Four Extraction Companies That Top BT Global Growth’s List

BT Global Growth’s game plan is to go long and short on a wide range of investments, but in this interview with The Gold Report, Paul Beattie, cofounder and managing director of the hedge fund, focuses on four undervalued extraction companies on which the fund is definitely long.

The Gold Report: Welcome, Paul. Would you tell us a little about Montreal-based BT Global Growth and your investing philosophy?

Paul Beattie: BT Global Growth is a hedge fund that I cofounded 10 years ago. We’re focused on the Canadian capital markets, especially international companies listed on Canadian exchanges. The business is abroad, but the company may be listed here. We find this to be the most inefficient part of the Canadian market.

We are long and short on all sorts of things and we don’t use leverage. We look for companies that are trading three and four times cash flow and have enterprise value:earnings before interest, tax, depreciation and amortization (EV:EBITDA) as low as three times or four times, if we’re lucky and find these opportunities. Then, of course, there are stocks in the same sector that have monumental valuations and trade at 50 times or 35 times cash flow, and it makes no sense. We short one against the other, and over time it works.

And on top of that, we short other things. The Japanese government wants the yen much lower, so we short the yen against the U.S. dollar. We’ve been doing it for years, and we’ll probably continue to do it for years.

We have macroeconomic views that tie into a lot of the main themes. They work as good hedges on the existing portfolio. We’ve been compounding at 10+% a year, year-in and year-out, and the stock markets have been doing about half that. We’re never fully exposed to the market, but we manage to do almost twice the return.

We’re very proud of the fact that we survived the disastrous year of 2008 when financial markets imploded, and the commodity bust three or four years later. We wouldn’t have made money if we weren’t on the short side. In fact, we’re the only fund in Canada that from the day Lehman Brothers declared bankruptcy; we were up every single month for the next 20 straight months. That’s through the worst of the worst.

And then stocks got so cheap in March of 2009 that we were sitting around asking, What on earth are we going to short now because there’s value everywhere? It didn’t take long to switch.

TGR: Investing in Canada-listed companies, you must be active in commodities.

PB: The extraction business is a great industry with lots of great opportunities. We think that the cheapest stocks in the world are often listed in Canada, but their operations are abroad.

Take a look at some of our favorite companies—Parex Resources Inc. (PXT:TSX.V), which is in Colombia. It’s a good-sized business, a $2.25 billion company, with great growth and great cash flow. It has a relatively cheap valuation, around five or six or seven times EBITDA. It offers huge growth and good management. The stock has been doing great.

And if it were a Canadian operation and not in Colombia, it would trade at probably twice the multiples. Colombia, in fact, is a great place to invest. That’s where the oil is, and that’s where the growth is. So we own Parex.

Red Eagle Mining Corp. (R:TSX; RDEMF:OTCQX; R:BVL) is an absolutely terrific story. It went from drilling the very first exploratory drill hole to test for gold to producing gold in five years. In this industry, that is a record. It did it on budget and on schedule. That’s very impressive. Red Eagle says it is going to announce commercial production sometime in the next few months, but it could be as soon as in the next few weeks. We think it’s going to be a very profitable mine.

We focus on the cash flow. We think Red Eagle trades at a tremendously cheap cash flow multiple. The EV:EBITDA is less than 3. Next year in 2018 it’ll be less than 2, which is just too low for any company anywhere. So it has a great future, and the valuation is very compelling.

Red Eagle Mining Corp. is an absolutely terrific story.

One criticism everybody has is when starting up the mine there are lots of risks. We went down and met with the construction people and mining engineers. Plants like this have been built all over Latin America, and it’s actually not that complicated. The plant is up and running. I think there are some 15 similar type plants in Latin America, so it’s not like Red Eagle is reinventing the process.

The tricky part will be to get the ore out of the ground and through the plant. But when you pull it out of the ground and you put it in a plant, it takes three days to figure out how much gold is coming out the other end. Three days, not three months. Red Eagle has very smart people and very good operational people. We think it’s all about the input. Red Eagle is going to ramp up extracting the ore. If the numbers go the way management thinks, this is among the cheapest mining stocks in the world.

TGR: What other extraction companies are at the top of your list?

PB: We do like the gold space. Since Mr. Trump was elected, gold has been quite volatile. At one point, everybody said the stock market is going to rally and gold stocks are not going to do well. Mr. Trump hasn’t addressed anything about the deficits. So when he’s talking about cutting taxes and spending more on infrastructure, this has to be financed one way or other. We don’t see Donald Trump as bad for gold. In fact, we could develop a very bullish case. Since the election gold came off a little bit, down $150 or so, but the gold stocks, a lot of them just fell in half. It was almost like panic selling.

One favorite gold company, in addition to Red Eagle, is Kirkland Lake Gold Inc. (KL:TSX; KLGDF:OTCQX). Kirkland Lake merged with Newmarket Gold Inc. We loved Newmarket, which is in Australia; Kirkland is in Canada. You put the two together, but for some reason lots of shareholders were not happy, so there was this period of uncertainty. The stock fell down to valuations that just don’t match the size of the company. The political risk is minimal. It has multiple mines in Australia and Canada, and good management. It just made no sense that it was trading at dramatic discounts to all the other midsize gold companies.

Our target on Kirkland is much, much higher. I think the stock is good for 30% or 40% upside just to get back to where it should be trading vis-à-vis its competitors. So it’s very compelling. It’s one of our biggest holdings now. Looking at the EV:EBITDA, Kirkland should be trading two full multiples higher. We think $12 to $13/share is going to happen just based on the comps. So that’s a great company.

TGR: Do you want to discuss any other commodities?

“Our favorite zinc producer is Trevali Mining Corp.

PB: Yes, there is zinc. There’s this whole thesis that we are going to have a global deficit in zinc. People have been talking about that for three years, and it really wasn’t happening. These things take time. But it sure does look like it’s happening now. I think we are in a deficit. And the beauty of all of that is there are very few ways to play that metal on the company side. So it doesn’t take a lot of work: Buy anything related to zinc that’s producing.

Our favorite zinc producer is Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX). It’s the only pure-play zinc opportunity listed in Canada. If you like zinc, play this. It’s not expensive at these levels, but if zinc does have a global shortage, then zinc prices are going to spike. When it spikes, Trevali has to do the same. We own a lot of Trevali; the stock is not expensive. Trevali offers good management and good people, and has two operating mines, one in Canada, one in Peru.

TGR: Thanks, Paul for your insights.

Paul Beattie is the cofounder and managing partner of PT Global Growth Fund LP. From 2000 to 2006, he was the cofounder and managing partner of a boutique investment bank, Stable Capital Advisors. He has extensive experience in private equity including raising investment capital for alternative asset funds from within Canada and abroad. Beattie was the founding executive of Telesystem International Wireless in 1994 and its predecessor company in 1992, and was Vice-President, Mergers and Acquisitions, involved in all aspects of financing activities. Beattie began his career as investment banker from 1986 to 1991 at Merrill Lynch Canada Inc., in the position of Vice-President, Corporate Finance, and was involved in a diverse range of advisory assignments and capital markets activities. He holds an MBA from INSEAD, France, and a Bachelor of Commerce (Honours) from Queen’s University, Canada.

Read what other experts are saying about:

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Disclosure:
1) Patrice Fusillo conducted this interview for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Red Eagle Mining Corp. and Trevali Mining Corp. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Paul Beattie: I own, or my family owns, shares of the following companies mentioned in this interview: All. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Red Eagle Mining Corp. Funds managed by BT Global Capital hold shares of the following companies mentioned in this article: All. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

( Companies Mentioned: KL:TSX; KLGDF:OTCQX,
PXT:TSX.V,
R:TSX; RDEMF:OTCQX; R:BVL,
TV:TSX; TV:BVL; TREVF:OTCQX,
)

Ellis Martin Report with Common Stock Warrants’ Dudley Baker


February 13, 2017

Published on Feb 13, 2017

Ellis Martin visits with analyst and newsletter writer/analyst Dudley Baker of http://www.commonstockwarrants.com to discuss buying low in a downturn and reaping the potential benefits as a bull market in metals seemingly returns. Listen to hear about successes and multiple ROI’s to possibly be gained in the coming market.

Remembering the Genius of Hunter S. Thompson

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Precious metals expert Michael Ballanger ponders the timelessness of Hunter S. Thompson’s “blistering attacks on the status quo” and their applicability to today’s political landscape. He also reminds us of the “incredibly bullish” fundamentals for silver and lays out the evidence for why this precious metal is on its way to $25/ounce by mid-year.

Being a teenager in the 1960s, my early formative years were all about the Beatles, JFK’s assassination, sex, drugs, rock and roll, and hockey, but when it came to entertaining myself, thanks to my mother, who was a voracious reader, I learned to love to read books. I remember the day that Mum handed me Ian Fleming”s “To Russia with Love” and since I was barely into my teens, I think it was the first time I was ever introduced to soft “porn” (which was predominant in all of the Bond books), which may have been Mum’s way of quietly giving me a Sex Ed lesson. As I grew older and moved away at 16 to play junior hockey with and against men in their 20s, I would ride the buses between St. Catharines and Ottawa with two or three paperbacks tucked into the zipper compartment of my carry-on bag.

“‘Whoever wins becomes so immensely powerful, like Nixon is now, that when you vote for President today you’re talking about giving a man dictatorial power for four years.'”

Later in university, the road trips were usually on airplanes and buses where my preferred reading topics included J.R.R. Tolkien’s “The Hobbit” and Ken Kesey’s “One Flew Over the Cuckoo’s Nest,” but nothing captured my heightened appreciation of depravity in humor and journalism more than Hunter S. Thompson’s many works ranging from his anecdotal account of life with the Hells’s Angels (1967) to the 1972 Nixon-bashing “Fear and Loathing on the Campaign Trail ’72.” Hunter S. Thompson was to the 1960s and 1970s what Matt Taibbi is to the current Western “narrative.” While Matt Taibbi coined that marvelous description of Goldman Sacks as “a great vampire squid wrapped around the face of humanity, relentlessly jabbing its blood funnel into anything that smells like money,” Hunter S. Thompson would lob invectives like “In a nation run by swine, all pigs are upward-mobile and the rest of us are f***d until we can put our acts together. . .”

In every generation, there are always those journalists that capture the national collective in print such that you need only read one of their books and you are immediately transported back in time whether it is James A. Michener’s “Hawaii” or Steinbeck’s “The Grapes of Wrath,” but Hunter Thompson’s works include passages that are literally timeless; the people he describes are found in every era and in every part of the globe since the dawn of creation. In light of the rise of the name “Donald Trump” to the point of total global dominance of the airwaves and the blogosphere, you really do have to appreciate the following passage written in the 1970s near to the end of the presidency of Richard Nixon:

“We’ve come to a point where every four years this national fever rises up — this hunger for the Saviour, the White Knight, the Man on Horseback — and whoever wins becomes so immensely powerful, like Nixon is now, that when you vote for President today you’re talking about giving a man dictatorial power for four years. I think it might be better to have the President sort of like the King of England — or the Queen — and have the real business of the presidency conducted by. . . a City Manager-type, a Prime Minister, somebody who”s directly answerable to Congress, rather than a person who moves all his friends into the White House and does whatever he wants for four years. The whole framework of the presidency is getting out of hand. It’s come to the point where you almost can’t run unless you can cause people to salivate and whip each other with big sticks. You almost have to be a rock star to get the kind of fever you need to survive in American politics.”

“I miss maniacs like Hunter Thompson tearing apart the public consciousness with his blistering attacks on the status quo.”

After I re-read that for the first time a few hours ago, I immediately thought of this Gong Show currently transpiring in the United States and wondered how, if he were alive today, Hunter S. Thompson would react to the Trump Phenomena and concluded that the timelessness of the above quote allows one to substitute “Trump” for “Nixon” and it would be pretty much relevant to 2017 and the myriad of issues we all face.

You know what I miss about the current state of the political narrative? I miss maniacs like Hunter Thompson tearing apart the public consciousness with his blistering attacks on the status quo which, here in 2017, would most certainly include the elitists that run the show – the banks, the two-party system, the Koch Brothers and their John Birch Society support of “free market capitalism” (where the definition thereof is “any business they are in”). Today, the younger generation would not allow a Hunter S. Thompson to invade their “safe space” with his psyche-bludgeoning sarcasm, his façade-melting insults, or his inane gift for telling us how “blotter acid with room-temperature Jack Daniels” would improve one’s perception of a particular political point of view or clarify an argument made against impeaching a president. Today, we have far too many wimps out there trying to be politically correct and perpetually non-invasive so as to keep everyone comforted in their own persuasions and preferences.

I blasted Bill Maher a few weeks back and now I’m looking to blast Jimmy Fallon whose “I’m too cool for words” persona gives me a total pain in the ass. However, since as a Canadian I have no real right to obsess over strictly American public figures of prominence, I’ll give you a Canadian megalomaniac, KEVIN O’LEARY, who now thinks that his ill-fated 1999 sale of Softkey to Mattel qualified him as a “business genius” such that the only businesses he is now involved with are those that utilize his self-engineered “star power” to promote the brand. What the world forgets is that as a salesman, O’Leary is unparalleled because only four years after selling Softkey to Mattel, Mattel had to settle a class-action lawsuit for $122 million after the projected $50 million of accreted profit wound up being a $105 million loss.

“Silver is now well on its way to $25/ounce by mid-year.”

Now, O’Leary is running to head up the Canadian Conservative Party and vows to displace Justin Trudeau as Prime Minister of Canada. As much as I would love to see anyone remove our current prime minister, a trust fund baby that has never graduated from university and never met a payroll and most-certainly qualifies as a card-carrying member of the 1% elite, I pray that his vanquisher is anyone but Kevin “Look at me!” O’Leary. We need a Canuck Hunter S. Thompson to smack sense into these frozen northern brains that are all tweeting their “selfies with Justin” and plastering them all over their Facebook pages as O’Leary does photo-ops with air-brushing as a prerequisite for inclusion.

I usually try to capsulize the trading week in gold and silver by doing a breakdown of the COT report but this week was a non-sequitur because with only a modest rise in open interest and the aggregate commercial short interest, there isn’t much to talk about. What IS significant in the precious metals arena for me is the terrific action in silver last week with the GTSR (gold-to-silver-ratio) going out for the week at 68.74 which means to me that, despite the fact that a pseudo-anonymous Peruvian “tout sheet” (featuring a failed Bay St. mining analyst) thinks silver is in over-supply, it is now well on its way to $25/ounce by mid-year. The evidence for me is the terrific action in copper and zinc (both highlighted in this publication for years) with the late-week explosion in copper through $2.75 paving the way for the copper-silver correlation to kick in.

Especially exciting is the fact that my number one holding for 2017 is a little Mexican silver project called Santa Rosa Silver Mining Corp. that is finally merging with Canuc Resources Corp. (CDA:TSX.V) with the $2.0 million financing about to close this week. In my watershed issue from a year ago entitled “Patiently Climbing Aboard the New Golden Bull,” I provided a rationale for a $1,450 gold price by the end of 2016 (which was wrong) such that with a GTSR of 50, silver could trade up through $72.50 (which was ALSO wrong).

Now, since the Crimex criminals were as usual allowed to cap the precious metals rally in the late summer by flooding the paper market with over 36.6 MILLION ounces of phony, synthetic, paper “gold,” which completely usurped any and all momo from the breathtaking rally from the prior January, it in no way denies me from re-stating my 2017 target for the GTSR at 50 and a gold price at $1,450. Should that be the case and should the base metals continue to scream higher led by copper, silver is going to dominate the precious metals landscape.

“‘A huge new layer of paper shorts has been dumped in daily trading, such that the open interest for silver is now approaching record levels again.'”

On the topic of silver, I read a piece over the weekend written by my GATA pal Mike Kachanovsky who goes by the moniker of “Mexico Mike” who has graciously allowed me to re-post. You all know that in addition to being a guest contributor to the website lemetropolecafe.com I am also a subscriber to the website because of one simple reason: GATA has the most informed precious metals content of any newsletter on the web. To wit, here is a great example of a concise analysis of the current silver market by a gentleman far more cynical than even yours truly:

“Silver launched out of the gate this morning like a scalded cat, after testing lows of $17.50 in Asian trading, the metal surged in NA trading and actually rose above $18 an ounce for a few minutes before the bankers slammed the door shut on that move. Nonetheless, the GSR is now back below 69 and silver is holding most of its gains, on a day when the dollar is well in the green.

The only fundamental driver for this move that I can think of is the closure of Escondida due to the strike. About half a million ounces of silver production a month comes from this mine, and since its owned by BHP you can be assured that silver by-product was forward sold in a hedging deal. I do not think this strike will drag on more than a few weeks, and so the net removal of silver bullion from the bankers will not amount to a big deal.

The banks buy silver at a discount in these forward contracts, and then use that silver as part of the rigging game to depress silver spot prices, which then enable them to buy the next round of mine production contracts even cheaper. See how this little game is played? Since most silver output is produced as a by-product from base metals mines, the operators are happy to lock in a price even if it’s below the cost of production for primary miners. And the regulators look the other way as many multiples of world silver output are then dumped in the paper silver market to fleece specs.

Silver has been driven below the $18 range since Trump was elected. Somehow the market is able to cheer on industrial stocks due to economic recovery hopes, and yet the industrial metal silver, which is in a long term supply deficit, is driven lower. To keep the spot price in this price range, a huge new layer of paper shorts has been dumped in daily trading, such that the open interest for silver is now approaching record levels again.

Any unexpected breakout for silver will put these contracts in danger. There is not enough silver on the planet to make good on a delivery demand for even a portion of the outstanding contracts. COMEX is a fraud because the ‘contracts’ are not legitimate and there is no remedy for a failure to deliver. In fact, the crooks that run this rigged little casino frequently change the rules to ensure contract holders are screwed, and that a cash settlement option is available to deal with spec longs in the event the banks cannot effectively destroy spot prices ahead of an option expiry window.

The best possible upside for silver involves having a frenzy develop such that the market is not contained with further paper. At the end of the day, industrial demand will drive the silver market. Price is what it is, but for critical components that MUST have silver to function, demand will compete for bullion no matter what the rigged price may do. Adding in investment demand from speculators will put a further crimp in bullion supply. If the bullion inventory is insufficient to meet this demand, all of the paper contracts in the world will just dig a bigger hole for the banks.

Not a goddamn word of this commentary is anything new to this sector. I do not suggest that the day of a supply squeeze is at hand. I do believe the rigged markets will continue to fleece idiot spec longs that want to gamble against bankers with unlimited leverage. But I also believe the drawdown of physical silver bullion is approaching critical levels and at some point the scam breaks down.

We have seen silver under a constant intervention lockdown since 2011. Meanwhile rising imports from China and India, plus the rising incremental demand for industrial consumption, plus several years of record bullion sales from worldwide mints, are having an effect.

The GSR was hovering around 70 for most of the last year or two. The total silver production worldwide is about 9 times the amount of gold. Does this GSR seem reasonable or sustainable to you?”

“‘The drawdown of physical silver bullion is approaching critical levels'”

This is the kind of commentary that remains priceless. Of course we all know that “not a goddamn word of this commentary is anything new to the sector” but I, for one, simply enjoy being reminded of a) the incredibly-bullish fundamentals for silver and b) the outrageousness of the bullion bank interference in that market. Thanks to GATA and Mike for a wonderful refresher.

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As for the miners and, in particular, the GDXJ, I am long the ETF (unleveraged) and flat the call options going into the new week and looking for a near-term correction in order to attempt to re-enter the option trade designed to add some torque to the position. To clarify, I am NEVER out of the precious metals markets; I am ALWAYS in possession of a multitude of shares in some “penny dreadful” junior ExploreCo that is going to become the next Newmont or the next Barrick on the basis of a brand new discovery. I also will never attempt to trade the physical metals that are strewn around the world in safety deposit boxes and vaults the location of which is kept under lock and key in the fire-proof safe in my home right next to the Remington Sparton 100 guarding it.

/images/Ballanger2-13-17-3.png

Of course, my partner disallows me from keeping the shells anywhere near it so as a backup, I have the same “personal protection device” I carried around in the middle of the Saint Louis going to attend a Richard Prior concert in 1974. She is a 1957 model and the same one used by Hank Aaron – superb for hitting home runs and errant thugs.

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I end this week’s missive with a final quote from my dear, departed friend/mentor/hero, Hunter S. Thompson, who actually does make a rather timeless commentary on the mainstream media’s inability to report anything vaguely resembling accuracy in either politics or finance:

“As far as I’m concerned, it’s a damned shame that a field as potentially dynamic and vital as journalism should be overrun with dullards, bums, and hacks, hag-ridden with myopia, apathy, and complacency, and generally stuck in a bog of stagnant mediocrity.”

…and that just about sums up the genius of Hunter Thompson.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Michael Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company, Bonaventure Explorations Limited, has a financial relationship with the following companies mentioned in this article: Santa Rosa Silver Mining Co./Canuc Resources Ltd. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

All charts and images courtesy of Michael Ballanger.

( Companies Mentioned: CDA:TSX.V,
)

Jack Chan Finds Data Supportive of Higher Oil Prices

COT report

Technical Analyst Jack Chan reads the charts and sees a major buy signal for energy.

$OSX is on a major buy signal, which can last for months and years.

COT data is supportive for overall higher oil prices.

VanEck Vectors Oil Services ETF

OIH is one of a few energy sector ETFs we are holding for long term gains.
Prices dipped into our buy zone in November, and again this week.

Oil Services Index

Our trading model identifies the buy zones in a bull market, simple and effective.

Oil Services Index

Energy sector gave a major buy signal in 2016, and the current correction has dropped prices into our buy zone.

Summary
Energy sector is on a major buy signal.
Prices are now in our buy zone.
We are holding energy sector ETFs for long term gains.

Want to read more Energy Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles with industry analysts and commentators, visit our Streetwise Articles page.

Disclosure:
1) Statements and opinions expressed are the opinions of Jack Chan and not of Streetwise Reports or its officers. Jack Chan is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. The author was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) Jack Chan: We do not offer predictions or forecasts for the markets. What you see here is our simple trading model, which provides us the signals and set-ups to be either long, short, or in cash at any given time. Entry points and stops are provided in real time to subscribers, therefore, this update may not reflect our current positions in the markets. Trade at your own discretion. We also provide coverage to the major indexes and oil sector.
3) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

Charts courtesy of Jack Chan

Jack Chan’s Weekly Update on Gold and Silver

NYSE Arca Gold BUGS Index

Jack Chan charts both long- and short-term buy signals for gold and silver.

Our proprietary cycle indicator is up.

Gold sector is on a long-term buy signal. Long-term signals can last for months and years and are more suitable for investors holding for long term.

NYSE Arca Gold BUGS Index

Gold sector is on a short-term buy signal. Short-term signals can last for days and weeks, and are more suitable for traders.

FCX Chart

FCX – we are long from 10.64, holding for long-term gains.

Silver Chart

Silver is on a long-term buy signal.

SLV Chart

SLV is on a short-term buy signal, and short-term signals can last for days to weeks, more suitable for traders.

Summary
Gold sector is on major buy signal. Cycle is up. Holding FCX for long-term gains.

Jack Chan is the editor of simply profits at www.simplyprofits.org, established in 2006. Chan bought his first mining stock, Hoko Exploration, in 1979, and has been active in the markets for the past 37 years. Technical analysis has helped him filter out the noise and focus on the when, and leave the why to the fundamental analysts. His proprietary trading models have enabled him to identify the NASDAQ top in 2000, the new gold bull market in 2001, the stock market top in 2007, and the U.S. dollar bottom in 2011.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Jack Chan: I, or members of my immediate household or family, own puts on the following companies mentioned in this article: Freeport-McMoRan Inc. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) Jack Chan: We do not offer predictions or forecasts for the markets. What you see here is our simple trading model, which provides us the signals and set-ups to be either long, short, or in cash at any given time. Entry points and stops are provided in real time to subscribers, therefore, this update may not reflect our current positions in the markets. Trade at your own discretion. We also provide coverage to the major indexes and oil sector.
5) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

Charts courtesy of Jack Chan

Copper price surges on BHP force majeure

February 10, 2017 Frik Els Escondida is forecast to produce nearly 1.1 million tonnes or 5% of the global total in 2016. (Image courtesy of BHP Billiton) In New York  on Friday copper for delivery in March jumped by more than 4% to $2.7710 per pound or $6,100 a tonne after BHP Billiton declared force majeure at its Escondida mine in Chile. Copper is now trading at its highest level since late May 2015 with year-to-date gains of just under 10%. BHP confirmed on Friday it could no longer meet contractual obligations on metals shipments from the mine, the world’s largest copper operation by a wide margin.  Striking workers also blocked roads at the Coloso port, where hundreds of thousands of tonnes of copper are shipped annuallySome 2,500 workers at Escondida walked off the job on Thursday and all indications are that the union is preparing for an extended fight over wages and … Continue reading

How to Double Your Money 94% of the Time…

How to Double Your Money 94% of the Time… By Justin Spittler Editor’s note: Today, we’re taking a break from our usual commentary to share a must-read piece with you. In the essay below, International Speculator editor Louis James pulls the curtain back on a money-making phenomenon. As you’ll see, this strategy has generated average gains of 133%. More impressively, it works almost 100% of the time. This is the first time we’ve shared this powerful secret with our readers. We hope you find this essay as eye-opening as we did. What would you say if I told you of an investment strategy that more than doubled your money within two years, 94% of the time? First, a confession. I’m about to tell you something that’s rather obvious. The phenomenon is well known. Despite that, I never did the math before. To my knowledge, no one has ever bothered, but … Continue reading

MGX Shareholders Ride a Rollercoaster

Bob Moriarty of 321 Gold chronicles MGX Minerals’s wild ride from $0.69 to $2.75 to $0.92 in three weeks.

On the 20th of January I was introduced to a new potential advertiser for 321gold and 321energy named MGX Minerals Inc. (XMG:CSE; MGXMF:OTCPK). I was quite impressed with both the President of the company, Jared Lazeson, and his vision for the future of his company.

He reminded me a lot of a fellow I met in the summer of 2011. Back then for hours we discussed the concept of a gold backed banking system. We drove around Colombia visiting a copper/gold explorer south of Medellin. We spent hours trapped in the back of a van chatting about how you could make gold the basis of a banking scheme. His name was Roy Sebag. He ran with his idea after a few modifications and turned it into BitGold that eventually bought GoldMoney. He was all of 25 at the time and easily one of the three smartest guys I have ever met.

He modified his plan over time and in 2015 started BitGold. It’s been a giant success since it allows everyone to go on his or her own personal gold standard. He’s probably made $100 million in share appreciation. He’s all of 31 now and no doubt has a golden future. The money is really no big deal; he made $50 million in well-timed investments by the time he was 25 from an initial start at the age of about 18.

When I talked to Jared Lazeson in January I got the same feeling of dealing with a very bright guy who understood just where he was going to go and how he was going to get there. So he probably would also qualify as being on of the three smartest guys I have ever met and light years ahead of me. But I am just smart enough to recognize a good idea when I see one.

We talked. He wanted to advertise and I wanted some shares based on the conversation. The shares were $0.69 apiece. A giant negative for the company was being based on the C-Exchange but somehow the company had great liquidity in spite of being on a poor exchange.

I made my mind up to buy some shares on the coming Monday. Alas, some rat wrote the company up on the 19th on Streetwise Reports. Over the weekend Streetwise sent the article to hundreds of other sites on their list.

I was willing to pay $0.70 a share for MGX but the shares opened at $0.72 and never looked back. They closed the day at $0.83, up 20% on the day. I reread the article and while it was a nice article, I thought the author missed most of the substance of what I understood to be the direction of MGX. Actually I couldn’t figure out from the article exactly what the company was going to do. When I talked to Jared, I though I had a clear idea of where they were headed but reading the article was like looking at a totally different company.

I hate chasing shares higher but after a 20% rocket higher to a close of $0.83, way above my bid of $0.70, the stock gapped higher the next day, opening at $.86 and never looking back. I really wanted some shares so I put in a bid at $0.95 and got filled finally. The shares continued to move up six days in a row going from $0.69 on the 20th of January to an intraday high of $2.75 on the 30th of January. In seven trading days, MGX boomed up by 298%.

I was in a quandary.

For those wise readers who have read my Amazon best seller Nobody Knows Anything, I repeatedly make the point that you have to buy cheap and sell dear. If you don’t take a profit when you have it, the only other alternative is to take a loss when you have to.

Let’s call the shares cheap on the 19th of January at $0.69. After all, we have the benefit of hindsight and now we know it went almost 300% higher in seven trading days. So again with the benefit of hindsight we know $2.75 was not cheap, it was dear. So I sold. Naturally like most people, I am incapable of picking the very top. I sold for $2.35 for a gross profit ignoring commissions of $1.40 a share in ten days on a $0.95 investment. I missed the top by minutes but made a nice profit. But I still wanted those shares.

Nothing goes straight up and nothing goes straight down. Anything going up six days in a row is unusual so it would be perfectly natural for those shares to make a giant correction. They did, going down five days in a row.

If you have read my book, you will fully understand that I think 85% of investors are as dumb as a rock and all you need to do to profit is figure out what they are doing and do the opposite. So I put in a stink bid of $1.50. On the second day of the decline the price plunged to $1.53 a share, down 25% on the day and very near my price. However, corrections don’t end in two days.

That’s also pretty irrational so I changed my bid to $1.05 believing those damn fools who wanted to buy at $2.75 a share would be whimpering about a pump and dump and would beg to unload their shares at the bottom. They did and on the fourth day of the decline the shares touched $.92 and I filled my purchase at $1.05.

Are most investors stupid? In a word, yes. They want to invest using their rear view mirror. They buy at tops only to sell at bottoms and it’s always someone else’s fault. It’s like walking into your Porsche dealer and being told that the price of the model you crave for your birthday is $75,000. And you realize the price is out of your league. The dealer whispers in your ear that actually they are overstocked and if you come back in a week you can buy it $10,000 cheaper.

What does the average investor do? He tells the dealer that he doesn’t want it cheaper, after all, that means no one wants it probably because there is something wrong with it. The average investor tells the dealer to call him when the price doubles because then it’s safe to invest; everyone wants them.

That may sound stupid but that is exactly what most investors do. So you need to figure out if you want to be in the 85% crying in their beer about conspiracies and manipulation or in the 15% laughing on their way to the bank. Take a wild stab at which group my readers are in.

If you notice carefully, I have spent a lot of time talking about human behavior and very little time talking about MGX. Actually the behavior of investors is key. It’s more important than the commodity or the management or the location. You have to understand where you are in the trading cycle. To do that, you need to understand sentiment. We hit a 29 year low in expectations for gold in December. That means nothing more than gold was cheap. In January of 2016, we hit a 5000 year low in commodities. That meant commodities in general were cheap. That’s the time to buy.

Now on to the boring subject of just what business MGX is really in and why you need to take a close gander at them.

In business and in life there are evolutionary changes and revolutionary changes. Mining lithium is evolutionary. There is plenty of it around but because of the need for electric vehicles and a need to store massive amounts of electricity, the demand for lithium has gone through the roof. And MGX was just another one of those 75 “lithium” next big deals. On the strength of their participation in the lithium space, the shares went from $0.08 in April of 2016 to $0.80 or so in January of 2017.

But MGX and Jared Lazeson are on to something quite revolutionary. You see a lot of lithium comes from brine found in basins. Chile, Argentina and Bolivia are home to a lot of the production of lithium. Basically they drill the basins until they come to the brine. They pump it to the surface and spread it out in giant ponds where the water eventually evaporates and they can collect the solid material containing the salt, magnesium and lithium and then further concentrate the material for sale as a commodity. In these basins, naturally the brine is considered valuable, an asset.

But there is a giant economic activity where brine is considered a liability. That’s the oil and gas business. You see when you drill an oil well and the oil flows to the surface or you pump it up, you have something the energy business calls a “Water Cut.” You are not only bring up oil, in many fields, you are bringing up brine or simply put, salt water.

In some fields, for every barrel of oil they produce, they may produce 50-100 barrels of brine. That brine contains high values of salt and lithium and magnesium and even silica. The same material that is considered an asset in a basin in South America is thought of as a liability in the oil business. The oil companies have to retrieve the oil from the fluid and pump the waste back down a hole. It’s a giant problem getting rid of the water.

Jared Lazeson got together with some of the smartest technical guys in the oil and gas business and they have come up with a process to take the brine that the energy people consider a liability and remove the lithium and magnesium and salt and silica as valuable byproducts. They are turning a liability for the oil business into an asset in a potential profit center. Now that’s revolutionary.

MGX is in the process of picking up the company named PurLucid who invented the process and Jared believes in the concept to the point his people have patented the process. The acquisition was announced on September 15th of 2016. It calls for MGX to invest $5 million to obtain 50% of PurLucid over two years and an additional $10 million to buy the remaining 50%. PurLucid is in the final stages of finishing the pilot plant to prove the process and develop working costs and profit potential.

MGX is doing a lot of things beyond my understanding and certainly beyond the understanding of the several people who have written about the company in the past two weeks.

People who know me and have followed my writing over the past 16 years know that I am blunt and to the point. I want everyone reading this to understand something vital. MGX is a work in progress. Until the pilot plant is finished and working no one is going to know that the potential for profit. Of course it’s a great idea but great ideas are a dime a dozen. I have met hundreds of people with great ideas that would make a fortune if only someone else would fund it.

So how do you judge a company with a great idea that went from $0.08 a share last April to $2.75 last week to $1.25 today? That’s actually quite easy. The company made an announcement on January 30th of some significance. They announced a new Chairman.

Now you may be thinking, “So what, Bob? Every company has a Chairman.” And you would be right. But whom they picked up as Chairman means he did the due diligence and now you and I don’t have to. The new Chairman of MGX Minerals is named Marc Bruner and he may as well have been the inventor of oil production from shale. His background in oil and gas is second to none.

I’m told Marc Bruner is a billionaire. Billionaires don’t fart around with companies with a $100 million dollar market cap potential. He sees the potential in what MGX is now calling “petrolithium.” Marc Bruner is not working for a salary. His compensation over the next two years is 17% of the company based on meeting certain goals. You may rest assured that if he sees potential and wants to invest his time, there is a billion dollar payoff down the road not just for him.

I believe that Marc Bruner believes in the process. So I wanted to own shares in the company and I do. There will be a lot of significant news being released over the next little while and I will do my best to keep my readers advised. I think the process works. I think Marc Bruner is a very smart guy and Jared Lazeson is wise enough to hire the smartest people he can hire. That’s a recipe for success in my view. The potential for MGX is a game changer and they may well become the swing producer for lithium, magnesium and pure silica.

Readers should know that there is somewhere between 125 and 200 ounces of gold per cubic kilometer of salt water. The issue is not if there are valuable minerals in brine but what the costs in energy are to remove them. If MGX has a cost effective process to remove lithium, magnesium, sodium chloride and silica from what is now nothing but a liability, they will indeed be on to a gold mine.

MGX is an advertiser. I own shares and any time they do a private placement I will probably participate. There is a lot of information on the web about the company and the people. Please do your own due diligence.

MGX Minerals
XMG-C $1.21 (Feb 10, 2017)
MGXMF-OTCBB 60.8 million shares
MGX Minerals website

Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: MGX Minerals. MGX Minerals is an advertiser on 321 Gold.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview/article until after it publishes.

( Companies Mentioned: XMG:CSE; MGXMF:OTCPK,
)

Five Companies Positioned for Healthy Returns as Energy Markets Recover

Volatility in the oil and gas markets continues, with prices plunging yet again in the recent chaos surrounding Greece’s default negotiations and other global political uncertainties. But a rebound is inevitable, and Mackie Research’s Bill Newman has his eye on companies that have managed to grow, step by step, even in hard times. In this interview with The Energy Report, Newman identifies companies with individual stories that will, in the end, defy the trend.

The Energy Report: With the collapse of the crude oil price and the timing of a recovery difficult to predict, the energy sector has fallen out of favor with investors. In the current oil and gas investment climate, are there any stocks that are immune to the negative sentiment and can still perform?

Bill Newman: We had low commodities prices over the past two years, which have really hit the junior oil and gas sector hard, alongside the corresponding valuations and share prices of many small-cap energy companies—but this is where the opportunity exists for investors today. The companies that have survived are generally underleveraged and it’s been incredible how efficient they’ve become in driving down drilling and completion costs. These companies have been able to really improve the well economics and are generating strong returns even at lower commodity prices. With a stronger and more stable oil price outlook expected in 2017, activity is starting to pick up and investors should be once again looking at those juniors that have survived the last two years, as they are positioned for healthy returns as the energy market firms back up and gets back to business.

TER: So which small-cap energy companies do you like right now?

BN: Domestically, we like companies that are applying horizontal drilling and multi-stage frac technology to unlock the Mannville oil and gas trend in Alberta. Generally, the well costs are low and the reserves sizable, so the economics are very attractive. The three Mannville players we like are Point Loma Resources Ltd. (PLX:TSX), Prairie Provident Resources Inc. (PPR:TSX) and Altura Energy Inc. (ATU:TSX.V). All three are relatively new companies with clean balance sheets, are opportunity rich, and we expect them to show substantial growth this year.

TER: Let’s take your first pick, Point Loma. What makes it stand out?

BN: Point Loma Resources is a new start-up and it holds a huge concentrated land base of over 200,000 net acres in west central Alberta with a massive horizontal drilling inventory (over 400 horizontal locations). The company was founded by a strong management team and board that are from highly successful oil and gas start-ups including Painted Pony, Thunder Energy, Surge Energy and Ember Resources. Production has built very quickly from around 135 barrels of oil equivalent per day1(35 boe/d) when it went public in July 2016 to an exit 2016 rate of 570 boe/d, mostly through the tie-in of behind pipe production volumes. In late January 2017, Point Loma announced an acquisition of an additional ~400 boe/d of production that came with over 55,000 net acres of land, which is a perfect fit with its existing assets. So we expect Point Loma will be producing over 1,100 boe/d by the end of Q1/17 through the tie-in of additional behind pipe volumes and increase to over 1,750 boe/d by year-end.

With so much land and a very large drilling inventory we expect production to continue to grow for many years. Through acquisitions and organic growth, Point Loma is targeting to grow to 10,000 boe/d within four to five years and this team has done it before. Valuation wise, given the company is not well known as a new start-up yet, Point Loma is one of the cheapest stocks in the domestic Canadian space today, trading far below where it should be and management’s average cost is approximately $0.59/share (versus the current trading price of $0.58/share), which means investors today can buy in and be aligned with management as they create value in the future for shareholders.

TER: What about Prairie Provident? How is it different from Point Loma?

BN: Prairie Provident Resources is also targeting Mannville plays within Alberta. The company is a little larger with current production of approximately 5,500 boe/d and should be over 6,000 boe/d by year-end. Prairie Provident has an inventory of over 170 horizontal development drilling locations, which should generate stable growth for many years.

The company is cheap on a net asset value basis. In January the company released its year-end 2016 reserves that showed a proven developed producing valued at approximately $1.14/share versus the current market price of around $0.72. In other words it is trading below its PDP value and a big discount to its proven plus probable value of $2.17/share. Prairie Provident is also cheap on a cash flow basis, trading at just a 2.5x multiple of our 2017 cash flow forecast. We think the discount will start to shrink as the company achieves its production targets and becomes better known by the market.

TER: What else can you tell us about Prairie Provident?

BN: Investors might be unaware that Prairie Provident holds over 230,000 net acres in the Saint Lawrence Lowlands in Quebec that is prospective for the Utica Shale. Later this year the Quebec government could release new regulations that govern the oil and gas industry that might lead to the drilling of the Utica, which was pretty much shut down in 2011. It’s unclear how attractive or restrictive the new regulations will be but the Quebec play is really a free option for investors in the Prairie Provident asset base.

TER: And Altura? What’s its story?

BN: Altura Energy Inc. was founded by high profile board members, including Darren Gee, president & CEO of Peyto Exploration, and Brian Laverne, president & CEO of Storm Resources, and is run by an experienced CEO, David Burghardt (ex-Vermillion Energy).

Altura’s assets are located in east central Alberta and the company is targeting oil within the Upper Mannville Group, specifically the Sparky and Rex reservoirs. Management has applied its extensive experience in horizontal drilling and completion technology to achieve the lowest well costs with industry-leading rates of return. The well economics are great because the Sparky and Rex reservoirs have large oil in place, with low drilling and operating costs.

Like Point Loma and Prairie Provident, Altura is a growth story focused on the Mannville. The company has taken production from about 400 bbl/d last year to over 900 boe/d currently and it should exit this year with over 1,350 boe/d. And it is in good shape financially with no debt and current working capital of about $9 million, and it should fund most of its 2017 drilling program with cash flow.

The next catalyst should be the release of its reserves report on February 24. Altura had a 100% drilling success rate in 2016 so reserves should look good.

TER: What about international companies? What’s your strategy there?

BN: Internationally, we like companies that can grow production through lower risk appraisal and development plays, as well as those international companies with exposure to massive high-impact higher-reward resources plays or exploration and appraisal upside for speculative appeal. The attractiveness to invest in small-cap international energy companies is gaining exposure to plays that can potentially provide investors to multi-bagger upside, targeting resources in the 50 million to billion-plus barrel size.

So we like Condor Petroleum Inc. (CPI:TSX). The company has a 100% interest in licences in Thrace Basin in Western Turkey and in the Pre-Caspian Basin in Kazakhstan. Condor has made discoveries in both countries and has recently started light oil production of 500 bbl/d in Kazakhstan. We expect first natural gas production of about 10 million cubic feet per day (10 mmcf/d) in Turkey to start up in the second quarter of this year. That should give the company a cash flow base to fund more development in both countries.

The natural gas field in Turkey is called the Poyraz Ridge, and Condor just finished a very successful four-well drilling program to develop and appraise the field. All four wells were successful and Condor discovered natural gas at a greater depth than was previous known, so it has substantially increased the mapped reservoir area. The company also found two new deeper reservoirs that could have significant resource potential, so we expect a substantial increase in the reserves of Poyraz Ridge field. Also later this year, Condor plans to drill the Yakamoz 1 exploration prospect that is structurally similar to Poyraz Ridge field, which is only 2 km away.

TER: What’s the high impact upside with Condor?

BN: The big exploration plays are in Kazakhstan. Condor holds a 100% interest in the Zharkamys West 1 block, which is in western Kazakhstan in the Pre-Caspian Basin. The basin has super-giant oil fields including the 13-billion-barrel Kashagan field and the 9-billion-barrel Tengiz field. Later this year Condor plans to drill the Korumbet NW exploration well targeting an intra-salt structure that has the potential to hold a recoverable resource of 45 million barrels. But the real upside is the pre-salt play. The cost of the well could be $25 million, so Condor will need to secure a partner before it can try to drill a potential company maker.

TER: Any other international names with big upside?

BN: Madalena Energy Inc. (MVN:TSX.V; MDLNF:OTCPK) has certainly had its ups and downs in the downturn of the energy market, but we think the company is finally turning the corner. In January, the company farmed out a 55% interest in the Coirón Amargo Sur Este block to Pan American Energy LLC. Madalena keeps a 35% stake in this prime Vaca Muerta shale asset and received US$10 million in cash and a carry on a two-well drilling program. The first high impact horizontal well targeting the Vaca Muerta shale should spud in the first quarter. The deal with Pan American has not only put Madalena back in business, it should also get the market excited again as horizontal drilling begins in the Vaca Muerta shale and there is the potential for a carried deep gas test by Pan American Energy.

TER: Is the investment situation in Argentina improving?

BN: The situation has definitely improved since Argentina’s new president, Mauricio Macri, took office in December 2015. Macri cut farm export taxes, lowered personal incomes taxes and reduced utility subsides. He lifted currency controls, which allowed the Argentina peso to float for the first time since January 2002. The Macri government also lifted restriction of capital movements out of the country. In January 2017, the government announced that it will maintain the natural gas price at US$7.50/mmbtu. The federal government and the provincial government of Neuquén reached an agreement with the labor unions to reduce costs in exchange for increased investment. As a result YPF, Total, Shell, Chevron, Dow and Madalena’s new partner Pan American Energy pledged to invest a combined US$5 billion in 2017 in the development of the Vaca Muerta shale play, increasing to US$15 billion per year starting in 2018.

TER: What’s the direct impact on Madalena?

BN: Madalena has a number of high-quality blocks Argentina and is actively looking for a deal to appraise and monetize the huge potential resource on its blocks. In November 2015, the company released the results of an independent resource estimate of the Vaca Muerta and Lower Agrio shale within two key blocks within the Neuquén basin in Argentina. The total net unrisked contingent and prospective resource within the Coiron Amargo and Curamhuele blocks was estimated at over 1.5 billion boe. The improved political and fiscal situation in Argentina and the massive injection of new capital into the energy sector can only help MVN secure a sale as a potential takeout target or joint venture on one or more of its assets, which would be a huge catalyst for the stock. At the current market price the company trades at a deep discount to the value of its conventional producing assets alone, giving no value to the potential of the Vaca Muerta shale and Lower Agrio Shale resources that the company holds.

TER: Thank you for your time, Bill.

Bill Newman is vice president of international and domestic oil and gas research with Mackie Research Capital Corp. He has been an energy analyst for 21 years. He holds a bachelor’s degree in commerce from the University of Calgary, and has a CFA designation.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles and interviews have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Articles page.

Disclosure:
1) Patrice Fusillo compiled this interview for Streetwise Reports LLC. She provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this interview: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this interview: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Bill Newman: I own, or members of my immediate household or family own, shares of the following companies mentioned in this interview: None. I am, or members of my immediate household or family are, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: : Within the last three years, Mackie Research Capital has managed or comanaged an offering of securities for, and received compensation for investment banking and related services from Madalena Energy Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.

( Companies Mentioned: ATU:TSX.V,
CPI:TSX,
MVN:TSX.V; MDLNF:OTCPK,
PLX:TSX,
PPR:TSX,
)

RJK and Winston Hit Big Gold

Bob Moriarty of 321 Gold profiles two gold explorers, RJK Explorations and Winston Gold, that he sees as low-risk, high-potential stocks.

Gold and silver shares have had quite a ride higher since the 15th of December when the Daily Sentiment Indicator from Jake Bernstein called the bottom to the day. Anyone who reads my site knows that I am a contrarian. I loved gold in December because everyone hated it. But I’m getting a little nervous now because it’s getting a trifle too popular. The speculators are running up the spec longs in the COTs and I would be a lot happier if we had a correction for a month or so.

So I have been looking for some low risk, high potential stocks that are cheap now and would be even better if they went down. I found two that have just released excellent results and the market still doesn’t get it.

I wrote about RJK Explorations Ltd. (RJX.A:TSX.V) on the 18th of January and told my readers to look out for drill results soon. The shares were $0.15 then giving the company a $2.1 million market cap. I said it was cheap.

On the 7th of February RJK released results showing excellent results from three of the four-hole program including 0.5 meters of 36.84 g/t au in hole 17-01, 2.5 meters of 9.05 g/t au in hole 17-02 and 14.0 meters of 5.37 g/t gold in hole 17-04. Those are what you want to see in a drill program. In spite of those results, the company still has a market cap of only $3 million. Buy cheap, sell dear.

It’s still cheap but not nearly as cheap as it was then. They do have a 183,000 ounce gold resource already so ignoring the great results announced on the 7th of February, the company has high grade gold at $20 an ounce in the ground. There isn’t much downside.

Another company I follow and own is named Winston Gold Mining Corp. (WGC:CNX; WGMCF:OTCQB)) and is drilling their primary project in the Winston Gold District located some 18 miles southeast of Helena, Montana. The site has two former gold mines called the Custer Mine and the Edna Mine.

Management intends to drill to develop a resource sufficient to begin trial mining of somewhere between 150 to 230 tons per day. Prior historic production of 100,000 ounces showed a production grade of 0.67 ounces per ton or 22.8 g/t.

Winston Gold holds a lease on the property that requires a yearly payment of $42,000 and exploration expenses of $200,000 yearly. There is a 2–3% NSR on production based on either patented or unpatented ground.

The company released excellent results on the 9th of February showing 1.34 meters of 18.8 g/t gold or 4.4 feet of 0.55 ozt in hole 1720. This was on top of other results back on January 23rd including results from hole 1633 that showed 0.7 meters of 44.57 g/t gold or 2.3 feet of 1.3 ozt.

I started talking to the company a year or so ago, long before they became an advertiser. I know one of their directors very well, Ben Porterfield. Back in 2006 the renowned Bob Bishop and I flew up to Alaska to visit a new company spun off from the Alaska assets of AngloGold called International Tower Hill Mines Ltd. (ITH:TSX; THM:NYSE.MKT).

One of the projects we visited was the Terra Gold project where we literally broke off pieces of 10-20 ounce gold. It was remarkable material. The ugly white rock was speckled with pinhead size pieces of gold (see image above).

Ben Porterfield and his partner, a former Korea USMC vet who was as deaf as a stump, were mining 10 ounces a day from the vein with equipment you couldn’t give away to a Goodwill thrift shop. I estimated at the time that you could replace the equipment for $10,000 and I was being expansive. I made up my mind at the time that if he ever got involved with another small-scale startup, I wanted to be part of it.

And interestingly enough, another company did a deal on Terra with International Tower Hill and blew millions of dollars and didn’t produce as much as Ben and his partner did operating with little more than hand equipment. That was the easiest to mine gold that I ever saw and two guys with $10,000 worth of equipment could make money and a company with millions couldn’t.

Winston Gold has been through an interesting year. The company peaked at $0.63 in October and with the decline in gold prices and a big shareholder unloading shares just as fast as he could, the shares dropped to $0.115 in late January. I participated in the PP at $0.40 in November and thought the shares were reasonably priced. When they tumbled to the new low three months later, I loaded up the boat. If you like something at $0.40 and it goes to $0.115 you have to like it more. Nothing at all has changed and the drill results validate their theory. I believe they will go into production and I want to be a shareholder when they do.

RJK and Winston Gold are advertisers and I have bought shares in the open market and participated in the PP with Winston Gold. Please do your own due diligence. I share in neither your profit nor your losses.

RJK Explorations
RJX.A-V $.20 (Feb 09, 2017)
RJKAF-OTCBB 14.9 million shares
RJK Explorations website

Winston Gold
WGC-C $.13 (Feb 09, 2017)
WGMCF-OTCBB 79.5 million shares
Winston Gold website

Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

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Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: RJK Explorations and Winston Gold. RJK Explorations and Winston Gold are advertisers on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
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Image supplied by Bob Moriarty.

( Companies Mentioned: RJX.A:TSX.V,
WGC:CNX; WGMCF:OTCQB,
)