Mickey Fulp, known as the Mercenary Geologist, spent some time with Metals News at the Metals & Mining Show in New York discussing his contrarian view of the junior exploration and mining sector.
Fulp has a long background in the business. He has more than 35 years experience as an exploration geologist with a B.Sc. from the University of Tulsa and a M.Sc. in Geology from the University of New Mexico. He has had direct experience in exploring a variety of deposits that include precious metals, coal, oil and gas, water, uranium and industrial metals all over the world. His specialty was geological mapping, business development and property evaluation. Using this experience, Fulp leveraged his knowledge and became the Mercenary Geologist, currently using his background to assist investors and companies as a speaker, writer and an analyst.
Fulp is quite direct when describing the condition of today’s market. He said, “This is no doubt a mother of a bear market.” However he feels, “Bear markets present buying opportunities.” Based on his own historical analysis, Fulp has discovered that the TSX Venture Exchange is replicating past historical periods. He said, “The TSX Venture index is approaching levels it was at in late 2002 and is the best proxy we have for the state of the junior resource sector. As a contrarian, I like to buy when everyone is selling.”
Fulp’s contrarian philosophy means that he does find options for purchasing and selling stocks, but not generally at the same time as others. Regarding his way of investing, he said, “We have buying opportunities now with companies that have the right share structure, the right properties, and who have money to continue without severe dilution.” Despite the fact that there are buying opportunities, Fulp believes that the bear market will continue for quite a bit of time. He said, “I don’t see the end of the bear market in sight, certainly not in the short or mid-term.” This is to be expected, according to Fulp. He said, “The business always goes in cycles. You just need to pick stocks that you are willing to hang onto until the market gets better.”
Choosing those stocks can be the real challenge. Fulp has a set of criteria that he looks at to determine if a company is worth investing in during this bearish market. He said, “The businesses have to have cash in the bank or have the ability to raise money without severely diluting shareholders.” In addition, Fulp believes that flexibility in strategic planning is another key component to choosing the right investments in a market like the one we have today. He said, “I think you want to find companies that can forward their projects or who can create mergers and acquisitions or are targets for takeovers.”
Instead of looking at the industry in segments, such as the gold market, uranium market or graphite sector, Fulp’s own preferences are more focused on individual companies rather than particular commodities within the mining industry. He said, “For me I’m more interested in individual companies. I’m bullish on many commodities. I’m probably less interested in specific sectors than I am with specific companies and metals that are in demand, where prices will stay strong.”
Recently, Fulp has added a few new companies to his own investment portfolio and a couple to those that he covers on his website. He said, “I’ve taken on two new companies as sponsors of my website. That means I own them and they pay a fee to be on my website.” Fulp mentioned these companies as ones to watch: Gold Royalties Corporation and Blackheath Resources Ltd. He said, “The royalty model is attractive because it generates cash flow with lower risk than miners.” The other company, Blackheath Resources, specializes in tungsten exploration and development. Said Fulp, “Blackheath Resources has three advanced exploration projects on past-producing mines in Portugal.”
Though Fulp may be bearish on the market right now, he thinks there are opportunities to profit. He said, “Bear markets present the best buying opportunities.” His philosophy is one that can help investors find the best investments. He said, “The people who historically make the most money in this sector are contrarians.” What is Fulp doing in his own portfolio right now? He said, “I’m taking profits on companies bought when they were unknown, unloved, unwanted, and undervalued and buying a new batch of similar companies. It takes some guts to do that. To be successful, you have to be comfortable with high risk / reward scenarios.”
One area that Fulp recommends is the uranium industry. He said, “I remain committed, in the mid to long term, to the uranium market. Uranium will be the answer to the world’s base load energy budget over the next 20 to 30 years. The US uranium developers have seen significant increases from their lows over the late winter and early spring. Smart money is moving strongly into the US uranium sector. The summer doldrums period always presents attractive entry points.”
You can learn more about the Mercenary Geologist by visiting Fulp’s website at http://www.themercenarygeologist.com/.