Marin Katusa has gotten a fair amount of attention in these parts over the past year or so, mostly because he was one of the first to get back on board and invest heavily in Northern Dynasty early in 2016, when the conventional wisdom was still 100% that the mine would never enter into permitting and never be built.
Now the conventional wisdom has swung the other way, with at least a small chance that the mine will be permitted now — and given the size of the deposit, and the fact that Northern Dynasty has been publicly stating that they have had productive meetings with Donald Trump’s incoming EPA team, that’s been enough to drive the shares up by 1,000% or so.
That’s now a very open story, we’ve been covering it since the Fall because it has been teased by several newsletters now, starting with Doug Casey and Marin Katusa and leaching over into Porter Stansberry’s letters, and getting lots of attention from everyone in the resource space. I even have some derivative exposure on this one, as a bet that if they go into permitting the price could jolt up even higher (I don’t know if they’ll actually build the mine, but if they get some positive traction on permitting there’s a decent chance that a huge major would buy in with a multi-billion-dollar commitment — which could jolt the shares much higher).
But now that pretty much everyone knows this story, Katusa is moving on to pitch other things for his newsletter — so what are Marin’s “three best junior resource stocks to own in 2017?”
Well, I’d bet that they’re probably all stocks we already know, but let’s see if he provides enough clues to get us some high-confidence answers.
Here are some clues about the first one:
“Best in Show Stock #1: Here’s Where the Next Big Resource Score Will Happen…
“We know being an early stakeholder in an oil-rich region about to be discovered is an incredible way to generate wealth. It’s been a sure money-maker for over 100 years. Any lucky Texas family can attest to that… as well as 5,000 Saudi princes….
“I believe that right now, investors have the same opportunity as investors had in the Bakken back in 2010… an opportunity to claim an early stake in North America’s next monster oil field.… and reap enormous capital gains as a result.
“I believe in this story so much that I’m betting millions of dollars of my own money on it. I’m confident this will be one of the most important investment opportunities we will ever see.
“The next Big Score is going to be made in the Montney Shale….
“While U.S. shale fields like the Eagle Ford get most of the press, the Montney is like the Eagle Ford… but on steroids….
… very recently, drilling teams discovered the “key” to unlocking the Montney’s potential… and now we know it is capable of incredible production.”
Hmmm… he has teased a Montney stock before. What other clues do we get?
“I’ve found the ideal Montney stock….
“This company is small. It is less than 1% of the size of Chevron. Therefore, it has massive growth potential.
“This small firm is managed by a world-class individual with a great track record of success.
“I know the guy personally. I’ve seen up close how he’s a brilliant, hardworking guy who will create value for his shareholders.
“Just as importantly, this individual owns large amounts of company stock. He has a lot of skin in the game. His interests are aligned with shareholders.
“This company owns a large chunk of acreage in the Montney’s richest area. All of the land near this small company’s holdings have been staked out by large oil companies.”
So… that’s not a lot of clues, right? Well, that just means I’ll have to stand behind my original guess on this one — Katusa is using exactly the same language to describe this as he did to pitch his favorite Montney play back in October, though that was also a pitch about specific November drilling results that were going to shock investors and send the stock on a 500-1000% bull run.
But, as I said, it’s not a 100% clear match — the match was clearer in October, partly because Katusa showed a video that was a great match for Montney’s investor tour video on their own website, but the clues are even thinner this time. I’m going with Blackbird Energy (BBI.V in Canada, BKBEF OTC in the US)) mostly because Katusa uses the same language to describe the company and the management team as he did back then… so you can decide for yourself how tenuous that connection is. As I noted when I first covered this one for the Iregulars, I personally own a small position in May 2021 warrants on Blackbird Energy shares, which offer a little bit of leverage.
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Blackbird did announce good results of their new drilling program in mid-November, which essentially meant that the new Stage System helped them to cut costs by 41% over their previous Montney wells, and they then commenced their “Accelerated Business Plan & Drill Program” and have spudded a couple wells, completed the facility and gathering system, and, as of last week, production is now “imminent.”
It’s not, however, an oil company — it’s a gas company. They are producing in an area that is rich in natural gas liquids and condensates, which are more valuable than dry gas and are priced based on oil prices to at least some degree, but it’s still expected to produce mostly natural gas. You can get most of this detail from their quarterly press release of mid-December, and things have mostly proceeded as they predicted in terms of construction time, well drilling, etc.
I don’t know what the cash flow will be from these early wells, but they will soon be generating cash from gas production. We’ll see how it goes.
What else is Katusa pitching? Let’s see if he looses any more clues for us:
“Best in Show Stock #2: The World’s Best Junior Uranium Stock
“If you’ve been reading my work over the past few months, you know I believe the uranium sector has huge upside potential from its current levels.
“Uranium is the fuel we use in nuclear power plants. Used the right way, nuclear power is the ultimate form of clean energy.
“Yet, after the nuclear accident that occurred in Japan after the 2011 earthquake, nuclear energy fell out of favor.”
That’s an understatement — as Katusa notes, the price of uranium before Fukushima was over $70 (it was up over $130 in the 2007 peak before that), and have been trending down ever since.
We’ve covered uranium pitches before, and it was a pretty consistent argument from pundits that the uranium mining industry requires prices to be up over $40 a pound for miners to make a profit and encourage development of new mines… though as the price has fallen further and further that “line in the sand” seems to have been sinking as well. It was inconceivable that prices could fall below $30, then it was inconceivable that they could fall below $20… so it’s hard to know just where the real “inconceivable” line is.
Partly that’s because uranium doesn’t really have live trading or a real “spot” market — some uranium is sold at those prices, but almost all of it is sold on very long-term contracts that have less price volatility. Right now, according to Cameco, the spot price is around $23-24 (down from $34.70 in January 2016, and after being mostly in the $30s since 2013), while the long-term price in December also hit a new low for the year at $30, down from $44 at the beginning of 2016 (after three years in the high $40s and $50s).
So yes, it seems from all applications of logic that uranium prices should rise here. But that was also true in 2014 and 2015 and 2016, during which several newsletter editors have tried to pinpoint the “bottom” for uranium and pitch speculations on uranium rising (the most vociferous of those was probably Dr. Kent Moors, who had similar ads running in each of those years — my most recent discussion of his pitch was last Summer here).