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Gold: Rattle Snake Investing with Marin Katusa of Casey Research

Guest Site: CaseyResearch.com

 

Transcript:

Futuremoneytrends.com: Greetings and thank you for joining us at futuremoneytrends.com. I'm here with Marin Katusa, the chief energy adviser for Casey Research. We have several questions from members, wrote them down.

If you could only make one investment for the next ten years, what would it be?

Marin Katusa: One investment over the next ten years. Hm. I've made two recent investments. Are we talking about current investments, or a sector moving forward? It's a very broad question.

Futuremoneytrends.com: Well, however you want to take it. If you were only allowed to make, if the governor of Canada came and said “You're only allowed to do one investment at a time now, and it's going to be locked up for ten years.”

Marin Katusa: Ten years? Well usually when I do my personal investments, I like to go for five to seven years. I'll tell you the story of when I started Copper Mountain team. I found these great guys, Jim O’Rourke and Rod Shier. That's my number one rule is finding amazing people who are willing to write big checks themselves. At the time I had a five year plan to put this into production. Well we hit the five years, and I realized that I had to rewrite my five years, and I'm coming onto ten years. So that's actually not a ridiculous time frame, so there's a company I've almost been involved for ten years. So I think you start with people. Great people. And that's what this conference is about, the map room table is investing in great people. So what I've recently done is I've bought more BRI because of Amir Adnani, I truly think that this guy in twenty years is gonna be exactly what people are talking about Robert Friedland today. I know Robert Friedland well, I met him through Doug, it’s Doug's best friend. So I've been lucky enough to be exposed to all these big legends early on, get to know them and figure out that there's patterns to success. So I would definitely invest in the right people. Another one is PRD Energy with Michael Greenwood. These are the right type of people. Here's a guy that wrote $11 million dollar check and has basically said “I'm going to finance the next 18 months myself.” And he's putting another 20 million dollars into his company. You follow the right people, the Lukas Lundin's, the Keith Hill's, the Robert Friedland’s, the Rick Rule's. The key to success if you're going to go ten years, look the commodity prices are going to change, the politics in these jurisdictions change, but if you find great people, they're gonna figure out where to go for success.

Futuremoneytrends.com: Yeah. For the resource sector in general, are we in a bear market for the junior resource stocks?

Marin Katusa: A secular bear market, for sure.

Futuremoneytrends.com: Okay, the FED has kept the economy propped up I guess. We've seen a huge stock market rally, but even cyclically, you would have a normal recession every six or seven years, so, it could be likely that we have a normal cyclical recession in the next year or next two years. What are you thinking for the resource stocks? It's almost like they've been beat up, but if the economy slows, you could be looking at the decapitation strike against a lot of these juniors.

Marin Katusa: Not really actually, I would disagree with that. For example, if you're investing in the right management teams, they're going to use that as an opportunity to consolidate and strengthen, not just their balance sheet, but their portfolio of projects. Look what Amir just did with BRI, he went and he's got a strong balance sheet, he's got a strong management team, and they took over a company with now he's got close to 4 million ounces of gold. He's doubled his ounces of gold. And that's just the beginning of the story. I hope there's more weakness in this, because I'm invested in the strong management teams. It's people. I can't emphasize this enough. Amir's a guy that now has 4 million ounces. The biggest investors in the business back that other company, but the management weren't A players, whereas Amir's an A player and he can consolidate this. And I wouldn't be shocked that looking three to five years down the road Amir's going to have over 10 million ounces of gold.

Futuremoneytrends.com: What's interesting about that deal is that JP Morgan, they paid $1.30 last year, I guess they financed at a dollar thirty, right?

Marin Katusa: Yeah, it was a dollar twenty and change I believe.


Futuremoneytrends.com: And Amir is acquiring it for about thirteen cents.

Marin Katusa: Correct.

Futuremoneytrends.com: This seems like —

Marin Katusa: That's because there's an opportunity. The market is weak and the strong guys are going to consolidate. This happens every 20 years in our sector, that's what Robert Friedland did, that's what Lukas Lundin (??) did. I'll tell you a story about Africa Oil. I was the first to write up the first research report on Africa Oil and there's a private company called Turkana Energy, and Lukas Lundin and Keith Hill saw the opportunity. This is at the bottom. It was January 2009, to write a 30 million dollar check was a very difficult thing to do. Lukas stood up and said “I'm doing 10 million myself personally.” Because that's what strong management teams do, they back their own deals. He paid 7 million dollars for that asset, which now today is valued at two and a half billion dollars, and it's going higher. So this is what the right guys can do in this type of market. And you can't beat these guys because this is what they do full time, but you can have major wealth creation by backing the right players in the business.

Futuremoneytrends.com: You know what's amazing is BRI's 75 cents with just over 1 million ounces of gold, BRI's 75 cents with 4 million ounces of gold.

Marin Katusa: In this market nobody cares. That's why you want to buy it. Not only is the KCR fund buying stock right now, myself personally is buying stock, and I'm going to continue buying stock. And whether it's a dollar twenty or seventy five cents, I'm not here for the near term, I'm not looking to trade this stock on a weekly basis. Amir's 35 years old. I'm looking to make money as he's getting older and smarter and better, and when you've got guys like Jim Mellon, who's on the board of this other company, he's the Warren Buffet of the UK. I hope that Jim Mellon sees that potential that Amir has and joins the board of BRI and you have Tocqueville, who has a major gold fund invested. JP Morgan. People are going to recognize the talent that Amir has put together. This story's just beginning. It's still in its infancy. Yeah I'm looking five to ten years out.

Futuremoneytrends.com: Not all of them have to do with investing, so we're hoping to give you some one from left field.

Marin Katusa: Let’s have fun.

Futuremoneytrends.com: Could you do it again, if left with nothing, could you become a millionaire, and how would you do it?

Marin Katusa: Exactly the way I did it the first time.

Futuremoneytrends.com: And how is that?

Marin Katusa: Basically, get in to something and become as knowledgeable as you can as possible. Submerse yourself into it, and take some big risks. Get in on these things early, find the right people who you can learn from. Doesn't mean you're going to have success, but my story, I saw the big potential first in tungsten, then in uranium. But get out there, meet people, read, find your passion and develop that. It might not be resources for your people but it might be bio tech, it might be whatever it is, but you have to follow your passion. And I truly think that the first step if you want to become a truly successful investor, it doesn't matter what, it could be in utilities, it could be in pharmaceuticals. You have to follow your passion, if you don't love doing it. For example, I love going out. I've been involved in building copper mines. If you don't like going out there and kicking rocks and getting out there with the miners and the geologists and the engineers and raising the money and dealing with the politicians and the social issues and the natives, and all of these aspects, you're not going to succeed at it unless you love it, so follow your passion. That's the one, only thing I can say is follow your passion.

Futuremoneytrends.com: What are some things you see as opportunities right now for young people specifically. As far as sectors, jobs, businesses to start.

Marin Katusa: Look, if you're a young, aggressive, hardworking guy, and let's just say that you don't have an inclination towards education or the academic or the financial world, go to a copper mine, you can start making at base a hundred thousand a year driving a truck. That's just base, that's not including bonus.

Futuremoneytrends.com: That's high school diploma, or...?

Marin Katusa: Yeah. Take a training course to learn how to drive the bigger trucks. It's air conditioned, it's all — Now if you want to get into the speculation and all that, you can get into building your own company for drilling or any sorts of — these are guys in Australia right now making a quarter of a million dollars a year and they're just roughnecks. But if I was a young guy I would really try to get into speculating a percentage of my net worth into these juniors. Because yes it is the riskiest investment on the planet, but there is no greater return where you could make for example, an Africa Oil, or reservoir, and you're getting ten, twenty times your money on these things.

Futuremoneytrends.com: We've talked about the uranium sector in the past. There's a little confusion. So the Russian and the US treaty is expiring.

Marin Katusa: The HEU Agreement, correct. It's already expired. The final shipment is happening at the end of this year.

Futuremoneytrends.com: Okay. The hope for many of the uranium investors was that that as a catalyst that is going to reduce supply.

Marin Katusa: Correct.

Futuremoneytrends.com: Is that intact, or are the Russians now going to convert those on their own?

Marin Katusa: Well the Russians have always been converting their nuclear warheads into highly enriched uranium, the Russians were down blending their nuclear warheads to provide the Americans. So one in every ten homes in America is powered by Russian nuclear fuel. Okay? Now there's something called the transitional agreement which the Russians said, by 2016 we're going to provide up to 50% of your previous demand. There's no talk about price, there's no fixed price. And the Russians are saying “up to,” what does that mean? Where are the Americans going to get the other half from? This time the Russians have different dance partners. The Chinese, the Middle East, India. And the Russians are doing something different which 20 years ago they didn't. What happened 20 years ago to the Russians? The USSR fell apart. The country was bankrupt. The Americans were the most powerful country in the world. Today? I truly believe that Russia is an equal power to America and has more friends than the Americans. Putin is a very powerful leader, he's a brilliant leader. Today, the Russians are going to countries, for example Sri Lanka, which nobody is talking about. They're not only financing, they're providing the money, they're providing the nuclear plant, and life of facility supply of uranium. So they're going totally vertically integrated. The Americans can't provide that. GE is trying to compete with these guys, but they can't. Because they can't. They're struggling to provide the finance and who's going to build these reactors? Who's going to provide the nuclear fuel? So the Americans in 1960 produced over 35 million pounds of uranium. They were the biggest consumer back then, they're still the biggest consumer today. The difference is: they've reduced their production by over 90%. America needs to increase their domestic production of uranium, and going to ISR is the nearest term solution for that.

Futuremoneytrends.com: As far as the uranium play, we've talked about Uranium Energy Corp, UEC, with Amir Adnani. Same CEO, or I guess he’s the chariman of BRI, CEO of UEC. Is that still a good play and a recommendation of yours?

Marin Katusa: It's my recommendation. It's in our recommendation. It was the number three pick on our uranium big webinar that we did with US Secretary of Energy Spencer Abraham, Canada's Energy Minister Lady Barbara Judge, Rick Rule, and if you just invested when we put that in mid-April, you would have made 50% on your money. When we first recommended Uranium Energy Corp, it was under 25 cents and it ran to $7. Why? Because you find a young, smart, aggressive guy which the management own over 20% of the company. There's patterns to the right type of success. He is completely aligned to making this deal work, because most of his net worth is in his company. And he took an exploration company and now he's the lowest cost producer. One of the newest mines in the world that brings on this uranium production. He went and got Li Ka-Shing, who's the wealthiest Asian man in all of Asia. He's the Warren Buffet of Asia. You got Rick Rule who's a legend in investing to provide 20 million dollars for him to develop Goliad. So Amir's position in his company, to provide low cost production when uranium does pull up. Let's face it, the spot price of uranium is half of what it was pre-Fukushima, but today you can't produce the material for what it's trading for. Eventually something has to break.

Futuremoneytrends.com: So what is that catalyst? Is it this Russian treaty expiring…or?

Marin Katusa: I think it's going to be a couple of catalysts. The first catalyst, nobody expected what happened at Fukushima to happen. That was a black swan event. You had 40 reactors (snap) like that turn off. Ten have already applied to come back online. That's going to be the first catalyst. Now remember, half of all of the LNG consumed in the world is done by two countries: Japan, 38%, and Korea, 12%. So the Japanese are paying $17 per NCF for this expensive gas powered energy, and it's crippling their economy. They have no choice but to go with nuclear. Now, it may take longer. It may take two or three years for uranium to go up to 70 – 80 dollars, but if you're willing to make a double or triple or quadruple, who cares. You're nowhere near the bottom. Companies are pulling back production. They can't make money. I think this is how you make money in a market. You invest in things that nobody is talking about, and you sell when they're popular. Contrarian investment.

Futuremoneytrends.com: In closing, looking at general economy right now, how do you like the environment just for individuals in general, as far as the economy, are we looking at a recovery? A real sustainable recovery?

Marin Katusa: I'm not smart enough to know about the general economy. I really focus on my junior resource sector. And this is exactly the market I love. Because I can get full warrants, our subscribers can get access to the best management teams at a discount, you don't have to pay. You just have to be patient, I call it rattlesnake investing. You just hang out and you wait, and when the opportunity's there, you have to snap up and grab it. And I love this market. And I don't think we're going to be out of the woods for another couple of years, but it's the choices you make today that are going to position yourself for the big upswing.

Futuremoneytrends.com: That’s great advice. Marin Katusa of CaseyResearch.com. Thank you so much sir.

Marin Katusa: It was my pleasure.

 

 

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