Metals and mining stocks are a hot topic right now. Global commodity prices continue to surge as the Russia-Ukraine conflict rages on… The U.S. is looking to ramp up domestic production of the minerals needed to produce electric-vehicle batteries… Even the “meme stock” crowd is jumping on board, recently pushing a previously unnoticed small metals miner up nearly 800%.
According to Dan, “There’s something broken about the market.” So this week on Stansberry Investor Hour, he invites seasoned geologist Brent Cook to break down the real opportunities in this highly complex industry.
Over his storied career, Brent has worked in more than 60 countries consulting on proposed mine sites. His knowledge spans all areas of the mining business, from the conception stage to detailed technical and financial modeling for mine development and production. In 2008, he founded the popular Exploration Insights newsletter and helped develop what is now one of the most invaluable tools in the industry, the Drill Hole Interval Calculator.
In other words, when Brent talks about mining and geology… we listen.
On this week’s episode, Brent offers four key tips for uncovering the greatest mining and exploration stocks and reveals how he personally avoids “red flag” companies. As he wryly puts it…
You can screen out a bunch. You can pick up [on] the bullsh*t. If you want to wash your hands after you’ve shaken, that’s a bad sign.
Mining, metals, and exploration companies can be extremely volatile and speculative. But they can also be rewarding for patient, long-term investors. So whether you’ve already tucked a junior miner away into your portfolio, you’re eyeing a few metals companies, or you’re just looking to get started, be sure to check out this week’s episode.
Founder of Exploration Insights
Brent Cook founded Exploration Insights in 2008 and has since transitioned into the role of senior adviser. As a seasoned geologist, Brent's knowledge spans all areas of the mining business, from the conceptual stage to detailed technical and financial modeling related to mine development and production.
Dan Ferris: [Interlude plays] Hello and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research. Today, we will talk with my old friend Brent Cook. He's a geologist. He's an investor in small mining stocks. If you invest in those stocks, you can't afford not to listen to this – every word of it. In the mailbag, today, notes about non-financial books and crypto. Interesting stuff. And remember, you can call our listener feedback line: 800-381-2357. Tell us what's on your mind and hear your voice on the show.
For my opening rant this week, let's talk about stock splits. Let's talk about that and more, right now, on the Stansberry Investor Hour [music stops]. Now, why do I want to talk about stock splits? That's kind of a boring subject, isn't [laughs] it? And if you don’t know what a stock split is, it's really simple... It's just a move that companies do to create more shares outstanding and to lower their share price. So if a company has – say they have 100 million shares and they're going to split the stock, 2 for 1.
So if you own it, for every share you had before the split you'll have two afterward. And yes, the share price adjusts so the market cap stays the same, right? So if the share price is $20 before the split it'll be $10. The market cap will stay the same. And it just has the effect of creating more shares outstanding and, like I said, lowering the share price.
Which if a company's shares get really expensive per share? Like $1,000 or $10,000 or $100,000 or something crazy? Sometimes, not all the time but sometimes, they want to accommodate smaller investors... people who can only afford to buy 10 or 20 shares or something. Or people who only have a few thousand bucks... put it that way. And if they only have a few thousand bucks and the share price is $10,000, they can't buy one share. So maybe you do a share split – 5 for 1, 10 for 1 – and then all of a sudden, they can afford to buy some.
So, you know, it's just a way of accommodating smaller investors mostly. And stock splits were really popular in the dot-com boom. Like, starting around 1995. Actually, 1995, there were 11 stock splits [laughs] in the stock market all year. Eleven. Eleven companies did it. And then by the time 2000 came and the dot-com boom had peaked that year, there were 104 of them, OK? So they became a much more popular thing. And they've kind of ebbed and flowed ever since.
But there haven't been 100 of them or even 60 or 80 of them ever since the last – I mean, there were a couple of smaller peaks. Like in 2006, basically height of the housing bubble, there were 50 stock splits that year. And, you know, 2015, there were 30 of them. Last year, there were 23. But there are some in the news that I find interesting. I find it interesting, for example, that – I can just pick on anybody here – like Tesla is doing a stock split.
Or Amazon is another interesting one [laughs]. Amazon is interesting to me. They're doing their first stock split since 1999, right? Just before the stock got absolutely murdered. I think it was down like 90% in the dot-com bust. Alphabet is doing one. GameStop is doing one... which is really funny because, you know, in GameStop's case, it isn't like the business is some great thing. It's just the stock has roared.
So they want to cut the share price, accommodate smaller investors maybe accommodate the Robinhood crowd, maybe. I don't know. But to me, there is a whiff of speculative fever in these stock splits. And the one that really, really has attracted my attention is Shopify, the e-commerce company. I mean, the share price is down like 50%, 55% or so and they have announced a 10-for-1 stock split. Now, that in itself – like, that's not that crazy. OK?
They want to split the stock. It's down 50%... seems to me like before it was down 50% would've been the time to do it [laughs], right? Because the point is, when the stock is at a high and the shares have a high price tag on them, you want to make it smaller. But OK. Sure. But the really interesting thing is the other part of this. And the other part of this is that the founder – this guy, Tobias Lütke of Shopify – he has been granted a 40% founder share of the vote.
Which I think is really weird. You don't get – you don't get control of the company by having it granted to you by the board. You're supposed to have control as a founder by not having sold your shares. And this founder's share keeps 40% of the vote with Tobias – with the CEO – even if he sells as much as 70% of his B-class stock... his real – his common stock in the company.
So he and his whole family – all of his affiliates where he might've spread shares around – they can sell as much as 70% of their holdings and they'll still have this 40% vote [laughs]. They'll be able to vote 40% of the outstanding shares. I mean, to me that's a little crazy. I mean, I don't get it. I think it's the weirdest thing I've ever seen in this type of situation.
Because having A- and B-class shares, that's not a weird thing. Lots of companies have done that in the past. I mean, Berkshire Hathaway has A and B. They have A and B because they didn't want to do a stock split, right? So the A shares have never split, and the B shares, they have. You know? They are now – I think they started out... oh, I forget how they started out... maybe 1/300 or 1/500 or something like that, and now they're 1/1,500... something like that.
You know me. I don't keep all the details in my head. But I know approximately, and approximately is good enough in almost every case in investing. But that's the point of that, right? So, small investors, if the share price is $500,000 and you only have $10,000 you can't buy Berkshire Hathaway. But you can, ever since they started with the B shares, right? So B shares aren't the issue. Although, you know, there are some quibbles you could have with that too.
But it's just so weird that they gave this guy this founder's share vote rather than him just voting his shares. You know? I don't know. I think it's very, very weird. And if you're a shareholder, you know – unless you think he's the Steve Jobs of e-commerce or something... and even then, you still want your vote. So I think the stock splits – I wrote in my last Stansberry Digest that "The speculative fervor is alive and well." Right?
The fact that the S&P 500 and the Nasdaq and all these big indexes are down for the year, it doesn’t matter. We're still within 5%, 6%, 10%, whatever index you want to look at, of the all-time most expensive moment ever – including March of 2000 and September of 1929, right? This is still the most expensive moment in history. So, you know, the speculative fever is alive and well. The fact that GameStop and AMC are still trading at these multibillion-dollar market caps when – I don't know – the businesses can't possibly be worth more than $100 million or $200 million... just they're dying.
They're losing money. They're burning cash. And at AMC, they're throwing money – you know, tens of millions of dollars – at a goldmine that is shut down and cannot produce one ounce of gold for less than it costs to get it out of the ground. It's crazy. I don't know. I just always feel like I have to be the guy to point out every instance of speculative craziness in the market because I'm always afraid that you're not getting enough of that. Because everybody wants to be bullish... Everybody wants to buy the dip.
And for as long as stocks and even still bonds... you know, bonds are still expensive even though interest rates have sharply come up. They've sharply come up off the most expensive moment in 5,000 years, right? According to the classic – what they call Inside the Yield Book by Sidney Homer – 5,000 years [laughs] of the stock of interest rates and we've just – you know, we're within spitting distance of – of the lowest all-time interest rates ever, right?
So it's still – the bubble is still here. It may not feel like it because the market is down, but the bubble's still here. And you can see it in this stock-split thing and this weird founder share thing and the fact that, you know, these stocks that deserve – where the businesses are unequivocally worth a lot less. Tesla... GameStop... AMC. There's no way they're not worth a whole lot less to any reasonable human being who would actually be in those industries and might want to buy that business.
Those people will know. Those businesses aren't worth anywhere in the neighborhood of where they're trading. So it's still crazy... it's still a bubble. It's still the biggest bubble ever. And that's all I wanted to say about that. I think it's worth saying. Now, time will tell [laughs], you know – it kind of hasn't been worth saying for a couple of years. OK? I get that. But so far this year, warning people about how expensive things were before this year started... you know, it still was kind of a good thing.
We'll see how it plays out over the next couple years. That's all I want to say about that. I really want to talk with Brent Cook. He's an old friend. I used to see him at mining conferences all the time... haven't been to one in more than 10 years. Can't wait to talk with him. Let's do it right now [music plays and stops].
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OK. It's time for our interview, once again. I'm really excited about today's guest... It's somebody I haven't talked to in a long time. And our guest today is Brent Cook. Brent Cook founded Exploration Insights in 2008 and has since transitioned into the role of senior adviser. As a seasoned geologist, Brent's knowledge spans all areas of the mining business from the conceptual stage through to detailed technical and financial modeling related to mine development and production. He has worked in over 60 – count them, 60 – countries and in virtually all geological environments, analyzing and providing commentary on proposed mine sites.
Brent has also co-authored Exploration Insights, an instructive compendium of excerpts and geological explanations that he hopes will be a source of education for current potential amateur investors doing their own due diligence. He also jointly developed the Drill Hole Interval Calculator with Corebox... an invaluable tool designed to provide investors with a means of estimating the grade of drill hole intervals between the highlights of a longer assay interval. Wow, Brent. Welcome to the show.
Brent Cook: [Laughs] Yeah. Thank you. I was hoping you'd keep going and going.
Dan Ferris: That's right. Just, "And that's all." It's been a long time. I think the last time I saw you in person was probably, maybe 10, 12 years or so ago in Vancouver at one of those events.
Brent Cook: Yeah. It's been quite a while.
Dan Ferris: Yeah. So, Brent, one of the main things that I wanted to talk to you about – if you don't me just jumping into the deep end here – was this Hycroft Mine that has come into the news recently... and specifically, like, I'm not a technical mining guy at all, right? I mean, I know you, right? And I know the guys at Altius Minerals and I know Rick Rule and a bunch of those people, etc... a bunch of people in Vancouver. But not a technical guy.
But I couldn't help noticing with this Hycroft Mine – which of course was invested in by AMC very famously recently, and I discussed it on the show a couple times. But I looked at the technical reports. And the one – the most recent one that dropped on February 22nd, 2022, if you go to the page where it says, "mineral reserve estimate" – and I have it in front of me. It says, you know, "Section 12: Mineral Reserve Estimate." And the page is blank, and it says, "This section is not relevant to this report." I mean, Brent, that's bad, right? That's just like, "Help me out here."
Brent Cook: Yeah. I would take that as not a good sign, indeed. It's crazy what's been happening with this Hycroft share price.
Dan Ferris: Yeah.
Brent Cook: The mine itself has been around for decades. The oxide was mined and made some money way back when, but now they're dealing with what we'll call sulfide ore... which is basically sort of like a pyrite with a bit of gold in it. And the grade is extremely low. It's like half a gram or less. And any method you use to recover it is going to cost you more than the gold you're going to get out. And that really hasn't changed. So my understanding – correct me if I'm wrong – is that AMC bought into it, but Reddit crowd and those sorts of folks jumped all over this thing and took – what was it –a 25-cent stock up to, I don't know, $2, $3. It's crazy.
Dan Ferris: Right. It is crazy. And here's the thing, Brent. Like, you and I talk about it like it's so obvious and simple. And, you know, you just stated very simply, "You know, the sulfide ore, however you try to get it out, you're not going to get – make as much money as it costs to do it." And you state it very simply. And yet, they're able to do all this.
They're able to get $56 million, half of it out of Eric Sprott, and then do this other $500 million shelf offering. I think they've gotten a couple hundred million. I think was $196 million was the number they announced that they've raised so far. And of course, as you point out, they ran the stock up. Um, it seems to be [laughs] like this is a real problem. Like, there's something broken about a market that lets this happen.
Brent Cook: Yeah. I mean, the Reddit crowd and such, they've jumped on similar situations where there's a big short. And there was a big short on Hycroft They see it and just ramp it up and shorts have to cover. So I suspect that's a lot of what's happened. Regards to Eric Sprott, I mean, his basic investment thesis is gold's going to the moon. If that's the case, you've got to deposit the – right now, it's non-economic. But if we see $3,000, $5,000, $10,000 gold in theory, this will be economic and the leverage there is incredible. You go from a negative NPV to a slightly positive or positive NPV. And that's a huge difference. But at the current market cap – which I don't know what it is right now, but it's [laughs] going to be a lot of people that get burned on this.
Dan Ferris: Yeah.
Brent Cook: Again. This is more – it's gone bust more than once.
Dan Ferris: Yeah. Yeah. It went – I think the last bankruptcy was 2015. OK. So, Brent, you actually made this seem like it's not completely insane, right? It's just massive leverage to a huge – and it better be pretty damn quick [laughs] – increase in the gold price. So, I mean, yeah.
Brent Cook: Yeah.
Dan Ferris: I guess the only crazy part left is, you know, probably not something you and I want to get into but a movie theater company investing in that kind of a thesis. It's just – you know, we get Eric... he's always been high risk.
Brent Cook: Yeah. And if your thesis is, "Gold's going to $10,000," or whatever, these marginal unaccounted deposits make a lot of sense. He's not – it's not the way I invest in the sector or Joe Mazumdar does – who writes Explorations Insights now. It's not how we look at it. But there's a number of ways to make money, I guess.
Dan Ferris: All right. So let's leave that behind and talk about how you do it, Brent. Because I want to tell our listeners, like, there are a lot of voices in the mining world that you should not be listening to. But I think Brent is one of the few who is, like, really credible and highly critical. Like, I've seen you say, "No. No. No." I've seen you say no to a lot of things over the years... just reading and in presentations of various things. So that in itself lends credibility. But what is it you're looking for that you so rarely find? Maybe give me an outline of how you do this... how you invest in mining companies.
Brent Cook: OK. So I like to get in early-stage projects where you're just looking at surface geology, soil or rock sampling, maybe some geophysics... maybe a drill hole or two or maybe not. And what you've got to do is understand what the potential discovery of this deposit looks like and might be worth if the company's successful. And bearing in mind that, you know, 1 out of – I don't know – 500 or 1,000 prospects actually turn into a real economic discovery in mind. So my goal – and Joe's as well – is to identify the fatal flaw as quickly as possible and move on to the next possible discovery.
And doing that, I mean, we've bought a lot of companies that eventually failed. But as they're pre-fail, I guess you'd call it, as the share price rises up because a good drill hole or whatever is starting to look better and better, if you can identify what's going to go wrong or what's going wrong – be it metallurgy, geology, jurisdiction, incompetent management... I've made a fair bit of money on ultimate failures just knowing – just getting out because the data tells me it's not going to work. So you're looking for that key information that tells you, "This is a bust. It's not – you know, it's not going to work." And if you don't find that, add to the position.
Dan Ferris: I see. So it's a process of attrition... you've got a series of bets and then you're saying, "Nope. Nope. Nope. Nope," and then you wind up with the best ones.
Brent Cook: In theory. I mean...
Dan Ferris: IN theory. Right [laughs]. Right. Nobody's perfect... nobody's universally 100% right. But it is an interesting process because when I talk about the things that I do in my newsletter, like, you know, we hardly have anything that's remotely related to mining, and there are companies like Costco and Starbucks and things like that and smaller companies too. And I'm always looking for the positive attributes. Now, there must be some positive attributes that you start out with and then you call them based on the negative ones. So what is a positive attribute or two that you look for in a small exploration mining play?
Brent Cook: Given the low odds, I think it only makes sense to buy into a company that their project has scale... meaning a big system, a big geologic alteration system. And you need big systems to make big deposits. And ultimately, you want to sell that deposit to a major. That's your exit strategy. You don't want to build it. And so, the positives would be early on... big scale, big alteration system in the right place.
Like, if you're looking for pore-free copper, gold deposit, you know, you got to look in the Andes... and certain places in the Andes. If you're looking for a Carlin-style deposit, you're going to look in certain places in Nevada or... well, Kyrgyzstan or something like that... where the geology's right, the system's right everything looks right.
So you're looking for a very positive geologic setting that is conducive to development of a big deposit. Now, most of these places are very geologic-active. There's faulting... there's volcanoes... there's all sorts of things going on. Which complicates the system. But the more complicated in general it gets, that tells you the more chances and the more times mineralizing fluids have ripped through the earth and possibly deposited a deposit.
Dan Ferris: Right. So, one of the only things that I've learned about geology is this idea about vulcanism... volcanoes and finding the – you find the shape of these things, you can just take a look at it at their cross sections and drawing sand thing sand see that it looks like it used to be a volcano. You know? But only now it's extinct... it's buried underground. So I think that's kind of a technical thing that the average investor could sort of wrap their head around.
But the rest of it is pretty difficult, isn't it? I mean, all the geologists tell me the same thing. You and Brian and Dalton at Altius Minerals who I know well, and a couple other folks, they say, "Well, Dan, the geology is very straightforward." OK. But geology's difficult, right? Like, what business does the average investor have getting anywhere near this stuff? Shouldn't it only be guys like you, Brent?
Brent Cook: I think if you're going to really get into this sector, the junior end of it anyway, you want to be able to have advice from someone who does know the sector... be that a newsletter writer, your broker, your brother who's a geologist... something like that. Because this involves so many different fields, if you will. You know, you got geology... you got metallurgy – which is the recovery of the material... you've got engineering, mining. You know, "How do you blow it up?"
You've got the economics behind it, so you need those people for the capital allocation. You need politicians or at least people who know politicians to work through the back system. And then, you need smart people that can raise money when you need it backing this company. So there's so many different things going on in the background and no one really is an expert on all of it.
And it's not that much different than biology or that sort of thing in that you and I – there's no way I could look at a small company and make some decision if their cancer development drug is working or not working, etc. You know? I wouldn't have a clue [laughs]. You know? So it's sort of like that. You need, in my opinion – it helps to have advice unless you're just going to buy into an ATF or buy the five biggest gold companies and hope the gold price goes up.
Dan Ferris: Right. That's a whole different proposition.
Brent Cook: Mm-hmm.
Dan Ferris: I mean, gold can be on fire. But if the – all those things – the metallurgy and the financing – all those things don't line up, you watch your little junior mining stock price going down... and gold's going up [laughs], so actually you don't know what the hell is going on. And there's another aspect of this that I want our listeners to know about too. I've talked to people who are good at finding these tiny, little mining stocks and making money on them.
And it seems like a pretty ordinary thing – and you've alluded to it already. But it seems like most of them don't work out at all. And, you know, all your money is made – if you have 100 of these things, all your money is made by five of them... something like that. I mean, that's one very well-known, extremely wealthy investor told me something just like that once. And I was like, "Wow. "Is that what it's like for you? I mean, how many of these little mining stocks are you holding in any given time?
Brent Cook: Well, in the letter when I wrote it and now Exploration Insights that Joe writes, we try and keep it to 20 companies. Really, you start getting more than that and it gets too hard to keep track of what's going on.
Dan Ferris: Right.
Brent Cook: So yeah. There's one philosophy like Eric Sprott or Rick Rule where they're – they've got enough money behind it they can buy 50-plus companies with the knowledge that 60% of them are going to fail, and 20% are going to go flatline. And 20% are going to do well with maybe two or three giving you 10-plus-baggers. And those are what make you the money. I don't have the... well, the capital or the willingness to try and follow the details of 50 to 100 companies. So I try and keep it down to a manageable amount and just watch for positive or negative results and react to it, you know, in a timely manner.
Dan Ferris: I see. So I'm glad we have you and then you gave the example of Rick and Eric. Because those are two different styles based on two different strengths. One is [laughs] clearly a financial strength, right? But yours is a technical strength, isn't it? I mean, you are a geologist. That is your strength with this. Because you said you're not one of the guys with infinite capital behind it, right?
Or massive capital. So your strength, then, is technical. Is there any other way? You know, there are more – there's more than one way to skin a cat. Have you met any other mining investors who are successful who have some other powerful strength, or is it just pretty much your technical guy like you or a finance guy like them?
Brent Cook: I think – you know, I know people who do well just betting on management. You know, they get to know the people that are running the company... they trust that they have the knowledge to recognize a good deposit and the financial ability to structure it right. I mean, Brian Dalton's – he's a classic example of that.
You know, he knows how to invest in the right people or the right projects. He's got a really good nose for competent people. And so, he can invest in that aspect of it. And a lot – you know, actually a lot of people do that. A lot of the letter writers, that's what they'll do, is they'll invest in people they trust. But [laughs] with the caveat that there's a lot of liars out there.
Dan Ferris: Right. So that logically brings us to that large of this. Which, again, it seems to me like if you're not a technical guy or an inside financial guy based [laughs] in Vancouver or Toronto or someplace, you're going to have a tough time – like, I'm not naming any names but there are people – I could name a couple of names and you and I would both roll our eyes and say, "Oh, geez." That I'm sure I could mention those names to 100, you know, investors – retail individual investors – you know, the kind of folks who read our stuff and manage their own money – and I could say, "Boy. Be careful of that guy," and they'd go, "Really? I thought he was" – whatever.
Brent Cook: Yes.
Dan Ferris: Which I guess that leads me to, you know, it's difficult. Like, how do I know? Is there – do I have any clues? How do I know that somebody is one of the better people that I can more or less trust?
Brent Cook: Yeah. It's not that – it's not easy in life in general, is it?
Dan Ferris: No [laughs].
Brent Cook: Yeah. It's about like that. But I think, you know, if a retail investor or somebody listening to your show here – if they can go to the actual conferences and talk to the people, I think you can screen out a bunch. You can pick up the bullshit, right?
Dan Ferris: Right. You can smell it.
Brent Cook: You want to wash your hands after you shake it, that's a bad sign, right?
Dan Ferris: Yeah [laughs]. That's good advice. I just – if you have another thought, please hold on to it, Brent, because I want to underscore what you just said. Did you hear what he just said, folks? Get in front of the people. Shake their hands. You know? Share the same air. I think that's very important in this field as in almost no other. But go on. Did you have something else?
Brent Cook: Yeah. No, It's certainly that. And if the person can explain to you what they're thinking, what their target looks like and how they intend to advance it and how they know if – at what point – what's the to-go, no-go decision point if the results come back... they can explain that to you in a logical way, that helps a lot. I mean, so many of these companies I spend time with talking to, they really don't have the concept of what success looks like. It's more like a treasure hunt and they're just looking for money to go drill a hole and hope to run into something. You know?
Dan Ferris: Right.
Brent Cook: That's not a – that's a clear red flag right there. If they don't really have a concept of what success looks like, the odds of finding it are pretty low.
Dan Ferris: Yeah. So one of the things that Lawrence Winter told me – Lawrence is the exploration guy at Altius Minerals. We mentioned Brian Dalton a moment ago. And one of the things she told me – because they run a really good prospect generator model. And he told me that to pick companies where they work the model well, like... if they say they have like, "This is our flagship deposit. We're putting lots of capital here," that's not really the way that model works, right? That model is little bit of capital... you know, maybe do your deal, find your partner, and move on. But it seems to me like you're not solely about investing in prospect generators. Like, you'll invest in other types of these little mining companies. Am I – I'm right about that, aren't I? [Laughs] Just make sure I’m right about that.
Brent Cook: Oh yeah. For sure. I think the prospect generator model makes a hell of a lot of sense in that the people running it recognize the odds are so low. And so, they generate an idea, bring it to a point and then bring in somebody else to spend the big money to test that idea. That makes a whole lot of sense. I mean, I do own one called Origin, which they've got a number – there's a prospect generator. They've got two royalties now. That makes a lot of sense too. And I think it's smart to have a few of those in your portfolio.
Dan Ferris: Yeah. Then that gets to my next question... which is, "What does it look like when you're not running that model?" To me, it looks like usually a small team of people with limited capital and they've got one or two projects that they're working on. And I look at those and I think, "Man. I feel like that just ramps the risk way, way high up and I better be Brent Cook if I’m going to put money into those." [Laughs] Right? I mean...
Brent Cook: Yeah. I think that's accurate. You know? These tiny-market-cap companies – $10 million, $20 million Canadian looking for something that, if they're successful, is worth $1 billion – that's a lot of fun when they hit but you've got to really understand when they don't hit, too.
Dan Ferris: Right. All right. So I want to circle back to something that you kind of alluded to before... when you talked about the need to understand so many things. You know? Including metallurgy and engineering and these other things to when it comes down to actually maybe building a mine one day.
Because why would you continue to develop a prospect if it could never be a mine? Right? And the funny thing to me is that I want our listeners to know, and you tell me that – if this describes you – I think it does... you never actually – you want to sell this thing. You want to sell the mineral prospect. You never actually want to be in the mining business, do you? Right?
Brent Cook: [Laughs] No. That's a real hassle. You're – and it's a hard transition for an exploration company to make. You know, you got a bunch of kind of free-thinking wildcat geologists out there on their own.
Dan Ferris: Guys like you.
Brent Cook: Possibly. But the mindset that goes into actually the detailed work of building a mine is completely different than exploring for a deposit. So it's very rare that a mining – an exploration company can transition successfully into a mining company. It happens rarely in North America... more often in Australia. They've got a different mindset and a way of doing things. But yeah. Ideally, I think you want to find something that a major mining company wants to buy and build. And there's your exit strategy.
Dan Ferris: I'm purposefully doing this. Again, I want our listeners to – I'm purposefully – you know, I've invited this guy who's great at mining and geology and investing in these little companies, and it sounds like I'm really trying to make it very unappealing. And I don't mean to. But I feel like – I mean, people get really worked up about this. Like, you know, all those folks buying Hycroft.
You know, they don’t – I mean, they didn't know anything about the movie business [laughs] buying AMC, and they sure as hell don't know anything about the mining business buying Hycroft. But I don't want to discourage people from doing this if it fits their risk profile. So I just want to sum up the Brent Cook way, if we could. Like, you've got a portfolio that you try to keep to 20. That's what you do with your real money, correct? You try to keep it to about 20 mines or so?
Brent Cook: That's right.
Dan Ferris: OK.
Brent Cook: Yes.
Dan Ferris: And so, money where your mouth is... the skin in the game. And you are – you have these positive attributes. You're mostly looking for companies in elephant country – we call it "elephant country," right? If you're looking for copper, you go to Chile, etc. as you outlined. Fish in the right pond. And a large system, right? Small mines are a bad idea. Big mines, they tend to work better, right? That seems to be our second point.
And get to know – get to know people. This is the one thing that everybody says. Like, the newest sort of mining newsletter person to the most seasoned geologist to the seasoned investors in Toronto, Vancouver, all these people – you're all saying the same thing about the people. "Get in front of them." So this is a – it's a time and sort of money-intensive process... for just for an individual investor to do this right, isn't it? It's not easy.
Brent Cook: Yeah, it is. If you want to do it seriously. Or you can, like, rely on someone who you trust and is competent to give you advice.
Dan Ferris: Right. Like, I could see Brent – you know, people could read Exploration Insights. They could have a really good broker. You know? They could, you know, get to know some of the people running the very best companies, right? Presumably, they're a source of good information.
Brent Cook: Mm-hmm.
Dan Ferris: So maybe there is a way to not have to travel all over the world [laughs] and become a part-time amateur geologist to do this. And the other part of the Brian Cook way seems to be, you better damn well know when things aren't going right. And I wonder, Brent. I know none of this is simple. I don't want to oversimplify and don't let me try to do that to you. But, you know, is there a pretty good list of typical things that tend to go wrong in a little mining exploration company?
Brent Cook: Yeah. Sort, of there is. You know, first is... oh, geez. It gets pretty complex there, That's what – you know, that's what I've been doing my whole life.
Dan Ferris: Sure.
Brent Cook: But metallurgy... which is basically, "How do you recover the ore?"
Dan Ferris: Mm-hmm.
Brent Cook: It can be simple or it can be very difficult. The more difficult it is, the higher-grade ore you need. "Is it oxidized?" If you're looking at gold or copper, "Is it oxidized?" Which means – "Or is it sulfide?" What it generally forms, it's in a sulfide form. When it oxidizes – which basically means groundwater has turned your iron ore or iron pyrite into rust. Once that happens, the rust has released the gold, so it's very easy to get. It's no longer tied up in the iron sulfide. So that's something to keep an eye on in terms of metallurgy. Mm-hmm.
Dan Ferris: The complexity of the metallurgy.
Brent Cook: Yeah. Metallurgy... jurisdiction... capex. "Is there water?" You know, if you make a discovery up in the middle of the Yukon, your capital and operating and development costs are going to be way higher than you do at just off of i-80 in Nevada.
Dan Ferris: Right [laughs].
Brent Cook: You know, those things are huge.
Dan Ferris: Right. OK.
Brent Cook: So yeah. There's lists. But they get complicated [laughs].
Dan Ferris: Right. So there are lists but they get complicated. And I encourage everybody – like take notes and Google this stuff. Google "sulfide ore versus oxide ore" and all this other stuff that Brent is talking about. Read the newsletter, Exploration Insights. Let's see. I think we're actually maybe ready for my final question.
But I feel like I – I'm trying to wring you out, Brent. I really want to – like, is there anything on your mind that we haven't covered yet? Let's do that before we do my final question. Is there anything on your mind today that we haven't covered yet about what you like if you want to throw a name at us? What have you got? What's up in that brain of yours?
Brent Cook: I'll give you an example of a company that we own. Bluestone – which BSR, I believe, is the symbol – in Canada. They've got a very nice deposit in Guatemala run by competent people. It's got an NPV of like $1 billion U.S. and currently trading for $200-and-something million U.S. But it's in Guatemala, so that's an issue. I think it's solvable, and I think it's going to be solved – and that's going to be a great deposit.
Somebody will buy and mine and it won't be Bluestone... although, they're putting together all – they're making it as simple as possible for someone like Barrick to come in and buy it. They're checking off all the hurdles. Big hurdle there is obviously Guatemala. They've got to keep that in – that's sort of an example of something that we own. We know the deposit's good, and we think the politics in Guatemala is going to get better. So that's sort of one, you know – you can see how we've thought this through and why we own it. On the Website, Joe's got to just finish –
Dan Ferris: Los Gatos?
Brent Cook: Uh-huh. Commentary on a company called Los Gatos, which is a silver deposit down – silver mine down in Mexico that the share price went down by two-thirds when they realized the resources they thought they had, they didn't have. So he goes through and evaluates that. And that's actually a good thing. I think there's five points on there that he goes through as to how we knew this wasn't – or why this didn't work. And that's on the website. So I suggest going there and looking at that. That's probably five good points to look at. Other than that, you've covered things pretty well [laughs]. As usual.
Dan Ferris: Well, I'm glad to hear that. If Brent Cook tells me I covered things pretty well, then I've covered things pretty well. All right, Brent. So my final question is the same for every best. And no matter what the topic. Like, even if we get off of finance. And you can answer anything you want. IT doesn't even have to be mining or anything. But the same final question for every guest is, if you could leave our listener today with one thought, however simple or complex it may be, what would that be? [Laughs] Yeah. Whatever's on your mind.
Brent Cook: Well now, that covers a lot of things, doesn’t it?
Dan Ferris: Yeah. I mean, one thought that you'd like to leave our listeners with... no matter what it is
Brent Cook: Doesn't have to do with mining or geology or anything? You know, I've thought about why we're here on Earth a lot. And I've decided it's to enjoy it. So I think just enjoy life. Kind of goofy but that makes sense to me.
Dan Ferris: Yeah. I don't think that's goofy [laughs] at all. And I actually have to tell you I turn 60 in November, and that caused me to do a lot of thinking about this type of thing. And I agree with you. I have used – it's funny you should say that to me, Brent, because I've used that very lens – I've looked at my whole life, all kinds of things through that very lens – over the past few months here. "Am I enjoying this?" I think I know exactly what you're talking about.
Brent Cook: Yeah.
Dan Ferris: And when I'm not enjoying something, "Oh, boy," I'm looking to get rid of it. You know? Or downplay it, you know, and find a different way to handle it if it's something I absolutely can't get rid of. I think you're spot on, man. I agree with you completely. Maybe this is old guys talking. Maybe that's [laughs] – you know, "Enjoy life." You know? You're not struggling... you're not young anymore. But just enjoy life, you know, not a whole lot of it left maybe." I don't know.
Brent Cook: Yeah. I think you and I have come along a similar path and that – you know, from early on in high school days I've always figured what's important is to enjoy what you've got and not... you know, not worry about too many things. Just go out and do it. Be brave and do it.
Dan Ferris: Good thoughts, Brent. Thanks for that.
Brent Cook: It'd be easy to bounce back if it ever happens.
Dan Ferris: And thanks for being here, man. It was great to talk with you. I hope we can do it again sometime.
Brent Cook: Yeah. It was a pleasure. I hope to run into you in some show somewhere in some state or country.
Dan Ferris: Yeah. I should be – you know, we've been locked down and I've been so lazy. I'm getting – I've gotten used to being locked down. I haven't gone anywhere. But we will run into each other, I expect, in like Vancouver or Denver or someplace... or maybe Toronto or someplace. Probably pretty soon.
Brent Cook: All right. Well, thanks for getting ahold of me. I appreciate it. It was a lot of fun.
Brent Cook: Yeah. Yeah. And we'll do it again, you know, reasonably soon hopefully. How about that?
Brent Cook: Sounds good.
Brent Cook: All right, Brent. Thanks so much.
Brent Cook: All right. Have a good day.
Dan Ferris: All right. You too [music plays and stops]. Well, it was great to talk with Brent again. I haven't – as I said, I haven't seen him in more than 10 years, I don't believe. And I hope to get back to one of the mining conferences soon. I'm sure I'll run into him because he goes to every one. And he's always there. And all the people I know who are any good at investing in little mining stocks, they always do it too.
Because there's no substitute – as we said – for getting in front of the people who you will be investing your money with. This isn't like anything else. It's not like buying Costco or Walmart or Starbucks and putting it in your 401(k) and forgetting about it. It's completely different. And it's much riskier. You will lose money on most of the little mining stocks you buy – even if you're the most successful little mining stock investor in the world.
Once you get past all that and get used to the idea of getting to know the people and getting to know something about, you know... just enough about geology. I know a teen, weeny bit about geology, but I's more than [laughs] most people, right? I know the Hycroft Mine has zero reserves. Most people probably don't know that. So there is a lot of learning to do.
But if you can stomach it all, you know – when you actually make money on one of these things, it can be like, you know, 500 or 1,000 times your money... it can be the most ridiculous money you ever made in your life. You'll probably, you know, lose 100% on 60% or 70% of the stocks you bet on with these things. Or maybe not 100 but you'll lose something on most of them.
But, man, if you can just have discipline and run a portfolio of these over a full cycle – right? This is not – the gains arrive quickly but this is not a short-term thing. And take into account all the things – take to heart all the things that Brent said... do your homework and learn. You know, it can be extremely financially rewarding. And I wanted to have – Brent is like one of the very most credible top guys.
And so, that's why I wanted to have him on the program... plus I like him. We've known each other a long time. All right. That was great, man. I'm so glad we spoke with him. All right. Let's look at the mailbag. Let's do it right now [music plays and stops]. One of the biggest fears I'm seeing right now from readers and podcast listeners is that there is no money left to be made in the U.S. stock market... that the extraordinary gains of the past decade are gone for good and that anyone over the age of 50 who's depending on stocks for their dream retirement is out of luck... destined for pain ahead.
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Send questions, comments and politely worded criticisms to [email protected] I read as many E-mails as time allows and response to as many as possible. You can also call our listener feedback line. 800-381-2357. Tell us what's on your mind and hear your voice on the show. Just a couple items this week. A couple of interesting items.
The first one's from Phillip G. Phillip G. says, "Hi, Dan. Thanks for your great work every week. What I like most? The diversity of different guests you have. I think everyone needs to find his own strategies, own way of investing. Most important thing is to have a plan and stick to it. The media today is doing everything possible to push you away from your plan and sell you whatever they can. Find your strategy and simply stick to it long-term and then you make money."
I agree with you, Phillip. You should know yourself, have your own plan and stick to it. And Phillip continues. He says, "On the recommendation of books, can you talk again about your favorite non-financial books? I found some great books you recommended. For example, The Formula and others." And for those of you who don't know The Formula, it's a book by Albert-László Barabási who we interviewed. It was a great interview. It was one of my favorite interviews that year... Episode 134, December 26, 2019.
And basically, The Formula was about Albert's study of how you can make a scientific study of your own success through studying networks and the mathematics of networks. It sounds like a really dry read but it's excellent. It's one of the best books – one of the best non-investing books I've ever read in my life and it deserves to be read and read and re-read.
And I was amazed. I mean, people talk about all these like self-"helpy" things that can help you succeed... you know, like The 7 Habits of Highly Effective People. I'm not saying it's not a good idea, but none of those things are truly scientific. This is a truly scientific book on how to succeed in the world, and I'm amazed by it. So, Phillip, it sounds like you want to hear another one [laughs], though.
And I don't know if I really have one. I'll tell you I have been reading fiction books, and I've been trying to find stuff outside of investing that address sort of Libertarian ideas and things that maybe are kind of off the radar screen... here and there. But I really – I don't have one for you outside of investing except to say this... that I believe that reading fiction is extremely important. And it almost doesn’t matter. I think, like regularly reading good fiction.
And for me, like, I recently read all 14 of the Ian Fleming James Bond novels, just from start to finish. And I found it really insightful. The books are a lot different from the movies and the character is a lot deeper and more thoughtful and more introspective. Like, if you saw the Daniel Craig movies, they're really great and all but the very first scene in the very first one – Casino Royale – it's not the James Bond – it's not the real James Bond [laughs]as far as I'm concerned.
Because James Bond had a big problem with killing people in cold blood. And in the very first scene, he just sits there in the office of the section chief in Prague, Czechoslovakia and the guy has an empty gun... he's no threat at all and he just assassinates him... he just kills him. And the real – and he seemed to be smug about it. He was quite OK with it. In the real James Bond, that simply is not the case... it wouldn’t happen.
So whatever that may be worth. I can't even describe to you – the things about reading fiction is, I can't even tell you what it teaches me, but I know it's teaching me something, and I know it's something valuable. Like, I'll know what it taught me when whatever is going to happen to me happens and I go, "Oh, OK." You know? "Such-and-such an insight came from such-and-such a book." The other thing I read was, I read one of the Jack Reacher novels.
And I found that very interesting. I found that character to be very interesting. He is – I saw him described as a "Righteous avenger for our time and the action hero of our time." Sort of the James Bond of our time... but a completely different type of a person than James Bond. And like I said. There was – it was a valuable experience to me but I don't quite know how exactly.
And I'm just convinced that reading good fiction and classic fiction – I actually did just buy Moby Dick and I read the first couple pages of it and I thought, "Hmm. Am I really going to be able to follow through on this?" And I think I will. So, you know, Moby Dick will probably be my next one... next fiction book. That's all I want to say about that. I think it's a great question, and obviously my answer is really not very specific [laughs] at all.
I don't think you need to read Ian Fleming or the Jack Reacher books unless you want to. But read something. Read what you think is good fiction. Find some good fiction. That's all I would say to you, Phillip. Next and last this week is Troy R. Troy says, "Hi, Dan. Over the past couple of years, I've become an avid listener of Investor Hour and truly enjoy your show. I don't always see eye-to-eye with all that is said, but the show is always thought-provoking and I guess that ultimately is the point."
Yes, Troy, I agree with you. Troy continues. He says, "I have a question regarding your thoughts on crypto, regarding the amount of money that has been invested and/or has migrated to the crypto space as well as the amount of money now tied to the crypto industry. Do you think it is, quote, "Too big to fail'? I readily admit I do not know the worth of the big banks that were too big to fail during the financial crisis. However, I'm guessing the trillions are now tied up in the crypto space. Cryptos plus NFT plus businesses, etc. Of course, trillions are the new billions of yesterday. Love the show. Keep up the great work. Troy R."
And you understand that when Troy says, "Trillions are the new billions of yesterday," he's basically just describing inflation. So, you know, there are a lot of trillion-dollar entities now than there were the first time the phrase, "Too big to fail," came into existence. In fact, back then the only trillion-dollar sort of agglomerations of – aggregations of assets were on bank balance sheets... were like bank asset values of the very biggest ones. And bank deposits too.
But yeah. So there's trillions in it. Is it too big to fail?" Now, what, "Too big to fail," means is that if – let's say bitcoin. That's a huge – that's a huge one, right? If bitcoin somehow fails, will it be bailed out by the Federal Reserve? Because that's what too big to fail – al the bank – the "too big to fail" banks will be bailed out by the Federal Reserve. I have a lot of problems with that, by the way. You know, the CEOs and all the executives of those banks, they have, in some cases, billion-dollar and hundred-million-dollar mammoth wealth essentially backed by the Federal Reserve.
It's a crime. It's horrible. I mean, talk about moral hazard... it's the worst. My answer to your question, though, Troy, is no. I mean, I cannot picture any Federal Reserve involvement if there's a crypto crash or if there's a bitcoin crash. You know? There are no – there's very few banks involved in this in any degree. You know? So maybe their Crypto holdings would go to zero and they would have a problem, take a big write-off.
But they wouldn’t go out of business I don't think. I can't see it. I can't see how crypto in general – you say the crypto industry and specifically bitcoin since that is the lion's share of the crypto marketplace... I don’t see it happening. And if somebody does, write in or call in, [email protected] And tell me why you think that bitcoin or the crypto space is too big to fail and could be bailed out by the Federal Reserve. I don't see it.
So that's another mailbag and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We provide a transcript for every episode. Just go to www.investorhour.com. Click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy. If you liked this episode and know anybody who might enjoy listening to the show, tell them to check it out on their podcast app or at InvestorHour.com.
Do me a favor. Subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram. Our handle is @InvestorHour. On Twitter, our handle is @Investor_Hour. Have a guest you want me to interview? Drop me a note: [email protected] Or call the listener feedback line: 800-381-2357. Tell us what's on your mind and hear your voice on the show. Till next week. I'm Dan Ferris. Thanks for listening.
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