Mickey Fulp Expects “The Summer Doldrums” To Start Soon

By
on 5/31/2014

There are well-known seasonal events that junior resource investors mark on their calendars: At the end of the year, tax-loss selling has become an expected norm with a rebound in the new year. So have stock price spikes immediately after resource conferences. And then there’s the summer doldrums.

We met up with Mickey Fulp, the Mercenary Geologist, at the Metals and Minerals Conference in New York City on May 12 and 13. We asked him what investors should expect in the year to come and some of the companies on his watch list.

Here’s what he shared with us:

“The junior resource market is getting better,” he said, although he certainly wasn’t excited about the pace of the recovery. “The Venture Exchange Index has flat-lined for the last couple of months. You can look back and say it’s been range bound since testing its low back in December and recovering in the month of January. We did not get hit by the PDAC curse, which was encouraging. The Index is floating, plus or minus 1000, lately range-bound between 990 and 1015.”

Even though the recovery pace isn’t rapid, it’s still good news: “I find it encouraging,” Mr. Fulp said. “We hope the ‘sell in May and go away’ adage will not hurt us badly. Certainly we have the summer doldrums looming and we should expect a downtick then.” Ultimately, he predicts the next few months to be “range bound and hopefully flat until everybody comes back to work after Labor Day.”

Next, we talked about some of the companies that Mr. Fulp was paying attention to, as well as a few that he has seen some success with.

“We did quite well on a uranium pick in late December that more than doubled in nine weeks,” he told us, speaking of Energy Fuels (TSX: EFR, MKT: UUUU). “It’s since come off dramatically with the uranium spot price going below $30. No miner can make money at that price. There is just no short-term demand for uranium in the market. How long that will last, no one has an idea.”

One exciting opportunity that has Mr. Fulp’s attention is Nevada Sunrise Gold Corp (TSX-V: NEV). “We hit on Nevada Sunrise. That was a 13 cent stock at the first of the year and it closed May 9 at $1.15.” “NEV is a 22% holder of the Kinsley Mountain Project, which is Pilot Gold’s high-grade Long Canyon-type discovery in Eastern Nevada. I was first on this project in 1978 so I’m elated to see what appears to be a significant discovery there.”

Even though he’s done well on those companies, Mr. Fulp was careful to point out that they may have run their course for now. “I’m not going to tell your readers they should look at Nevada Sunrise at $1.15,” he said. “It already made a big run and may come back and fill-in the gap. I mention it to show that the market is rewarding discovery. This discovery has been much more than a liquidity event for that stock, but two private placements become free-trading soon so there is risk at current levels.”

Here’s another exciting opportunity that Mr. Fulp is involved with: “Our tungsten play, Blackheath Resources (TSX-V: BHR), has done reasonably well. In recent news they earned 71% of the Covas project from Avrupa Minerals (TSX-V: AVU). They have four other past-producing tungsten mines in Portugal and some of those certainly look like they could be flagship projects.

The aforementioned Avrupa Minerals had a polymetallic discovery in the Portuguese Pyrite Belt back in February and recently announced a couple of more drill hits. The project is funded completely by Antofagasta Minerals. That is one to look at for a longer-term play as drilling progresses.”

Even with these success stories and more promising opportunities on the horizon, Mr. Fulp never sits still. In fact, he’s taking advantage of the slow recovery to look at other potentially undervalued companies.

Next we asked about a couple of sectors.

We first talked about rare earth elements: “That is so 2009,” he said. “We made our money in rare earths and moved on in 2011 and 2012. Few of the 200 junior companies actually rewarded shareholders. Countless companies have failed. There are no new mines on the horizon. There is certainly space for a heavy rare earth element producer outside of China but that has not been filled. But where is it going to come from? The leaders in the industry in 2009-2011 have not progressed with economic studies that show they can be profitable mines. Their feasibility and prefeasibility studies have shown that they are sub-economic, metallurgically difficult, and/or cannot be financed. We got into rare earths early and made our money and for the most part, got out.”

To prove his point, he mentioned one of the more successful companies, Tasman Metals (NYSE: TAS), that he still holds a position in. “Tasman Metals is expanding into tungsten and looking to go into other specialty materials in the near-term. Although the rare earth deposit they have is still a viable project, it’s quite a ways down the road.

The next sector we talked about is gold: “I opine that gold is going to be range bound this year and it will close higher on December 31st 2014 than it was on January 2nd. Gold equities, in general, have failed for the past decade. Gold miners are cutting costs, cutting staff, and trying to reinvent themselves by producing fewer ounces with better margins so they can attract and reward shareholders. It’s going to be a while before that happens with more write-offs pending in the remaining three quarters of 2014. The gold juniors have for the most part not found and developed economically-viable deposits.”

Although Mr. Fulp is expecting the summer doldrums to take a toll, he thinks the market overall is improving. “It looks like the market is getting better. Good companies are being rewarded. Financings are available for good projects. That was not the case in 2013.”

DISCLAIMER:

Mickey Fulp is a shareholder of Energy Fuels Inc, Nevada Sunrise Gold, Blackheath Resources Ltd, Avrupa Minerals Ltd, and Tasman Metals Ltd. Energy Fuels and Avrupa Minerals are sponsors of his website.

REFERENCES

Mickey Fulp’s websites: www.mercenarygeologist.com; www.mercenarygeologist.fm

Metals and Minerals Conference site: www.metalsandmineralsevents.com