Moriarty: Well, by and large we choose to attack countries that cannot defend themselves. Pakistan was good and Afghanistan was good and Iraq was good and Syria was good and Iran’s good. Why they’re antagonizing Russia, which most certainly is nuclear armed, I don’t know.
Maurice Jackson: Switching gears, let’s move onto companies that have your attention at the moment.
Bob Moriarty: Well, there’s my favorite trio and Quinton Hennigh is behind all three of them in Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX), which we have talked about at some length. It’s very hot in Australia right now and summer starts cooling down in March and April and they’ll get busy. Novo is doing some stuff now, but nothing of significance that will move the market. They will be testing at Egina probably starting in April and I expect some very significant results there.
But of more interest is Miramont Resources Corp. (MONT:CSE) that I think they’ve completed six holes so far in southern Peru. They’ve got a very interesting deposit with three big targets that could be a world-class project. I’m not sure the first results they’re going to show out of the box, blow the lead off the stock kind of assays. It’s a drill program that I expect to be of major importance. I expect drill results coming out in two to four weeks, and they’re certainly going to be very interesting and it’s the stocks that I own a lot of and I’d like a lot. It’s got about $30 million market cap. Now Novo has about $400 million market cap, so Miramont’s can move a lot more than Novo in terms of percentage.
Second, you and I went to Irving Resources Inc. (IRV:CSE; IRVRF:OTCBB) a year and a half ago, almost two years ago now. They should and should be in great big quotation marks, should start drilling about mid-March and probably six weeks to two months after that start coming out with the results. They’re testing two things. They’re going to test the area that we saw that had very high grade gold right at the surface in a vein system. Just for your information Keith Barron went over there. The samples that we took tested about $25,000 a ton. Keith Barron took a sample that tested $35,000 a ton. That’s not going to be the first drill target. The first drill target’s going to be in the sinter. The sinter has shown some several grams to the ton assays from the coats of silica cap that makes it the sinter. That sinter is steep because that’s typically not where the gold is found. The gold is trapped underneath the sinter and they’re going to drill into that. I can’t tell you whether Irving will hit on the first hole or its 50th hole, but I expect some real barn burning results there.
Maurice Jackson: It’s truly interesting times for Dr Quinton Hennigh there. How about switching to the Metallic Group of Companies. What can you tell us about them?
Bob Moriarty: Well, the first company that I wrote up going back 18 years ago is NovaGold. The guy that I was working with was Greg Johnson, he was the Vice President of Exploration. Very intelligent guy, very good guy. I like him a lot. What he’s done he’s put together three companies in different commodities. He’s got a company that specializes in copper and it’s called Granite Creek Copper Ltd. (GCX.V:TSXV). He’s got a company called Group Ten Metals Inc. (PGE:TSX.V; PGEZF:OTC) that has a platinum, palladium deposit in Montana right next to the Stillwater mine. It appears from a technical point of view, it appears that they’ve got a carbon copy of the Stillwater Mine.
Greg has done a brilliant job of putting packages together that nobody else has ever put together before. Everybody knew there were some good projects at Stillwater that weren’t owned by Stillwater. One guy owned one and another guy owned another. Another company owned the other and what Greg’s managed to do is put that together. Then there’s Metallic Minerals Corp. (MMG:TSX.V) that specializes in silver up in the Yukon. The interesting thing is, it’s all under similar managements. I like him a lot. These are all very quiet companies. Nobody’s heard about them. Nobody pays any attention to them, but I think that all three of them will end up being home runs. I like Greg Johnson a lot, he’s a good guy.
Maurice Jackson: Full disclosure, all the companies that you’ve referenced so far are sponsors of Proven and Probable with the exception of Granite Creek Copper. There’s one more company that recently you’ve been discussing and that is Rover Metals. What can you share with us?
Bob Moriarty: Well, Rover Metals Corp. (ROVR:TSX.V; ROVMF:OTCQB) is interesting. Rover has got the market cap about $3 million and they’ve got just under a million dollars in the bank. They can get started. In a roaring ball market it is not the majors or the mid tiers that have the greatest percentage advance, it’s the little tiny companies that have the major upside. Rover is north of the Yellowknife okay up in the Northwest Territory. I think they’re 110 kilometers north of the Yellowknife.
Most people won’t even recognize this, but I think it’s the biggest gold mine in Canada was the giant mines in Yellowknife. It was a big deal 30 or 40 years ago, but you don’t hear much about that district now. He’s put together a good package. They’re getting a lot of interesting results. He’s got enough money to get started on the drill program and it’s the company that can go from the $3 million market cap to a $30 million market cap with one set of good drill holes.
Maurice Jackson: The CEO there is Judson Culter. Just for our audience, we will be interviewing Group Ten Metal’s tomorrow as well as Rover Metals. Then Metallic Minerals as well next week and we plan to have Granite Creek Copper as well. We just interviewed Novo Resources and we’re trying to get Miramont and Irving back on the program as well here in the future. Finally, Bob, you just released a new book entitled ‘Basic Investing in Resource Stocks: The Idiot’s Guide.’ Allow me to be the first to congratulate you in less than 10 days your book is the best-selling book on Commodities Trading on Amazon. That’s quite an accomplishment.
Bob Moriarty: Well, yeah, but you’re the guy who kept bugging me to write the damn thing. It’s all your fault, it’s not my fault.
Maurice Jackson: I’m delighted and honored that you wrote the book and I know everyone that will be wise enough to purchase a copy will feel the same. Bob, tell us about your book, and why should someone reading purchase a copy?
Bob Moriarty: Well, here’s what’s interesting, if you’ve never written a book or a long article, you don’t realize that once you start writing, it takes a life of its own. I fully intended to cover copper and uranium and zinc and silver and gold and platinum and palladium. What I intended to do turned out to be something totally different than what I actually ended up with. I started writing and whatever it is that controls my typing fingers said, “No, you don’t want to go in this direction. You want to go in this direction,” so I did that. What I did is I put in a lot of things that I’ve learned over the years that they’re very important.
I mean, let me give you a perfect example. There are so many people who are invested in gold and silver and resource stocks, who spend a lot of time worrying about manipulations. The funny thing is the whole manipulation thing is just as big as scam as “Bitcon” and Global Warming. We talked about Bitcon when it was $800 billion and it’s $150 billion now. That was a great financial fraud world test. Global warming and carbon credits is an absolute fraud. It’s a tax. There is no such thing as global warming. The real danger is global cooling and it has far more to do with the sun than it has to do with the actions of man.
To a much smaller degree, the idea of manipulation being significant, it’s similar. It’s fraud and the people who talk about it know that they’re using fraud. However, it’s very appealing. When you go out and buy a company or when you go out and buy a commodity and it goes down, you can always point at manipulation and say, “It’s manipulated. I didn’t lose money because I’m stupid and made bad decisions. I lost money because it’s manipulated.” The guys who talk about manipulation and use manipulation as an excuse don’t bother telling everybody every financial instrument is manipulated. It is manipulated by everybody all of the time. Now if you think that manipulation is significant, you should not invest. It’s that simple, but everything’s manipulated.
We know the government manipulates the interest rates. We know they manipulate currencies, good chance they manipulate stock market. Who gives a shit? It’s like the sun coming up, you can’t do anything about it. Why worry about it? I put in a bunch of tips that I’ve learned over the years from mistakes that I’ve made and I’m really quite proud of the book. I think it’s a good book and I think that people will save themselves a lot of money by buying and reading the book.
What I try to do is I try to make books very simple. I’m not interested in a 400 or 500 page turner or I’m trying to espouse some really unique theory of investing. I don’t give a shit. I want to help ordinary people make decisions that can make them money. Now, I think you and I have talked a couple of times about the Daily Sentiment Indicator. I have used that to predict turns in 24 commodities. I did it in January of 2018 and then I did it in the end of December 2018. Only 24 commodities that I predicted would turn direction, 24 of them did it. The funny thing is I’m not a guru. Anybody could do that, if they would read the book, if they would understand the basics. If they use the tools that are available to everybody. Anybody could do that. There’s no magic to it. Everybody wants to convince people there’s some kind of magic. You need to listen to the experts, you need to listen to the gurus. Well, the experts are all full of shit. Why would you want to listen to them?
Maurice Jackson: Your book resonates with so many people, hence the success it’s had already. When one reads this book, you have the ability to tap into one of the deepest reservoirs of intellectual capacity in this sector that has a proven pedigree of success. Bob is sharing with you the tools he uses, and they’re very practical. Anyone as you referenced could use the tools.
When I first read the book, it wasn’t what I expected. Not in a disappointing way, I thought you were going to go into a more technical side but instead it’s a very pragmatic book. It’s very easy to understand and apply. Bob, on behalf of Proven and Probable, we want to thank you for giving us the seal of approval as one of the trusted sources that you recommend for readers. That is by far the highest compliment to our work and I want to thank you for that sir.
Bob Moriarty: Well, I don’t know whether you should thank me. If people hate the book, I’m going to blame you.
Maurice Jackson: We’ll take the blame on that one. Let me ask you this as well, what type of feedback have you received from your peers in the industry?
Bob Moriarty: Very positive. When you’re a writer you never really know how people are going to react to it. I mean face it, there’s a lot of books that are worth reading. When you do something and you have invested a lot of time and energy and thought into something, you want people to react to it in a positive way. I’ve talked to a lot of people and I’ve had a lot of people do reviews so far and there will be a lot more reviews. Everybody is receiving it very well. I think these guys are not trying to suck up to me. If they saw a problem with it, they’d say something.
Maurice Jackson: Bob, give us a title one more time and share with us where we can purchase a copy.
Bob Moriarty: Okay, you can go to Amazon.com and buy it there in any country they sell books. It’s “Basic Investing in Resource Stocks: The Idiot’s Guide.” I want everybody to understand it’s not the reader that’s the idiot, it’s me.
Maurice Jackson: Bob, before we close, last question. What did I forget to ask?
Bob Moriarty: Probably dozens and dozens of things. You just lack the ability to ask any interesting questions. Once you got past, “How are you doing on your book?” you just ran out of interesting things to say.
Barbara Moriarty: He forgot to ask about the new investment.
Bob Moriarty: Oh, which new investment?
Maurice Jackson: Well, please share with us.
Barbara Moriarty: Sheep. I bought two of the Swiss Valley black Nosed Sheep. They are a special breed. They are very rare and they are absolutely gorgeous. They are living in five star luxury in the new forest in England and they are two males, but they sort of didn’t go full, did they really?
Bob Moriarty: Yeah. Let me be nice about this. They used to be males.
Barbara Moriarty: They have them fixed, but they’re not like normal sheep. They are like lovely cuddly teddy bears.
Maurice Jackson: Pleasure speaking with you, ma’am.
Barbara Moriarty: I will send you a photo.
http://www.valaisblacknose.org/
Maurice Jackson: Bob, for someone that wants to get more information on your work, please share the websites.
Bob Moriarty: I’ve got two websites, 321energy and 321gold, and they’re free websites and we’ve got about 50,000 people a day coming to them. We think they’re valuable.
Maurice Jackson: Last but not least, please visit provenandprobable.com for Mining Insights and Bullion Sales. You may reach us at contact@provenandprobable.com.
Bob Moriarty of 321gold and 321energy.com, thank you for joining us today on Proven and Probable.
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
We brought you on today to discuss current events, companies that have your attention and to discuss Amazon’s best-selling book right now under commodities trading, which happens to be your book aptly entitled “Basic Investing in Resource Stocks: The Idiot’s Guide.” Bob, you shared with me on a number of occasions to be aware of political and geopolitical events as they have a direct influence on our lives and portfolio. Let’s begin with current events and there’s a number of them unfolding right before us. Beginning in the U.S., what has your attention and why?
Bob Moriarty: I don’t know a good term to use, but it’s almost a feeling of a sick desire to watch something obscene, the Cohen hearings are certainly interesting. It’s a measure of how far over the cliff the country has gone. It’s obscene. Why you would get a guy who is a felon and who’s lied to Congress, who has an agenda to testify in Congress is just amazing! We know the guy is a liar. It’s all political theater. Sadly, neither party, no one is trying to improve the country. They’re just trying to get even with the guys on the other side of the aisle. It’s sick okay, but it’s interesting to watch because it’s so sick.
Maurice Jackson: In previous interviews you referenced the Deep State/Shadow Government. For someone new to the conversation, who is the Deep State and what is their significance?
Bob Moriarty: I’m not sure that deep state is a good term. It’s really the Congressional Military Industrial Complex that President Eisenhower warned us about in 1961 in his farewell address. In his written copy, President Eisenhower called it the Congressional Military Industrial Complex. His political advisor said, “You can’t do that. You can’t criticize Congress, so remove that. Just call it the Military Industrial Complex.”
There exists within the United States a small subset whose economic welfare is based on constant war. We no longer fight wars to achieve peace. We fight wars to achieve war and it’s a transfer of wealth from the taxpayers, the United States to the Congressional Military Industrial Complex. Wars will destroy, actually it has destroyed the United States already.
The United States is bankrupt, it’s functionally bankrupt. There is nothing we can do about it. There is no savior that’s going to come along. There are no solutions, we’re bankrupt. The standard of living of most Americans is going to decline a lot more than it already has.
Maurice Jackson: Just for the record, is it the Military Industrial Complex or the Democratic Party, which one is it that really wants President Trump out and why?
Bob Moriarty: Both the Deep State and the Democrats, but only because they wanted Hillary Clinton in. She was supported by the Deep State. A couple of months ago I was writing and talking about there being a coup d’etat in the United States. Then Andrew McCabe came actually went on 60 Minutes and he admitted it. I mean this is bizarre. If you have a coup d’etat in any country in the world, the legal system should arrest these guys, give them fair trials and shoot them. We don’t do that. We admit, “Oh yeah, we attempted a coup d’etat, the Department of Justice and the NSA and the CIA and the FBI were all trying to overthrow the democratically elected president of the United States,” but who cares?
Maurice Jackson: Bob, I want to go back to my previous question, what will be the purpose or what is the ultimate intent? If they get President Trump out, then what?
Bob Moriarty: Well, see, that’s the problem. We talk about defeating the ISIS in Syria or we talk about regime change in Iran or regime change in Syria or regime change in Afghanistan or regime change in Iraq. We never have a plan B. We never have anything that we actually intend to do. The journey has become the destination and that is perpetual war.
Maurice Jackson: Let me ask you this here, what is Bob Moriarty’s assessment of President Trump?
Bob Moriarty: I think the man’s an idiot. You want to beat around the bush, he’s a blithering idiot. He’s a narcissist. He’s knowledge of things economic or historical are absolutely obscene. He’s most certainly a criminal, but when you say that you also have to say, well, his opponent was Hillary Clinton. If she had been elected president, there would have been four versions of air force one, three of them just to carry her baggage around.
Maurice Jackson: Therefore, in some regards the United States would have the same president in Trump or Clinton. Let’s expand the narrative to geopolitics here. Things are really heating up between India and Pakistan. What’s going on there?
Bob Moriarty: Let me back track a little bit. I think we’ve discussed the worldwide revolution before, but the population of every country on earth is upset because the power and the money is being transmitted from the 99% to the 1%. Everybody is upset, the Yellow Vest and Israel and Canada and Brussels and Spain and I’m certain that’s true in Pakistan as well. There is an area of disputed territory between Pakistan and India that’s been in dispute since 1948. There are people, there are terrorists, India calls them terrorists, but they’re supported by Pakistan who set off a bomb and killed 40 Indian policemen, military. India was naturally upset.
When you’re dealing with two parties who are equipped with nuclear weapons, you want to avoid that kind of stuff. Because one of the options is everybody keeps being stupid and you end up lobbying nuclear weapons at each other. I’m not going to say I’m predicting it, I don’t know what the possibility is. I know it’s a very dangerous time and I wish there was a way of sorting it out that made sense. Unfortunately, I mean the only sane political leader in the world today I think is Putin.
Maurice Jackson: Speaking of Putin, I want to address the situation with Russian, Ukraine as well. Before we do that, let’s move west and go and discuss the situation between the U.S. and Iran, what’s going on there?
Bob Moriarty: Well, here’s what’s funny. Israel has been advocating for a war against Iran since 1982. It’s in writing. They’ve said it many, many times. It has nothing to do with Iran and everything to do with Israel. Israel has convinced the United States to fight their wars for them. There is no Iranian nuclear weapons program period. It stopped years ago, all 17 U.S. intelligence agencies admitted and there is no nuclear weapons program period, end of story. Everything that has been said about Iran is something that has been made up by Benjamin Netanyahu and the Mossad. They’re trying to convince the Americans to go to war.
Now since Donald Trump was bought and paid for by Sheldon Adelson, he sold his soul for about $30 or $35 million in the presidential campaign. Benjamin Netanyahu through Sheldon Adelson literally tells the President of the United States what to do. I’m naturally against that, however, if Hillary Clinton had been elected she would have done the same thing. We need to stop fighting wars for Israel. I am not a pacifist. I am the opposite of a pacifist. I am a warrior and I fought in war and I know all about war because I’ve been there. I would defend my country and my family and my state in a minute against a true enemy.
We go out and create the straw enemies who are not the enemies of us on behalf of Israel. Then we attack them and we let a bunch of our kids get killed. We pay for the war and it’s bankrupted the United States. The United States can end up just like French empire, the Spanish empire, the Russian empire, the British empire, it’s going to bankrupt itself. The standard of living of Americans are going to go down substantially, fighting wars for a tiny meaningless country in the Middle East.
Maurice Jackson: You know what you say sometimes I know that others may disagree with you and say, “That’s a little extreme,” but the reality is, you’ve stated empirical evidence. Wars bankrupt nations and then they also devalue their currency and history does repeat itself. The United States currently is on that trajectory. Let’s move north here. You referenced Russia earlier, there isn’t that much news coming out from Russia and Ukraine. What’s the situation like there?
Bob Moriarty: Well, actually there is and again that’s a situation where the neocons who are under the control of Benjamin Netanyahu. I mean they’re traitors to the United States, but they would like to get into war with Russia and they’re using the Ukraine. It’s really funny because the Ukrainian government is supported by the United States, Poroshenko, they’re just as corrupted as they could be. It’s the worst possible thing in the world for the Ukrainian people, but we don’t give a shit, okay, as long as they do what the United States wants to do, which is to antagonize Russia.
Now everybody talks about Russia having invaded Crimea, but the Crimea was always part of Russian, been part of Russian since I think Catherine the Great. The Crimea only became part of Ukraine in 1954, because Khrushchev got drunk and he signed it over to the Ukrainians. Ukraine was part of the USSR back then, so it didn’t really change anything whatsoever. When the United States sponsored and paid for and admittedly paid $5 billion of American dollars to subvert the Ukrainian government and sponsored the coup d’etat in Ukraine against their democratically elected president. Then the thugs that are running Ukraine started stirring up trouble that was anti-Russian. The people in the eastern part of the country voted and said, “We don’t want to be part of Ukraine, we’re Russian. We’ve always been Russian and we want to be Russian.” Ukraine is kind of split in two.
Ukrainian Navy tried to force a ship through a very narrow straight and the Russians captured the ship and said, “No, you can’t do that. That’s illegal to do.” It’s a hot spot and it’s something that could go nuclear in very short order. We have a small group about 30 people who are at the heart of military industrial complex. They’re neocons, they’re dual nationals. They do not owe any loyalty whatsoever to the United States, but all of it to Israel who want to sponsor war between the United States and Russia. If we do, if we allow them to do that, it’s a war that’s going to last for about 30 minutes.
Maurice Jackson: Well, certainly it’s a war that we don’t want. I recall, Bob, you’ve referenced before in previous interviews it’s a fact that maybe most people aren’t aware of. You referenced that the United States does not engage in war with countries that have nuclear weapons. I’m I correct in my memory on that?
Bob Moriarty: Well, by and large we choose to attack countries that cannot defend themselves. Pakistan was good and Afghanistan was good and Iraq was good and Syria was good and Iran’s good. Why they’re antagonizing Russia, which most certainly is nuclear armed, I don’t know.
Maurice Jackson: Switching gears, let’s move onto companies that have your attention at the moment.
Bob Moriarty: Well, there’s my favorite trio and Quinton Hennigh is behind all three of them in Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX), which we have talked about at some length. It’s very hot in Australia right now and summer starts cooling down in March and April and they’ll get busy. Novo is doing some stuff now, but nothing of significance that will move the market. They will be testing at Egina probably starting in April and I expect some very significant results there.
But of more interest is Miramont Resources Corp. (MONT:CSE) that I think they’ve completed six holes so far in southern Peru. They’ve got a very interesting deposit with three big targets that could be a world-class project. I’m not sure the first results they’re going to show out of the box, blow the lead off the stock kind of assays. It’s a drill program that I expect to be of major importance. I expect drill results coming out in two to four weeks, and they’re certainly going to be very interesting and it’s the stocks that I own a lot of and I’d like a lot. It’s got about $30 million market cap. Now Novo has about $400 million market cap, so Miramont’s can move a lot more than Novo in terms of percentage.
Second, you and I went to Irving Resources Inc. (IRV:CSE; IRVRF:OTCBB) a year and a half ago, almost two years ago now. They should and should be in great big quotation marks, should start drilling about mid-March and probably six weeks to two months after that start coming out with the results. They’re testing two things. They’re going to test the area that we saw that had very high grade gold right at the surface in a vein system. Just for your information Keith Barron went over there. The samples that we took tested about $25,000 a ton. Keith Barron took a sample that tested $35,000 a ton. That’s not going to be the first drill target. The first drill target’s going to be in the sinter. The sinter has shown some several grams to the ton assays from the coats of silica cap that makes it the sinter. That sinter is steep because that’s typically not where the gold is found. The gold is trapped underneath the sinter and they’re going to drill into that. I can’t tell you whether Irving will hit on the first hole or its 50th hole, but I expect some real barn burning results there.
Maurice Jackson: It’s truly interesting times for Dr Quinton Hennigh there. How about switching to the Metallic Group of Companies. What can you tell us about them?
Bob Moriarty: Well, the first company that I wrote up going back 18 years ago is NovaGold. The guy that I was working with was Greg Johnson, he was the Vice President of Exploration. Very intelligent guy, very good guy. I like him a lot. What he’s done he’s put together three companies in different commodities. He’s got a company that specializes in copper and it’s called Granite Creek Copper Ltd. (GCX.V:TSXV). He’s got a company called Group Ten Metals Inc. (PGE:TSX.V; PGEZF:OTC) that has a platinum, palladium deposit in Montana right next to the Stillwater mine. It appears from a technical point of view, it appears that they’ve got a carbon copy of the Stillwater Mine.
Greg has done a brilliant job of putting packages together that nobody else has ever put together before. Everybody knew there were some good projects at Stillwater that weren’t owned by Stillwater. One guy owned one and another guy owned another. Another company owned the other and what Greg’s managed to do is put that together. Then there’s Metallic Minerals Corp. (MMG:TSX.V) that specializes in silver up in the Yukon. The interesting thing is, it’s all under similar managements. I like him a lot. These are all very quiet companies. Nobody’s heard about them. Nobody pays any attention to them, but I think that all three of them will end up being home runs. I like Greg Johnson a lot, he’s a good guy.
Maurice Jackson: Full disclosure, all the companies that you’ve referenced so far are sponsors of Proven and Probable with the exception of Granite Creek Copper. There’s one more company that recently you’ve been discussing and that is Rover Metals. What can you share with us?
Bob Moriarty: Well, Rover Metals Corp. (ROVR:TSX.V; ROVMF:OTCQB) is interesting. Rover has got the market cap about $3 million and they’ve got just under a million dollars in the bank. They can get started. In a roaring ball market it is not the majors or the mid tiers that have the greatest percentage advance, it’s the little tiny companies that have the major upside. Rover is north of the Yellowknife okay up in the Northwest Territory. I think they’re 110 kilometers north of the Yellowknife.
Most people won’t even recognize this, but I think it’s the biggest gold mine in Canada was the giant mines in Yellowknife. It was a big deal 30 or 40 years ago, but you don’t hear much about that district now. He’s put together a good package. They’re getting a lot of interesting results. He’s got enough money to get started on the drill program and it’s the company that can go from the $3 million market cap to a $30 million market cap with one set of good drill holes.
Maurice Jackson: The CEO there is Judson Culter. Just for our audience, we will be interviewing Group Ten Metal’s tomorrow as well as Rover Metals. Then Metallic Minerals as well next week and we plan to have Granite Creek Copper as well. We just interviewed Novo Resources and we’re trying to get Miramont and Irving back on the program as well here in the future. Finally, Bob, you just released a new book entitled ‘Basic Investing in Resource Stocks: The Idiot’s Guide.’ Allow me to be the first to congratulate you in less than 10 days your book is the best-selling book on Commodities Trading on Amazon. That’s quite an accomplishment.
Bob Moriarty: Well, yeah, but you’re the guy who kept bugging me to write the damn thing. It’s all your fault, it’s not my fault.
Maurice Jackson: I’m delighted and honored that you wrote the book and I know everyone that will be wise enough to purchase a copy will feel the same. Bob, tell us about your book, and why should someone reading purchase a copy?
Bob Moriarty: Well, here’s what’s interesting, if you’ve never written a book or a long article, you don’t realize that once you start writing, it takes a life of its own. I fully intended to cover copper and uranium and zinc and silver and gold and platinum and palladium. What I intended to do turned out to be something totally different than what I actually ended up with. I started writing and whatever it is that controls my typing fingers said, “No, you don’t want to go in this direction. You want to go in this direction,” so I did that. What I did is I put in a lot of things that I’ve learned over the years that they’re very important.
I mean, let me give you a perfect example. There are so many people who are invested in gold and silver and resource stocks, who spend a lot of time worrying about manipulations. The funny thing is the whole manipulation thing is just as big as scam as “Bitcon” and Global Warming. We talked about Bitcon when it was $800 billion and it’s $150 billion now. That was a great financial fraud world test. Global warming and carbon credits is an absolute fraud. It’s a tax. There is no such thing as global warming. The real danger is global cooling and it has far more to do with the sun than it has to do with the actions of man.
To a much smaller degree, the idea of manipulation being significant, it’s similar. It’s fraud and the people who talk about it know that they’re using fraud. However, it’s very appealing. When you go out and buy a company or when you go out and buy a commodity and it goes down, you can always point at manipulation and say, “It’s manipulated. I didn’t lose money because I’m stupid and made bad decisions. I lost money because it’s manipulated.” The guys who talk about manipulation and use manipulation as an excuse don’t bother telling everybody every financial instrument is manipulated. It is manipulated by everybody all of the time. Now if you think that manipulation is significant, you should not invest. It’s that simple, but everything’s manipulated.
We know the government manipulates the interest rates. We know they manipulate currencies, good chance they manipulate stock market. Who gives a shit? It’s like the sun coming up, you can’t do anything about it. Why worry about it? I put in a bunch of tips that I’ve learned over the years from mistakes that I’ve made and I’m really quite proud of the book. I think it’s a good book and I think that people will save themselves a lot of money by buying and reading the book.
What I try to do is I try to make books very simple. I’m not interested in a 400 or 500 page turner or I’m trying to espouse some really unique theory of investing. I don’t give a shit. I want to help ordinary people make decisions that can make them money. Now, I think you and I have talked a couple of times about the Daily Sentiment Indicator. I have used that to predict turns in 24 commodities. I did it in January of 2018 and then I did it in the end of December 2018. Only 24 commodities that I predicted would turn direction, 24 of them did it. The funny thing is I’m not a guru. Anybody could do that, if they would read the book, if they would understand the basics. If they use the tools that are available to everybody. Anybody could do that. There’s no magic to it. Everybody wants to convince people there’s some kind of magic. You need to listen to the experts, you need to listen to the gurus. Well, the experts are all full of shit. Why would you want to listen to them?
Maurice Jackson: Your book resonates with so many people, hence the success it’s had already. When one reads this book, you have the ability to tap into one of the deepest reservoirs of intellectual capacity in this sector that has a proven pedigree of success. Bob is sharing with you the tools he uses, and they’re very practical. Anyone as you referenced could use the tools.
When I first read the book, it wasn’t what I expected. Not in a disappointing way, I thought you were going to go into a more technical side but instead it’s a very pragmatic book. It’s very easy to understand and apply. Bob, on behalf of Proven and Probable, we want to thank you for giving us the seal of approval as one of the trusted sources that you recommend for readers. That is by far the highest compliment to our work and I want to thank you for that sir.
Bob Moriarty: Well, I don’t know whether you should thank me. If people hate the book, I’m going to blame you.
Maurice Jackson: We’ll take the blame on that one. Let me ask you this as well, what type of feedback have you received from your peers in the industry?
Bob Moriarty: Very positive. When you’re a writer you never really know how people are going to react to it. I mean face it, there’s a lot of books that are worth reading. When you do something and you have invested a lot of time and energy and thought into something, you want people to react to it in a positive way. I’ve talked to a lot of people and I’ve had a lot of people do reviews so far and there will be a lot more reviews. Everybody is receiving it very well. I think these guys are not trying to suck up to me. If they saw a problem with it, they’d say something.
Maurice Jackson: Bob, give us a title one more time and share with us where we can purchase a copy.
Bob Moriarty: Okay, you can go to Amazon.com and buy it there in any country they sell books. It’s “Basic Investing in Resource Stocks: The Idiot’s Guide.” I want everybody to understand it’s not the reader that’s the idiot, it’s me.
Maurice Jackson: Bob, before we close, last question. What did I forget to ask?
Bob Moriarty: Probably dozens and dozens of things. You just lack the ability to ask any interesting questions. Once you got past, “How are you doing on your book?” you just ran out of interesting things to say.
Barbara Moriarty: He forgot to ask about the new investment.
Bob Moriarty: Oh, which new investment?
Maurice Jackson: Well, please share with us.
Barbara Moriarty: Sheep. I bought two of the Swiss Valley black Nosed Sheep. They are a special breed. They are very rare and they are absolutely gorgeous. They are living in five star luxury in the new forest in England and they are two males, but they sort of didn’t go full, did they really?
Bob Moriarty: Yeah. Let me be nice about this. They used to be males.
Barbara Moriarty: They have them fixed, but they’re not like normal sheep. They are like lovely cuddly teddy bears.
Maurice Jackson: Pleasure speaking with you, ma’am.
Barbara Moriarty: I will send you a photo.
http://www.valaisblacknose.org/
Maurice Jackson: Bob, for someone that wants to get more information on your work, please share the websites.
Bob Moriarty: I’ve got two websites, 321energy and 321gold, and they’re free websites and we’ve got about 50,000 people a day coming to them. We think they’re valuable.
Maurice Jackson: Last but not least, please visit provenandprobable.com for Mining Insights and Bullion Sales. You may reach us at contact@provenandprobable.com.
Bob Moriarty of 321gold and 321energy.com, thank you for joining us today on Proven and Probable.
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Miramont Resources, Irving Resources, Novo Resources, Granite Creek Copper, Group Ten Metals and Metallic Minerals. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Miramont Resources, Irving Resources, Novo Resources, Granite Creek Copper, Group Ten Metals and Metallic Minerals are sponsors of 321 Gold and/or 321 Energy.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Miramont Resources, Irving Resources, Novo Resources, Granite Creek Copper, Group Ten Metals and Metallic Minerals. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Miramont Resources, Irving Resources, Novo Resources, Granite Creek Copper, Group Ten Metals and Metallic Minerals are sponsors of Proven and Probable. Proven and Probable disclosures are listed below.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click herefor important disclosures about sponsor fees.
4) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
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The Information presented in Proven and Probable is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this forum is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information on this forum and provided from or through this forum is general in nature and is not specific to you the User or anyone else. You should not make any decision, financial, investments, trading or otherwise, based on any of the information presented on this forum without undertaking independent due diligence and consultation with a professional broker or competent financial advisor. You understand that you are using any and all Information available on or through this forum at your own risk.
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To place an order call 855.505.1900 or email maurice@milesfranklin.com
From The Desk Of David Schectman
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This article makes the obvious point that a return to a gold standard is the only way nations can contain the interest cost of servicing debt, given the alternative is inflationist policies that can only lead to far higher interest rates and currency destruction. The topic is timely, given the self-harm of American economic and geopolitical policies, which are already leading America into a cyclical slump. Meanwhile, American fears of Asian domination of global economic, monetary and political outcomes have come true. The upcoming credit crisis is likely to kill off the welfare state model in the West by destroying their unbacked paper currencies, while China, Russia and their Asian allies have the means to prosper.
The fragility of state finances
In my last Goldmoney article I explained why the monetary policies of inflationist economists and policy makers would end up destroying fiat currencies. The destruction will come from ordinary people, who are forced by law to use the state’s money for settling their day-to-day transactions. Ordinary people, each one a trinity of production, consumption and saving, will eventually wake up to the fraud of monetary inflation and discard their government’s medium of exchange as intrinsically worthless.
They always have, eventually. This has been proved by experience and should be uncontroversial. For the issuer of a currency, the risk of this happening heightens when credit markets become destabilised and confidence in the full faith and credit, which is the only backing a fiat currency has, begins to be questioned either by its users or foreigners or both. And when it does, a currency starts to rapidly lose purchasing power and the whole interest rate structure moves higher.
The state’s finances are then ruined, because by that time the state will have accumulated a lethal combination of existing unrepayable debt and escalating welfare liabilities. Today, most governments, including the US, are already ensnared in this debt trap, only the public has yet to realise the consequences and the planners are not about to tell them. The difficulty for nearly all governments is the deterioration in their finances will eventually wipe out their currencies unless a solution is found.
There is a solution that if taken allows the state to survive. It could be modelled on Steve Hanke’s (of John Hopkins University) preferred solution of a currency board, that when strictly observed removes the state’s ability to create money out of thin air. He recommends this solution to currency debasement and the evils that come with it for Venezuela and the like, linking a distressed emerging market currency to the dollar. But here we are considering stabilising the dollar itself and all the other currencies linked to it. The currency board in this case can only be linked to gold, which has always been the peoples’ money, free of issuer risk. In former times this was the basis of a gold exchange standard.
Professor Hanke’s currency board is a rule-based system designed to achieve the same thing. Once the system is in place, every currency unit subsequently put into public circulation by the monetary authority must be physically backed by a defined weight of gold bullion. This was the method of the gold exchange standard adopted by the Bank of England under the terms of the Bank Charter Act of 1844. A modern currency board, consisting of digitised currency, effectively works the same way.
A currency board system is not the best mechanism whereby currency is made exchangeable for gold. Its weakness is it relies on the state fulfilling its obligations, so it would be better to use gold directly, either in physical or digitised form. America reneged on its gold exchange standard in 1933/34, when it first banned gold ownership and then devalued the dollar. That was simply theft by the state from its citizens. Therefore, other safeguards for a gold exchange standard must be in place.
A return to a credible gold exchange standard will then put a cap on interest rates and therefore government borrowing costs. Instead of nominal rates of 10% going on 20% and beyond, a gold exchange standard will probably cap long-term government borrowing rates in a two to five per cent range. It also allows businesses with viable investment plans to progress as well. Not only is it an obvious solution, but it is similar to that adopted in the UK following the Napoleonic wars.
Britain had government debt levels in 1815 greater than that of all advanced nations today relative to the size of her economy, with the single exception of Japan. She introduced the gold sovereign coin in 1816, comprised of 0.2354 ounces of gold, as circulating money with a face value of one pound. Over the following nine decades, not only did she pay down her government debt from over 200% of GDP to about 30%, but her economy became the most advanced and wealthy in the world. This was achieved with sound money, whose purchasing power rose significantly over those nine decades, while the quality of life for everyone improved. A sovereign was still one pound, only it bought much more.
Ordinary people were encouraged to work, spend and save. They aspired to make their families better off. The vast majority succeeded, and for those few unfortunates who fell by the wayside, charitable institutions were set up by successful philanthropists to provide both housing and employment. It was never the function of the state to support them. It would be too much to claim that it was a perfect world, or indeed that everyone behaved as gentlefolk with the best of Victorian values, but the difference between the successful laissez-faire economy in Britain with its relatively minor faults compared with the bureaucratic socialism that succeeded it is stark.
The key is in the creation and preservation of personal wealth, contrasting with socialist redistribution and wealth destruction, which has steadily undermined formerly successful economies. The future is coalescing towards an inflationary collapse for all Western governments, the manner of which is described in more detail in the following section. For prescient politicians, it creates the opportunity to reverse out of socialism, because the silent majority, which just wants commercial stability in preference to state handouts, if properly led will support a move away from destructive socialism. It is not a simple task, because all advice that a politician receives today is predicated on the creed of inflationism and socialist imperatives.
Why and how an inflationary collapse occurs
Monetarists are fully aware that if a government increases the quantity of money in circulation, its purchasing power declines. Their theory is based on the days when gold was money and describes the effect of imports and exports of monetary gold on the general price level.
Pure monetarists appear to assume the same is basically true of fiat currencies, unbacked by gold. But there is a fundamental difference. When gold is used as money for settling cross-border trade, an arbitrage takes place, correcting price differentials. When prices are generally low in one country, that country would achieve sales of commodities and goods in other countries where prices were higher. Gold then flows to the lower price centre, raising its prices towards those of other countries. With unbacked national currencies, this does not happen.
Instead, national currencies earned through cross-border trade are usually sold in the foreign exchanges, and the determinant of trade flows is no longer an arbitrage based on a common form of money. The pure link between money and trade has gone, and whether foreigners retain or sell currency earned by exports depends mostly on their confidence in it. That is a matter for speculation, not trade.
Domestic users of state-issued currency are divorced from these issues, because foreign currencies do not circulate domestically as a medium of exchange. Instead of being a form of money accepted beyond national boundaries, as gold was formerly, there is no value anchor for domestic use. For this reason, a national currency’s purchasing power becomes a matter of trust, and it is that trust that risks being undermined in a credit crisis. The less trustworthy a government, the more rapidly a currency is in risk of decline.
This is why monetarism, which was based on gold as ubiquitous money, is no longer the sole determinant of currency values. It is true that an increase in the quantity of circulating money devalues the existing stock, but if the population as a whole is prepared to increase its preference for money, usually expressed as a savings ratio, there need be no detrimental effect on its purchasing power.
With fiat currencies we enter a world where statistics reflect the quantity of money, and never the confidence people have in it. Additionally, we should observe that statistics can tell you everything and nothing, but never the truth. It is possible for an economy to collapse, but statistically appear healthy as the following example illustrates.
Imagine, for a moment, that modern statisticians and their methods existed at the time of the Weimar Republic. Government finances were covered by approximately ten per cent taxes and ninety per cent monetary inflation. It was a government whose finances were run on the lines recommended by today’s modern monetary theorists.[i]
There can be no doubt the low level of taxation was an encouragement to business and permitted the redeployment of earnings for investment. A falling exchange rate delivers excess profits for export businesses as well. Interest rates were attractive relative to the rate of price inflation, and the economy, statistically anyway, was expanding rapidly.
This was certainly true measured in nominal GDP, the basic measure of economic activity today. Official prices, which are always the latest gathered and indexed, lag monetary debasement by at least a month, possibly two or even three. To this we must also mention governments always under-record price inflation, which is the natural consequence of earlier debasement. Therefore, even after an official price deflator is applied to nominal GDP, “real” GDP growth in Germany between 1918 and early-1923 would be judged by today’s government economists to be booming.
Interestingly, Joseph Stiglitz and a raft of left-leaning economists and politicians believed Hugo Chavez’s socialist policies were successful in 2007, when statistics revealed a similar interpretation for Venezuela’s inflation-ridden economy. However, instead of Germany being deemed to be in an economic boom, in 1920 economists in the classical and Austrian traditions saw it for what it was. Even Keynes wrote about it in his Tract on Monetary Reform, published coincidentally in late-1923 when the papiermark finally collapsed.
Germany’s inflation may have been a statistical success, but it concealed crippling wealth destruction through the transfer of wealth and wages from private individuals to the state through monetary debasement. As Lenin is reputed to have said, “The way to crush the bourgeoisie is to grind them down between the millstones of taxation and inflation.”
In Germany, inflationary financing started before the First World War to finance a build-up of armaments. At the outbreak of war, gold convertibility was suspended, and the unbacked papiermarkbegan its inflationary drift. Exploiting the facility to issue valueless pieces of paper as currency and for the people to circulate them as legal tender became the principal source of government funds.
This trick worked until approximately May 1923. By then, the purchasing power of the mark had fallen consistently at a relatively even pace. It then took only seven months to lose all its purchasing power, when the public collectively realised what was happening, and manically dumped their marks for anything. It was the katastrophenhausse, or crack-up boom, the end of life for a state’s unbacked currency.
It was the pattern firmly established in all fiat currency collapses, which, besides the currencies in existence today, has happened to all of them throughout the history of post-barter trade, without any known exception. It is the familiar route along which the dollar and other paper currencies are travelling today. Now that we are entering a statistical slowdown in most major economies, Weimar-style financing is set to return to centre-stage. The fate for unbacked state currencies, unless somehow averted, will be the same.
The lesson from Weimar and today’s monetary inflation is that the period before the public cottons on to it can be prolonged. In Germany it was 1914-1923, followed by a swift seven-month collapse. Today it is from 1971 and still counting. But the final collapse could be as rapid as Germany’s between May and November 1923.
Doubtless, we will see rising price inflation later this year, but that statistic will continue to be suppressed. With the gap between the effect of accelerating monetary inflation and the official rate of price inflation widening, we could see for a brief period the statistical recovery in GDP that so badly misled Professor Stiglitz and others observing Venezuela’s economy twelve years ago.
A gold standard alone is insufficient
A major problem for governments when price inflation begins to rise is the notional cost of borrowing, because markets alive to the decline in the currency’s purchasing power will drive interest rates higher, despite official attempts to suppress them. So far, the problem has been successfully covered up by central banks rigging government debt markets, and by government statisticians masking the true rate of price inflation through statistical trickery. In future, efforts to keep a lid on reality will presumably intensify as a core feature of monetary and economic policy. In light of another wave of monetary debasement, the question then arises whether markets will permit this market rigging to continue. If not, the purchasing power of unbacked currencies will be visibly undermined by the erosion of public confidence in them.
We cannot know this outcome for sure until it is well on the way. The Lehman credit crisis led to a global explosion in the quantity of money as central banks worked in tandem to rescue the banks and the entire financial world. That injection still circulates in the global blood-stream. A second globally-coordinated monetary debasement is just starting, notably with China leading the way. A realistic assumption must be that this time the purchasing power of state currencies will be the victim of a severe monetary overdose.
This being the case, there is bound to be an upward adjustment in nominal interest rates forced on central banks by the markets. Government financing becomes overtly inflationary, embarking on a modern equivalent of the papiermark route. How else do you describe accelerated quantitative easing?
A loss of confidence in currencies is always reflected in the prices of gold and silver, which by then should be heading considerably higher. Crypto-currencies could compound the problem by becoming an alternative for people no longer content to retain bank deposits.
Governments and their central banks will be at a fork in the road. One direction towards monetary stability is rough, tough, suspension-breaking, but leads to a better place. The other towards accelerating monetary debasement is smoother, more familiar, but just out of sight leads to a cliff-edge of monetary destruction.
Which road will your government take?
Western governments are poorly equipped to make this decision. There are a few people in the political establishment who might understand the choice, but they will have to deliberately put the clock back, and reverse government policy away from socialism and state regulation towards free markets and sound money. They will be fighting the neo-Keynesian economic establishment, the inflationists who form the overwhelming majority of experts and advisers. These neo-Keynesians populate the central banks and government treasury departments almost to the exclusion of all other economic theorists. Spending ministers and secretaries of state will have to be told to reduce their power-bases, which goes against their personal ambitions and political instincts.
It will take an extraordinary feat of leadership to succeed.
In favour of a brave statesman will be the free-market instincts of the silent majority. It is only at times of crisis that a statesman can muster this support. In a different context, Churchill in 1940 comes to mind. The public will not know the solution, but with the right leadership they can be led along the path to economic and monetary salvation. The currency will have to be stabilised by making it convertible into gold bullion, and government spending will have to be slashed, by as much as a quarter or a third in most advanced economies. This means enacting legislation cancelling government responsibilities, something that could require a state of emergency. The message to the electorate must be the government owes you nothing. And so that you can look after yourself, the government must encourage individuals to accumulate personal wealth by removing taxation from savings.
Obviously, the most socialist welfare states will face the greatest challenge. There will be extreme tension between financial reality and entrenched interests. There can be no doubt that their currencies are most likely to fail.
The Eurozone poses a particular challenge, with one currency circulating between nineteen member states. Conventional opinion is that all the troubles visited on the PIGS (Portugal, Italy, Greece and Spain) are due to an inflexible currency. Here, there is likely to be a split, with Germany and perhaps a northern faction gravitating towards the protection of a gold standard, while the PIGS will press for more interest rate suppression and infinite supplies of easy money from the ECB.
The US is a pivot of disaster
The US has a different but more worrying problem. It refuses to accept its decline as the dominant super-power, retreating into trade protection and autarky. Consequently, the US Government is taking destructive decisions. Since President Trump was elected, he accelerated inflationary financing late in the credit cycle in the belief it would lead to greater tax income in due course. He has also replayed the Smoot-Hawley Tariff Act of 1930, in the belief that trade protectionism somehow makes America great again (MAGA). Instead, it has crashed global trade, just as it did in the 1930s. MAGA is a fateful combination of tax cuts and trade protectionism. It is a curious form of self-harm, which backfires badly on American consumers and corporations. And it does not help foster good relations with America’s creditors, who have allowed America to live beyond her means for decades.
Foreigners now own dollars in enormous amounts, for which interpret they are America’s reluctant bankers. They are now beginning to be net sellers as a consequence of a dollar glut in their hands, combined with America’s clumsy geopolitical manoeuvrings. TIC data for December showed foreigners sold a net $91.4bn[ii] – the largest monthly outflow during Trump’s presidency, and this only a few months after everyone believed foreigners were buying yet more dollars to service their own debts.
While ignoring its dependency on foreign finance, America is trying to strangle China’s economic and technical development, but that horse has already bolted. Washington surely knows the jig is up, and that the US, Japan and Britain are merely islands on the periphery of a vitalised Eurasian powerhouse. We were all warned this would happen in one form or another by Halford Mackinder over a hundred years ago.[iii] America, it appears, is prepared to destroy herself rather than see Mackinder’s prophecy come true.
Consequently, the whole world is being thrown into a trade-induced slump, and the American government is central to the problem. We can expect its economy, along with all the others, to decline significantly in the coming months. It will be an encouragement for yet more inflationism. The monetary expansion which is sure to follow is set to lead to an acceleration in the decline in the dollar’s purchasing power, as foreigners turn from dollar bankers to dollar sellers. This will lead to an increase in the value of time-preference set by markets, and unless the Fed counters this increase sufficiently by raising its rates, the dollar will simply slide.
Under current circumstances, the 1980-81 Volcker solution of raising interest rates to 20% to stabilise the currency does not appear to be available. Furthermore, to reverse the Nixon shock of 1971 and reinstate gold backing for the dollar as a means of limiting the rise in interest rates is simply not in the establishment’s DNA. America, which is very much the guilty party in destroying its own Bretton Woods monetary arrangements, will find it very difficult to change its tack with such economic cluelessness at the top.
The SCO bloc[iv]
Things are very different in Asia. The eight members of the Shanghai Cooperation Organisation, together with those seeking to join, represent roughly half the world’s population. It is led by gold-friendly China and Russia. A further two billion people can be said to be directly affected by the way the SCO develops, including the populous nations of South-East Asia, the Middle East, and Sub-Saharan Africa. That leaves America’s questionable sphere of influence reduced to roughly one and a half billion souls out of a global population of seven. It is proof of Halford Mackinder’s foresight.
China and Russia still have significant infrastructure plans, which will stimulate Eurasian economic activity for at least the next decade, perhaps two. If the formerly advanced national economies slump, of course Asia will be adversely affected, but not as much as even China-watchers fear. The upcoming credit crisis is likely to mainly affect America, UK, Western Europe and their military and economic allies. The SCO bloc could escape relatively lightly, if it takes the right avoiding action.
The threat to the SCO’s future is mainly from its current monetary policies, with China in particular using credit expansion to manage the economy. She has sought to control the consequences of domestic monetary policy through strict exchange controls, a strategy which has so far broadly succeeded.
The growing possibility of a dollar collapse will call for a radical change in China’s monetary policy. We know the direction this new policy will take from the actions of Russia, China and increasingly those of other SCO members, and that is to somehow incorporate gold into their paper monies. Furthermore, they are capable of doing it and making it stick.
While it is clear to us that China and Russia understand the importance of gold as true money, it is not clear whether they have a credible plan for its introduction into their monetary systems. The Russians seem to have a good grasp of the issues. China had a good grasp, but many of her economic advisors are now Western-trained in neo-Keynesian inflationary beliefs. Therefore, China is not wholly immune to the faults that are likely to destroy the dollar and other Western currencies. But the central message in China’s successful cornering of the physical gold market is a switch will be made to sound money when it is strategically sensible, despite the neo-Keynesians in it ranks.
Almost none of the SCO nations have significant welfare commitments to their populations. It is therefore possible for them to contain government spending in an economic downturn. Not only can Russia and China introduce a gold exchange standard and make it stick, but fellow SCO members and those nations tied to it can either introduce their own gold exchange standards, or alternatively use gold-backed roubles and yuan to anchor their currencies.
The economic and monetary direction taken by the SCO in the coming years could turn out to be relatively successful, at least compared with the difficulties faced by the welfare states. Such an outcome would be immensely positive for humanity as a whole and be a lifeline for those of us deluded into inflation-funded socialism. You never know, it might even force spendthrift Western governments to reform their ways and return to sound money policies.
The effect on the price of gold should be obvious. It is said that foreign students in Berlin in 1923 were able to buy houses with the spare change from their allowances, sent to them by their parents, usually in dollars or pounds. Dollars at that time were as good as gold. Today, a currency board or gold exchange standard would have to be fixed at a rate significantly higher than current fiat-currency prices. Gold is the ultimate protection from theft by currency debasement.
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SPROTT 2019 Top 10 List
Authored by Trey Reik, Senior Portfolio Manager, Sprott Asset Management USA, Inc.
During 2018, we started to sound a bit like a broken record. We felt the Fed’s dual policy agenda of simultaneous rate hikes and balance sheet reduction was too aggressive in the context of a global economy bloated with debt and addled far too long by salves of quantitative easing (QE) and zero interest rate policies (ZIRP). We even questioned whether the Keynesian academics at the Fed fully appreciated the direct and measurable impacts of QT on global money supply.
All the way through December’s unanimous decision by the Federal Open Market Committee (FOMC) to hike fed funds for the fourth time in 2018, our concerns gained very little traction in consensus circles. Because we have remained confident in our analysis, we found the second half of 2018 to be a frustrating investment environment.
During 2018, we started to sound a bit like a broken record. We felt the Fed’s dual policy agenda of simultaneous rate hikes and balance sheet reduction was too aggressive in the context of a global economy bloated with debt and addled far too long by salves of quantitative easing (QE) and zero interest rate policies (ZIRP). We even questioned whether the Keynesian academics at the Fed fully appreciated the direct and measurable impacts of QT on global money supply.
All the way through December’s unanimous decision by the Federal Open Market Committee (FOMC) to hike fed funds for the fourth time in 2018, our concerns gained very little traction in consensus circles. Because we have remained confident in our analysis, we found the second half of 2018 to be a frustrating investment environment.
Powell’s Pivot: The Fed’s Policy Reversal
How quickly things can change. In the four weeks following the December FOMC rate hike, the Fed executed one of its sharpest policy U-turns in memory. Indeed, the Fed’s tonal shift has been so profound, it is difficult to square recent comments from Fed Governors and Regional Bank Presidents with their stated positions just a few weeks prior. What could possibly account for such a dramatic about-face from such a characteristically deliberative body? Is the explanation as simple as the 19.6% decline in the S&P 500 Index (S&P 500)1 between Chairman Powell’s “long way from neutral” comment on 10/3/18 and Secretary Mnuchin’s convening of the President’s Working Group on Financial Markets on Christmas Eve?
In our experience, the contemporary Fed is always hyper vigilant about signs of financial stress with perceived potential to evolve into debt deflation. To us, S&P 500 air pockets are but a symptom of a far more troublesome underlying condition: insufficient credit creation to sustain inflated paper claims. Once equities complete their current Pavlovian bounce, consensus will need to confront the more sobering implications of the Fed’s policy reversal. The Fed is far too tight and has already tripped the switch on long overdue debt rationalization.
Of course, this is precisely the juncture for which we have long prepared.
Gold Coiling for Spirited Advance
Similar to early 2016, when global financial markets were destabilized by the Fed’s initial 12/16/15 rate hike, the gold price responded quickly to market fallout from Chairman Powell’s early October overreach, and has remained in steady uptrend ever since. Importantly, gold’s advance has not been derailed by the S&P 500’s 18.1% bounce from Christmas Eve through 2/15/19. To us, gold’s performance clearly signals Fed policy error, and we believe spot gold is coiling for spirited advance as global central banks pivot back toward easing. For gold investors, this is the mix of real-deal fundamentals on which spectacular gains are based.
Given the seminal nature of catalysts now in play for precious metals, we felt the timing appropriate for a comprehensive review of factors driving the gold price. In this report, we have compiled our Top 10 List of fundamentals supporting a portfolio allocation to gold in 2019. Because our gold investment thesis rests on epic global imbalances, our first few sections review underpinnings of our long-term gold thesis.
#1. Gold has been the Best Performing Global Asset for 18 Years
We often marvel at investor apathy towards gold’s investment merits. Especially in institutional circles, gold is generally viewed as an archaic asset offering negligible portfolio utility. To us, it is remarkable that gold could remain such an institutional outcast after posting the single best performance of any global asset for eighteen years running. Since 2000, not only has bullion outperformed traditional investment assets in cumulative total return, but gold’s ongoing bull market has also proved to be highly consistent in its annual progression. As shown in the rightmost column of Figure 1, the average of gold’s annual performance in nine prominent currencies has been positive in 16 of the past 18 years.
Figure 1: Annual Performance of Spot Gold in Prominent Global Currencies (2001-2018)
Source: Bloomberg.
Given gold’s fringe standing in much of the investment world, it is interesting to note that gold bullion’s cumulative performance since 2000 has trounced the S&P 500. As shown in Figure 2, gold’s cumulative gain from 12/31/00 through 2/15/19 totaled 385.42%, versus a 110.23% advance in the S&P 500 price level, and a 201.15% gain in S&P 500 total return.
Figure 2: Spot Gold2 vs. S&P 5001 (Price and Total Return Indices) (12/29/00-2/15/19)
Source: Bloomberg.
(Note to Reader: Items 2-9 have been condensed. The full 28-page Gold Report can be found here.)
#2. Paper Claims have Decoupled Completely from Productive Output
Synopsis: Greenspan, Bernanke and Yellen Feds have facilitated trillions of dollars of credit creation atop a fairly consistent GDP denominator. Why is debt-to-GDP analysis important and what does it have to do with gold’s portfolio merits? While timing is uncertain, it is inevitable that the U.S. financial system will eventually rebalance to the degree that GDP can productively support total debt levels. There are only two possible routes for the U.S. debt burden to be recalibrated to underlying GDP: default or debasement. Because gold can neither default nor be debased, it is an ideal portfolio component until such time as the U.S. financial system rebalances.
#3. Central Banks are Admitting Tightening is No Longer Possible
Synopsis: Since the Fed’s about-face on rates, the biggest riddle in financial markets is what could possibly have served as the underlying trigger. Was it the S&P 500 swoon, pressure from President Trump or some signal of financial stress not yet publically disseminated? We suspect it was a combination of all three. Whatever the true mix of catalysts, the message has been received, not only by the Fed, but by all global central banks, which have discarded in unison their collective resolve for policy tightening.
#4. The Return of Negative Interest Rates
Synopsis: In unison, global central banks are swinging quickly and hard back towards an easing posture. The world is quickly refocusing on the likelihood and utility of negative interest rates. The global total of negative yielding sovereign bonds has exploded 56% from $5.733 trillion on 10/3/18 to $8.944 trillion on 2/15/19. Already within $1 trillion of its September 2017 high, how large will the ultimate supply of negative-yielding sovereigns become in the unfolding cycle? While just one of many factors influencing the gold price, correlations confirm that gold is taking notice of the global pivot to negative rates.
#5. Fed Credibility Under Siege
Synopsis: While we recognize U.S. Fed power borders on the divine, we have always found the proposition that 19 individuals, no matter how capable and well-supported, might possibly price the world’s reserve currency more efficiently than free markets to be a fairly absurd notion. Sidestepping our perceptions of Fed Governors and Regional Bank Presidents, both individually and as a deliberative body, we have detected since early 2018 distinct erosion in the Fed’s factual credibility.
#6. Deteriorating U.S. Fiscal Position
Synopsis: One of the least kept secrets in global financial markets is the deteriorating fiscal position of the United States. Everyone knows the Trump Administration’s Office of Management and Budget (OMB) now forecasts $1 trillion-plus budget deficits in fiscal 2019, 2020 and 2021. Everyone knows OMB assumptions for GDP growth in those years are likely a bit optimistic (3.2%, 3.1% and 3.0%). And everyone knows post-tax-cut federal receipts are already lagging advertised projections.
#7. Gold Versus U.S. Dollar as Strategic Reserve
Synopsis: Central bank demand for gold soared to a multi-decade high in 2018, rising 74% YOY – the highest level of CB net purchases since the dissolution of Bretton Woods (1968-1973). There is no question that President Trump’s penchant for sanctions has energized longstanding rancor towards the dollar-standard system. As recently as 2000, 72.7% of global foreign-exchange (FX) reserves were denominated in U.S. dollars. By year-end 2018, the U.S. dollar had shrunk to 61.9%. We believe that the declining use of dollar-denominated assets by global central banks has less to do with direct supply/demand impacts in currency markets than with the symbolic impact on the U.S. dollar’s hegemonic status.
#8. Global Policy Uncertainty
Synopsis: Since 2016, the twin shocks of Brexit and the Trump Presidency have bookended near continuous political turmoil in global markets. Investors have become inured to the daily twists and turns of President Trump’s seemingly erratic decision-making and Prime Minister May’s Sisyphean negotiations with both the EU and her own Parliament. Indeed, investors’ increasingly thick skin to political headline risk may be leading to underestimation of potential black swans forming on the horizon.
#9. Dormant Volatility
Synopsis: Important components of our 2019 gold investment thesis are the lingering imbalances from eight years of QE (quantitative easing) and ZIRP (zero-interest-rate-policy). Artificially depressed interest rates always distort time preferences and foster malinvestment. In the instance of the post-GFC (Great Financial Crisis) Fed, these imbalances have become epic in size and scope. At Sprott, we adhere to the theory that volatility generally signals change. We believe isolated outbreaks of volatility during 2018 served as early signposts of profound change in financial markets (the unwinding of eight years of volatility-suppressing QE and ZIRP). What is being vastly underestimated by investor consensus is the stored force of volatility suppression during these past eight years.
#10. Gold as Non-Correlating Portfolio Asset
In documenting an objective record of gold’s portfolio utility, one logically begins with gold’s traditional profile as safe-harbor asset. It goes without saying that gold’s safe-haven reputation accrues from bullion’s established history of relative outperformance during periods of financial stress. As shown in Figure 18, gold has done a masterful job of insulating portfolio capital from sharp declines in U.S. equities during the past three decades of financial crises.
Figure 18: S&P 500 Index versus Spot Gold During “Crisis” Periods (1987-Present)
Source: World Gold Council. Dates used: Black Monday: 9/1987-11/1987; LTCM: 8/1998; Dot-Com: 3/2000-3/2001; September 11: 9/2001; 2002 Recession: 3/2002-7/2002; Great Recession: 10/2007-2/2009; Sovereign Debt Crisis I: 1/2010-6/2010; Sovereign Debt Crisis II: 2/2011-10/2011; Greek Default: 6/2015-9/2015.
Institutional focus on non-correlating assets has directed trillions-of-dollars of investment capital towards hedge funds and specialized investment partnerships in disciplines such as real estate, private equity and venture capital. A more recent trend, however, has been mounting investor backlash against elevated fees charged by alternative managers in the context of mediocre investment returns (not to mention onerous liquidity and lockup provisions). In short, a marquee consideration for today’s pension and endowment stewards has become whether the fees, lockups and obfuscation of alternative investments are truly worth their while.
Even more challenging to the industry status quo, gold bullion has rivaled the performance of alternative asset indices while simultaneously displaying far lower correlation to these vehicles than either stocks or bonds. As shown in Figure 23, the correlation between prominent alternative asset indices and the S&P 500 Index has averaged 80% over the decade through 2018. By way of comparison, the 10-year correlation between these same indices and spot gold has averaged just 9%. At an 80% correlation-rate with U.S. equities, high-priced and unwieldy alternative vehicles seem hardly worth their freight.
Figure 23: Correlations between Alternative Asset Indices and S&P 500 Index, U.S. Treasuries and Spot Gold (Monthly Data Trailing 10-years through 2018)
Source: World Gold Council.
We thank you for your diligence in reviewing our fundamentals supporting a portfolio allocation to gold in 2019. We expect gold’s 2019 performance to more than justify the effort.
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Trey Reik
Senior Portfolio Manager
Sprott Asset Management USA, Inc
203.656.2400
| 1 | S&P 500® Index represents 505 stocks issued by 500 large companies with market capitalizations of at least $6.1 billion. This Index is viewed as a leading indicator of U.S. equities and a reflection of the performance of the large-cap universe. The SPX Index represents price only, and SPXT Index represents total return with dividends reinvested. |
| 2 | Spot gold is measured by the Bloomberg GOLDS Comdty sub-index. |
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This content is intended solely for the use of Sprott Asset Management USA Inc. for use with investors and interested parties. Investments, commentary and statements are unique and may not be reflective of investments and commentary in other strategies managed by Sprott Asset Management USA, Inc., Sprott Asset Management LP, Sprott Inc., or any other Sprott entity or affiliate. Opinions expressed in this presentation are those of the presenter and may vary widely from opinions of other Sprott affiliated Portfolio Managers or investment professionals.
This content may not be reproduced in any form, or referred to in any other publication, without acknowledgment that it was produced by Sprott Asset Management LP and a reference to www.sprott.com. The opinions, estimates and projections (“information”) contained within this content are solely those of Sprott Asset Management LP (“SAM LP”) and are subject to change without notice. SAM LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, SAM LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. SAM LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. SAM LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. SAM LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, SAM LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.
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The risks associated with investing in a Trust depend on the securities and assets in which the Trust invests, based upon the Trust’s particular objectives. There is no assurance that any Trust will achieve its investment objective, and its net asset value, yield and investment return will fluctuate from time to time with market conditions. There is no guarantee that the full amount of your original investment in a Trust will be returned to you. The Trusts are not insured by the Canada Deposit Insurance Corporation or any other government deposit insurer. Please read a Trust’s prospectus before investing.
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Dr. Quinton Hennigh the President and Director of Novo Resources (TSX: NVO | OTCQX: NSRPF) sits down with Maurice Jackson of Proven and Probable to discuss the companies road to production. Current and prospective shareholders will be introduced to the thesis and unique value proposition that Novo Resources provides to the market. We shall address a number of fronts from expanding the project portfolio from 7,000 sq km to 12,000 sq km, bulk sample results, mechanical rock sorting with TOMRA, and DTC Eligibility for U.S. investors just to name a few. Dr. Hennigh shall provide a thorough comprehensive update on each project in the Novo portfolio.
VIDEO
AUDIO
TRANSCRIPT
Company’s Quest to Become an Established Gold Producer in Australia
Contributed Opinion
Source: Maurice Jackson for Streetwise Reports (2/23/19): https://www.streetwisereports.com/article/2019/02/23/companys-quest-to-become-an-established-gold-producer-in-australia.html
Dr. Quinton Hennigh, chairman and president of Novo Resources, sits down with Maurice Jackson of Proven and Probable to discuss how the road to production looks.
Maurice Jackson: Joining us for a conversation today is Dr. Quinton Hennigh, the president and chairman of Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX), which is focused on “A New Paradigm in Gold Exploration and Investing.” Dr. Hennigh, welcome to the show.
Quinton Hennigh: Thank you, Maurice.
Maurice Jackson: Last time we spoke, Novo Resources accomplished a major milestone and that was the inclusion into the GDXJ. Since then Novo Resources has been extremely busy on a number of fronts from expanding the project portfolio, providing bulk sample results, mechanical rock sorting and DTC Eligibility, just to name a few. But before we go into greater detail, Dr. Hennigh, for someone new to the story, who is Novo Resources?
Quinton Hennigh: Novo Resources is Canada listed company that is focused on exploring in Australia. I founded the company roughly nine years ago, and it was explicitly to explore for a certain type of gold deposit in northwest Australia in a region called the Pilbara, which is just in from the Indian Ocean along the northern coast. Our projects are close to two cities, Port Hedland and Karratha.
They’re major cities that give access to the interior where there’s a lot of active iron ore mining in the region. The Pilbara has had a long-standing reputation, over 50 years, for their iron mines around Newman and Tom Price. Coincidently, within this same region Novo recognized the potential for gold early on in actually in the same strata, believe it or not, as the iron ore sequence.
Novo had a hypothesis that the Pilbara was once connected with the Kaapvaal Craton in South Africa. Both of those cratons are very old rocks, they’re over three billion years old, they share a lot of geologic similarities, including the strata that’s been deposited on each block. In addition, we identified the stratigraphy can be correlated from one side of the ocean to the other.
In South Africa, as many people know, there are vast deposits of gold in conglomerates in a basin called the Witwatersrand Basin. These gold deposits have been mined since around 1886 when they were first discovered; they produced something like 35% of all the gold produced on earth, around 1.7 billion ounces. The Witwatersrand Basin is a remarkable deposit; it’s basically the Saudi Arabia of gold.
The logical conclusion for us was, if deposits like that are present in South Africa, maybe over here in the Pilbara Craton there are similar deposits in conglomerates and of similar age, that have yet been discovered. Therefore, we came to Australia on that premise. We first structured deals with a gentleman named Mark Creasy, a well-known prospector in Australia, and those deals were largely centered over in the eastern part of the Pilbara region.
The Pilbara region is quite vast from one side to the other, covering over six hundred kilometers, and from the coast up here down to Paraburdoo is something like 250 or 300 kilometers. This is an enormous target area. Our first exploration ever was at Beatons Creek.
In 2011, drilled up a small resource at Beatons Creek, but what we learned is that the conglomerate units were quite continuous, and the gold is indeed there. The gold is a coarser grain than the Witwatersrand, but it is indeed present and appears to be economic. During our time at Beatons Creek we also conducted a bit of exploration at Marble Bar.
Since that time, we have focused efforts more to the northwest and acquired this vast land package by Karratha. This was based on a discovery roughly two-and-a-half years ago of gold being found by prospectors in areas like Comet Well and Purdy’s Reward, as well as others around the marsh and the basin, including Egina and some other select locals.
The gold occurrences had been known by the locals for many years. When the news got out in late 2016, we strategically assembled a land package, including Comet Well and Egina. Novo staked a tremendous amount of ground, which is 100% owned by us. In addition, we also conducted a joint-venture agreement with Artemis Resource.
Maurice Jackson: Dr. Hennigh, you’ve already introduced us to the project portfolio, but introduce us in particular to the value proposition we have before us.
Quinton Hennigh: The conglomerate gold systems in our project portfolio are different gold deposits than most people are used to seeing. Our conglomerates are flat-sheet-like, and continuous over large areas. We’ve latched onto three systems in particular that we’re focused on right now, which are Beatons Creek, Comet Well and Purdy’s Reward, where we are actively exploring now.
In 2018, we assembled the land package at Egina, and we’re conducting advanced exploration there now including bulk sampling.
For current and prospective shareholders I believe it best to become familiar with our trajectory for each project, as they are separate and unique. At Beatons Creek we’ve now undertaken a couple rounds of drilling over the past few years and also large-scale sampling, so this would be trench sampling as well as bulk sampling, and our current resource stands at somewhere around 670,000 ounces Measured, Indicated and Inferred. We are looking to grow that and are working to get a resource put together at Beatons Creek north of 1 million ounces in the near future.
Not only that, we’ve done a lot of work like test mining and other things to demonstrate the economics and continuity of this system. We are looking to advance our Beatons Creek project towards monetization over the coming year. Beatons Creek is our most advanced, it’s certainly a robust project. What you see there at Beatons Creek, you see conglomerate horizons, in some places it’s stacked six high, so we have a conglomerate bed with a bit of intervening material, another conglomerate bed, and so forth.
At Beatons Creek we have a robust deposit, easily accessible form surface. Those familiar with coal mines in West Virginia would identify these as tabletop mines. That’s the kind of setting we have at Beatons Creek, so it’s a really interesting deposit from that aspect, and the most exiting aspect is that Beatons Creek may be very inexpensive from a production standpoint. The gold is coarse and is easily recoverable; gravity recovery captures a lot but you know cyanide captures the rest so we expect very, very good recoveries out of that deposit in particular.
At Comet Well and Purdy’s Reward, we first evaluated the system, because it is a very coarse gold system, this is not your average gold deposit.
The gold particles are often tenths of a gram up to multi-gram even tens of grams, and they’re distributed through the conglomerate somewhat randomly. Therefore, one can’t just walk up, grab a rock chip sample and expect to know through fire assay what’s in this rock. We’ve had to do some very hard yards in terms of bulk sampling and other means to begin to evaluate the grain here.
What we’ve shown at Comet Well and the Purdy’s Reward joint venture with Artemis is that the continuity appears to be good over several kilometers. We’ve done a lot of core drilling for geology and stepped out into the basin. Presently, we have enough data between the core drilling, three-dimensional modeling, as well as the grade data that we have from the bulk samples, to put together a mineralization report.
This is a big step for Novo. All of our tenements are currently exploration licenses. In order to advance a project towards a mining stage, we have to convert exploration licenses to mining licenses in Australia, and to do that we need a couple of things. One, we need a mineralization report, in this case we’re not necessarily going to produce a resource per se, we’ll demonstrate that we have a potentially economic body of rock here, through the data that we’ve collected that I just mentioned.
Novo Resources will submit a mineralization report within the next few weeks. The other aspect that’s needed is an agreement with the Aboriginal community, this would be the Ngarluma Community. The Ngarluma Community basically covers most of this project area here. We’ve been in negotiations with them, and developed a good relationship with the Ngarlumas, over the past year and a half.
We need to strike what’s called a “Native Title Agreement” that allows us rights to go mining, as well the Ngarlumas have commercial rights, such as royalty, as part of this project. But these are things that also have to be worked out for granting a mining lease.
We anticipate taking Comet Well and Purdy’s Reward through a development trajectory, probably first through trial mining. In fact, we might do a certain amount of trial mining this year. That will provide us more supporting data for developing a larger scale mine. But we are definitely moving Comet Well and Purdy’s Reward forward in a trajectory towards making a producing asset.
Revisiting the map, one can see that Comet Well and Purdy’s Reward are really just a small component of a much larger land package. As I alluded to earlier, within the conglomerate horizons, people have found nuggets weathering out of these conglomerates over many kilometers through this region. We have a lot of greenfields work to do along strike (gold line).
We also have some very interesting new ground at Egina that we’ve recently assembled. At Egina the conglomerates have weathered away over time. They used to cover a significant portion in the Pilbara. But as they have weathered away and receded back, they’ve left the gold that was in them behind across a terrace, or flat country through here in the Pilbara. If one drives across this country, it is absolutely flat as a pancake, very similar to West Texas.
If one were to look in either direction, it’s like a pool table. But the flat surface throughout this region has what is called a lag gravel horizon on it. The lag gravel horizon is about one to two meters thick. Novo was able to demonstrate last year through our trial bulk sampling at Egina that it contains gold and it’s fairly coarse-grain gold; we recovered something like 108 grams of gold out of a hundred cubic meters of bulk sample that we collected.
That’s pretty remarkable! A lot of alluvial deposits are less than 0.3 grams, and the grades we’re seeing at Egina are very enticing. Our hypothesis is that this terrace, of which we own about 400 sq km, could be a sizeable gold project in its own right.
Egina is basically another very large target we have. It is earlier stage, but the nice thing about Egina is that it’s soft rock, gravels at surface. Novo can advance this in a fairly orderly fashion.
We control 100% (of the blue on the map) at Egina. Thus, we are able to get out there and do a lot of test mining and stuff like that that we can’t quite undertake presently at Comet Well at the moment. So Egina is definitely going to be a focus for us this year. We’re going to tackle that terrace gravel, see what kind of economics that might have, including the size and potential that we might have.
Therefore, we are going to do sampling not only in the mining lease but hopefully in some more extensive areas to demonstrate the hypothesis that this region could hold a vast gold deposit could be true.
Maurice Jackson: Dr. Hennigh, allow be to interject here. This land package you have here, it looks quite massive, how many square kilometers are we looking at here?
Quinton Hennigh: Our land package is around 12,000 square kilometers at present.
Maurice Jackson: Let me ask you this, sir. I know Novo Resources has undergone a tedious and methodical process in attempting to figure out grade and tonnage. In the spring of 2018 the company released the first bulk-sample results from Comet Well, how have those been coming along?
Quinton Hennigh: The bulk samples from Comet Well that we released in May were the first two that we completed. To get these samples through the lab was a big exercise. It required several renditions of crushing and experimenting and assaying different streams. We also were battling a bit of wet weather down in Perth last year; it took a long time but we did get a pretty comprehensive set of assays out in late October that demonstrated the grade of these conglomerate horizons.
What we’ve identified are two conglomerate horizons at Comet Well and Purdy’s Reward. The lower one of which is say 2or 3 meters thick, the grades range from about a 1 to 6 grams, and it sits right on the basement, so it’s basically the lowermost bed of rock in this bigger sequence.
Twelve to fifteen meters above first horizon is a second horizon. We call it the Upper Cannonball conglomerate, the Upper Cannonball conglomerate is about 1 to 2 meters thick, and again the grades in that bed are in a range of 1 to 3, 4 grams, somewhere in that range. And it’s very continuous along strike; we can see good continuity from one trench to the other over three-and-a-half, four kilometers right now. We feel very compelled that it’s demonstrating similar continuity to the beds we see at Beatons Creek.
For those who have followed Novo Resources for the year are familiar with the challenges we had at Beatons Creek. Specifically, we had to develop sampling protocols to deal with the coarse grade, assay protocols that were unusual; it took some time to develop. But now, Beatons Creek is basically getting close to mine.
Comet Well and Purdy’s Reward area are going along the same trajectory as Beatons Creek. We’ve had to cut our teeth with different styles of bulk sampling and assaying but we’ve now got things under control. We are also experimenting with somewhat unconventional techniques of recovering the gold.
Novo has done test work with TOMRA, for example; this was starting in late last year in November. The results that came out are fantastic! We think there is potential to crush up the conglomerate, screen it, of course, but put it through an ore sorting machine, and actually let the ore sorter pick rock with the gold particles.
You know the downside of coarse gold is assaying. It’s a real challenge, but the upside is that the metallurgy might be very favorable for us. Novo is very excited about that ore sorter possibility.
Maurice Jackson: Dr. Hennigh, the following may be a bit premature to address at the moment but the two most frequent questions I receive from prospective shareholders are, “Is this a place for deposit?” and, “How do you intend to extract the gold?” What do you have to say to those two questions?
Quinton Hennigh: Sure, the first question is a very good one. I came to this region on the basis that there might be deposits like those in South Africa. Now let me give a little background there, in South Africa there are really two types of ore, there’s the conglomeratic ore and in that the gold occurs as particles distributed in the matrix of the conglomerate.
In effect those are alluvial deposits in the Witwatersrand Basin. There is also what they call “carbon leader ore.” Carbon leader ore is a very, very thin seam of carbon, almost like coal, and I’ve written several papers (click here to view paper) on this with other authors. We believe that that seam of carbon is basically the fossil remains of early cyanobacterial mats that formed or evolved in a time when Earth’s atmosphere was largely reduced. The idea is the sea water back at that time, under reduced conditions, would have been able to dissolve a fair bit of gold. Gold dissolves in reduced atmospheric conditions.
The cyanobacteria was the first photosynthetic life. During this time period the cyanobacteria starting to kick off oxygen. What we believe is that that oxygen, which causes gold to precipitate, actually pulled, or started pulling the gold out of sea water and created that little carbon seam type ore, that is very, very rich in gold. This is a very, very unusual style of gold mineralization. It’s a thin and very continuous and covers many square kilometers. A seam of carbonaceous gold ore.
I came here looking for similar carbonaceous ores. What have we found? Well, at Beatons Creek, in fact we’ve talked about this in the past, we’ve actually found particles, pieces of carbonaceous material in the conglomerates here. So to answer your question, at Beatons Creek, we see two types of gold, we see bonafide alluvial gold. These would be loose, somewhat rounded particles in the matrix of the conglomerate, but we also see a component of carbonaceous material at Beatons Creek that tells us that that same process that you see in the Witwatersrand was active over in this area.
At Comet Well and Purdy’s Reward, what we see in the conglomerates here are large, rounded; they appear to be water-worn nuggets of gold. The origin of that gold we still haven’t put our finger on, but it’s possible that that gold has been recycled from weathering of previously existing conglomerates or carbonaceous beds that no longer exist.
In their present form it’s alluvial gold, but it’s ultimate origin is still in question. In addition, we have gold that appears to have grown in the matrix around the nuggets. This is what we call “halo gold,” it’s a thin halo about two or three millimeters wide around the gold nuggets, the coarse nuggets, and we believe that gold is actually a precipitated type gold, probably in response to biogenic activity.
So once again I would say it’s a mixture of two types of gold that have brought the system together. We have alluvial particles for sure, we have secondary gold that appears to be perhaps biogenic in nature.
Maurice Jackson: Alright and the second question: “How do you intend to extract the gold?”
Quinton Hennigh: Like the coarse gold is a problem from the sense of assaying but in terms of recovery, it is quite favorable. Gold is dense. One of the easiest ways to treat coarse gold is, of course, gravity recovery, and that’s certainly a possibility, but one of the things we wanted to look at was a call it a somewhat portable style of processing, by using ore sorting machines.
These ore sorting devices are skid mounted or they’re mounted on a transportable platform. They can be moved from one location to the other. Now why is that important? Well, this is a flat deposit, so if you have something that’s long, you know rather than trucking ore from one place to another over kilometers, why not mine process, right on the spot, and then move as you mine the material.
We looked at TOMRA ore sorters starting late last year (click here). We tried ore sorting early in 2017, had mixed results with the Steinert, first looked like it worked great, second rendition didn’t work so well. When we went to TOMRA they showed us some reasons why they thought they could improve things dramatically and just recently we published the final data from that.
In fact, the two samples that were good coherent conglomerate material that we put through saw recoveries over 80% just by sorting. This is using a scanner device, X-ray transmission that literally picks out particles of rock off a conveyor belt that have gold embedded in them. It’s just remarkable! We essentially took gravel, put it on a conveyor belt, sent it across this machine, and it picks out the little particles of rock with gold. What you end up with is a concentrate that’s a very, very small fraction of the overall mass you put in that machine, and it has most of the gold in it.
There are a few additional steps we have got to take to test this further. One question is “What do we do with the fines?” At the present, we are considering to conglomerate them, and then put them through the ore sorter as they are. In other words, turn them back into little pellets or something, let the ore sorter pick them out. Or another option we could do is just put the fines through a gravity circuit on their own. These are options we are considering, which are essentially unconventional means of processing for this very unconventional deposit.
Maurice Jackson: Looking forward, what are the company’s goals and objectives for 2019?
Quinton Hennigh: First, at Beatons Creek, which I talked about as being the most advanced project. We have a resource remodel underway right now, this is work that’s ongoing and we are expecting some bulk samples back from the project. These are ones we collected late last year. Once we have all that data, which should be available by the end of the first quarter, we anticipate publishing a new, updated resource for Beatons Creek. We are targeting over a million ounces, we’ll see if we can get there, I feel pretty confident. Beatons Creek should be a robust deposit. This puts the project in a good path for monetization. Then we will take the next steps of looking at how we potentially develop that project.
Second, at Comet Well and Purdy’s Reward, we anticipate doing a level of trial mining this year. We are continuing to evaluate some of the test work around the TOMRA, for example, as a means of processing at Comet Well. I think once we get a full evaluation, and we do have a bit more data we got to get back on that, but once we have a full evaluation of that processing, we’ll look at that trajectory. Bear in mind, we also are shooting for that mineralization report and working on a Native Title agreement so that we can convert a lot of that country into mining leases. That’s the trajectory for Comet Well and Purdy’s Reward.
Third, at Egina, once the rainy season’s over in a few weeks, we anticipate getting out there and hitting the mining lease very hard. This is the mining lease where we took our bulk sample last year. We anticipate putting together on a test basis, a grid of samples across a target area, where we can see if we can put together a resource on the terrace gravels.
We also anticipate, because it’s a mining lease and we have permit to go up to 50,000 tons extractable, doing some small-scale test mining. We are seeking to help build our confidence around that project. The other aspect to Egina, very important, we anticipate taking some samples further afield in some more distant areas, and trying to get an idea how extensive that deposit may be. If Novo proves that that deposit covers a vast area, encompassing many tens of square kilometers, in that country, I think people will sit up and take note. I think that’s really a big add to the story we have in the Pilbara right now.
Maurice Jackson: Near term, what is the next unanswered question, when should we expect results, and what determines success?
Quinton Hennigh: Per each project, the factors that determine success are a bit different. We have data coming back from bulk samples from Beatons Creek that will help support a new resource model, again that’s going to be over the next few weeks. We anticipate getting that resource put together by the end of this quarter.
If we see a resource above a million ounces I think we now have critical mass that allows us to look at that project a bit differently and more aggressively in terms of advancing it.
As far as Comet Well goes, I think right now we feel comfortable with the grades and the continuities we’re seeing. I think we have a fairly decent understanding of what this deposit is. What we really need to do there is to go test mine it on a scale, maybe a few tens of thousands of tonnes, and from multiple locations alone the strike of the conglomerate.
We also have to do some ore sorting tests to see if we can use that as a means of processing. Those are the two factors if we can successfully process this material using ore sorter, and that includes capturing the gold that’s in the finer material, I think we have an exceptional means of treating this unusual mineralization.
Ore sorting and test mining at Comet Well are absolutely critical paths for us. At Egina, because it’s free-dig gravel at surface, we have the luxury, and because we have a mining lease, too, of going out there and being pretty aggressive. Right so we can go out and start digging some hundred cubic meter samples like we did late in 2018, and we can advance that project quickly.
Basically, it’s almost like doing an exploration program in parallel with test mining and test processing. So I really think even though the metrics are not fully defined yet, I think Egina is one where it’s an easier project that can be advanced much more quickly. Therefore, we believe going forward Egina is going to become more and more important to the company.
Maurice Jackson: Sir, what do you see as the biggest challenge for Novo Resources, and how would you mitigate that situation?
Quinton Hennigh: This is a good question. Australia’s a very good place to work and in particular in Western Australia. Every single project that’s been put up for permitting and advancement has become a mine. There are virtually no examples where a deposit wasn’t mined, but it takes time. That’s our determining factor.
We have to do things like permit, we have to get mining leases from exploration licenses. We have to do the proper steps. We have to work with social license, we can’t just go in and start mining. I think a lot of people, they look at our projects and they’re very exciting, it’s easy to see that these things could be developed, we literally go out and start mining some tomorrow if you had that luxury, but we have to do things right here.
We have to do things right, both in terms of permitting, social license and all of those aspects, but we also have to do the right technical work to make sure that we take the right steps. We don’t want to go and fall on our sword. I guess my comment to that question would be, time and patience is what we need.
Maurice Jackson: Switching gears, sir can you please share with us the current capital structure for Novo Resources?
Quinton Hennigh: We have a little over 163 million shares out. We have a few options in warrants out there bringing us to 204 million shares. Right now we have a little less cash than shown above, we’re around CA$45 million at the end of the year. We have a good treasury, which is great! Because these projects, as I just said, need time and patience to advance.
What we really are appreciative of is the shareholder base. We’ve got good shareholders, we have Kirkland Lake, we have Newmont Mining, Mark Creasy who I mentioned earlier, we have a lot of long-term shareholders who really understand the geology, and they understand the steps that we need to take to get these projects through to fruition.
Maurice Jackson: And at the recording of today’s interview, right now the share price is at CA$2.32. Sir, for our U.S. investors, what can you share with us regarding DTC Eligibility?
Quinton Hennigh: Novo Resources filed DTC Eligibility in October 2018. This will enable U.S. citizens’ shares to be traded electronically in much more user-friendly way to facilitate electronic trading. It allows U.S. shareholders to put those share certificates into a U.S. brokerage accounts and trade them. So we did that for the benefit of our shareholders and I haven’t heard any complaints since.
Maurice Jackson: Last question. What did I forget to ask?
Quinton Hennigh: What does Novo Resources want to become? People who really know us know the story. They know we want to become a gold producer. Novo has tackled a very unusual style of mineralization but we want to prove that these deposits are going to make good economic mines, and we have three very promising projects, each of which has huge potential! Beatons Creek, Karratha, as well as Egina, all have extremely good potential to be very large, and hopefully very high margin, deposits.
I think if I had one comment to say, that’s the path we’re going to take: “Novo would like to become an established Western Australian gold producer.”
Maurice Jackson: Dr. Hennigh, for someone who wants to get more information on Novo Resources, please share the contact details.
Quinton Hennigh: Please contact our Head of Investor Relations Leo Karabelas in Toronto. His telephone number 416.543.3120 or email leo@novoresources.com.
Maurice Jackson: And as a reminder, Novo Resources trades on the TSX.V symbol NVO and on the OTCQX symbol NSRPF. Novo Resources is a sponsor of Proven and Probable and we are proud shareholders of Novo Resources for the virtues conveyed in today’s message. And last but not least, please visit our website, provenandprobable.com, where we deliver mining insights and bullion sales. You may reach us at contact@provenandprobable.com.
Dr. Quentin Hennigh of Novo Resources, thank you for joining us today, on Proven and Probable.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
Quinton Hennigh: Thank you, Maurice.
Maurice Jackson: Last time we spoke, Novo Resources accomplished a major milestone and that was the inclusion into the GDXJ. Since then Novo Resources has been extremely busy on a number of fronts from expanding the project portfolio, providing bulk sample results, mechanical rock sorting and DTC Eligibility, just to name a few. But before we go into greater detail, Dr. Hennigh, for someone new to the story, who is Novo Resources?
Quinton Hennigh: Novo Resources is Canada listed company that is focused on exploring in Australia. I founded the company roughly nine years ago, and it was explicitly to explore for a certain type of gold deposit in northwest Australia in a region called the Pilbara, which is just in from the Indian Ocean along the northern coast. Our projects are close to two cities, Port Hedland and Karratha.
They’re major cities that give access to the interior where there’s a lot of active iron ore mining in the region. The Pilbara has had a long-standing reputation, over 50 years, for their iron mines around Newman and Tom Price. Coincidently, within this same region Novo recognized the potential for gold early on in actually in the same strata, believe it or not, as the iron ore sequence.
Novo had a hypothesis that the Pilbara was once connected with the Kaapvaal Craton in South Africa. Both of those cratons are very old rocks, they’re over three billion years old, they share a lot of geologic similarities, including the strata that’s been deposited on each block. In addition, we identified the stratigraphy can be correlated from one side of the ocean to the other.
In South Africa, as many people know, there are vast deposits of gold in conglomerates in a basin called the Witwatersrand Basin. These gold deposits have been mined since around 1886 when they were first discovered; they produced something like 35% of all the gold produced on earth, around 1.7 billion ounces. The Witwatersrand Basin is a remarkable deposit; it’s basically the Saudi Arabia of gold.
The logical conclusion for us was, if deposits like that are present in South Africa, maybe over here in the Pilbara Craton there are similar deposits in conglomerates and of similar age, that have yet been discovered. Therefore, we came to Australia on that premise. We first structured deals with a gentleman named Mark Creasy, a well-known prospector in Australia, and those deals were largely centered over in the eastern part of the Pilbara region.
The Pilbara region is quite vast from one side to the other, covering over six hundred kilometers, and from the coast up here down to Paraburdoo is something like 250 or 300 kilometers. This is an enormous target area. Our first exploration ever was at Beatons Creek.
In 2011, drilled up a small resource at Beatons Creek, but what we learned is that the conglomerate units were quite continuous, and the gold is indeed there. The gold is a coarser grain than the Witwatersrand, but it is indeed present and appears to be economic. During our time at Beatons Creek we also conducted a bit of exploration at Marble Bar.
Since that time, we have focused efforts more to the northwest and acquired this vast land package by Karratha. This was based on a discovery roughly two-and-a-half years ago of gold being found by prospectors in areas like Comet Well and Purdy’s Reward, as well as others around the marsh and the basin, including Egina and some other select locals.The gold occurrences had been known by the locals for many years. When the news got out in late 2016, we strategically assembled a land package, including Comet Well and Egina. Novo staked a tremendous amount of ground, which is 100% owned by us. In addition, we also conducted a joint-venture agreement with Artemis Resource.
Maurice Jackson: Dr. Hennigh, you’ve already introduced us to the project portfolio, but introduce us in particular to the value proposition we have before us.
Quinton Hennigh: The conglomerate gold systems in our project portfolio are different gold deposits than most people are used to seeing. Our conglomerates are flat-sheet-like, and continuous over large areas. We’ve latched onto three systems in particular that we’re focused on right now, which are Beatons Creek, Comet Well and Purdy’s Reward, where we are actively exploring now.
In 2018, we assembled the land package at Egina, and we’re conducting advanced exploration there now including bulk sampling.
For current and prospective shareholders I believe it best to become familiar with our trajectory for each project, as they are separate and unique. At Beatons Creek we’ve now undertaken a couple rounds of drilling over the past few years and also large-scale sampling, so this would be trench sampling as well as bulk sampling, and our current resource stands at somewhere around 670,000 ounces Measured, Indicated and Inferred. We are looking to grow that and are working to get a resource put together at Beatons Creek north of 1 million ounces in the near future.
Not only that, we’ve done a lot of work like test mining and other things to demonstrate the economics and continuity of this system. We are looking to advance our Beatons Creek project towards monetization over the coming year. Beatons Creek is our most advanced, it’s certainly a robust project. What you see there at Beatons Creek, you see conglomerate horizons, in some places it’s stacked six high, so we have a conglomerate bed with a bit of intervening material, another conglomerate bed, and so forth.
At Beatons Creek we have a robust deposit, easily accessible form surface. Those familiar with coal mines in West Virginia would identify these as tabletop mines. That’s the kind of setting we have at Beatons Creek, so it’s a really interesting deposit from that aspect, and the most exiting aspect is that Beatons Creek may be very inexpensive from a production standpoint. The gold is coarse and is easily recoverable; gravity recovery captures a lot but you know cyanide captures the rest so we expect very, very good recoveries out of that deposit in particular.
At Comet Well and Purdy’s Reward, we first evaluated the system, because it is a very coarse gold system, this is not your average gold deposit.
The gold particles are often tenths of a gram up to multi-gram even tens of grams, and they’re distributed through the conglomerate somewhat randomly. Therefore, one can’t just walk up, grab a rock chip sample and expect to know through fire assay what’s in this rock. We’ve had to do some very hard yards in terms of bulk sampling and other means to begin to evaluate the grain here.
What we’ve shown at Comet Well and the Purdy’s Reward joint venture with Artemis is that the continuity appears to be good over several kilometers. We’ve done a lot of core drilling for geology and stepped out into the basin. Presently, we have enough data between the core drilling, three-dimensional modeling, as well as the grade data that we have from the bulk samples, to put together a mineralization report.
This is a big step for Novo. All of our tenements are currently exploration licenses. In order to advance a project towards a mining stage, we have to convert exploration licenses to mining licenses in Australia, and to do that we need a couple of things. One, we need a mineralization report, in this case we’re not necessarily going to produce a resource per se, we’ll demonstrate that we have a potentially economic body of rock here, through the data that we’ve collected that I just mentioned.
Novo Resources will submit a mineralization report within the next few weeks. The other aspect that’s needed is an agreement with the Aboriginal community, this would be the Ngarluma Community. The Ngarluma Community basically covers most of this project area here. We’ve been in negotiations with them, and developed a good relationship with the Ngarlumas, over the past year and a half.
We need to strike what’s called a “Native Title Agreement” that allows us rights to go mining, as well the Ngarlumas have commercial rights, such as royalty, as part of this project. But these are things that also have to be worked out for granting a mining lease.
We anticipate taking Comet Well and Purdy’s Reward through a development trajectory, probably first through trial mining. In fact, we might do a certain amount of trial mining this year. That will provide us more supporting data for developing a larger scale mine. But we are definitely moving Comet Well and Purdy’s Reward forward in a trajectory towards making a producing asset.
Revisiting the map, one can see that Comet Well and Purdy’s Reward are really just a small component of a much larger land package. As I alluded to earlier, within the conglomerate horizons, people have found nuggets weathering out of these conglomerates over many kilometers through this region. We have a lot of greenfields work to do along strike (gold line).
We also have some very interesting new ground at Egina that we’ve recently assembled. At Egina the conglomerates have weathered away over time. They used to cover a significant portion in the Pilbara. But as they have weathered away and receded back, they’ve left the gold that was in them behind across a terrace, or flat country through here in the Pilbara. If one drives across this country, it is absolutely flat as a pancake, very similar to West Texas.
If one were to look in either direction, it’s like a pool table. But the flat surface throughout this region has what is called a lag gravel horizon on it. The lag gravel horizon is about one to two meters thick. Novo was able to demonstrate last year through our trial bulk sampling at Egina that it contains gold and it’s fairly coarse-grain gold; we recovered something like 108 grams of gold out of a hundred cubic meters of bulk sample that we collected.
That’s pretty remarkable! A lot of alluvial deposits are less than 0.3 grams, and the grades we’re seeing at Egina are very enticing. Our hypothesis is that this terrace, of which we own about 400 sq km, could be a sizeable gold project in its own right.
Egina is basically another very large target we have. It is earlier stage, but the nice thing about Egina is that it’s soft rock, gravels at surface. Novo can advance this in a fairly orderly fashion.
We control 100% (of the blue on the map) at Egina. Thus, we are able to get out there and do a lot of test mining and stuff like that that we can’t quite undertake presently at Comet Well at the moment. So Egina is definitely going to be a focus for us this year. We’re going to tackle that terrace gravel, see what kind of economics that might have, including the size and potential that we might have.
Therefore, we are going to do sampling not only in the mining lease but hopefully in some more extensive areas to demonstrate the hypothesis that this region could hold a vast gold deposit could be true.
Maurice Jackson: Dr. Hennigh, allow be to interject here. This land package you have here, it looks quite massive, how many square kilometers are we looking at here?
Quinton Hennigh: Our land package is around 12,000 square kilometers at present.
Maurice Jackson: Let me ask you this, sir. I know Novo Resources has undergone a tedious and methodical process in attempting to figure out grade and tonnage. In the spring of 2018 the company released the first bulk-sample results from Comet Well, how have those been coming along?
Quinton Hennigh: The bulk samples from Comet Well that we released in May were the first two that we completed. To get these samples through the lab was a big exercise. It required several renditions of crushing and experimenting and assaying different streams. We also were battling a bit of wet weather down in Perth last year; it took a long time but we did get a pretty comprehensive set of assays out in late October that demonstrated the grade of these conglomerate horizons.
What we’ve identified are two conglomerate horizons at Comet Well and Purdy’s Reward. The lower one of which is say 2or 3 meters thick, the grades range from about a 1 to 6 grams, and it sits right on the basement, so it’s basically the lowermost bed of rock in this bigger sequence.
Twelve to fifteen meters above first horizon is a second horizon. We call it the Upper Cannonball conglomerate, the Upper Cannonball conglomerate is about 1 to 2 meters thick, and again the grades in that bed are in a range of 1 to 3, 4 grams, somewhere in that range. And it’s very continuous along strike; we can see good continuity from one trench to the other over three-and-a-half, four kilometers right now. We feel very compelled that it’s demonstrating similar continuity to the beds we see at Beatons Creek.
For those who have followed Novo Resources for the year are familiar with the challenges we had at Beatons Creek. Specifically, we had to develop sampling protocols to deal with the coarse grade, assay protocols that were unusual; it took some time to develop. But now, Beatons Creek is basically getting close to mine.
Comet Well and Purdy’s Reward area are going along the same trajectory as Beatons Creek. We’ve had to cut our teeth with different styles of bulk sampling and assaying but we’ve now got things under control. We are also experimenting with somewhat unconventional techniques of recovering the gold.
Novo has done test work with TOMRA, for example; this was starting in late last year in November. The results that came out are fantastic! We think there is potential to crush up the conglomerate, screen it, of course, but put it through an ore sorting machine, and actually let the ore sorter pick rock with the gold particles.
You know the downside of coarse gold is assaying. It’s a real challenge, but the upside is that the metallurgy might be very favorable for us. Novo is very excited about that ore sorter possibility.
Maurice Jackson: Dr. Hennigh, the following may be a bit premature to address at the moment but the two most frequent questions I receive from prospective shareholders are, “Is this a place for deposit?” and, “How do you intend to extract the gold?” What do you have to say to those two questions?
Quinton Hennigh: Sure, the first question is a very good one. I came to this region on the basis that there might be deposits like those in South Africa. Now let me give a little background there, in South Africa there are really two types of ore, there’s the conglomeratic ore and in that the gold occurs as particles distributed in the matrix of the conglomerate.
In effect those are alluvial deposits in the Witwatersrand Basin. There is also what they call “carbon leader ore.” Carbon leader ore is a very, very thin seam of carbon, almost like coal, and I’ve written several papers (click here to view paper) on this with other authors. We believe that that seam of carbon is basically the fossil remains of early cyanobacterial mats that formed or evolved in a time when Earth’s atmosphere was largely reduced. The idea is the sea water back at that time, under reduced conditions, would have been able to dissolve a fair bit of gold. Gold dissolves in reduced atmospheric conditions.
The cyanobacteria was the first photosynthetic life. During this time period the cyanobacteria starting to kick off oxygen. What we believe is that that oxygen, which causes gold to precipitate, actually pulled, or started pulling the gold out of sea water and created that little carbon seam type ore, that is very, very rich in gold. This is a very, very unusual style of gold mineralization. It’s a thin and very continuous and covers many square kilometers. A seam of carbonaceous gold ore.
I came here looking for similar carbonaceous ores. What have we found? Well, at Beatons Creek, in fact we’ve talked about this in the past, we’ve actually found particles, pieces of carbonaceous material in the conglomerates here. So to answer your question, at Beatons Creek, we see two types of gold, we see bonafide alluvial gold. These would be loose, somewhat rounded particles in the matrix of the conglomerate, but we also see a component of carbonaceous material at Beatons Creek that tells us that that same process that you see in the Witwatersrand was active over in this area.
At Comet Well and Purdy’s Reward, what we see in the conglomerates here are large, rounded; they appear to be water-worn nuggets of gold. The origin of that gold we still haven’t put our finger on, but it’s possible that that gold has been recycled from weathering of previously existing conglomerates or carbonaceous beds that no longer exist.
In their present form it’s alluvial gold, but it’s ultimate origin is still in question. In addition, we have gold that appears to have grown in the matrix around the nuggets. This is what we call “halo gold,” it’s a thin halo about two or three millimeters wide around the gold nuggets, the coarse nuggets, and we believe that gold is actually a precipitated type gold, probably in response to biogenic activity.
So once again I would say it’s a mixture of two types of gold that have brought the system together. We have alluvial particles for sure, we have secondary gold that appears to be perhaps biogenic in nature.
Maurice Jackson: Alright and the second question: “How do you intend to extract the gold?”
Quinton Hennigh: Like the coarse gold is a problem from the sense of assaying but in terms of recovery, it is quite favorable. Gold is dense. One of the easiest ways to treat coarse gold is, of course, gravity recovery, and that’s certainly a possibility, but one of the things we wanted to look at was a call it a somewhat portable style of processing, by using ore sorting machines.
These ore sorting devices are skid mounted or they’re mounted on a transportable platform. They can be moved from one location to the other. Now why is that important? Well, this is a flat deposit, so if you have something that’s long, you know rather than trucking ore from one place to another over kilometers, why not mine process, right on the spot, and then move as you mine the material.
We looked at TOMRA ore sorters starting late last year (click here). We tried ore sorting early in 2017, had mixed results with the Steinert, first looked like it worked great, second rendition didn’t work so well. When we went to TOMRA they showed us some reasons why they thought they could improve things dramatically and just recently we published the final data from that.
In fact, the two samples that were good coherent conglomerate material that we put through saw recoveries over 80% just by sorting. This is using a scanner device, X-ray transmission that literally picks out particles of rock off a conveyor belt that have gold embedded in them. It’s just remarkable! We essentially took gravel, put it on a conveyor belt, sent it across this machine, and it picks out the little particles of rock with gold. What you end up with is a concentrate that’s a very, very small fraction of the overall mass you put in that machine, and it has most of the gold in it.
There are a few additional steps we have got to take to test this further. One question is “What do we do with the fines?” At the present, we are considering to conglomerate them, and then put them through the ore sorter as they are. In other words, turn them back into little pellets or something, let the ore sorter pick them out. Or another option we could do is just put the fines through a gravity circuit on their own. These are options we are considering, which are essentially unconventional means of processing for this very unconventional deposit.
Maurice Jackson: Looking forward, what are the company’s goals and objectives for 2019?
Quinton Hennigh: First, at Beatons Creek, which I talked about as being the most advanced project. We have a resource remodel underway right now, this is work that’s ongoing and we are expecting some bulk samples back from the project. These are ones we collected late last year. Once we have all that data, which should be available by the end of the first quarter, we anticipate publishing a new, updated resource for Beatons Creek. We are targeting over a million ounces, we’ll see if we can get there, I feel pretty confident. Beatons Creek should be a robust deposit. This puts the project in a good path for monetization. Then we will take the next steps of looking at how we potentially develop that project.
Second, at Comet Well and Purdy’s Reward, we anticipate doing a level of trial mining this year. We are continuing to evaluate some of the test work around the TOMRA, for example, as a means of processing at Comet Well. I think once we get a full evaluation, and we do have a bit more data we got to get back on that, but once we have a full evaluation of that processing, we’ll look at that trajectory. Bear in mind, we also are shooting for that mineralization report and working on a Native Title agreement so that we can convert a lot of that country into mining leases. That’s the trajectory for Comet Well and Purdy’s Reward.
Third, at Egina, once the rainy season’s over in a few weeks, we anticipate getting out there and hitting the mining lease very hard. This is the mining lease where we took our bulk sample last year. We anticipate putting together on a test basis, a grid of samples across a target area, where we can see if we can put together a resource on the terrace gravels.
We also anticipate, because it’s a mining lease and we have permit to go up to 50,000 tons extractable, doing some small-scale test mining. We are seeking to help build our confidence around that project. The other aspect to Egina, very important, we anticipate taking some samples further afield in some more distant areas, and trying to get an idea how extensive that deposit may be. If Novo proves that that deposit covers a vast area, encompassing many tens of square kilometers, in that country, I think people will sit up and take note. I think that’s really a big add to the story we have in the Pilbara right now.
Maurice Jackson: Near term, what is the next unanswered question, when should we expect results, and what determines success?
Quinton Hennigh: Per each project, the factors that determine success are a bit different. We have data coming back from bulk samples from Beatons Creek that will help support a new resource model, again that’s going to be over the next few weeks. We anticipate getting that resource put together by the end of this quarter.
If we see a resource above a million ounces I think we now have critical mass that allows us to look at that project a bit differently and more aggressively in terms of advancing it.
As far as Comet Well goes, I think right now we feel comfortable with the grades and the continuities we’re seeing. I think we have a fairly decent understanding of what this deposit is. What we really need to do there is to go test mine it on a scale, maybe a few tens of thousands of tonnes, and from multiple locations alone the strike of the conglomerate.
We also have to do some ore sorting tests to see if we can use that as a means of processing. Those are the two factors if we can successfully process this material using ore sorter, and that includes capturing the gold that’s in the finer material, I think we have an exceptional means of treating this unusual mineralization.
Ore sorting and test mining at Comet Well are absolutely critical paths for us. At Egina, because it’s free-dig gravel at surface, we have the luxury, and because we have a mining lease, too, of going out there and being pretty aggressive. Right so we can go out and start digging some hundred cubic meter samples like we did late in 2018, and we can advance that project quickly.
Basically, it’s almost like doing an exploration program in parallel with test mining and test processing. So I really think even though the metrics are not fully defined yet, I think Egina is one where it’s an easier project that can be advanced much more quickly. Therefore, we believe going forward Egina is going to become more and more important to the company.
Maurice Jackson: Sir, what do you see as the biggest challenge for Novo Resources, and how would you mitigate that situation?
Quinton Hennigh: This is a good question. Australia’s a very good place to work and in particular in Western Australia. Every single project that’s been put up for permitting and advancement has become a mine. There are virtually no examples where a deposit wasn’t mined, but it takes time. That’s our determining factor.
We have to do things like permit, we have to get mining leases from exploration licenses. We have to do the proper steps. We have to work with social license, we can’t just go in and start mining. I think a lot of people, they look at our projects and they’re very exciting, it’s easy to see that these things could be developed, we literally go out and start mining some tomorrow if you had that luxury, but we have to do things right here.
We have to do things right, both in terms of permitting, social license and all of those aspects, but we also have to do the right technical work to make sure that we take the right steps. We don’t want to go and fall on our sword. I guess my comment to that question would be, time and patience is what we need.
Maurice Jackson: Switching gears, sir can you please share with us the current capital structure for Novo Resources?
Quinton Hennigh: We have a little over 163 million shares out. We have a few options in warrants out there bringing us to 204 million shares. Right now we have a little less cash than shown above, we’re around CA$45 million at the end of the year. We have a good treasury, which is great! Because these projects, as I just said, need time and patience to advance.
What we really are appreciative of is the shareholder base. We’ve got good shareholders, we have Kirkland Lake, we have Newmont Mining, Mark Creasy who I mentioned earlier, we have a lot of long-term shareholders who really understand the geology, and they understand the steps that we need to take to get these projects through to fruition.
Maurice Jackson: And at the recording of today’s interview, right now the share price is at CA$2.32. Sir, for our U.S. investors, what can you share with us regarding DTC Eligibility?
Quinton Hennigh: Novo Resources filed DTC Eligibility in October 2018. This will enable U.S. citizens’ shares to be traded electronically in much more user-friendly way to facilitate electronic trading. It allows U.S. shareholders to put those share certificates into a U.S. brokerage accounts and trade them. So we did that for the benefit of our shareholders and I haven’t heard any complaints since.
Maurice Jackson: Last question. What did I forget to ask?
Quinton Hennigh: What does Novo Resources want to become? People who really know us know the story. They know we want to become a gold producer. Novo has tackled a very unusual style of mineralization but we want to prove that these deposits are going to make good economic mines, and we have three very promising projects, each of which has huge potential! Beatons Creek, Karratha, as well as Egina, all have extremely good potential to be very large, and hopefully very high margin, deposits.
I think if I had one comment to say, that’s the path we’re going to take: “Novo would like to become an established Western Australian gold producer.”
Maurice Jackson: Dr. Hennigh, for someone who wants to get more information on Novo Resources, please share the contact details.
Quinton Hennigh: Please contact our Head of Investor Relations Leo Karabelas in Toronto. His telephone number 416.543.3120 or email leo@novoresources.com.
Maurice Jackson: And as a reminder, Novo Resources trades on the TSX.V symbol NVO and on the OTCQX symbol NSRPF. Novo Resources is a sponsor of Proven and Probable and we are proud shareholders of Novo Resources for the virtues conveyed in today’s message. And last but not least, please visit our website, provenandprobable.com, where we deliver mining insights and bullion sales. You may reach us at contact@provenandprobable.com.
Dr. Quentin Hennigh of Novo Resources, thank you for joining us today, on Proven and Probable.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
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