The Energy Report

Source: Maurice Jackson for Streetwise Reports   08/08/2019

Mickey Fulp, the Mercenary Geologist, and Maurice Jackson of Proven and Probable discuss the resurgent precious metals markets, as well as base metals, critical metals and energy metals.

Maurice Jackson: Joining me for a conversation today is Mickey Fulp, the Mercenary Geologist. Glad to have you here today to share your market insights, which are quite remarkable. And, I want to get your thoughts right now on the gold price. The market seems to be quite exuberant at the current price of $1,400 per ounce. Is $1,400 the new floor or is it a head fake?

Mickey Fulp: I’m being increasingly convinced it’s a floor because no matter what the U.S. dollar seems to do—I mean the U.S. dollar’s up 150 points or more over the last month or so. And, despite its perturbations on a daily basis, gold’s hanging in there. Hasn’t even gotten close to breaching $1,400 for quite some time. So, it was a bit iffy. So, there’s certainly resistance on the downside in the $1,385 range. What’s the resistance on the upside? Well, probably $1,450. We’re pushing that this morning.

Maurice Jackson: We certainly are.

Mickey Fulp: We keep establishing new six-year highs, and it was six years ago since gold even approached these sorts of values. You know, as a geologist, exploration geologists do have to have an eternally optimistic side. Maybe that’s coming out. But [it’s] looking better—if we can get through to Labor Day and then through the return of everybody to the market, let’s say by the Precious Metals Summit in Beaver Creek, Colorado, in late September.

If we can get through that, then I think it could be onward and upward for gold because then you have seasonal factors coming into the equation—Indian wedding and festivals specifically. And then the love trade comes into the Western world—those two or three weeks before Christmas where we all tend to buy our loved ones gold-bearing bling.

Maurice Jackson: I don’t know if my wife would agree with that but, honey, I will get you something this year. Mickey, how about silver? Any thoughts on silver?

Mickey Fulp: Well, silver’s lagging behind and the gold-silver ratio is starting to go down. But, a month ago it was well above 92, and that is extremely rare territory. I think about 2% of the time since Nixon took us off the gold standard in 1970 has the gold-silver ratio been that high. It’s about 87 right now. You noticed overnight or yesterday, when gold popped a little bit, or even this morning when it’s kind of gone another leg up, [that] silver hasn’t participated in this last little run here.

Maurice Jackson: I know you’re not the biggest fan of silver, if I’m not mistaken, but would you actively be buying silver right now?

Mickey Fulp: Well, if I had a choice of buying gold or silver right now, I’d be buying silver because it’s undervalued with respect to gold. That ratio, the mean, the median and the average are both about 55 to 56, and so you know, that ratio will come into play at some point, again. If you buy silver now and that ratio normalizes, then you trade in your silver for your gold. The other thing that’s going on right now is numismatic gold coins are selling at not much over the markup for a current bullion coin from the government. I actually picked up a couple of numismatics yesterday, so I’ve already got the bling for my girl.

Maurice Jackson: I have as well. Regarding gold numismatic coins. I like divisibility so I don’t usually go for the one-ounce. I like the half-ounce gold numismatic and one-tenth platinum, which the one-tenth actually leads to my next question for you. And, that is platinum. What are your thoughts on platinum?

Mickey Fulp: Well, I bought some platinum back in January, I think when it went below $800/ounce. It’s now made triple bottoms below $800 in the last year. So, triple bottoms, as the chartists will tell you, that’s when you want to buy. When it made its last little foray under $800 was month or five weeks ago, if memory serves, and now it’s at $850 again. That’s another buy. It’s good time to buy platinum.

Palladium dropped $100 bucks overnight or yesterday. I think that must solely be due to a bunch of longs [getting] shaken out of market when Trump put those additional tariffs on, because palladium is an industrial metal. It’s not a precious metal. So it lost, dropped like a rocket yesterday.

Maurice Jackson: Now, I would be remiss if I didn’t ask you, because my e-mail box will be inundated with why didn’t you ask Mickey [if] he’s going to buy silver or platinum? Of the two, which one would you prefer to buy?

Mickey Fulp: Oh, I don’t know. I just buy silver coins kind of willy nilly. I bought bags of junk silver in 2008–2009, so for me, buying silver, I just buy a few coins here and there. But, if I was going to buy a significant amount of precious metals right now personally, I like those platinum philharmonic coins. Some beautiful coins.

Maurice Jackson: And, just a little insight for those [reading] as well, if you’re looking at silver. I get this question asked as well: What has the lowest premium right now? The answer is junk silver. Junk silver right now has the lowest premium.

Mickey Fulp: I was unaware of that.

Maurice Jackson: Yes.

Mickey Fulp: So, it’s always good to have a bag of junk silver around.

Maurice Jackson: It certainly is. When silver is out of favor—most people don’t realize this—it is junk silver that has the lowest premium. When silver is in favor, it’s the junk silver that has the highest premium.

Mickey Fulp: Oh, you should know, as a dealer for our buddies at Miles Franklin.

Maurice Jackson: Absolutely. Let’s switch the conversation. Let’s go to base metals. What has your attention in base metals?

Mickey Fulp: Well, copper always does. And copper’s gotten knocked down again on the trade tariffs, and some of the copper companies are on sale right now. The base metal complex overall, from the supply-demand, fundamentals viewpoint, looks very bullish, but nothing’s going to happen in the base metal complex. There’s not much upside that’s going to occur until something happens with China and the U.S.—some positive resolution or something. Some news that actually is of substance indicates this is going to get better before it gets worse. And we haven’t had that.

Maurice Jackson: So, what do you say to someone who says they’re ecstatic about battery metals right there. They’re going to say, “Mickey, you’re crazy; we’re going lithium; we’re going electric.” What do you have to say about that?

Mickey Fulp: Well, I’d say you can’t go electric without copper. So, if you want to look at a battery metal, an electric metal, look at copper. The so-called battery metals—which would include lithium and cobalt and vanadium—just when those prices go exponential, they go parabolic.

And that’s happened over the last year on all those metals. Lithium’s lost 45% value from 14 months ago. Cobalt’s less—lost 75% of its value in the last year—and vanadium’s lost 70% of its value since December. So, do you want to be involved with those metals? I don’t know. If you’re a speculator in the metals market, [you] can’t really trade them because, with lithium [and] vanadium, those aren’t traded with futures and options market on the world exchanges. Cobalt is, but it’s such a very small market, you know, that would individual speculator want to get into those sorts of things? I don’t think so.

So, then, how can you play them? Well, you can play them through the exploration or development companies, but they tend to go exponential with the prices, and they go screaming down the other side and oftentimes never recover when the metals go down. I mean these are parabolic spikes over the last year or so on all three of these metals.

Personally, I run away from these things. If you’re going to play any of these specialty metals—and that would include the rare earths and the battery metals and tungsten and antimony and it just goes on and on and on—realize that those markets are mainly controlled by the Chinese. If you’re going to play any of those stocks, do your due diligence early, get in early and take your profits and get out.

Of all the cobalt in the world, 60%+ comes from the Democratic Republic of Congo. Vanadium? There are three standalone vanadium mines in the world, and most of the vanadium supply is by steel smelters, a byproduct of uranium production, a byproduct from fly ash waste from coal-burning power plants, and finally, residues from petroleum cracking. So, what happened last year? All those byproduct producers said, “Oh, vanadium’s at (whatever it was, can’t remember how high) $34 a pound for vanadium pentoxide.” And, what happened? Well, all those by-product guys said, “Oh, we need to make more vanadium.” They made more vanadium and they created a vanadium market. Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.American) starts recovering vanadium from the White Mesa Mill. You know, so, a standalone vanadium project in northern or central Nevada is not going to make it.

Maurice Jackson: Now, you and I have discussed uranium in previous interviews. We love the value proposition of uranium and one of the catalysts for it is section 232. Give us some of your insights on that.

Mickey Fulp: Trump punted and it really surprised the market because we thought that was going to have actions of substance, if you will, [in July]. He kicked the can down the road 90 days and the market was not expecting that. The market expected a resolution that [would] run these uranium stocks, uranium producers, developers in the U.S.—run them up. They cratered them. [Trump] has 90 days from mid-July; that would be mid-November to act on this. It’s probably a good time to buy uranium stocks right now—specific uranium stocks and for a trade.

Maurice Jackson: If you were a betting man, how do you think the outcome’s going to be?

Mickey Fulp: Well, I’ve already gone on record with four scenarios I thought he could do to support the uranium mining industry. And they were all categorically wrong because he punted. He could put on subsidies, he could put on tariffs, he could give tax credits; [there are] a variety of things they can do to help the domestic uranium mining industry. He could require quotas from U.S. producers. We’ll just have to see.

Maurice Jackson: I love having this discussion with you because I learn so much from you. Mickey, if someone else wants to learn more from you, what’s the website?

Mickey Fulp: MercenaryGeologists.com is the website. We put out something on the order of four pieces of content, including this interview, on the website every week. And, you will get a notice if you’re a subscriber. Best thing about becoming a subscriber is it’s free. So, the price is right. And, we’re very active on Twitter @mercenarygeo, with something a little less than 52,000 Twitter followers.

Maurice Jackson: Well, our subscription price—we match with yours. It’s free, so we welcome you; please to visit us at www.provenandprobable.com. Mickey Fulp, it’s always an honor to have you on our show. Thanks for joining us today.

Mickey Fulp: Thanks a lot, Maurice.

Maurice Jackson is the founder of Proven and Probable, a U.S. based media company that has a dual prong approach. The first prong identifies undervalued junior mining opportunities, conducts site visits around the world, and interviews CEOs of companies that are on major world stock exchanges and some of the most respected names in the natural resource space. The second prong, Proven and Probable is an independent licensed representative of Miles Franklin to sell physical precious metals in a number of options to expand a precious metals portfolio, offering physical delivery to home or business of gold, silver, platinum, palladium and rhodium, a fully insured offshore depository, as well as precious metals IRAs, and ledger private blockchain distributed ledger technology stored at the Royal Canadian Mint.

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