Gwen Preston | Generalist Investors Will Soon Be Searching for Value That They Will Find in Mining Stocks

Gwen Preston is the founder of the Resource Maven newsletter that focuses on mining, exploration, and resource investing.  In this interview, Gwen shares her fundamental thesis regarding why mining stocks and commodities will soon be rising in price as generalist investors seek out value that they will not be able to find anymore in the general equity markets.  Gwen discusses her top commodity for 2019 and why she believes this commodity will perform well.  She also offers a plethora of resource investment advice regarding navigating risks, assessing exploration companies, apportioning your portfolio, using the upcoming tax-loss selling season as a buying opportunity, and much more.

0:05 Introduction

1:40 Gwen’s background and the genesis of her resource investing newsletter

4:46 Overcoming the initial learning curve of beginning as a resource investor

8:00 How closely does Gwen’s personal investment portfolio resemble her newsletter recommendations?

9:17 How Gwen’s portfolio is currently apportioned among the various commodities

11:57 Gwen’s fundamental thesis on why mining stocks and commodities will soon be rising in price

14:41 Gwen’s top commodity for 2019

17:48 Navigating current risks as mining investors

22:56 Gwen’s thoughts on the 2018 tax-loss selling season

25:07 Would Gwen invest in an explorer that has bloated share structure if there are other positive qualities about that exploration company?

29:01 Is it better for an exploration company CEO to have a geological background or a financial background?

30:56 Up-and-coming mining jurisdictions that western mining investors should pay attention to

34:01 How Gwen has used legal, non-insider information to capture nice, short-term profits

BEGIN TRANSCRIPT:

Bill: Welcome back ladies and gentlemen, you are listening to Mining Stock Education. I am Bill Powers, your host, and I’m thankful that you’re tuning in again to another expert episode, and today I have on the line with me Gwen Preston, the Resource Maven. You can find Gwen at resourcemaven.ca.

She also has a YouTube channel where she offers a very concise educational tidbits, and about five to six-minute clips about how to invest in resource stocks. Gwen also runs the maven letter, which is a paid subscription letter, and I’ve asked her onto the show today to share her insights with us regarding her approach to mining stock investing as well as her take on the current markets. So Gwen, thanks for joining the show today.

Gwen: Thank you very much for having me.

Bill: Let’s begin by offering a little bit of background, many listeners I’m sure will be aware of your background. For those that aren’t aware of how you came to have this letter and focus exclusively 100% of the time on resource investing. How did you come to this place and what was the genesis of your newsletter?

Gwen: It’s a good question. Because I think a lot of people end up in the mining sector, at least in Vancouver, which is where I live, and sort of at the heart of the exploration sector. There’s a good number of people who end up in mining, of course, that excludes geologists who put themselves there specifically, but a lot of us, one of the interesting things about mining, is that it takes about understanding or running mining stocks, is that it takes a broad range of skills and information, skills and knowledge. And so, there’s a lot of people from a finance background or from geology backgrounds or from communications background who end up in mining and end up learning a lot about it, falling in love with it and sticking with the sector, which is what happened with me. My background is chemistry, I have a bachelor’s degree and then journalism as a master’s degree.

And when I finished journalism school, I ended up getting a job at the Northern Miner, which is the newspaper that’s all about global mineral exploration and development. And so, over the next about six years, I was…I had the incredible opportunity to learn about mining. A great test of whether you understand something is to write about it. And since my job was to write about these things, I had to make sure I understood them. So I got to travel the world and ask geologists and management and analysts questions until I understood what was going on. And through that, I really fell in love with the sector. It applied Chemistry and Geology and Economics, which to me, it’s fascinating. The potential to make money is very attractive. The requirement to manage risk is an added challenge that I think is, I mean, we wish it wasn’t there, but it’s very much part of the situation and it’s another kind of interesting aspect as well.

And, yes, so I was with the Northern Miner for five years in the middle. I had left for two years to be a ghostwriter for another newsletter writer who was focusing at the time on energy stocks. That was Marin Katusa actually, when he was with Casey writing energy letters. That was a great experience, gave me insight into the newsletter business; a lot more capital markets knowledge. And then I’ve gone back to the Northern Miner and I was there, and in 2014 I looked around and figured the mining markets had the bottom sometime soon and when they did and started up again. I wanted to be able to participate actively as a journalist too, I could not. I could not invest in things that I was writing about because that would sway my objectivity. So I quit my salaried, pensioned, benefited job and started my own business at the bottom of a bear market, which took a lot of deep breaths, but I’m incredibly glad that I did because I really love what I do now. I’m far more involved in the sector than I was, in doing what I do now, which is writing about what I invest in, and it’s a huge challenge and very rewarding.

Bill: You mentioned that you really got to learn mining stocks when you joined the Northern Miner. Can you talk a little bit about how you overcame that initial learning curve? I’ve read books on mining stock investing where they say it takes at least two to three years to really begin to even comprehend the sector. And then I interviewed a fund manager, Warren Irwin earlier this year. He told me, you don’t even know what you’re doing before 10 years of doing this. Can you talk about that learning curve when you first start engaging with mining stocks?

Gwen: Absolutely. It is a very significant learning curve and when I mentioned at the beginning that there’s people from various…from quite a different walks of life who come to the sector, that’s the way it is and the interesting thing is that each of those people, whether you come from a finance background or a geology background or communications background, you have a set of skills that are really important in the mining sector and then you have to learn the rest. So every CFA who becomes a mining analyst, doesn’t know anything about mining, any geologists who becomes a mining analyst, has to learn the financial modeling side of it. And that’s the case for executives, whether it’s a geologist who becomes a president of a company or whether it’s someone like me who has a science background. So I was able to wrap my head around the geology with some ease.

I mean I’m still very much learning and I am not a geologist and there’s lots of things that I still pick up every day. But I could wrap my head around the geology. That was the lowest barrier to me. What I think for the…on the investing side, when I was at the newspaper and did not have to…to be honest, worry about share prices. I was just telling the stories. I was telling the stories of the geology, the stories of the companies, the backgrounds of the project, but the newspaper was objective so there was no, this is a good stock, this is a bad stock, this is a good opportunity. That is absolutely not part of the Northern Miner nor should it be. When I left, started my own publication and, of course had my own opinions.

First of all, the weight there is, you know, the weight on my shoulders is very significant. People are paying attention to what I’m suggesting is a good place to put their money, so that’s big. But the learning curve almost felt like it started new, because there is so many details to pay attention to when it comes to corporate structure and who’s in the stock, and how was it, how did it come together? How old is it? What’s the warrant situation? What’s the access to capital? What’s their backstory? And raising capital? There’s so many details to know. So, it is a very steep learning curve which is too bad for the retail investor who just doesn’t usually have the time? Most don’t have the time to sort of, you know, put in all the hours needed to understand it all. So my response to that is always to have a network.

Don’t try and do this alone. Investing in mining stocks, have people that you talk to about it because no one knows everything. But have friends who are good at the geology, good at the capital markets, good at the marketing and promotion side, have people that you can talk to so they can help you with the things that you don’t know, and they can probably shine some light on the people involved in each deal and the projects and whether they have a backstory. There’s so much to know, so just don’t try and do it on your own.

Bill: So you write the newsletter, but then you also personally invest. How closely does your personal investment portfolio resemble what you profile in your newsletter?

Gwen: Almost exactly. So the Maven newsletter is about what stocks I’m buying and selling and why I’m doing it. That to me is the way that a newsletter has to be structured. I don’t think there’s any point reading something that is about a stock that someone isn’t investing in with their own money, because yeah, that just doesn’t make sense to me. Occasionally there are things that I invest in personally that don’t make it into the letter. And that’s usually just because they aren’t appropriate or there isn’t an opportunity, so perhaps there’s an opportunity to participate in a financing, and I’m unable to secure an allocation to offer to my premium subscribers, and occasionally I will participate in that without mentioning it. But at the end of the day, the purpose of my investing, well, not the purpose. The purpose of my investing is to make money. The purpose of my publications are to share my knowledge and my network and my research with everybody so that they can do what I’m doing. So it’s a very, very close match between the Maven portfolio and my personal portfolio.

Bill: And how is your portfolio apportioned right now among the various commodities?

Gwen: So that’s a good question. It is still gold heavy because gold dominates the exploration sector. And in the Maven letter, which is my main flagship publication, the idea is to play predominantly in the call it high risk, high reward explorers. And so simply because there are, you know, 10 bold explorers for every two copper explorers for every, I don’t know, half of the zinc explorer, you end up with more gold stories, but they’re just everywhere. That said, I actively search out exposure to, especially copper and zinc because I’m very bullish on the fundamentals for those two metals. So I actively seek out those stories. I’m also, I’m bullish on uranium so I seek out opportunities there. And it’s important to make sure that you look at your portfolio. I think from that perspective, it’s easy if you’re interested in high risk, high reward exploration stocks, if you love that part, that speculative aspect of resource investing, it’s very easy to fall in love with exploration stories.

We do it all the time, and that’s okay. But I think it does…it is important to take a step back every now and then and look at your portfolio. Even if it’s chockablock with explorers, that’s fine, but assess the distribution a little bit. Make sure you’re not only in the gold sector or, you know, make sure that you do also have exposure to copper and zinc and uranium, and maybe you are particularly interested in energy metals, so you might like the vanadium, you might like cobalt, maybe you like nickel or graphite, make sure that you have commodity-wise, more than one way to win. You know, zinc, went on a hell of a run in 2016, and so paid to have exposure to zinc in your portfolio. And you can’t always, unless you’re very prescient, you can’t always predict which commodity is going to make a move that year. So, I’d say one of the ways to manage risk in the sectors to make sure that you have exposure to more than one way to win on the commodity front.

Bill: Do you cover producers or royalty companies are at all?

Gwen: So that’s a good question. In my main letter, my weekly Maven newsletter. Not really, that is more the high-risk high reward side of the sector. So it is predominantly explorers, there are also some development stories. Companies that are building mines, largely because I think their takeout targets. That said, my fundamental thesis right now for the mining sector is that generalists investors who’ve been making money hand over fist, hopefully in the broad stock market because they’ve been rising for nine years, whatever it is, are going to rotate into metals in the next little while because the broad stock markets are becoming less certain, more volatile because overvaluation is a big question in those areas. And so, with valuation questions and with volatility rising, it’s the reliable pattern. Late in an economic expansion. You know, stocks get overvalued, volatility increases. Investors start to look to diversify and they start to look for value.

Very few value opportunities out there, but mining is one of the very few sectors that missed this big bull market, so they will find miners and commodities reliably outperformed late in an economic expansion because mines are very slow to be built. Commodity supply is very slow to react to demand. Demand has been rising through this global economic expansion, and we’re certainly at a point where demand is outstripping or set to outstrip supply for quite a few of the key metals. Copper and zinc and uranium standout in the very short term here. And so with a bullish fundamentals for those metals and with undervaluation in the miners, there’s good reason to believe that generalists will rotate into the sector. It only takes a few generalists rotating into the sector for…to make a huge impact because the mining sector is so small. So that’s the big picture argument to be interested in mining right now. And because that’s my big picture argument, I do have…I’ve launched a second newsletter that I call Maven Metals, which is specifically designed to help generalist investors who are perhaps entering the mining sector for the first time come and just learn enough about the sector to, you know, to make their move.

And so, my flagship newsletter is quite detailed. It’s quite technical. It’s quite high risk. My second newsletter, which is a monthly publication, it’s the opposite. It tries to keep things quite simple. It tries to be educational about the sector, and its investment ideas are producers, royalty companies, more advanced stories that have much less risk, but that will, that should offer good upside, if only because of leverage to rising metal prices as this big picture commodity argument unfolds. Sorry, that was a very long answer to quite a simple question.

Bill: But was a very thorough answer. Thank you. So we’re about six weeks away from 2019 as you peer over the New Year into 2019. If you could only choose one commodity to invest in, what would it be and why?

Gwen: What a good question. Oh, it’s so tempting to say uranium. Uranium is already up to 40% in the last six months. The uranium sector is very bullish, but there’s always question marks about timelines with uranium. So I may hedge and not put uranium right at the top of the list. I would probably say either gold or copper. I’m leaning towards copper, because the fundamentals for copper are really strong. And right now copper has been very oversold, and the reason for that is trade wars. Trade war rhetoric introduced a huge amount of anxiety in the market about whether global growth was going to come to a screeching halt. There’s good reason now. I think post-midterms, and given the dialogue that is being reported between China and the States, I think reason to believe that the worst of the trade war rhetoric is over. And really all we need is for the rhetoric to calm down. The trade wars themselves would have an impact for sure on metal demands.

But the fundamentals for copper are so bullish, by which I mean there is such a significant supply gap and it’s not that far away. Like global growth would have to come to sort of a screeching halt for there to be enough copper. And I really don’t expect trade wars to create a screeching halt to global growth. It certainly has tamped things down. But if we can come to a bit of a resolution on what these tariffs are going to look like, then people can start having a little bit more confidence in what the impacts are going to be. And then I think copper should be able to step away from what has been controlling it, which is just anxiety over trade wars and return and respond instead a bit more to the fundamentals, which are really bullish. I mean, we’re looking ahead, copper is the market that eats through 20, 21 million tons a year, and five years from now we’re going to be short 5 million tons a year for the next five years.

That just doesn’t work. The world cannot be short 20% of the copper that it needs. Copper is the thing that allows us to develop and to electrify which, you know, electrification being such a strong force right now. It just doesn’t work. And so copper prices need to rise in order to better reflect that supply gap, and in order to incentivize copper exploration, copper development, new mines. So I think that will all manifest as trade wars ease off. So I’m going to go with copper as my answer.

Bill: Excellent. When you look at the mining sector, obviously we invest in the mining sector because it offers us a great potential reward. But with that comes much risk. So what would be some of the greatest risks that mining investors should currently be aware of?

Gwen: It’s always so many. So, it really depends which area you’re playing in. So if you’re talking about the sort of the lower risk end of the spectrum, so the producers and the royalty companies, then the biggest risk is always just commodity prices. And so, the fundamental thesis that I outlined there relies on copper strengthening, on zinc strengthening, on gold at least holding its ground and perhaps getting stronger. The rationale for those is dependent is based on supply demand. There not being enough supply to meet demand. It depends on inflation likely stepping in and weakening the dollar, which helps metal prices, and it relies on global growth. And it relies on generalist rotating into the sector. So those things really depend on whether on how growth manifest, as long as growth continues in America and around the world, then inflation argument works. The demand argument works, the commodity supply-demand setup works. So then it all makes sense.

And then I think it’s pretty reliable. If global growth really does fall off a cliff, then that’s the biggest risk, if you’re working off of metal price leverage as your main thing, which is what you’re doing if you invest in producers. If you invest in explorers, the biggest risk is that its exploration. And at the end of the day, most exploration does not work. It’s sad to say, but it’s absolutely the truth. Most exploration does not discover a new deposit that becomes valuable, specifically particularly valuable, let alone gets bought out or turned into a mine.

So the biggest risk is simply the game you’re playing. And there are ways to hedge that risk for sure, or to manage that risk. I shouldn’t say hedge, just to manage that risk, follow serially successful people, pay attention to jurisdiction, pay attention to other important factors like share structure, and be very careful of, when I say people, I mean, yes, be very careful of who’s running the company.

And there are, unfortunately, there are inarguably still some people, you know, who run mining companies who do a terrible job. And by that, I mean they pump up their stock price inappropriately, you know, arm wave about discoveries that aren’t real, and investors can lose a lot of money in those stories. And so, that’s really sad because there’s, whenever, you know, a sector has the level of risk that we already have, we don’t need to add to it by also having, you know, dirtbags involved. But they’re there so you really need to have confidence in the people who were running the company and the way that they’re running the company, the way they’re presenting information, the way that they’re telling the story, who they’re bringing in, and how they’re paying themselves. So it seems really detailed to, you know, to zoom in on that, but I think the people are a huge risk, and can also be a huge benefit. But just make sure you know who you’re dealing with.

Bill: Before you profile a stock and a company, in your newsletter. Approximately how many hours of research would you put behind that recommendation? That came to me as you were talking with all the due diligence points.

Gwen: No. Fair enough. I mean, 10 hours is probably a good estimate of that.

Bill: That’s going through the financials, the insider, selling and buying.

Gwen: All that stuff. So, I spend a lot of time just on the project and the geology. I spend about a third of that time probably with the people. So with the management team. And then yes, you got to go through all the financial side of things, and then quite often I go and visit these projects as well. So, you know, then the number multiplies manifold, because I’ll fly to whether it’s Nevada or Mongolia, I’ll fly over there to get a better look at the project and especially if it is a jurisdiction that perhaps I don’t know enough about, a large part of the trip. I’m not a geologist. So looking at the rocks, is interesting, but a huge reason to do those trips is to get a better understanding of the risk and reward of the jurisdiction. And then just to also spend several days with the people. Like I say, it really matters who is running the company, how they operate, how honest they are, how they spend money, what their focus is. And by just spending, you know, three days with some people, you’re not talking about the project all the time, but you’re always learning about a person when you’re spending time with them. So that’s another big factor. So yes, I’d say the minimum starts with about 10 hours and then it goes up. It can go up significantly from there.

Bill: What are your thoughts about the upcoming or expected tax-loss selling season? It’s been a down year in the miners and the junior miners. So sometimes the tax loss selling can be extreme. Well, what’s your expectation?

Gwen: I mean, yeah, tax-loss selling is absolutely always a factor in our industry. Yeah. It’s happening. It’s already happening. I mean, I think the more active maybe savvy investors’ tax-loss sell quite a bit before now because if they’re down, they don’t need to wait for them. They don’t necessarily wait for stocks that are down to be down even further. You can still walk in your loss, but maybe not lose quite as much money by doing your tax loss selling even in September, maybe October. So it’s absolutely a factor. It’s always a factor. November is achy month for my stocks, for lack of a better word, it’s just always quite icky, but the other way to look at this is that tax-loss selling can certainly exacerbate losses in your portfolio, but if there’s stocks that you truly still believe in, then it’s a buying opportunity. Right? Often stocks hit their 52-week lows right around now.

So if it’s a company that you really believe in or that especially one that you think has significant news coming out early in the year, the rebound from a tax-loss selling situation can be pretty dramatic, especially if we get a new year’s run, which often happens in gold and can often happen in other metals as well. And we get, again, savvy investors, institutional investors, brokers stepping in and snapping up the stocks that have been beaten down by tax-loss selling so buying into them. The rebounds can be pretty dramatic. So if there’s a stock that you really believe in, I mean, watch it. This could be a good opportunity to the average down your position or enter a stock that you haven’t entered before, but that you really like. That’s my main…its important to pay attention to tax-loss selling, but really I look at it as a buying opportunity.

Bill: As you’re analyzing exploration stocks and let’s say you come across one, there’s many things you like, the management, the project, the jurisdiction, but yet it has a bloated share structure. Would you invest in a company like that? And what would you need to see in order to take a position in an explorer with a bloated share structure?

Gwen: I probably wouldn’t invest, to be honest.

Bill: Just stay away from it completely?

Gwen: I mean, so there’s the first…the basic factor is, I’m sure most of everyone who’s listening can do the math here. If an explorer is worth 20 million bucks and then makes a discovery that doubles its value, brings it to $40 million dollars, that’s great. But if there’s 30 million shares out, the increase in value per share is much more dramatic than if it has 300 million shares out. So, share structure is the fundamental thing that determines how much you as an investor are rewarded for owning stock in a successful exploration situation. And so, if there’s too many shares out, you just don’t get the returns. And then the other, the more sort of nebulous, but still a very real factor is that companies with large share structures have been around for a while, and that’s okay.

But you often can have legacy issues there were, who owns the stock? How down are they? Are they going to use any boost if there is a discovery and the share price gains? Are they just going to use that as an opportunity to finally exit some stock that they’ve owned for years that has been under-performing? It’s difficult to have success with a bloated share structure. So, if you’re looking at an exploration company, I mean, I think you want fewer than 100 million shares out for sure. Ideally, you want fewer than 50, but that’s tough. You know, companies do have to finance to survive. But if it’s really big, then I’m not interested. As a company gets more advanced, they’re into have a discovery, they’re drilling up that discovery, maybe they’re already into, you know, a feasibility study, or they’ve gone down the path, well, then you should expect that they have more shares out because they’ve had to finance to get to where they are. So, you know, there’s reasons for sure, structures to get bigger, but if you’re at the early stage of exploration, it’s very difficult to win as a shareholder if there’s too many shares out.

Bill: And what about an early stage explorer that has a lot of warrants or option overhang. Is that a complete turnoff for you or do you look at that and say, “Hey, if they hit a discovery hole then maybe the share price will blow through that, and then they’ll have a lot more coming into the treasury through the exercising of the warrants and the options.” How do you view that?

Gwen: Yeah, I mean the way you describe can definitely work. If the structure is still reasonably strong and there are warrants, then the warrants can work and like you say, they can add to the treasury, they can bring in money when it works. I think what’s a bigger picture question is why are there so many warrants? And that hearkens to how does management approach raising money and spending money and place finding shareholders. And so, if there’s lots of warrants, then maybe they are not stringent enough when they don’t, takes a strong enough position with when they’re financing to try and limit those fat, like try and limit the number of warrants that are up. There shouldn’t be a huge number of options because, again, that sort of speaks to how they approach shareholder capital. So the warrants situation, it’s not as cut and dry as the share structure situation. I wouldn’t say too many warrants means no, but it’s…it just raises a few more questions that you need to investigate and an answer.

Bill: Sticking with exploration companies, now concerning the management, specifically the CEO or the president of an exploration company. If you were forced to choose between the two options, with that being a CEO with a geological background or a CEO with a financial background, which one would you choose and why?

Gwen: It’s a good question. So, probably the finance background.

Bill: Because they need money continually?

Gwen: They need money continually. And the job of a, I mean, so there’s a president and the CEO role, and really the CEO’s role is to get out there is to tell the story to the investment community, and to raise money. And so, you need to have enough geologic understanding that you can tell the story appropriately and answer the questions that are asked. But really your focus is on money and on marketing.  Right? And so you don’t need to be a geologist to tell it to do that, but you do need to have really good connections in the capital markets, and understanding of how the capital markets works, and like sort of entrepreneurial creativity when it comes to some of the, you know, business challenges that arise. So probably I would go with finance.

That said, there are clearly some very good, some very smart geologists out there who have become incredibly competent, capable, successful management. And so they’ve learned that side of the story. So, I’m not discounting geologists completely because they can learn it and they can be good at it, but there’s more examples of geologists who are leading companies and lead them into the ground because they lack the capital markets abilities. Then there are other geologists with really great capital markets ability who win on that front.

Bill: Regarding mining jurisdictions, you and I are westerners. Are there any up and coming mining jurisdictions that maybe westerners like you and I are not paying attention to, that maybe we need to focus a little bit more on?

Gwen: So, Ecuador is attracting a lot of attention these days, so I think that one to pay attention to, it’s got some very good potential. It went through some political stuff that political and mining, regulatory stuff that really turned investment interest away. They’re fixing that now. It’s working a lot better and there’s companies that have made some significant discoveries. SolGold being the lead example. I think Ecuador’s worth paying attention to. More in a bigger picture answer to that question though, I don’t necessarily… Okay, so there’s two things. First of all, early in a newer mining bull market, which is still where we are now, jurisdiction really matters in that there’s still not a huge number of investment dollars floating around. And so those investment dollars gravitate to really safe places. So, Nevada people are in love with Nevada right now. People are in love with Ontario and Quebec.

People love British Columbia. People love proven parts of Mexico. Right? People really like, investors really like safe, secure…to at least check the jurisdiction box off with, you know, without any questions when the market is still young. As the market strengthens, then we get into the stage where there’s more money for new, really truly new discoveries, really truly grassroots exploration that requires going into more far afield areas, and when geologists do that, they have the potential to make very significant new discoveries. And there’s money for that as the market evolves.

So, when we get into that stage, I don’t really have a list of yes and no jurisdictions. I’m open to any jurisdiction. I just have to learn about it and decide whether I’m comfortable with it or not. For example, I have two investments right now in Mongolia, and Mongolia has had a checkered past when it comes to mining policy, but I think the prospectivity there right now…it’s prospectivity there is almost unparalleled and the government is showing its ability to work with mining companies, and one of the things that major minors really need right now is big new discoveries, district scale opportunities. And there’s not very many places in the world where that still exists, because so many places have been looked at so closely. So it’s not, yes, yeah, it’s not black and white, but right now a lot of the focus is still on safe jurisdictions, but I think the more far-field jurisdictions are starting to attract attention, especially for majors who are already looking around.

Bill: One of your calls this year that I really appreciated and admired was what you said about EMX Royalty before they announced the sale of their copper property in Russia. And I liked that because you analyzed the company, you saw their historical operating patterns and then you saw an anomaly, which is what an exploration geologist looks for. And then you said something’s afoot here. There could be something big coming. And then you were right. I actually spoke to the CEO at the Beaver Creek Precious Metals Summit, and he said, “Yes, she was spot on.” And so I just appreciate that because you use your knowledge to capture a really nice short-term profit. So, for listeners that aren’t aware of what I’m referring to, number one, could you talk about that and then number two, as a followup, what are other ways that you have used your legal, non-insider information to capture a nice short-term profits?

Gwen: Okay, yeah. So EMX Royalty is a company that’s been around for a long time, 12 years I think. They were, what’s called? A Project Generator, which means they stake early stage opportunities, do groundwork, show that there’s prospectivity on these projects and then they farm them out to other companies to continue the exploration, and they retain either part ownership or royalty on those projects. So that’s been their business model for a long time.

They’ve been doing it for long enough that they have now a very strong paying portfolio of royalties, so they’ve become more of a royalty generator and a project generator. So they’re self-funded on the exploration front from royalty payments. But what the situation that you’re referring to is the other part of their business model, which is where the team makes strategic investments when they see really undervalued opportunities.

And that happened back in 2009, they noticed a company called IG Copper, had managed to get a 51% stake in a huge porphyry project in the far east of Russia, of all places, called Malmyzh. They recognized, because this is a very strong geologic team, they recognized the potential there. And so they started investing in IG, which is a private company. And over the years they established a 41% stake in IG copper. And they also provided a lot of technical expertise, leadership consulting to IG. And IG worked with its partner on the project, which is Freeport McMoRan, to prove out that there was a huge amount of copper and gold on this project. And long, long story short, the Russian copper company has now bought Malmyzh, and they bought it for a hundreds of millions of dollars and that, those hundreds of millions ended up giving…ended up resulting in a payday to EMX of CAD$90 million.

So that’s just now sitting in their bank account, and that’s just a direct result of having invested in having seen the opportunity in IG copper. And really they took…they multiply their money fivefold for the amount that they invested. They got back fivefold in seven years, is the timeline there. So that’s really well-played, right? And so the reason they can do that and the reason that I invest in your Eurasian, well, sorry, it used to be called Eurasian, now it’s called EMX, is because this team, when we were talking before about management and, you know, finance versus geologists. EMX is the…is actually a perfect hybrid. They are all geologists, but they’re incredibly entrepreneurial geologists. The backstory of the Malmyzh situation involves really interesting deals that Dave Cole, the president, who you just referred to, negotiated to make sure that this whole thing could play out in a way that worked really well for IG copper and therefore worked really well for EMX.

So it’s that situation. What knowledge did I use? I used people. I use the fact that I’ve known the team at EMX for 10 years now. They have managed to enter and profitably exit jurisdictions that others would not succeed in. Haiti is a standout example thereof. They also were one of the first to move into Serbia, and they now own a really significant royalty on the best copper-gold development project in the world, which is the Timok asset that Nevsun bought. And now Nevsun is being bought by as the Zijin Mining out of China for that asset, and EMX royalty on it and they’re going to make a bunch of money once that thing gets into production. So this is really about recognizing that this team is entrepreneurial, it works really hard.

They’re geologic knowledge is almost best in field. So that was the story there. And I think that’s sort of the big picture story is you have to know the people. And when a team perhaps has a success, maybe their project gets bought, their company gets bought. That’s great. The first thing I do is figure out what are they doing next and how can I be involved in what they’re doing next? You have to follow the serially successful people.

Bill: And you knew their pattern was not to take on debt, and then because they were taking on debt, you said there, there must be something going on now right now. Wasn’t that part of it also?

Gwen: Yeah, that was. So a few months ago they did. They took on sort of a high-interest short-term loan from Sprott, which was weird. This is not like you said, not a company that takes on debt. Let alone a short-term high-interest loan, but I was like, “Wait a second.” There’s only one reason they would do this. And that’s if they’re expecting a really big payday very soon that will more than let them pay off that loan. Which is exactly what happened. So yeah, the other thing that that brings up is that you really have to pay a lot of attention with exploration stocks. You have to pay attention to every news release and that’s really hard for retail investors who have jobs and family and lives that they’re trying to keep up with. But you have to pay attention to every news release because there can be important information in every single one. So, again, that goes back to what I said earlier. Don’t try and do it alone. Make sure that you have a network of people, perhaps newsletter writer like myself or you have people who are helping you keep up with the information because information comes fast and furious, and can change the story very quickly, and you need to keep up.

Bill: Absolutely. Is there anything more you want to say about other ways you’ve profited using legal, non-insider information or did you pretty much cover it?

Gwen: Yeah, I mean I can say sort of in terms of one style of information to another, whether it’s geology or whether it’s a deal that happens or whether it’s a way that money is being raised or, but it really…to sort of reiterate, it comes down to each piece of information and there’s the press release, and you can read through the press release and it says what it says, and then there’s reading between the lines. And reading between the lines comes from expertise. Maybe you’re aware of the group that they’re doing to deal with and you have an understanding of what that group’s backstory is, what their patterns are.

Maybe you are a geologist and you can understand better than others what the details and the geology means. Maybe if you understand this management team and if they’re doing “x”, like taking on a big loan or an unexpected loan, then that probably means “y” that they’re about to get a big payday. So reading between the lines is really important and it’s difficult. It takes experience. So it’s one of those when you talk about learning curve early on, it’s one of those nebulous aspects of the learning curve, right. You can’t sort of put your finger on everything that you need to know, but as you go along, you realize that there’s more and more and more that you need to know in order to be able to successfully read between the lines.

Bill: Gwen, you’ve shared so many insightful things today.  For newer mining investors in particular that are listening to this podcast, you need to listen to this again. This is a 40-minute interview by a newsletter writer, a full-time resource investor, and you need to go back to the beginning after listening to this, whether you’re mowing the lawn or doing the dishes, whatever you’re doing, but you want to absorb what Gwen has shared with us today, again. So Gwen before you go, please share more information about your newsletter, how people can follow you on the web.

Gwen: Oh, thanks for asking. So, my website is resourcemaven.ca. You can…there is free trials or you can sign up to get my publication for free for a period of time. So you can see what it is, you can also subscribe there. If you live in the Vancouver area, there’s the conference that I participate in regularly called the Metals Investor Forum, that happens a couple times a year. It’s a great opportunity for me to meet subscribers. And on my website, you can also easily find my YouTube, my LinkedIn, all those other social media outlets that help you follow along with what I’m doing.

Bill: Gwen, thank you for coming on the show and sharing your insights. I appreciate it greatly.

Gwen: Well, thank you so much for having me. It was a great conversation.