Gerardo Del Real,
Editor
Oct. 12, 2021
Editor’s Note: We had such a great response the last time I interviewed contrarian speculator Jeff Phillips that I had him back on this week to talk about current tax loss opportunities in the resource space. He explains why buying stocks that others are selling at this time of year can be so profitable. And we also touch on the uranium consolidation and some other resource stocks he likes.
Enjoy!
— Gerardo
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GERARDO DEL REAL JEFF PHILLIPS
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me once again, in what's becoming a weekly conversation, is contrarian investor, Mr. Jeff Phillips.
Jeff, it's great to have you back on again. I got such positive feedback the first couple of times you and I chatted... that I figured I'd have you back on to talk about share structure, tax loss selling season and how you approach that... being that you've seen so many of these cycles over your three-decade career investing in the commodity space. So, thank you so much for your time again.
Jeff Phillips: No problem, Gerardo. Thanks for having me.
Gerardo Del Real: So, for those that are not familiar with tax loss selling season, can you provide just a brief overview of what that entails?
Jeff Phillips: Well, I think it's not just in the mining sector, it's across the board. At the end of the year, you're trying to manage your tax… here in the United States is different than other places. And I'm sure you have listeners from all kinds of different countries, but here in the United States, at the end of the year, any gains you have you're going to be paying taxes on the following year. So, people tend to look for things at the end of the year and, specifically, in the natural resource sector that they can sell to get a tax loss against their gains, therefore, reducing their tax liability next year. So, you tend to have indiscriminate selling. And when you're talking about highly illiquid companies that don't trade millions of dollars a day in the junior resource space, it can cause downward pressure without buyers at this time of the year.
Gerardo Del Real: Different speculators in the space, specifically, the resource space, take different approaches, right? Me, for example, as you know, I help raise capital for private and public companies, and I take more of a long-term approach when it comes to those financings. But I also keep a separate trading account specifically for opportunities like when tax loss selling season provides bargains in the space that typically tend to outperform once we get through the holidays and into the new year. How do you approach tax loss selling season? Then I really want to get into maybe a couple of opportunities that you see out there in the space.
Jeff Phillips: I basically approach tax loss selling season with my own portfolio in mind and position sizing that I'm looking at. Everybody's different. After the last interview I did with you about gold and uranium stocks, I started looking at Lion One Metals, because one of the readers of the article worked for the company and said, you should look at our company as a tax loss candidate. And when I looked at the company it had a ton of cash. I can't remember the amount. I think it was over $50 million though. They were exploring in Fiji. I started looking at the company and, again, it's trading at a 52-week low, it had plenty of cash.
And it is led by a Chairman who's sold two companies before for a billion dollars. That's the type of company you want to look for during tax loss selling, even if you just bought and owned it from November until the end of January. Your odds of making money are good. There's lots of those companies. So, again, a lot of companies in the gold space right now are trading at 52-week lows. Quality companies. I don't mean the crap companies. But even the not-so-good companies will bounce back. People tend to look for new investments in the new year. Tax loss selling has driven them down. So, again, you can do really well playing that season.
Gerardo Del Real: And Lion One Metals, just for those of you who are keeping track, the ticker symbol is (TSX-V: LIO). It's fully permitted, $57 million in cash, six drill rigs. They own their own assay lab. And, as you mentioned, Jeff, are trading near 52-week lows. That's a gold project in Fiji. You mentioned Lion One. What else do you see out there? Let's talk gold and copper, maybe a couple of picks there. And, then maybe you can share a couple of names that we may not have our eye on that you're buying.
Jeff Phillips: Yeah, Gerardo, just so we're clear I don't own Lion One. It was just a company that emailed me from our last interview and I happened to look at it and say this is something worth looking into at tax loss selling time. So, again, it looks like an interesting company. I don't own it, but that's a good example of someone reaching out, saying, "Hey, look at our company. We know what we're doing. We have people that know what we're doing. And we've been hit hard this time." And it's not just this time of the year, the gold market's been down all year. So, these stocks are trading at their lows, continuing to trade lower without buyers.
Gerardo Del Real: You mentioned share structure and how important that is.
Jeff Phillips: I place a great deal of importance on what management teams have done in the past. And I place great importance on share structure. Matter of fact, that's my criteria before I even look at assets, to see how a company has been set up, how they've done their financing, how they set the company up originally. Again, a lot of these companies are set up — they may do well and you may be able to buy them — but you know, the founders and the promoters have millions of shares at pennies. So you really look at are those locked up? Are they reporting? Are those insiders? Are those off the books? Where did those millions of shares go that were sold at five cents now that stock is at a dollar? Where are they? So, structure is really important. And you and I were talking about a company that I'm quite excited about right now. It's definitely not a tax loss selling candidate. It's purely a discovery, or it's not even a discovery play, they have a discovery.
Gerardo Del Real: Absolutely. Let’s talk about those flying-under-the-radar companies you either own or are adding to, or looking to possibly own because of the opportunity with tax loss selling season.
Jeff Phillips: Oh goodness. There's a bunch of them I'm possibly looking at it. It just depends on the size you're trying to get into, Gerardo. It's not just tax loss companies I look at this time of year. There's a lack of buying. So even companies, some of the uranium companies that are off of their highs, but aren't necessarily going to get sold off anymore, because they're not really 52-week lows. I think there's a buying opportunity there. So, I'm looking at a bunch of different sectors. In the copper space. I think we’ve discussed Kutcho Copper (TSX-V: KC)(OTC: KCCFF), which isn't trading at a 52-week low, but I think is an excellent buy. I know we discussed Revival Gold (TSX-V: RVG)(OTC: RVLGF), before, which is trading near a 52-week low, and is an excellent buy. And there's you know, literally, you know more of them than I do, that are quite interesting.
Gerardo Del Real: Excellent, Jeff. Thank you. Before I let you go, any other piece of advice for people that may be newer to the space? We talked about uranium last week, and we talked about how people that haven't speculated in this space before often get shaken out because it's so volatile, right? But 30%, 40%, and even 50% moves during consolidations are commonplace in this space. So, anything else that you'd like to add?
Jeff Phillips: We’ve been chatting a little bit about Aldebaran Resources (TSX-V: ALDE)(OTC: ADBRF). Aldebaran is exploring in Argentina, has a number of projects in Argentina. Their flagship is the Altar gold and copper project. It's a very large project, billions of pounds of copper, depending on what cutoff grade and so forth to use; five million ounces of gold. It's a lower grade deposit that they were able to acquire from a major that's still a 20% shareholder.
In its day, that project sold for $350+ million dollar. Aldebaran was able to acquire that asset for pennies on the dollar. It's in Argentina where we've seen Filo Mining (TSX: FIL)(OTC: FLMMF) have a lot of success and several other companies in the last year. We both like Argentina, but what it impresses me with a company like Aldebaran is you look at the share structure and 49% of the company is owned by a company called Route One, which is a billion-dollar hedge fund that only backs people like John Black, who runs Aldebaran, who's built and sold a junior before. The other family that they back is the Lundin family, which is behind Filo Mining. And, they backed several other known builders of companies, and sellers.
But again, Aldebaran is an interesting company, because you have half the company owned by one major fund that's in it for the long haul, fully reporting. Their other reporting shareholder is Sibanye Stillwater (NYSE: SBSW), the major mining company that owns 20% of Aldebaran. They've participated in any financings the company's done. So you're talking about 70% of that company that's controlled by people that aren't trying to flip stock for pennies like most of Canada. On top of that, you have another 10% owned by management and some key people that participated in their last successful junior.... Which they sold for $600 million. So you have some long-term shareholders. But what's more exciting is that property, even though it's very massive but lower grade at this point... they've made some additional discoveries last year with a limited drill program that shows an area that has higher grade mineralization. They are targeting that area with a very large drill program beginning imminently in the next 30 days.
So, we're going to see results. I'm excited about the property. I think it has the potential to be a world-class copper-gold property. We already know there's a lot of gold and copper there. So, a company like that's what interests me, because again, 70% to 80% of the company's long-term shareholders are looking to build the asset and sell it to someone larger. They're not looking to flip it. There's still risks because, again, you want to find higher grades and more there. But there's lots of exploration potential, and they're embarking on the largest drill program they've had there under current ownership. I think the chance of discovery is excellent. I like Argentina. I like this area, specifically the province they are in. That's an excellent speculation. You know, it doesn't trade a lot. It trades around C$0.60. But, again, if you want to speculate on something with real people that have built and sold a company before and a real share structure that makes sense... then Aldebaran a great speculation.
Gerardo Del Real: I absolutely agree. I had the opportunity to chat with John Black in Beaver Creek last month. I sense the excitement from him and his team about the aggressive drill program they are embarking on and I'm looking forward to the results. Jeff, it's always informative, it's always insightful. I appreciate it. Thank you so much for your time again.
Jeff Phillips: Thank you, Gerardo.
Keep an eye out for our brand new uranium research later this week. We plan on taking full advantage of what’s developing in that sector.
Until then, check out my current uranium guidance here.
Let's get it!
Gerardo Del Real
Editor, Resource Stock Digest