Bob Moriarty: A Contrarian's Guide to Volatile
Source: Sally Lowder of
The Gold Report
Trotting the globe in his unrelenting quest for investing
opportunities, Bob Moriarty had just completed a 21,000-mile
travel-a-thon when he picked up the phone for this exclusive
The Gold Report
He liked a lot of what he saw, found plenty of bargains along the
way and is willing to name names. Ever the contrarian, he is
picking up stocks when everyone else is dumping them; he plans to
cash in when the mass of sellers morphs into a mass of buyers and
drives prices up.
The Gold Report
We're hearing many people these days warning that it's not a good
time for investing in junior mining stocks. The TSX Venture
Exchange has been experiencing some of its lowest volumes in six
to nine months. What do you believe investors should do this
Anybody following my website for years will be familiar with me
saying this: You can ignore technical analysis. You can ignore
seasonality. You can ignore fundamentals. The only thing you can
ever absolutely make money in is being a contrarian. Some very
big names in the mining industry, including Rick Rule and Eric
Sprott, have said, yes we're in the bottom but it'll be several
months before you should invest. Where were they April 25 last
year, when I said we'd reached the top in silver? For months
afterward, the very best place to be was in cash. You have to
look at what people say and when they say it. Very few people got
it last year, but I clearly was one of them.
We are at a major bottom in gold and gold shares. The fact
that some of the biggest names in the business are telling
investors to bail out or keep their hands on their wallets if
they're tempted to buy is a buy signal. If you have a hundred
people in a room and every single one of them was a bear, the
next trade would be up because you would have run out of sellers.
The fact that the volume is so low speaks volumes all by itself.
There are no buyers-only sellers, and we're about to run out of
those. When that happens, the very next trade will be up.
It's a chicken-and-egg situation. Which came first? In this
situation, was it the bottom or the news? Everybody hears, "The
Dow went up 200 points today because of xyz." They try to connect
news with action and it's exactly the opposite. When gold and
gold shares go up, they'll say it's because of Iran, or Israel,
or Osama bin Laden or Ron Paul. It's nonsense. It will go up
because we're running out of sellers. When you have no sellers,
you only have buyers. It's that simple. Too simple for most
people to understand. But those who do will make a lot of money.
Dawn follows the darkest hours.
But suppose the government announces quantitative easing (QE) 3,
for instance, or some new European debt problems crop up.
Wouldn't such news prompt investors to buy junior gold and silver
Absolutely not. What you hear on the radio, read in newspapers
and most of what you see on the web is not news. It's propaganda.
We have the equivalent of QE3 in Europe, something like $6.7
trillion, and gold, silver and equities have been going down.
There's no connection between news and action. We have been
spring-loaded to believe that the news is important and it's not.
It's meaningless. Six people control 95% of the news media and
you're being told what they want you to believe. That doesn't
mean it's news.
So you have to divorce yourself from the news if you really want
to be a contrarian in investing in mining stocks?
Absolutely. Every time I call a silver or gold top and I'm
perfectly correct, a hundred people immediately write to tell me
how stupid I am in calling a top when in fact they're always dead
wrong. They never tell me a month later; they always tell me as
soon as I say it. Well, I've called tops and bottoms correctly
for 10 or 11 years now. To be able to do that, either I have to
know something other people don't or I have to be the guy doing
the manipulation. And believe me, I'm not the guy doing the
manipulation. All markets are manipulated and that makes
manipulation as close to meaningless as you can get.
The mere fact that shares are hard to sell and there's very
low volume is a buy signal all by itself. If you want to make a
fortune in the junior mining segment, buy when nobody wants to
buy and sell when everybody wants to buy. If that were all you
did, you'd make 100% a year. Juniors have a 200-400% range every
year. Buy when things hit a new low, sell when they hit a new
high and ignore all the "gurus."
You talked about calling silver's high last April, and you've
again been looking at silver and gold assets around the world. Do
you consider yourself more of a silver bull or a gold bull? Or
I'm an agnostic. As for what I look for, I don't look for silver
or gold or boron or natural gas. I look for opportunities. The
Argentex Mining Corp. (ATX:TSX.V; AGXM:OTCBB)
silver property we visited two weeks ago is a hell of an
opportunity, and I said so.
That's in the Santa Cruz Province in Argentina, which has been a
hotbed of exploration activity over the last several years.
Yes, I was actually down there visiting four years ago. I liked
the stock when it was $1.34/share. It's trading at about
$0.38/share now, but two weeks ago it was trading at $0.25/share.
If you're buying shares in silver at $0.25, you're effectively
buying silver equivalent at $0.11/oz. If silver goes down to
$15/oz, you're still going to make money.
Argentex will release a new NI 43-101 any day now, and they've
doubled the amount of drilling, so it wouldn't surprise me to see
the resource almost double. But in any case, when silver was
selling for $5/oz, there were silver company shares selling for
$1/oz in the ground. So, $0.08, $0.11 or $0.20-that's pretty
cheap for an ounce of silver.
Do you look at certain jurisdictions or provinces that are
particularly good for mining activity and then bet on some of
those areas? Or is it always company specific in your view?
It's actually management-specific. You need to look at a lot of
factors, of course, but the most important is management. The
country or province is absolutely important. I'm going to write
an article shortly and will call it "The Miners' Lament." It's
about having a gold or silver or boron project and the price of
the commodity goes up. As soon as the price goes up, governments
get greedy. That's happened in Peru, Bolivia, Ecuador and
Australia. To a certain degree it's happening in Argentina,
because the government has started getting greedy and claiming a
bigger piece of the miners' pie.
On May 4, Argentina's Congress passed a bill to nationalize
, the biggest oil company there, expropriating 51% of Repsol's
shares. Although not entirely unexpected because President
Cristina Kirchner had announced her decision to nationalize YPF a
couple of weeks earlier, the action-pretty much effective
immediately-sent shockwaves through the resource investing
community. Do you think this news makes investing in Argentinian
juniors more risky?
There are a couple of different issues to address here. One is
the stupidity of government in Argentina. In 1914, Argentina had
the third-highest GDP in the world. Based on agriculture and
metal wealth and the educational level of its people, Argentina
still should be one of the wealthiest countries in the world.
It's not, and hasn't been for 100 years now. The reason is 100
years of incredible stupidity in government.
The resources are there. The people are there. The climate's
wonderful. The wine's good. Buenos Aires is a lovely city to live
in. Yet Argentineans suffer economically. For the government to
seize YPF is especially stupid. The excuse was it was not making
enough money out of it-in much the same way that the power
company in South Africa wasn't making a profit because the
government imposed limits on what the power company could charge
for the power it sold.
Governments believe they're smarter than the economy and they
can repeal or modify the laws of supply and demand. They can't.
The last 6,293 times governments have tried to show they're
smarter than the economy, they've screwed it up. Governments just
get in the way of people making money. If you go to Switzerland,
you don't even see government. In Sweden, government's in the
background and that's a welfare state. But, government doesn't
figure into every newspaper article and everything you hear on
the radio. In China, I don't have a clue how the government
works; I just know it's an exciting place to make money.
So let's go back to whether it's safe to invest in Argentine
juniors. I think it is because the juniors are in the exploration
stage and they're bringing money into the country. It would be
especially stupid for the government to get involved at this
point. I don't think it will fool around with the production
companies yet, either, but there's no limit to the stupidity of
Santa Cruz Province in particular seems to be a fantastic
jurisdiction for exploration-great roads, nearby power,
supportive locals. I was impressed.
I was quite impressed too. And I know that you went to see
another project. I saw
Netco Silver Inc. (NEI:TSX.V; NTCEF:OTCBB)
, which is on the Chilean border. It has a similar series of
sheeted veins and high silver grades. The company has been
totally ignored by the market.
Tell us a little bit more about Netco.
When I look at a property, I try to figure out the limits. I saw
a series of sheeted veins, similar to what we saw in Santa Cruz
at Argentex. I think Netco found 10, 12 or 15 kilometers in
strike length. Netco has two problems. First, it's one of the
most god-awful names I've ever heard and, second, the management
hasn't done or said anything for five years, so the market has
totally ignored it. However, that's exactly what I look
Every project I'm going to see now has low-hanging fruit just
begging for somebody to come along and pluck it, take it home and
eat it. How can you beat silver at $0.11/oz? Netco has
2,000-3,000 gram silver intercepts over meters and nobody's ever
heard of them before, including me.
There are so many companies out there now that you could
invest in the biggest piece of crap stock in the universe and it
will be up 100% or 200% in a year. Really good stories, from
Argentex and Netco in Argentina to
Tembo Gold Corp. (TEM:TSX.V)
Canaco Resources Inc. (CAN:TSX.V)
, Kinross Gold Corp. (K:TSX; KGC:NYSE) and Keegan Resources Inc.
(KGN:TSX/NYSE.A) in Africa-you could name 100 companies and
they're going to be up 400% to 500% in the next 18 months.
Well, Bob, let's go off and harvest some of that low-hanging
fruit. You travel the world. Tell us about some of your
One of the real low-hanging fruits has to be Canaco, which went
from an $800 million (
) market cap a year ago to about $80M or $100M now. The stock has
gone from $8/share down to $0.88/share and the company has only
about $0.60/share in cash. But it's worth $800M. Its intercepts
are fabulous. No question whatsoever, it's going to be a mine. It
has no particular issues.
Tembo did a financing at $1/share last year, made its initial
public offering in February, and its stock went up to $2.20 or
$2.30/share shortly afterward. I think it's trading at close to
$0.90 now. Tembo's project in Tanzania is located right next to
Barrick Gold Corp.'s (ABX:TSX; ABX:NYSE) Bulyanhulu gold mine,
and the same team that ran Bulyanhulu is now at Tembo. They're
coming up with intercept after intercept and know exactly what
they have. With a 97,000-meter drill program scheduled, Tembo's
going to have millions of ounces. And the company's being given
How do you view Tanzania in terms of jurisdictional risks?
The real issue there is the infrastructure. Mining provides most
of the country's export income, so it's as important in Tanzania
as it is in Peru. If you want to talk about jurisdictional risk,
look at Peru and think again about "The Miners' Lament." Newmont
Mining Corp. (NEM:NYSE) is trying to build a $4.8 billion mine in
Cajamarca Province. The president of Cajamarca Province is
demanding a $780M slush fund that only he has access to for
"environmental" purposes. I can guarantee it's a bribe and he
wants 1.5% of the purchase price to let Newmont get into
Peru's smart enough. It gets 60% of its export earnings from
mining and now has a process in place whereby some of these
idiots can be thrown out, and I think the local people in
Cajamarca are about to throw him out. There's so much corruption
in Peru. It's like Ecuador and Bolivia-there's no rule of
North of there,
Corazon Gold Corp. (CGW:TSX.V)
operates in Nicaragua. Its stock is going for one-third of the
price from two months ago, and I'm picking up some for myself.
Corazon was smart enough to walk away from the Santo Domingo
concession in central Nicaragua because the terms weren't very
attractive. But just a few weeks ago, the company picked up three
excellent new properties, contiguous concessions along the Rio
Coco in northern Nicaragua.
Going back to Africa for a moment, are there any other names you
Abzu Gold Ltd. (ABS:TSX.V; ABZUF:OTCQX)
has some world-class projects in Ghana and absolutely fabulous
management. In fact, it shares management with
MAG Silver Corp. (MAG:TSX; MVG:NYSE)
, which is one of the big success stories of the last 10 years.
I've not visited Abzu, but I've been to the adjacent mining
property. And getting back to your earlier question, from
geological and jurisdictional points of view, both Ghana and
Tanzania are excellent places to work.
What are some of the North American stories you like, Bob?
First, let's talk about the difference between Canada and the
United States. Canada is a wonderful place to work. I think it's
the most favorable mining community in the world. There's some
invisible line you cross when you go from the U.S. into Canada
and all of a sudden, you become sane. The people in the U.S.
amaze me with their ignorance of politics, economics and
everything that's going on in the world. They're so insular; they
just don't pay attention.
Canada, on the other hand, is still an international country.
The miners and geologists in Canada travel all over the world,
and like Johnny Appleseed, they're spreading goodwill and
knowledge wherever they go. There is no mining anywhere in the
world without an abundance of Canadians, and by the same token,
no mining area anywhere else in the world has an abundance of
Americans except America.
That said, from a geological point of view, there's enormous
opportunity in the United States, but the government's still
being especially stupid. At some point, somebody will realize you
can't keep spending more money than you take in. The United
States is borrowing $0.41 out of every $1 it spends today. That's
insane. Some 88 million Americans are unemployed or
underemployed-88 million people who aren't working and we have
only 64% employment among those who should be working. At some
point, Americans will have to produce something besides
hamburgers and new regulations and idiots in politics.
How does that relate to getting projects in Nevada, Montana and
Arizona permitted and into production?
It's going to get easier. I went to see
Trueclaim Exploration Inc. (TRM:TSX.V;
in Arizona. Silver nuggets, which are extremely rare, were
supposedly found on its property, and the whole story about the
Lone Ranger firing silver bullets apparently came from there.
It's a perfect example of a wonderful project in a wonderful
area. Arizona was settled because of mining in the first place.
But the property is unfortunately on U.S. Forest Service land,
which means jumping through 67 hoops and stumbling through a
bureaucratic minefield to get anything done. That has to
Let's get back to some of the other names you like.
Comstock Mining Inc. (LODE:NYSE.A)
. I was visiting its properties in Nevada about a year and a half
ago. Of course, it has the Comstock Lode, enormously rich in both
gold and silver, and a lot of money in the till. But Comstock
isn't moving as fast as I'd like; I'd like to see things speed up
Evolving Gold Corp. (EVG:TSX; EVOGF:OTCQX;
is really an interesting story. It has a joint venture on its
Rattlesnake Hills project in Wyoming with a subsidiary of
Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE), which has agreed to
spend $75M to earn half the project. So if half of Rattlesnake is
worth $75M, the other half owned by Evolving Gold should also be
worth $75M. But you can buy the whole company including its
Carlin properties for $29M. Go figure. I visited its Carlin
project in December. I think it's very close to a major
intersection where it has been drilling in the Carlin Trend.
Gold Standard Ventures Corp. (GV:TSX.V;
on the same trip, right next door to Evolving Gold. I said in
December that Gold Standard may have already drilled a home-run
hole on a major new deposit and not even realized it. In fact,
that was the case, and its stock has gone from $1/share to about
$2.50/share. Evolving Gold, on the other hand, is in the
$0.22/share neighborhood, so cheap it's insane. It was as low as
$0.15/share in 2008, but up to a couple of bucks in
To have new discoveries cropping up in Nevada is pretty exciting
when you consider how much exploration has been done there. It's
amazing what Nevada is producing in terms of mining opportunity
I'm extremely familiar with the Carlin Trend and what's been
going on there in the last five years, and it's the juniors who
are making the bigger discoveries. I don't even bother talking to
the majors. They aren't developing as many ounces as they're
producing, and they're all going to be out of business in 10 or
15 years. You just can't conduct your business doing it that way.
But with someone like Gold Standard's Vice President of
Exploration Dave Mathewson doing the exploration, the juniors are
coming up with these multimillion-ounce deposits that nobody
dreamed of because they never tried drilling there before.
Obviously, you feel like it's a shopper's paradise in junior
stocks. Are there any other opportunities that you're
particularly keen on that you'd like to talk about?
Anything related to energy is an opportunity. Natural gas is
being given away. And, from a contrarian point of view, it's a
gimmie. Potash is absolutely a big opportunity and graphite is
So you don't think all the buzz about graphite means it's a
bubble, a flavor of the month?
It absolutely is the flavor of the month. But you get a bubble
when about 450 companies are in a space, and now there are only
about 30. I don't expect all 30 to succeed, but I own about five
of them. I'm quite happy to because I think there's a wonderful
opportunity there. When it gets to 450 companies, I'll probably
start selling some of my shares. Every investor should be
familiar with Hobson's Choice.
Hobson was an innkeeper in rural England back in the 1700s. He
was very lazy. If someone came to him asking for a trotting horse
to ride around the village for an hour or two, he'd fetch the
first horse nearest to the door of the stable. It might be a plow
horse. So Hobson's Choice was no choice at all or the best of a
We live in a financial environment in which every bank in the
United States has been bankrupt for four years and everybody is
still pretending they're going to survive. In Spain, 52% of the
young people are unemployed. We are so close to a global
revolution, it terrifies me. In that situation, you have to go to
safety. So investors have no choice, really. And believe it or
not, I don't see anything safer than juniors-gold or graphite or
boron or natural gas or potash. If you are faced with a choice of
investing in U.S. T-Bills or Greek bonds or Spanish bonds or
resource juniors, what would you invest in?
People always have to eat and need a way to trade.
You've got it. But they must have something of value to trade. I
don't know whether the gold price will be $500/oz or $5,000/oz or
$50,000/oz, but I can tell you that in two, three or five years,
if you have a 10-ounce bar of silver in one hand and a 1-ounce
gold coin in the other, you'll know you're holding something of
value. Marc Faber says everybody should buy a $1M T-bill, put it
in a nice frame, hang it on the wall and in 10 or 20 years when
the grandkids visit, they can point to it and say, "See that?
That used to be money." Paper money is already a relic. It's not
a prediction-it's here now. [
Faber, who produces a monthly investment newsletter,
Gloom Boom & Doom Report,
chatted recently with
The Gold Report
You've given us some good stuff to chew on, Bob. Thanks so much
for your time.
Convinced that gold and silver were at their bottoms, and
wanting to give others a foundation for investing in resource
and Barb Moriarty brought
to the Internet 11 years ago, and later added
to cover oil, natural gas, gasoline, coal, solar, wind and
nuclear energy. Both sites feature articles, editorial
opinions, pricing figures and updates on the current events
affecting both sectors. Before his Internet career, Moriarty
was a Marine F-4B pilot and O-1C/G forward air controller with
more than 820 missions in Vietnam. A captain at age 22, he was
the youngest naval aviator in Vietnam and one of the war's most
highly decorated. He holds 14 international aviation records,
and once flew an airplane through the Eiffel Tower's pillars
"just for fun."
Want to read more exclusive
interviews like this?
for our free e-newsletter, and you'll learn when new articles
have been published. To see a list of recent interviews with
industry analysts and commentators, visit our
1) Sally Lowder of
The Gold Report
conducted this interview. She personally and/or her family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are
The Gold Report:
Argentex Mining Corp., Tembo Gold Corp., Abzu Gold Ltd., MAG
Silver Corp., Comstock Mining Inc., Evolving Gold Corp., Corazon
Gold Corp. and Gold Standard Ventures Corp. Streetwise Reports
does not accept stock in exchange for services.
3) Bob Moriarty: I personally and/or my family own shares of the
following companies mentioned in this interview: Tembo Gold
Corp., Evolving Gold Corp., Trueclaim Exploration Inc., Gold
Standard Ventures Corp. and Corazon Gold Corp. My website is paid
by the following companies mentioned in this interview:. Argentex
Mining Corp., Tembo Gold Corp., Abzu Gold Ltd., Comstock Mining
Inc., Evolving Gold Corp., Gold Standard Ventures Corp. and
Corazon Gold Corp. I was not paid by Streetwise Reports for
participating in this story.
The Gold Report
is Copyright © 2012 by Streetwise Reports LLC. All rights are
reserved. Streetwise Reports LLC hereby grants an unrestricted
license to use or disseminate this copyrighted material (i) only
in whole (and always including this disclaimer), but (ii) never
The Gold Report
does not render general or specific investment advice and does
not endorse or recommend the business, products, services or
securities of any industry or company mentioned in this
From time to time, Streetwise Reports LLC and its
directors, officers, employees or members of their families, as
well as persons interviewed for articles on the site, may have a
long or short position in securities mentioned and may make
purchases and/or sales of those securities in the open market or
Streetwise Reports LLC does not guarantee the accuracy or
thoroughness of the information reported.
Streetwise Reports LLC receives a fee from companies that are
listed on the home page in the In This Issue section. Their
sponsor pages may be considered advertising for the purposes of
18 U.S.C. 1734.
Participating companies provide the logos used in
The Gold Report
. These logos are trademarks and are the property of the
101 Second St., Suite 110
Petaluma, CA 94952
Tel.: (707) 981-8999
Fax: (707) 981-8998
For more information, go to