Bizarro World Podcast,
with Nick and Gerardo
Dec. 27, 2022
Merry Christmas and Happy New Year from Bizarro World. In our last podcast of the year, we discuss some year end stock market action, including the ongoing bear market and recent S&P selloff. Then we give away our annual Bizarro World Awards to the best — and not so best — of the junior mining world. And then we cap it off with some crystal balling for 2023.
1:22 Year-End Market Action
7:00 Bizarro World Awards
23:18 Crystal Balling for 2023
Gerardo Del Real: I am mining investor and editor of Resource Stock Digest, Gerardo Del Real, here with my partner Mr. Nick Hodge, who also is an investor and is the publisher of Daily Profit Cycle. This is the 199th episode of our weekly therapy session that we call Investing in Bizarro World, where we talk about the markets, we talk about what we're investing in. We talk about some of the crazy stuff that's going on all around us. This week we're going to get right into it. We're going to jump into awards. We got some awards to hand out. We'll briefly talk about the CIA killing JFK and it not making anyone's bingo card nor anyone caring.
Nick Hodge: Everybody already knew.
Gerardo Del Real: We're going to talk about SBF back in the US and out and about. But before we get into that, Nick, how are you? It's been an interesting week, man.
Nick Hodge: It's been interesting for sure. I've been traveling across the country, made it back to the East Coast, where I haven't been for a couple of years. Looking forward to spending time with family. Looking forward to the holidays. And seemingly as busy as ever as that all comes to a close. So no shortage of action in the market and plenty of things to do, but I'm well. How are you?
Year-End Market Action
Gerardo Del Real: I am well. Thank you for asking. Yeah, let's get into it. I actually don't want to do a lot of market commentary because I feel like the trading action, whether we're talking about the major indices, gold, silver, copper, the dollar, Bitcoin, it all kind of did the exact same thing that it did the previous week. So I'd much rather jump into some of the awards that we want to hand out. But I do want to take a second to say that by the time everybody gets this, Christmas would've come and gone, and we'll be headed towards the new year. For those that celebrated Hanukkah, I hope you had a great one. For those that celebrated Christmas, I hope you had a great one. Yeah, I hope everybody has a great 2023. I know for a lot of traders and a lot of speculators in the resource space, it was a tough year.
You and I fortunately were able to pick some winners that really helped pick up the laggards in the portfolio and made for a pretty spectacular year I think on both fronts. So congrats to you and I'll pat myself on the back a little bit as well. I had my best personal year and that was just by doing what I often do and sometimes gets me in trouble by over levering myself on an aggressive position that just happened to work out really well. But yeah, let's get right into it. Do you have any market commentary you're dying to get off your chest or do you kind of feel that it's kind of similar to what happened last week?
Nick Hodge: I can do it in 30 seconds. The S&P has turned back around. So surprise, surprise, we're still in a bear market, which isn't really anything changing. But people were starting to get wound up because the S&P had been going up for a couple of weeks, and that's now firmly out the window back to a bear market. Corporations are starting to announce earnings, which I've told you were going to be horrendous for this upcoming quarter, and that's the case. The canary in the coal mine this week was Micron Technology (NASDAQ: MU) who went from a dollar, over a dollar per share earnings last quarter to negative 18 cents per share earnings this quarter. From the year ago quarter, they were over $2 a share, so they-
Gerardo Del Real: They might be headed to $2 a share at this pace.
Nick Hodge: Well, that was the impetus for the most recent S&P selloff, it was down 2%. Thursday, the day we recorded this, they're going to lay off 10% of their staff and there's only 486 more S&P companies to report. So we'll see.
Gerardo Del Real: I'll give you my quick market commentary that I want to touch on and we'll talk about this company a bit here during awards time. But Patriot Battery Metals, look, it's funny, I had a friend that's done extremely well. I mean, extremely well, right? He was positioned really, really well, really, really early and has held the position and even added to it in his trading account here, and added a year ago. So he's in good shape and he reached out to me yesterday, yesterday being the 21st of December, on Patriot, and he said, "Man, this thing's gone down quite a bit in the past couple of weeks." And I had to remind him that it made new all-time highs on December 8th, and that if you look at the whole year, I zoomed out and showed him a one year chart. I said, "You see those little spikes? You see those little blips? You see what comes after the little blips?"
I said, "Just don't overthink it, man. Just sit tight and enjoy your multimillion dollar gains. Just be happy. Have a great Christmas, have a great New Year's and just let it shake out." So listen, whether you have a million shares, 2 million shares, a 1,000 shares of Patriot Battery Metals, whatever your position is, I think the recent pullback is likely close to being over. It was shorted from the all-time highs into that a ASX listing. I know there's been some structural things there that have gotten in the way of the Canadian price ticker and the Australian ticker reaching parity with the currency discount, but I think that's over. They're trading pretty close hand in hand. Today being Thursday the 22nd, it was up some 7% at one point. I think we're going to see some follow through.
Look, I know we have holidays coming up obviously, but there's still a lot of trading days left in this year and you've seen Patriot, it can pull back 40% in two weeks, can also be up 200% in a couple of weeks. So curious to see where it ends the year. Keeping fingers crossed for double digits. I had hoped for C$20. I don't think we get there. Definitely think there's a good shot at double digits, and then bring on 2023 because I'm not into it for C$10 or C$15. I'm into it for much higher prices.
Nick Hodge: Well, trees don't grow to the sky, I've always been told and taught, and the chart looks actually healthy. It's pulled back to the level it was before the most recent run up and that's how you get energy for the next slingshot, right?
Gerardo Del Real: It's done it every single month for the past 12 months, folks. This one isn't hard. You don't have to be brilliant or a great technical chartist or any of that. We know the company has catalysts. We know the company has 30 some holes to report. We know they're talking to every major miner and chemical company. When I say major mining companies I'm not talking just lithium companies, by the way. So this is all public information. Sit tight, let those assays come out. They're about to embark on the most aggressive drill program it's ever had. And oh by the way, we probably get a resource estimate in the first quarter, early second quarter of 2023. That'll be I think between 135, I'm upping it now to 175 million tons, and that's if it doesn't include CV13, which I think on its own we'll see some of those widths and some of those grades. But if it does what I think it can do, I think that's a good 35 to 50 million ton deposit in its own right.
Start talking a couple 100 million tons, that adds up real quick. You put that on the ASX and you're going to see C$20, $30 here in 2023. So that's my market commentary on Patriot that I know a lot of you write in about. So figured I'd give it to you. Let's get right into it. You ready to hand out some awards, Nick?
Bizarro World Awards
Nick Hodge: Let's do it. I saw the award categories and I have my nominees.
Gerardo Del Real: I'm going to start with you then. Let's go for best IR person.
Nick Hodge: Best IR person is Shawn Perger from the Grosso Group. And I'm not sure if I've given him the award or not before, he might have been a runner up because we've done that a couple of years.
Gerardo Del Real: He was last year, yes sir.
Nick Hodge: The runner up?
Gerardo Del Real: Mm-hmm.
Nick Hodge: Oh, so he gets the actual award this year. That's great. He executes for multiple companies. He's always reaching out, getting the interviews for his companies, making sure you have the news, shaking you down, trying to get you to recommend his companies, making sure you don't forget about them. And he does it, like I say, for multiple companies in the Grosso Group — Golden Arrow Resources, Blue Sky Uranium, and Argentina Lithium, which we happen to finance at C$0.20 and has subsequently gone over C$0.30 cents and raised money at higher prices and is on to a new lithium discovery in Argentina, as you like to say. So Shawn is diligent and he's my IR person of the year.
Gerardo Del Real: All right. I've given this award multiple times to Amir Adnani. Amir, you as always have done a brilliant job this year. My hat's off to you. You executed beautifully for both GoldMining and UEC, but this year the award goes to Jordan Trimble of Skyharbour Resources. It's a passing of the torch in the sense that, look, Jordan has emerged there. Skyharbour has yet to really hone in on that high grade significant discovery that it's been looking for. But as far as getting ahead of all of the major catalysts and positioning the company for future catalysts, he's done a brilliant job executing on the project generator model, joint venturing properties, bringing in a new co-flagship, a former Rio Tinto project. And look, there's not a news release that comes out where he's not emailing me, texting me, calling me, wanting to talk about it, wanting to provide uranium macro take, which is always excellent. Earning every one of those dollars that he's being paid, not just as CEO but as a real professional IR person. So I'm giving it to Jordan Trimble this year. Good work there, Jordan. And I agree actually on Shawn. Shawn is a great runner up. He is as insistent and diligent as anyone out there, and if I had a mining company and I hired an IR person, that's exactly what I would want out of them.
Nick Hodge: Sure, yeah, Jordan's a great pick too. That's even more than IR. It's corporate development, biz dev, all that sort of stuff. They got a lot of drilling coming up, so I'm excited about that.
Gerardo Del Real: Yeah, same. He's positioned that company in shareholders well. Let's start with the most disappointing stock in our respective portfolios, Nick, before we go patting ourselves on the back too much. Let's eat some crow real quick.
Nick Hodge: It's easy in a tough year. I mean, and also your brain is wired from evolutionary times to recognize fear more than non fear, more than opportunity. That translates into investing, in the fact that you remember your losers more than your winners over time. It's just how your brain is hardwired. So when I start thinking about losers, and I'm a half empty guy anyway, the glass is half empty. So I tend to think about the negative more anyway.
Gerardo Del Real: It's why we get along well. I'm the opposite.
Nick Hodge: There was a couple I looked at, but the most disappointing was, and I know what yours is going to be, but for me it was Anacortes Mining, which we financed. They rolled back, so there's one negative against it. At a post rollback price of $2.40, I wrote a check and had others write a check as well. It's a high grade oxide project recognized around the world. It got some leadership in there that had a good run before in the gold space, but the drill results just didn't come up to par with what the deposit had shown before, and the stock sold all the way down to C$0.40 cents as it trades today. So from C$2.40 down to C$0.40 cents. Sold it in the letter actually today into the year tax loss to offset some of the gains and will be doing that personally.
Sometimes things don't work out, and that's how it goes, and this was one of them. The company has money to drill but has shelved that in the spirit of preserving capital and has been sort of advertising or flagging to the market that an acquisition was in the works, that hasn't materialized, and they ended up putting a press release out about that. They had a deal on the table, but it hasn't got across the finish line yet. And so disappointing on multiple fronts, from the share price to the drill results to the not being able to sell the asset and move on.
Gerardo Del Real: Well, let's get to mine. And you already know it's got to be Magna Gold, right?
Nick Hodge: Yep.
Gerardo Del Real: This is a company that, look, we initially financed at 10 cents. It ran to a high of $1.80 cents. Gold started to consolidate, and then with the pullback in the gold price the company started to consolidate. It sits at 3 cents right now, and so with Magna Gold, what happened, right? It's a classic mining, why I try to stay away from miners, right? Classic mining mistake. The company didn't raise capital at higher prices. It put itself in a position where the liabilities that it had, outstanding payments, payments to contractors, contracting equipment, it put itself in a position where it had to rely on the geologic model holding up and then finding the ounces they anticipated would be there. And all that it took to derail the company was one bad quarter, right? 7,000 or so ounces that just from reading the MD&A just simply weren't there.
But I think obviously the market's full of sharks and predators and I've heard whispers that there were deals on the table for some M&A. That was shorted. It sent the share price down in 50, 40 cents and I heard there was a financing in place at that level. Then mysteriously a week or two later there was a walking away at the table by the group that was going to finance it. That sent it down to 20 cents. Look, here we are at 3 cents. So Magna Gold, why haven't I sold it in the portfolio? Why am I thinking about buying some personally at 3 cents? It's one good quarter away from being back to the profitable mining company that it was three quarters ago. So at 3 cents with the market cap, it's like a C$4 million market cap. You have a fully permitted mine with over 2 million ounces and you have high grade oxide, you have underground mining, you have satellite deposits, you have an excellent silver property that yielded some of the more exciting silver results out of Mexico earlier this year at the Margarita Project.
You have all the makings of a very successful mid-tier. So either Magna's back at $1, $1.50 this time next year or it's going to be bankrupt in a month or a month and a half. And so for me, the question I personally ask myself is, how much of my capital, my hard-earned capital, am I willing to gamble on the fact that it's not going to be bankrupt if it doesn't find a white knight or someone that can come in and provide a combination of financing and a loan to allow Arturo to do what he usually does best, which is execute brilliantly.
Again, got to own that one. It went from C$1.80 to C$0.03. So yeah, that's mine. Definitely frustrating. Involved on making some friendly introductions to several groups, and hopefully there's some traction there. But no guarantees, everybody. Y'all have to do your own due diligence on that. Definitely worth speculative capital that you can afford to completely lose, because you might, but I'm keeping it. We'll see, we'll see what happens. We'll see if I nibble, we'll see if I add, but that's mine. Definitely Magna Gold, just completely disappointed.
Nick Hodge: I would've guessed as much.
Gerardo Del Real: Yes sir. Yes sir. So we'll see where that ends. Let's talk about the least disappointing stock, the best performing stock in the portfolio. We'll start with you, Mr. Hodge.
Nick Hodge: So in the letters, the most successful company for me has been Critical Elements Lithium for the year. I'm just looking at the calendar year. So I wrote it down so I got it right. Started the year at $1.35, went to a high of $2.53. That doesn't match your lithium returns and I know what your answer has to be, but that's sort of once in a lifetime or twice in a lifetime type discovery there. But it's in the same space and the stock performed well. They got their final permit. They're now construction ready, they're entertaining financing and offtake offers from numerous outfits just like Patriot Battery is. C1.35 to C2.53 in a year is good work, especially in the year that we've had. But we're in at the first price, much lower than that anyway, C$0.30 cents with C$0.45 warrants that have been exercised.
So that's pretty good return. I still hold the bulk of my shares and have recommended it now in multiple letters and think it'll continue to be a quality investment for all the reasons that we know Lithium is going to be a quality investment for years to come. Coupled with the fact that they now have their permits, so it's Critical Elements for me.
Gerardo Del Real: No, look, you're not going to go broke making those types of gains, Nick. Heck of a pick. The warrants you're in, that sweetens it up. Look, Critical Elements, having itself a permit is so great for that entire James Bay region. Obviously it's a positive for my best performing stock this year, which everyone knows is Patriot Battery Metals. I won't recite it all again, help finance it at C$0.16. I'm sitting strong there at the $7 level today. Hit a high of C$10 something here just a few weeks ago. I think it's headed much higher, as I said earlier on, but-
Nick Hodge: That's my personal best return too, but I didn't recommend it, but I am a shareholder.
Gerardo Del Real: So yeah, for both, it's both for me, right? I recommended it in all three services. We finance it, then we put on a long term position on it, and then we put a trade on it that I'm holding, because again, I'm not touching that until somewhere in the twenties and thirties. But look, I think that region, back to James Bay, is ripe for consolidation. And if I'm a Rio Tinto and I'm looking for lithium deals, I'm looking for districts, I'm looking for entire regions that can provide some efficiencies of scale, can provide for cost offsets. When I look at the hydropower available to a company like Patriot and the access available to a company like Critical Elements, oh god, it's mouthwatering, right? I mean, if you're a major wanting to write a check and you're wanting to secure lithium supply for the next 20, 30, 40, 50 years, you want scale, you want stability, you want rule of law, you want multiple companies, you don't just want a district, you want a region.
James Bay offers all of that in spades, baby. So I think we're going to get a Voisey's Bay type of situation where there's just bid after bid and a buyout war that materializes in the next couple of years. I don't think it'll be just for Patriot. I think it's going to be for multiple companies in that region. So yeah, go Patriot Battery Metals. Obviously I'm excited for 2023, and obviously I think both the macro and the micro for the companies in the region that have significant discoveries are going to continue to do very, very, very well.
Nick Hodge: Is Blair going to have to take off his shoe? Pound it on the table.
Gerardo Del Real: He might have to. He might have to. I mean, yeah. I'll keep the private conversations private, but I've teased him about writing his memoirs one day. I've had some people write in with scenarios with C$100 price targets. I'm not that bullish yet. I've mentioned here I can see a path to C$50 though, I can see a clear path to C$50, and with some discovery luck on some of those other clusters, and some luck on the macro side. Yeah sure, I could see maybe, maybe triple digits, but that'd be a couple of years away. I think C$50 is still reasonable by the end of next year if things cooperate. So Patriot is definitely mine. Let's see what it does here in 2023.
Nick Hodge: Looking forward to it.
Gerardo Del Real: All right. What do we got next? This is actually the same answer. So I'm not even going to answer it, the exploration story of the year. I mean, for me it's got to be Patriot. You just discovered a lithium district when lithium's in all time highs, and turns out that your lithium district probably is going to hold multiple 100 million tons and might end up being the biggest hard rock lithium discovery ever before it's all said and done. So kind of hard to argue with that on my end of it. Anything on your end that sticks out other than Patriot?
Nick Hodge: I wrote down a couple, and I went outside the portfolio because there was a couple exploration stories that got rewarded this year. So you'll get your money's worth through this free podcast.
Gerardo Del Real: Money back guarantee.
Nick Hodge: And I guess a lot of people in the resource space know about these or have heard of them, but we're rattling them off. There was Western Alaska which had a discovery at Waterpump. Very wide widths of one to two gram gold, hundreds of meters. That stock went from C$1 to C$6. So that's good work if you can get it. It's pulled back a little bit. The other one that was getting a lot of chatter and airtime this year was Snowline. Snowline Gold up in the Yukon with their rogue project. That stock went from C$0.70 cents to C$4.00. Again, has pulled back a bit. They raised some money at higher prices, so good on them, but had a lot of analysts and newsletter writers talking about them and started exhibiting at the shows this year. Another one that ran hard and flew under the radar of a lot of folks is a company called American Eagle, and probably had the best return actually going from C$0.02 to C$0.33 on a copper discovery at their NAK project in British Columbia.
So those are three that have been rewarded in the market, have made discoveries, have been good exploration stories. Then one that's caught my attention but I haven't dug into as much as I should is i-80 gold.
Gerardo Del Real: Yes.
Nick Hodge: Which continues to put out good results at the Ruby Hill project. It's a CRD, carbon replacement deposit, but has a couple different styles of mineralization and a couple of different metals that are there. That hasn't been as rewarded as the first three I just mentioned there. That's a Ewan Downie company. So there's four, I mean, I gave you four, sorry about that. But those are the ones, the first three are the ones that really were recognized by the market and had people talking, of course outside of Patriot Battery Metals.
Gerardo Del Real: Love it. Ewan Downie, obviously involved with another company that we help finance. It should be going public soon, actually. I forgot about, there's like four companies in my safe where I have paper certificates and they're not small holdings, by the way. I mean, they're significant enough for me, so I shouldn't be forgetting about them. But it was a pleasant Christmas present when I reached into my safe the other day and realized that I still have three or four companies that are going public here in the next couple of months I believe. So looking forward to that happening in 2023.
Crystal Balling for 2023
Let's look forward a little bit, Nick. I didn't want to look backwards and talk major indices and commodities for the week, because again, it was a pretty boring week on that front. But let's look forward, what do you see for the major indices starting Q1, Q2? More of the same?
Nick Hodge: Yeah, and this wasn't on the list, so this is all off the cuff, but you know.
Gerardo Del Real: So was the rest of it.
Nick Hodge: Yes. You see all these CNBC folks putting out their S&P targets for the end of the year and everybody was wrong for this year, got sold off pretty dang hard, was down something like 15 or 17%. If I have to look, you asked about six months. If I had to look all the way to the end of the year, to the end of 2023, I think it's relatively flat, and I'll tell you why. I think you get it down first two quarters and then I think it starts to rebound in the second half of 2023.
I continue to think it goes lower, in the S&P I'm talking about, in the first two quarters of 2023 for reasons I've said a million times in newsletters and on this podcast, is slowing growth and recession, higher rates for longer than people realized and the earnings growth just simply not being there. We're starting to see that already, like I said at the top of this podcast, with 14 companies already reporting. So yeah, I think it's a rough six months.
Then I think on the backside of that you get a really good environment for gold, a really good environment for copper, and perhaps even sooner than that, a good environment for uranium because I've convinced myself that fundamentally it's all there for uranium, but the stocks got ahead of their skis earlier in the year and they became a victim of tax loss selling here in the past two months. Even ones that are now just getting gravy handed to them from the US government.
Gerardo Del Real: Gravy in the form of dollars, y'all.
Nick Hodge: Yeah. So I think investors are just selling them down and I think with the flip of the calendar, the uranium sentiment sort of flips as well.
Gerardo Del Real: I couldn't agree more. I am looking forward to a phenomenal 2023 across the commodity space, especially in copper, lithium I think we'll continue at current levels, if not higher. Uranium I think will double at the very least from here in 2023. Copper, we've talked about copper in the past. I'm very, very bullish in copper. What else? Look, in the precious metals. Again, gold and silver I think they're going to have a heck of a 2023. The precious metals didn't break out the way I thought they would in 2022. I thought we'd get that in Q4, but they did a great job of preserving wealth, and I'll put the gold chart up against any of the major indices any day of the week and take that return every single year if those are the only two financial instruments that you want to use. Gold did well for preserving wealth this year. So yeah, excited for 2023. I can't wait for it.
I hope everybody has a phenomenal new year. We will be taking a week off to let you all enjoy the rest of 2022, but expect us to be back at it with episode/therapy session number 200 to kick off the new year, so exciting times. Nick, anything you want to add to that?
Nick Hodge: No, that way they don't have to look at me in my Jihad lighting here from the cave in Afghanistan, where I'm putting this message out from. So it'll give us time to celebrate the holiday with our family. Hopefully you all do the same, and then we'll get back to our regularly scheduled programming early in 2023.
Gerardo Del Real: Love the comments, everyone, love the feedback. I hope all of you have a phenomenal start to your 2023. Have a phenomenal New Year's. Please be safe out there. Check us out at dailyprofitcycle.com/subscribe to make sure you're getting updates and the market commentary straight to your inbox. Go to Daily Profit Cycle, check out all the free information you have there, and if you have a free second and you want some more sponsor paid free information, you can go to resourcestockdigest.com. I'm Gerardo Del Real along with Mr. Nick Hodge. It was a great 2022 with everybody and I'm really looking forward to 2023. Send us off, Nick
Nick Hodge: No, see you. Have a good one.