TOPICS IN THIS INTERVIEW:
01:40 Junior Gold/Silver Stocks Now in a Bull Market
05:00 Other Commodities that are also rallying; how to profit
08:00 Callinex Mines update: Massive Gold/Commodity Opportunity
14:45 World Economy Today in Uncharted Territory: BREXIT Results in Shaky Central Banking; The Reckoning is Coming
Impressive Track Record and He Only Owns 1 Stock for His Favorite Sector
It’s a rare find to meet anyone who has invested in tiny micro-cap companies and then see them turn into billion-dollar giants.
Our guest today, Carlo Civelli, has been an instrumental investor in dozens of these tiny stocks, where they’ve gone from a few million to billion-dollar market cap companies.
His expertise is resources stocks, but you’ll be shocked to find out that today, he only owns a single exploration stock.
We first profiled Callinex Mines (TSXV: CNX & US: CLLXF) at 20 cents Canadian. Since then, it’s been a clean double!
However, the zinc market is moving big, and we believe Callinex is like holding a call option on this much-needed metal.
They’ve recently made strategic acquisitions. While others have been in a bear market position, Max Porterfield, CEO of CNX, has been on an aggressive acquisition spree.
A few weeks ago, I met with him in Vancouver, where his company was the only zinc play invited to Rick Rule’s Sprott Resource Conference.
We will have a full update for you on Callinex Mines tomorrow.
The growth of this company in the past year makes it an even better position to own today than when we first alerted you to it last year.
Consider Shares of Callinex Mines (TSXV: CNX & US: CLLXF).
Click here to listen to my exclusive interview with Carlo Civelli.
(00:02) Daniel: Greetings, and thank you for joining us at FutureMoneyTrends.com. I have a very special guest for us today. He’s somebody we’ve interviewed over the years, one of the most successful people you will ever speak with when it comes to investing in the junior natural resource space. You know, occasionally you get to speak to somebody who’s successfully invested in a small junior stock for pennies… literally low, million-dollar market cap companies, and then they’ve turned into billion-dollar companies. Occasionally you get to talk to one person who’s done it one time. This guy’s done it over a dozen times – perhaps even dozens of times. You just never heard of it, so I want everyone to listen to this entire interview. What he has to say is very important to your portfolio. He’s been brutally honest with you; he’s not sugar coated it. Last we spoke to him, he only owned a single junior resource exploration company in this sector. That says a lot. He has been bearish on the sector. Of course, the last time we spoke to him we were in the end of 2015, so we’re going to talk to him to see if his thoughts have changed. Our guest today is legendary investor Carlo Civelli. Carlo, thank you for joining us.
(01:20) Carlo: Thank you, Dan, it’s my pleasure joining you.
(01:23) Daniel: Well, Carlo, let’s start off… you were very bearish last time we spoke to you. What are your thoughts right now on the junior resource market? And I also want to specifically point out the precious metals stocks – are they in a bull market?
(01:43) Carlo: Well, I have to admit that I believe they are. When you interviewed me again at the end of ’15, I suggested that I was bearish and the gold price, of course, then, coupled with the energy prices, which were going very well, showed that I was right. But being also a chartist, I could see, obviously, that January, February, the gold charts turned around. The gold stocks went from a very highly oversold position to follow the gold price, which was showing signs of going up. And certainly, in February, then, we reversed positions and we played the gold market, 3 or 4 gold stocks only, relatively big ones that are obviously in production, advanced-stage, you don’t want to get into the junior resources or junior gold stocks. And we were very successful, I can say, and we also played the gold stock market through the JNUG It’s listed on U.S. and also the within Canada. And I have to say, though, that we are practically out of those now, because I can see that gold is just hovering in here. There seems to be no direction. If you look at the fundamentals, the gold producers are very heavily short, and the ETFs are very heavily long. And, of course, I think over the next couple of weeks, maybe months, are going to tell us which way the market wants to go. The last time that the ETFs were this bullish was when gold was at $1900, and then gold collapsed, and the ETFs really were the ones driving the gold market down by having to unload all of their positions. And I think today we are in the same position again. Let’s see where we go. Gold is moving up and down in reaction basically to daily input, either from the market about the Brexit. When it shot up $30 or $40, then it lost it all back again. Now we’re in a sort of in-between and waiting to see who’s going to win: the bulls or the bears. Meanwhile, of course, the whole market, the Canadian resource market, has had a tremendous run. We have also participated, to a small extent, in a couple of junior gold stocks that are actually drilling and have found resources. And, like every good CEO should do, they have come to the market and loaded up with cash. So at least they all have the money now to really perfect their drilling plans and hopefully come up with some resources in the meantime. And at the same time, we are obviously concentrating still on the one stock that you mentioned.
(05:08) Daniel: Well, let me ask you… so, the previous metal stocks have been getting all the glory, I guess, in 2016. What other commodities are you looking at that are also seeing a resurgence?
(05:25) Carlo: Well, in particular, we’re looking at the zinc market, and obviously we’re not the only one. As you can see, there’s Goldman Sachs out there. There's MMG, there’s lots of good research reports being written about zinc. And in fact, the price has risen by some 47% this year. It appears to go back to basically what happened back in 2006-2007, when the LME stockpiles, and also the supply went down, the price doubled or tripled. The price of zinc, I mean, doubled or tripled at that point. I can see that we are practically in the same position again, so the market is showing signs of a potential market panic. I mean, that’s a tough word to use, but it looks like it. The market is under-supplied and one of the biggest underground mines just recently shut down, so the [unintelligible]is down, and also the market supply coming from the mines is not going to be there anymore. So, that is one market that we are concentrating on. Also because zinc is really a specialty play. There’s really no – or very few – known pure zinc deposits. It usually comes as a byproduct of other metals, and we believe that this could be a really, very big price increase in the next 2 to 3 years. I think that this is a long-term play, and it’s not like gold. It’s not driven by ETFs or by speculators – this is really a metal that is needed for infrastructure. And, here again, China is the driving force right now. They have announced that they are going to make large investments in infrastructure. They need to stimulate their economy. And so zinc appears to be the best-placed metal at this point to go into bullish supply dynamics. And there is also weak defined supply growth. And all of this put together really leads me to believe that the one stock that we invested in is the one that’s going to benefit most in the next run.
(08:06) Daniel: Well, let’s talk about that stock. So, for those who have not heard our Carlo interviews, we interviewed Carlo in the spring of 2014. A man by the name of Max Porterfield, a mutual friend of ours, just took over a company called Callinex Mines. At the time, I want to say the stock was around CAD$0.20, and we have been doing updates with Carlo since, about every 4 to 5 months. And I want to say the second interview we did with Carlo, it was at $0.25, and the most recent one we did at the end of 2015, Callinex Mines was at about $0.30, or maybe even early 2016 it was about $0.30. Today, as we do this interview, it’s around $0.40 to $0.41. So Carlo, let’s talk about Callinex Mines. What have they done since the last time we spoke, in very early 2016, and here we are in August of 2016… what is an update on this company?
(09:07) Carlo: Well, the company has moved in, as I said before, what I believe to be the right direction. We have also been able and Max, I must say, has been very, very successful in also raising money. In this whole resurgence of the resource market, the junior resource stocks, he’s been able to go out and raise, I think over $4 to $5 million. This means the company is fully financed at this stage, and he’s been moving the company in the zinc market. Again, because we thought that there would be an undersupply and a shortage in the market. And as such, we wanted Callinex to be at the forefront of acquiring zinc deposits that are in known mining districts. All of them, of course, in Canada, so no exposure to any emerging markets or any problems in emerging markets. And, in particular, we wanted the company to be ready, even when the big guys want to buy zinc mines that are at quick timelines to production. And I think Max has been exceptionally successful in doing that. I just want to point out that Callinex, for example, just acquired over 2.7 billion pounds of zinc equivalent, and the zinc now is $1, and the market cap only at $20 million… you can make your own assessment of what the company could be worth once these mines or these deposits are moved into or closer to production. And I think that we are at that stage now. For example, there are two exceptional deposits, one being the Nash Creek project. It’s a perfect example of what Max is doing, and it has a large, low-grade resource based near mining infrastructure – existing mining infrastructure. And what Max is doing is he wants to leverage the underlying metal prices so that the company will have a huge impact once the market realizes that it’s probably one of the only companies that has a total focus on zinc. And, for example, second one, there’s the Superjack project, which is only 15 kilometers away from one of the largest underground mines, in Canada, again. It was recently shut down, which is one of the reasons why the zinc price has actually risen, and it’s in similar geology, and we believe that this could be a very big winner again. And then Thursday, Callinex is also drilling near Flin Flon, again, an existing mining district, which has produced gold and zinc and copper over 100 years. And there, of course, is the HudBay mining smelter, and it’s running out of feed. And so, this is a wildcard, of course. We don’t know what’s there yet, and Callinex has a mining, a drilling program in place so we will know in the next 6 to 9 months what we have. And HudBay is obviously watching the company closely, also because of other projects that we have near HudBay’s mine up there. And so what I believe we have here is basically a call on the zinc price. It’s an “out of the money” call at this point, but we obviously believe it to be in the money within the next couple of years. And again, ill reiterate that zinc is not speculative, it’s not driven by ETFs, which can move one way or the other. It is a metal that is really needed by the world, by infrastructure plays, and we believe to be there. So this is one of the most exciting junior resource companies that I have invested in that we have a big position in. We are constantly providing input into the management, although Max is very able in acquisition to make his own decisions. And I know that he’s out there looking at other opportunities to acquire other zinc deposits, and we are willing to provide the cash to do that, and I think that we’re sitting on a great spot and a great future for the company.
(14:20) Daniel: Yeah, I know, an incredible opportunity. It’s a zinc call, essentially, on the zinc price, and certainly one of the best performing zinc companies out there. Like I said, we first talked about this at $0.20. It’s literally doubled, now it’s at CAD$0.40. You can buy shares at CNX on the TSX Venture or using the symbol CLLXF on the U.S. side. Oh, I also should disclose that I am a significant shareholder, at least relative to my net-worth, so I own shares of Callinex Mines as well. Carlo, before we go, I always like to talk to you about the macro-economic trends, and let me just throw this out there: if you were a U.S. central banker or a European central banker, what are you looking at right now that might be keeping you up at night?
(15:14) Carlo: I’m sorry, say it again? I couldn’t hear you…
(15:16) Daniel: If you were a U.S. central banker or a European central banker today, what problems or issues might you be looking at right now that would be, you know, a problem?
(15:34) Carlo: Well, I think I pointed this out a couple of times already. I think that we are in uncharted territory. The central banks really don’t know themselves what the hell to do, and they keep on deferring raising interest rates, which, in my opinion, is a mistake. I don’t think that a small increase in interest rates over time would kill the economy. It would probably dent the stock market, but that’s not what the central banks should be concerned about. And you can see that the markets are running, but they’re running on just cheap money, on cheap fuel. The underlying economics are okay in the U.S., and this is certainly still the market that we are concentrating on, whereas Europe is still in the doldrums, and I think that Brexit has obviously added another problem, which is going to stay with us and with England for the next… maybe years. In my opinion, it’s a very, very negative sign that they chose to have the Brexit, and once again, it was basically the urban elites. Not being overwhelmed by the underemployed and by the people out in the midlands, in particular, in England. And it shows that the government doesn’t really know what’s going on in their own country. You can see also the stress tests, which just passed in the last two weeks, where, strangely enough, all the banks seemed to pass, except for a handful. And the handful that had problems are mostly in Italy. And if you had applied some stricter rules to those stress tests, I think that contractually, all of the Italian banks would have failed, because their only asset that they had is really Italian government bonds. So I don’t know how you can value that, and particularly like a [unintelligible], which has their only asset is Italian government bonds. One should at least have applied a haircut to that, which, of course, would have shown the bank to be totally bankrupt. Not just a little bankrupt, as they seem to be now. And Italy doesn’t want to do any bailing, for political reasons. They keep on pushing their problems out, as they have always done over the past 20 years, and it can only lead to a bigger collapse. So, as I said, I believe in my first interview with you, let’s enjoy the markets as long as we can. I think the reckoning will come, and again, nobody, in my opinion, nobody seems to know how to get out of this. Everybody that I talk to, people that have made money in the industry and in the markets, are all scared of the end-game. And to be honest, I would not want to be a central banker now. You can see Draghi particular in Europe has problems with the Bundesbank. The Germans, of course, are totally against the QE, but they had to go along because we just did it. And I wouldn’t want to say that he does this because he’s Italian and he wants to save the Italian banks, but there’s certainly some truth to that. And here we are. Europe cannot increase the interest rates because the European economy is really not doing well at all. And with Brexit coming, also Germany will have problems, because they will not be able to export as much as before to England because of the low pound. England, at the same time, has problems that they can only overcome by doing Competitive devaluations all the time, adding, of course, to the inflation, because as we all know, up until ten years ago, England was a net exporter of energy, whereas now they are net importers. So the lower their currency goes, the more their energy bill goes up. So it’s not a nice view from the outside, but hell, as I said, let’s enjoy it. Let’s play the markets and let’s make money for as long as we can. And as you know, we can make money both ways. We can also go broke eventually.
(20:42) Daniel: Absolutely. I’ve heard Rick Rule often say one of the lessons he had to learn early on was inevitability does not necessarily mean imminent. So, Mr. Civelli, legendary investor. We’ve done very, very well listening to you, and we appreciate your time and hope to talk to you again very soon.
(21:02) Carlo: Thank you very much. It’s been a pleasure.