Playing on train tracks – Richard Mills & Bob Moriarty

Rick Mills, Editor/Publisher, Ahead of the Herd:

In the first week of May the Federal Reserve bought $43.5 billion in long-dated US Treasuries. Now to me that’s QE, Quantitative Easing. The last long term auction that was conducted was described as “tepid,” with a bid-to-cover ratio of 2.46X and a tail of 1.2 points the yield on the 20 year bonds was forced up over 5% to get investors to buy them.

Yields soared, the dollar is heading down, QE can lead to lower interest rates and a weaker currency which is basically the Trump’s administration’s stated goal, which is lower yields, weaken the dollar and that fixes the trade deficit and brings manufacturing back to the US. But on the other side of it for us, Quantitative Easing definitely has a knock-on effect for commodities and precious metals by increasing the money supply.

But a question for you Bob, why is the Fed buying billions of bonds literally conducting stealth QE and being so quiet about it?

Bob Moriarty, Founder, 321gold:

Well, here’s what happening and to ask about the US Treasury market you have to look at the Japanese Treasury market. The Japanese Treasury market is literally collapsing right now; their interest rates are shooting through the roof, and they are dumping Treasuries just like China is, which is why we are absolutely in QE. This is what we’ve been talking about for weeks, it’s happening, it’s accelerating and it’s going to get far worse soon.

RM: Trump escalated his tariff threats again this morning and gold soared again, last I looked, 65 bucks an ounce.

BM: Well, you want to talk about something amazing, did you see the article in the Wall Street Journal talking about the penny?

RM: Yes, I did, it costs 3.7 cents to make it so they’re going to ditch it. What are kids going to put on railway tracks now?

BM: Yeah, but here’s what’s really funny, what’s it cost to make a nickel?

RM: Don’t know.

BM: It’s 8.7 cents so it’s a false economy in a way. They’re saving money on the pennies but it’s going to cost money on the nickels and good question but see you’re way too young. Up until 1959 what were pennies made of?

RM: Copper.

BM: Okay, what are they made of now? They’re made of zinc, it’s copper-coated zinc. Now when I was a kid you could take real copper pennies and put them on the train tracks and as long as the damn thing didn’t hit you and kill you, you could end up with this beautifully elongated former penny. But now all you’ve got is this big piece of crap zinc.

RM: Yes.

BM: But here’s what’s funny it’s a false economy. Now if they’re going to get rid of the penny why is it they’re not getting rid of the nickel? And there’s a very simple answer. They don’t want to admit there’s inflation, but of course there’s inflation. If it costs 3.7 cents to make one cent it’s not just false economy it’s inflation and you’re hiding it so literally the lowest coin that we should be making is the dime, the 10-cent piece.

Now during the hyperinflation in Germany what happened to the coins in Germany?

RM: They were melted down.

BM: Exactly, they hoarded them, and they melted them down because the smallest piece of change was more valuable than the biggest bills they had.

RM: It was a commodity.

BM: Right, it was something of value. There will come a time when there are no coins in circulation in the United States because the currency is so worthless.

RM: I expect yields to keep rising and the dollar to keep falling, it’s an extremely unusual situation that seems to be, along with the tariffs and the new budget that the United States is pushing through, very good for commodities, gold and silver stocks.

We’ve got three stocks to talk about today: Rackla Metals, Storm Exploration and Orestone Mining.

So, let’s get into Rackla Metals (TSX.V:RAK). I don’t know much about it other than what you’ve told us. I believe in our last article you mentioned Rackla.

BM: Well, here’s what’s interesting. Because I’ve been doing this for 24 years now and travelled so much, I get to run into everybody at one time or another and the CEO of Rackla is nothing short of brilliant.

Simon Ridgway started Fortuna Silver, he started Radius Gold and he’s the CEO of Volcanic Gold Mines (TSX:VG). We have never talked about this before, but I’ve got a map in the article I did about Rackla. In the Tombstone Gold Belt there is an eastern quadrant which is where Snowline Gold (TSX:SGD) and Rackla are, and a western quadrant.

The western quadrant has the advantage of having more road access and Sitka Gold is certainly affected by that and Victoria Gold and Banyan Gold.

Snowline and Rackla have to spend a lot of money frankly on drilling because they’ve got to use helicopter access, but one thing and we’ve said this for weeks and weeks, the US dollars in deep serious trouble, the world’s financial system is in deep serious trouble, and the greatest opportunity for investors now is in the junior resource stocks.

I wrote an article and it’s on the website today, it’s a review of the book ‘Gold and Silver: The Greatest Bull Market Has Begun’.

Jordan Roy-Byrne wrote that, and he just did a really great job. When I started going to gold shows 25 years ago everybody was older than I am. Now people are a lot younger and that’s a really good thing and this book talks about why gold and silver and the shares are such a good investment.

He doesn’t talk about gold from a historic perspective, he talks about it from the investing perspective, and that absolutely is worth doing. But I’ve gotten to meet people and of course I know Jordan and I happen to know the people at Rackla, and they’re really good people and they’re going to succeed.

RM: Yeah, that’s an interesting point you raise. Andrew works with me, and he lives in Vancouver, and he went to the conferences this year and we were talking after the conferences were over and I asked him if anything stood out and what really stood out to him was the age of the people attending.

There were middle-aged people, and many younger people in the in the 20-45-year-old range, there’s definitely something to what this author’s writing about. We’ve seen it at the last couple of resource conferences including PDAC.

BM: Absolutely, well here’s what’s funny Do you know why there is a generational up-shift?

RM: I think a lot of it has to do with demographics. There’s a lot of people my age, and older, baby boomers who were old school commodities, gold, silver and junior company investors. The demographics just suggest when you’re retiring it’s a risk-off situation, you’re not investing in a lot of these stocks, and you almost have to pass the torch and get the younger generation into it. So, I think it’s a matter of demographics and risk-off as you age and retire, Bob.

BM: Well there’s also the fact that the old people are dying off okay, It really is that simple, we’ve got a lot more young people and Andrew is absolutely correct, because the old gold bugs who went through the boom in the ‘60s and ‘70s they’re all dying off so I’m pleased to hear that from Andrew, young people today are focused on the stock market and cryptocurrencies and I see both of them as the kiss of death financially.

RM: I agree, I’m old-school economics. If you’re not mining, if you’re not digging it out of the ground, if you’re not cutting down trees, if you’re not fishing and farming and ranching, I mean those are solid things you can hold in your hand, and they create new wealth and it’s the only way to do it.

You play in the markets, you’re transferring money from one pocket to another, you can play in tech but you’re transferring money from yourself to a tech billionaire, you can play in a lot of spaces but if there’s nothing to back it up, if you’re not creating something out of your resource and manufacturing, that’s the only way you’re creating real true wealth.

BM: I totally agree. Far too much of the US’s economy and certainly the European economy as well is shuffling pieces of paper, and shuffling pieces of paper does not create real wealth.

RM: No, it doesn’t, wealth is created by the drill bit. True wealth, exploration, discovery, advancement, and the truth machine we call drilling, that creates true wealth. That’s new money for you, it’s new money for your family and yeah it is paper stocks, but it’s the bottom of the food chain for the creation of true wealth.

Let’s get to our next stock which is Storm Exploration (TSX.V:STRM). When we first started talking about this almost two months ago the market cap was barely $2 million, now it’s $4.1 million they’ve got several really good properties, but their flagship property is Miminiska, which has gold in a Banded Iron Formation (BIF). They are going to raise some money and drill it this year.

They’ve got four huge projects, three of them have proven gold endowment. I like this one and I know you are interested in Banded Iron Formations.

BM: Well strangely enough I delivered small planes all over the world for a 10-year period and in 1976 I took a twin-engine Rockwell from Florida to Australia for Lang Hancock who was the second-richest guy in Australia.

And Lang Hancock was the guy who discovered the Banded Iron Formations in the Pilbara, and as it turns out the Banded Iron Formations in the Pilbara are the largest iron formation in the world, and the richest.

The guy that I was working for made me fly with Lang Hancock’s son-in-law who worked for him and frankly given the choice between a co-pilot and a wet soggy sandwich I’ll take the wet soggy sandwich anytime. But I flew 76 hours with them from the US West Coast to Australia in total over a 10-day period.

And all he talked about was the Banded Iron Formations and strangely enough in October of 2008 I met Quinton Hennigh, and he explained to me that what created the Banded Iron Formations is exactly what created the Witwatersrand, okay? When single-cell creatures began to produce oxygen, iron and gold precipitated out of salt water and that was an eye opener to me, but what I discovered was the Banded Iron Formations are always associated with gold.

So, Storm has the issue of they’ve got a very low market cap right now and very low visibility, but they’ve got the advantage that they certainly have a very attractive project that has been misused in the past. They had new management come in and the relationship with the locals is far better now and we’re moving into a period where it’s much easier for companies to raise money.

Now Trump signed something this week to create a strategic wealth fund, and I think that’s a big deal. One of the things they could easily do is start pumping money into the junior resource market and I think there’s going to be a giant shift soon. The only problem is a lack of money and that’s going to change and when you’ve got a market cap of $4 million really only one direction you can go.

RM: Yeah, I agree with all of that, let’s take the BIFs, the Banded Iron Formations, they have a lot of characteristics that make them significant for the juniors that own them. Producers like them, they want them for many reasons. They tend to be high-grade, high-margin deposits that have large gold inventories often in the multi-million-ounce range, that’s a fact about gold in Banded Iron Formation.

In addition, the grades tend to be very consistent, they’re not nuggety, so they’re easier resources to define for explorers and producers, they’re going to be able to predict the ounces that will be mined to a greater degree of accuracy.

And third, the metallurgy of these gold in Banded Iron Formation deposits tends to be very simple so you get excellent gold recovery in a less complex processing circuit to recover the precious metal.

Banded Iron Formations account for about 60% of global iron reserves, they’re found across the world and there’s gold in them. It just depends on whether it comes in an economic amount or not in one spot, but the fact is these deposits are everywhere, they’re very well known, the metallurgy’s very well known, the type of gold is that it’s consistent, everything about these deposits is very well known, they’re very favorable to find a deposit in and get it into production.

BM: Well, the real key there is, okay you understand the concept of a pathfinder. There’s a lot of deposits; but trying to find something that says there’s gold here is difficult. You want to look for pathfinders and strangely enough Banded Iron Formations are the closest thing to 100% accurate pathfinder.

If you have a Banded Iron Formation, there is gold around there somewhere. So, from a tactical point of view, Storm ticks all the boxes. The negative of course is the fact they don’t have very much money, but we’re moving into an environment, and I mean I don’t know if you realize it but as of right now gold is only $140 short of the highest it’s been in history. So, we could be back on the way up.

RM: About Storm, their flagship Miminiska has high-grade gold and it’s been confirmed by drilling at a number of locations on that property. They’ve got two main targets, Frond and Miminiska and they’re separated by 14 kilometers. There’s gold at both ends, there’s gold in the center. The one thing I want to say is it it’s all great to have all this, but you like to see insiders, the guys in the company having skin in the game.

Bruce Counts the CEO owns 7% of the stock, he’s attracted a strategic investor, John Williamson. Now John flies under the radar but many people know Founders Metals, Thesis Gold and Benchmark Metals. John’s been involved in all of them. John’s also a prolific money raiser, he’s raised over a billion dollars, and he’s orchestrated several lucrative exits for shareholders.

Johns an advisor and he owns 10% of the stock, so that’s 17% of a low float owned by insiders. To me that that’s a great indicator, I want to own that company when management is so experienced, has had such success, they actually own a significant percentage of the company, and can raise money.

BM: Absolutely, I mean everything is checked.

RM: The next stock we want to talk about is Orestone Mining (TSX.V:ORS), we’ll start off saying that if you believe what I just said about management having skin in the game and being experienced and able to take it where we need it to go, CEO David Hottman and his team — I mean they’ve been involved with, everybody’s going to recognize these names — Bema and Eldorado [Gold]. David and team are frugal, these guys haven’t taken wages, they haven’t diluted shareholders with options, they are very much involved in the company.

They’ve got three great projects, two of which are going to be drilled this year. These guys are focused, they definitely dislike dilution, and they are definitely aligned with shareholders. What do you think?

BM: Well, I will always fall back to what attracts me more than anything else, when things are cheap. Now I was buying Orestone when it was 2 cents a share, it’s 4.5 cents a share right now. Again, it’s totally under the radar scope, very few people know about it but it’s cheap, it’s got a $2.77 million market cap.

I highly suggest people read Roy-Byrne’s book about investing in gold and gold shares because he really nails it, and there is literally the opportunity of a lifetime in the junior resource stocks now. I talked to Quinton Hennigh a couple of days ago and I said, “You can buy anything under $0.10 and it’s going to go up 5- to 50-fold. We’re entering an entirely new environment that’s going to create generational wealth.

RM: There is a significant investor in Orestone, I believe they pretty much recognize that Orestone’s gold and silver oxide, heap-leach open-pit property called Francisca is an opportunity, so Crescat Capital has invested in the company. Orestone did a very small private placement of $600,000 and Crescat got $400,000 of that, and the company had $200,000 of it to place.

It’s a lot of things you say, it’s the market cap, it’s the fact that we’re going to go drill an oxide that could be hundreds of meters deep in Francisca, and it’s just a feeling that you get when you know you made the right decision.

BM: Well, here’s the key: when management of the company is working for free, okay, they are fully invested. Now when I talked to David and I suppose that was two or three months ago and he told me that, I was very much in favor, and I said you need to talk to Crescat. And Crescat certainly saw the opportunity.

I said one of the things that you need to do is you need to find what are your projects that a small amount of money can be the low-hanging fruit, and the Francisca property was absolutely it. The $600,000 can give them a lot of information, double or triple or quadruple their visibility, and the next private placement they’re going to do they’re not going to do for pennies.

RM: The bottom line for me is Orestone management has put numerous heap leach projects into production and those companies went on to do very well. Their Francisca Project is a potential effort to replicate that.

Moving on, it’s interesting that the US pulled the Truman home. Of course it had a collision, had its captain fired and lost three fighter jets, that’s a rough deployment and now it’s coming home.

BM: Well, here’s what’s crazy, when a bunch of guys wearing sandals and turbans kick the shit out of the United States navy, why would you want to attack Iran?

The most important thing is if you look at the 18 wars the United States started since 1945, we haven’t won a single one of them. In every situation we were worse off at the end of the war and if you lose every fight don’t go into a biker bar and insult the biker’s woman because you’re going to get your ass kicked. It has to do with a country’s basis reason for fighting wars. Now what is the only reasonable intention — if you’re going to fight a war what’s the only thing worth fighting for?

RM: Everyone I hold dear, everything I have is right here on this farm.

BM: That’s another way of saying it, the only thing worth fighting for is peace, okay, and the United States does not fight for peace. Russia wants peace, and in December of 2021 they sat down and said, “Okay here’s the red lines, here’s what we want: secure borders, we don’t want the Nazis shelling us anymore, we want them to abide by Minsk 2, we don’t want expansion of NATO,” and they listed all the things they wanted. And of course they were totally ignored.

When Russia fights a war, they’re fighting so they can accomplish peace. When the United States fights a war, they’re fighting to fight a war.

Here’s the deal. Anybody who actually does any research into Ukraine versus Russia, this is a war that was started by the United States, it was financed by the United States. In 2019 one of the big consulting firms came up with the design for the US — how they can destroy Russia.

They’re bombing Russia every day and American troops and British troops and Canadian troops and New Zealand troops and Australian troops and French troops are dying in Ukraine today and the Belgian defence minister just came out a day or two ago and he said, “We really desperately need that ceasefire so we can move NATO troops into Ukraine.”

Well, that’s what started the war the first place, and they’re not even making any bones about it. They intend to destroy Russia, and I hate to point it out, they’ve been losing that war 2.5 years and they’re going to lose it until the Ukraine doesn’t exist anymore.

RM: Let’s switch over to Israel now and the Gaza Strip. Israel controls 50% of it, they’re going to control a lot more here, I think the goal is 100%.

They’ve been withholding aid, food and medicine to deliberately starve and sicken the Palestinians at the same time bombing the hell out of Gaza. To me they’re committing genocide, and the world is almost quiet. Israel is committing genocide in Gaza, for me they’ve gone way beyond payback and lesson teaching for the horror of October 7^th. Period.

BM: There’s so much evil going on in Israel I’m absolutely staggered. Now the UK, France and I think maybe Germany, but a couple of the EU countries have literally come out said, “Hey Israel, this deliberate starvation of Gaza is wrong, and you need to do something about it.” I believe the number of trucks entering Gaza is six trucks a day and it’s just evil. Deliberate starvation is a war crime, and it should be stopped, and it should be punished.

RM: Iran, where are we? Are we going to get an agreement? Ayatollah Khamenei comes out and he says there’s no way we’re giving up our nuclear enrichment, our civilian plan. The United States says, “Yeah, no you’re definitely giving it up or bad things are going to happen.” Israel leaks the plans to bomb Iran and now they’re back together again for another round of negotiations. 

BM: The Iranians have made it crystal clear that they’re not giving up nuclear enrichment and they have all the right in the world legally to have nuclear enrichment.

And there is something obscene about the only country in the Middle East equipped with weapons of mass destruction, which is Israel and being nuclear-armed threatening Iran when 18 US government intelligence agencies insist Iran does not have a nuclear weapons program.

So that theory is we want the United States to join us bombing a country to prevent a nuclear weapons program that doesn’t exist. And if you think about that that’s pretty stupid. But there’s conflicting information.

The six B2s have returned to the United States from Diego Garcia, and the British have sent a bunch of fighters and aerial refueling aircraft to Cypress to support an attack on Iran by Israel.

I’ll make a prediction, and I’m a guy who flew a record number of combat missions in fixed wing aircraft, if Israel and the US, or Israel and the UK, or Israel, the US and the UK attack Iran it will destroy Israel.

RM: We’re going to wrap it up here, you’ve got a couple of minutes just to say whatever you want here, Bob.

BM: Well literally this is the greatest time to invest in world history. If you invest in what was not popular which is junior resource stocks the returns are going to be extraordinary.

RM: Absolutely agree 100%, thank you for your time and until next week.

BM: Super deal. Thanks Rick.

Rick Mills
aheadoftheherd.com

Bob Moriarty
321gold.com

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Richard owns shares of Storm Exploration (TSX.V:STRM) and Orestone Mining (TSX.V:ORS). STRM & ORS are paid advertisers on his site aheadoftheherd.com

This article is issued on behalf of ORS & STRM

Bob owns shares of Rackla Metals (TSX.V:RAK).