Issue link: http://resourceworld.uberflip.com/i/882975
O C T O B E R / N O V E M B E R 2 0 1 7 www.resourceworld.com 33 buy those companies hoping to repeat the success of others. Of course, as companies got fuel in their treasuries they were able to take on riskier exploration. A higher metal price doesn't stimulate that type of appetite. RW: Do you think that mining stock investors want to do their own research or just be told what to buy? JK: This is a controversial topic. In the old days of the 1980s and 90s when brokers still played a significant role as a gateway between companies and investors, brokers would do all the homework, pick up the rumours and pass those onto cli- ents. Then the momentum would get going and investors would trade it as long as the momentum was positive. This doesn't really happen anymore. The brokerage industry has retreated from these high-risk types of commentary. There are a handful of newsletter writers still out there. Yes, the speculators would like to be told what to do but now the problem is "By the time I hear it, it's prob- ably too late." So there is a shifting onus onto investors to do a lot more homework on their own in order to be in a position to make an investment decision in a high- risk junior stock that has a chance of paying off. RW: Should mining stock investors follow companies with a specific com- modity currently in vogue? For example, today cobalt seems to be an attractive commodity. JK: Investors should have a big picture vision of the future. If they believe electric cars are going to be in widespread use in three or four years and that the supply of cobalt is inadequate to fulfill the needs of this burgeoning electric car industry, then yes, they should focus on projects that already have a cobalt deposit that may benefit from a stronger cobalt price. Or exploration plays where the grade that might be deliverable might not have worked 20 years ago but when the demand for the metal has expanded two to four times, then a lower grade would work. This is kind of like a mini super cycle except its metal specific. It's driven by new technology, new applications and new usages that expand total demand for metal. RW: With last year's financings going into exploration, are you expecting some significant mineral discoveries to be made? JK: Last year was a significant water- shed in the junior space because we shifted from money being raised just by the feasibility demonstration companies to companies that had mineralized sys- tems that really weren't good enough to go into production at prevailing metal prices and also needed a substantial metal price increase to really qualify as an optionality trade. So this is a rethinking of existing mineral systems with new exploration models and putting a lot of money into it. Osisko's Windfall Project is the classic example of this deposit with 1.6 million ounces of 8 grams/tonne gold that still wasn't worth developing. Then the Osikso team goes in and says, "This is a misun- derstood Timmins-style system that needs to be drilled at this angle and that angle. It needs a completely different model." So now there are 400,000 metres of drill- ing going into this project in an attempt to turn it into a district-scale operating asset. A significant change took place last year and, in March this year, we had the biggest funding month for TSX Venture Resource Juniors since June 2011. It was still a relatively small percentage of the companies that got the money but we've had a quiet period since April. A lot of money has been going into the ground. There should be a lot of news coming out in the final quarter of this year and, hope- fully, will be of a positive nature that confirms, for example, "Yes, the Windfall district has many more ounces at a grade and in a form where it is mineable at a profit at the metal prices we have." RW: I guess the trick is to identify the best investment candidates before a big run-up in the stock price? JK: Yes, and this is where the company website becomes very important. This is now the new platform where companies show their stuff and their presentations. How do they tell their story? Do they pro- vide an analogy in terms of another similar deposit? Do they show all of the data sets that are defining their targets? Do they do a good job explaining what they are trying to accomplish? RW: When you seek out good mining stocks, do you favour a certain stage of exploration? JK: I prefer the earlier stage juniors because those companies tend to be valued relatively low and when they start making a discovery, the market undergoes what I call "S Curve Action" where you will see a market valuation that equals what ulti- mately, if it is a success, the project ends up being what it's worth when it goes into production. So you can get these enormous 5, 10, 20 times gains during the uncertain period as a discovery is unfolding where we do not yet know what the limits of the deposit will be nor what the grade will be. That is the most exciting part of the junior exploration game. The optionality feasibility demonstra- "Now, gold is trending up again. Base metals across the board are trending up. There seems to be a surprising economic strength driving the higher metal prices and gold, of course, is being driven by geopolitical concerns about the leadership role of the United States on the global stage."