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Kaiser Media Watch Blog - January 1, 2023 to January 31, 2023

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The KRO Blog is where unrestricted content of a time sensitive nature is posted. It includes the Kaiser Media Watch Blog which features content involving John Kaiser produced by third parties such as the Discovery Watch series by HoweStreet.com, interviews by outfits such as Investing News Network, SDLRC related commentary, the KRO Monthly Summaries, and just about anything else John writes that is not intended exclusively for the fee based KRO Membership.

Posted: Jan 26, 2023JK: Kaiser Watch January 26, 2023 with Jim Goddard and John Kaiser
Published: Jan 26, 2023KRO: Kaiser Watch January 26, 2023: Geopolitics & Energy Transition as Junior Drivers
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

Podcast Download

Kaiser Watch January 26, 2023: Geopolitics & Energy Transition as Junior Drivers
Jim (0:00:00): You will be in Vancouver this weekend for the Metals Investor Forum. What will be the topic of your presentation?

The Vancouver January 2023 Metals Investor Forum will be held on Friday and Saturday (January 27-28) at the Fairmont Pacific Rim Hotel across from the convention center where the Vancouver Resource Investment Conference will take place on Sunday and Monday (January 29-30). My MIF session will be on Saturday between 11:20-12:50. The conference is free but you must register in advance. My presentation will be about the "Implications of Geopolitics and the Energy Transition for Resource Juniors".

The most pressing global themes today are 1) the push to achieve zero net emissions by 2050 in order to keep global warming to a 1.5 degree celsius gain above pre-industrial revolution levels, and, 2) the showdown between autocracy and democracy that is pitting China and Russia against the United States and Europe, with the rest of the world wondering which side to choose. These two themes conflict with each other but both have positive implications for the resource juniors and the reasons why I think the decade long bear market for resource juniors is over, at least for the next few years.

Earlier this month the International Energy Agency published its Energy Technology Perspectives 2023 report. It is a 48 MB pdf with 458 pages which I am still digesting after it emptied my laser printer's toner cartridges. The IEA is a non-profit organization created in 1974 in response to the OPEC oil shock to serve as a think tank for energy security and policy. It is an extension of the OECD (Organization for Economic Co-operation and Development) and its membership is restricted to OECD members. It is a collection of democracies from which autocracies like China, Russia and Saudi Arabia are conspicuous by their absence.

It is a fascinating report which looks at a near term 2030 target for the expansion of EV sales toward ultimately replacing ICE car sales to eliminate CO2 emissions from fossil fuel combustion in the transportation sector. It also assumes that the solar and wind power will continue to expand as costs keep dropping, and that the intermittency problem of these renewable energy sources will be solved by using their surplus energy to conduct electrolysis of water to make hydrogen that can be burned to make electricity when the sun is not shining nor the wind blowing. The IEA's vision only sees light vehicles being powered by battery charged electricity. Heavy duty vehicles used for transportation of people and goods (trucks and buses) will be powered by hydrogen fuel cell technology in 2030 and beyond.

The IEA is also realistic about natural gas as an energy source. Natural gas is a problem for home heating because there is no way to capture the CO2 emissions from every home's furnace and so the IEA sees electricity powered heat pumps as the future source of heat for residences. It sees nuclear energy as only supplying 5% of the future's electricity needs, and instead sees reforming natural gas to make hydrogen while capturing the carbon at giant conversion facilities and piping it as carbon dioxide to storage facilities. They call this "carbon, capture, utilisation and storage" or CCUS. Although lithium ion batteries are seen as suitable to power light vehicles, the technology is deemed inadequate for the needs of long distance transport involving heavy duty vehicles. The problem with fossil fuel combustion is that it is impossible to capture tailpipe CO2 emissions, but hydrogen fuel cells simply emit water.

The hydrogen scenario as a source of grid electricity or direct fuel for heavy duty transportation is still a decade down the road, but this technology has interesting implications for future platinum group metal demand, especially for elements like iridium which most people have never heard of except as the clue that helped explain what wiped out the dinosaurs 65 million years ago. Figure 1.6 shows the growth of six clean energy technologies from a 2021 base to 2030 and 2050. It is clear that solar-wind energy installations and electric cars are the key growth areas from now until 2030.

The IEA report is very helpful for helping one understand how the experts think the energy transition will achieve net zero emissions by 2050, but its real relevance to the resource juniors is what it sees as the 2030 target which is a major shift from ICE to EV car sales. What impressed me about the IEA report was that it has put its finger directly on a very serious problem, namely that the critical metal supply needed to make the EV goals for 2030 a reality are not yet in place, and given the abysmal history of mine development timelines, the report is brimming with urgency to ramp up mining investment over the next few years. The elephant in the room it ignores is the reason it takes so long to produce new metal supply, namely the horrendous permitting system particularly in OECD member countries where no autocrat can declare "make it so". Figure 1.11 is important because it shows two things: 1) how much average yearly CapEx must expand to for 2023-2030, which it splits between upstream mining and downstream processing and clean technology manufacturing. It also shows the time window available to make final investment decisions, and while it stretches to 2027-28 for processing and manufacturing decisions, the window for mining decisions is 2023-2025. In other words, a massive amount of capital needs to be committed over the next few years to mine development involving the 5 key critical minerals.

The metals the IEA highlights are copper, nickel, lithium, cobalt and the magnet rare earths. Of these copper and the rare earths are related to the motors and wiring of EVs while nickel, lithium and cobalt are related to the batteries. Cobalt is the least important because R&D is working to eliminate it mainly because its 65% supply from Congo is seen as an unmitigable risk factor. I've selected a few graphics from the IEA report which illustrate why this report is so important and in effect a blueprint for the resource juniors.

Figure 3.3 presents the 5 critical metal groups in terms of expected NZE related usage for the 2030 and 2050 goals using 2021 as a baseline. Eyeballing those bar charts it looks like copper needs a 50% supply expansion to meet 2030 NZE needs, nickel needs a 100% expansion with a slightly higher gain for cobalt, magnet rare earths (the IEA uses neodymium as the placeholder for the Nd-Pr-Dy-Tb group) also need a doubling of supply, but the stunner is lithium which needs a 600% gain from 100,000 tonnes of metal in 2021 to 700,000 tonnes in 2030. The 2050 NZE goal requires lithium supply to increase 1,200% from the 2021 level, though by 2040, as Figure 3.5 shows, lithium battery recycling will start to become a major part of annual supply. Figure 3.8 is important because the left part shows what regions will receive $180-$220 billion in mining investment that has already been earmarked, while the right part shows how much each of 4 critical minerals (nickel, copper, cobalt, lithium) needs from the required $360-$450 billion investment, and what portion is not yet committed. In the case of nickel and lithium only half their required investment has been earmarked, whereas for copper which requires 62% of the total, only a third of that need is identified.

Lithium supply requires only 4% of this total required investment by 2030, which would be $14-$18 billion of which only half has been identified, which makes lithium seem not so important. But Figure 3.6 makes it very clear what a huge change in annual global demand lithium faces by 2030 when recycling will not yet be a meaningful source of secondary supply. In 2021 the global copper supply was worth nearly $200 billion at the average price of $4.22/lb. An EV uses 6 times as much copper as an ICE car. All this talk about the world needing more copper supply is valid but it is building on an already huge base. In the case of nickel the IEA sees a 100% demand growth, which is also a big deal because in 2021 the nickel supply at $8.38/lb was worth $50 billion. However, it is unclear in light of the growing interest in lithium iron phosphate batteries for cheaper cars in China and India to what extent nickel-manganese-cobalt batteries will be part of the EV rollout.

In the case of lithium there is no substitution for the batteries used by the EV fleets the carmakers are developing and marketing. The IEA expects lithium demand to grow 600% by 2030, and over 1,200% by 2050 though by then a large part of the supply will come from recycled batteries. The lithium supply by 2030 is the most pressing problem in the energy transition, which is why Lithium Mania 2.0 has reached a tipping point. The need to identify and mobilize new lithium, nickel and copper supply over the next decade will be very good for the resource juniors, especially in the case of lithium where the major producers have little experience. If the 2021 price of $15/lb lithium carbonate becomes the new long term reality, the annual lithium market will be worth $100 billion by 2030, and $200 billion by 2050. If there is one point to take home from the IEA report, it is this incredible lithium supply expansion over such a short period, with its future source to be identified in the ground over the next three years, required to make the primary 2030 net zero emission goal a reality.

The IEA Membership List

ETP 2023 Figure 1.6 - Clean Energy Paths to Net Zero Emissions

ETP 2023 Figure 1.11 - CapEx needed and Decision Windows

ETP 2023 - Lithium, Copper, Nickel, Cobalt, Rare Earth required demand growth

ETP 2023 Figure 3.5 - Critical; Mineral Recycling Supply Growth Timelines

ETP 2023 Figure 3.8 - 2030 NZE Goal required mining investment and gap

ETP 2023 Figure 3.6 - NZE 2030 projected demand growth for Critical Minerals

The Value of Copper Supply in 2021

The Value of Nickel Supply in 2021

The Value of Lithium Supply in 2021
Jim (0:11:15): What are the implications of geopolitics for resource juniors?

Geopolitics has positive implications for resource juniors in two different ways, both related to the showdown between autocracy and democracy which has three general outcomes. The first outcome is that the alliance between China and Russia hardens, as a result of which the United States and Europe representing a rules based democracy order square off against authoritarian nations, with emerging market countries deciding which side to take. This will result in global economy splitting into two distinct trading zones. Given that rare earths come mainly from China, and both China and Russia are a major source other metals, and China is a major processing center for converting concentrates into end-use feedstocks like lithium carbonate or hydroxide, this will cause a scramble by the democracy group to find new supply in secure jurisdictions that also have the greatest permitting obstacles. Inadequate supply of key critical minerals would hurt the EV goals for 2030. But it would make discovery oriented exploration by resource juniors very important. And if it results in higher real metal prices, it would allow pounds in the ground to be developed in a manner similar to what happened during the 2000-2010 China super cycle.

This splitting of the world into autocratic and democratic zones is also very positive for resource juniors because half the world will cease using the US dollar to settle its trade in goods and services. At the moment nobody really wants to settle in rubles or RMB, but central banks everywhere are working on their own digital currency platforms so that they can escape geopolitical sanctions imposed by the United States. Gold is a fungible asset class consisting of 6.4 billion ounces in above ground stock worth about $12 trillion today. Central banks from autocracies stepped up gold buying in 2022 rather than buy US treasury notes. This trend will continue and gradually push up the price of gold in real terms, not just to reflect inflation.

The gold market is very deep. In 2021 the market bought 96.5 million ounces of new mine supply worth about $174 billion. No new mine will ever be big enough to affect the price of gold negatively. Whatever the juniors discover and get developed as a mine can be sold at the prevailing gold price. In 1992 Francis Fukuyama wrote a book called the end of history to celebrate democracy's victory over autocracy. The great western hope was that China and Russia as they became part of a globalized economy would evolve into democracies as prosperity flourished. But Russia never had a chance thanks to the looting of the country's resources by the oligarchs whom Putin was able to get under his thumb. And in 2014 Xi Jinping decided to make sure the Chinese Communist Party remained in charge of everything. Putin's invasion of Ukraine made the embrace of autocracy by China and Russia official. History is back and gold demand will grow as history weaves an uncertain future.

The second potential outcome for the autocracy-democracy showdown is that the United States itself mutates into an autocracy that squares off against every other country except those it can bully into being an ally such as Canada. Donald Trump personifies this desire to turn the United States into a thug nation where a small group jams its belief system down everybody's throat such as we have seen in places like Afghanistan. This outcome is very bad for the energy transition goals but very good for gold demand because if this happens in the United States, the nation will become vulnerable to a breakup into smaller states such as California and Texas whose economies individually are bigger than that of Canada. This fracturing will not be good for the US dollar. But even if the United States can enforce domestic thug rule to prevent a breakup into the DisUnited States of America, the rest of the world will start to shun the US dollar whether they are competing autocracies or still democracies. Whether resource juniors can flourish in such an environment is a different question I am not going to bother with because I think this outcome is so very undesirable and hopefully unlikely.

The third outcome is that China and Russia undergo domestic revolutions that ousts their strongman leaders and allows these resource rich and powerful nations to embrace democracy as a political structure which enables globalized trade to be restored and the energy transition goals be pursued collectively. This is the most desirable outcome for the good of the world but it is not positive for gold demand. Nor would it be helpful for resource juniors when the richest and lowest costs deposits once again dominate global metal supply. However, I think we are in no danger of this outcome becoming reality, and even if it starts to trend in this direction, it will take years to become realit

Percentage of Global Metal Supply China and Russia Reporesent

What share of the Global GDP Pie will the Autocracy and Democracies Alliances Represent?

USD Dollar "safe haven" rally peaked in H2 of 2022

The Value of the Gold Supply in 2021

Gold Price Reversal not reflected by GLD holdings growth

Western gold bugs not visibly driving gold uptrend
Jim (0:23:35): What are the implications for the five companies in your Metals Investor Forum session?

I have five excellent companies in my session: Eagle Plains Resources, Vanstar Mining Resources, FPX Nickel, Solitario Zinc and Amarc Resources. None of them are involved in lithium. Two are involved in gold, one in nickel, one in copper, and one is a prospect-generator with an exciting zinc-lead-silver exploration play. More detail on them in next week's KW episode.

Amarc Resources Ltd (AHR-V)

Fair Spec Value
Joy Canada - British Columbia 3-Discovery Delineation Cu Au
Eagle Plains Resources Ltd (EPL-V)

Fair Spec Value
Vulcan Canada - British Columbia 2-Target Drilling Zn Pb Ag
FPX Nickel Corp (FPX-V)

Good Spec Value
Decar Canada - British Columbia 6-Prefeasibility Ni
Solitario Zinc Corp (SLR-T)

Fair Spec Value
Golden Crest United States - South Dakota 2-Target Drilling Au
Vanstar Mining Resources Inc (VSR-V)

Bottom-Fish Spec Value
Nelligan Canada - Quebec 4-Infill & Metallurgy Au
Disclosure: JK owns FPX Nickel and Eagle Plains; Amarc Resources, Eagle Plains, Solitario Zinc are Fair Spec Value rated 2023 Favorites, FPX Nickel is a Good Spec Value 2023 Favorite; Vanstar is Bottom-Fish Spec Value rated

Posted: Jan 19, 2023JK: Kaiser Watch January 19, 2023 with Jim Goddard and John Kaiser
Published: Jan 19, 2023KRO: Kaiser Watch January 19, 2023: A James Bay Area Play Tipping Point?
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

Podcast Download

Kaiser Watch January 19, 2023: A James Bay Area Play Tipping Point?
Jim (0:00:00): Eskay Mining provided an update for last year's work in the Scarlet Ridge area. What are the implications for an Eskay Creek 2 discovery?

Eskay Mining Corp announced on January 18, 2023 the results for the first 15 holes in the Scarlet Ridge area which create hope that the Eastern Anticline at the northern end of the Eskay property just 7 km southeast of Eskay Creek 1 has potential to host a similar gold and silver enriched VMS system. This area has seen little historical exploration which was focused on the main Eskay Anticline, immediately south of what is now Skeena's Eskay project and is called the Sib-Lulu area where SSR spent $7.7 million between 2017-2018 before dropping out, and farther south in what is now the TV-Jeff area.

Unfortunately none of the results reported for the Scarlet Ridge area include anything resembling hole 109, or even the 22 Zone to the southwest where Murray Pezim's Calpine drilled first before the 1 km stepout got lucky. The holes in the Scarlet Valley area for which assays were reported were less than 5 m intervals with gold below 1 g/t though silver grades were impressive at 12-96 g/t (0.5-3.0 opt). The company now views this mineralization is distal to the Tarn Lake-Scarlet Knob area about 3 km to the southwest.

The Tarn Lake-Scarlet Knob area was drilled later in the season and only Tarn Lake got any holes of which assays have been received for 15 holes. Of these 3 were deemed significant enough to be worth reporting in Wednesday's press release. Hole 10 had the best interval of 5.43 m of 4.1 g/t gold and 98.3 g/t silver. Eskay Mining did not say how many holes are still pending. A drill plan showing labeled locations and traces for the Tarn Lake holes was not provided in the press release though one was for the Scarlet Valley holes to the north. Leapfrog 3D images were provided for some of the Tarn Lake holes but these do not create a sense that a significant zone is emerging.

The Tarn Lake and Scarlet Knob targets sit across an 850 m wide portion of the Bruce Glacier which peters out to the north towards the Scarlet Valley area. Both areas yielded good gold and silver values from surface grab samples, with the best gold values on the eastern side in the Scarlet Knob area. The Scarlet Ridge to Tarn Lake area is underlain by the Eskay Rhyolite which hosts Eskay Creek 1 and is cut by a series of east-west andesite dykes interpreted as feeder structures for the stockwork and replacement style mineralization present at surface. John Dedecker believes Tarn Lake and Scarlet Knob are part of the same system under the glacier.

The results for the Scarlet Ridge area qualify as "encouraging" which means Eskay Mining plans to return in the summer to delineate these zones. The company is currently investigating if it can drill through the glacier. I downgraded Eskay Mining from a Fair Spec Value rated 2022 Favorite to my 2023 Bottom-Fish Collection, a move that the latest results vindicate. The junior drilled 29,500 m in 2022, much of it the TV-Jeff area where it would also like to return in 2023. We will find out how much most of this work cost at the end of January when the 9 month November 30 financials are due.

While I have Eskay Mining in my 2023 Bottom-Fish Collection, the stock chart is not yet showing signs of a bottom. In terms of the rational speculation model, this project, which I now treat as still being at the target testing stage in search of a major discovery, has an implied value of $176 million which represents poor speculative value for even a $2 billion future outcome. I would consider bottom-fishing after we learn what the balance sheet looks like, see how the market reacts and how CEO Mac Balkam will fund whatever the 2023 summer program will be. After March 8 there will only be 2.2 million warrants left at $3.40 from last year's flow-thru financing, so in terms of a warrant overhang Eskay Mining will be very clean. By Q2 of this year we will know if 2023 is indeed shaping up as a better year for the resource juniors, especially if gold remains strong. But right now there are cheaper and more timely bottom-fish to chase.

Eskay Mining Corp (ESK-V)

Bottom-Fish Spec Value
Eskay Canada - British Columbia 2-Target Drilling Au Ag Cu Pb Zn

Eskay Drill Results for Scarlet Ridge Area

Drill Plans for Scarlet Valley and Tarn Lake areas

Relative Locations of Scarlet Valley, Tarn Lake & Scarlet Knob targets

Implied Project Value Chart for Eskay Mining
Jim (0:06:54): Why was Patriot Battery Metals halted in late trading on Wednesday?

Patriot Battery Metals was halted around noon west coast time January 18, 2023 pending a news release. Since the company at $8 with 132 million fully diluted already has a $1 billion plus valuation and has drilled 100 holes into the CV5 pegmatite of its Corvette project in Quebec's James Bay region, I wasn't expecting assay results. I also wasn't expecting a bought deal financing because the company had raised $20 million at $13 in September and another $4 million with its ASX listing IPO. The next important milestone is a resource estimate for the CV5 pegmatite which sets the stage for economic studies but that won't happen until Q2 at the earliest.

A more plausible reason for a mid market halt in the current circumstances is that the company had received a takeover bid or perhaps a major financing offer at a premium to market from a strategic investor. For example, Rio Tinto has made no secret about being interested in the future of lithium supply, and the James Bay region is shaping up as a world class region. I don't think Patriot would consider a farmout offer as happened in the early days of the 1990s diamond boom in the Northwest Territories because the capital markets for major discovery plays are so much more evolved these days.

A negative reason for such a halt would be the arrival of a lawsuit challenging Patriot's title to the Corvette project. There is an adage that no world class discovery is real until a lawsuit has been filed. Another reason could be that a First Nations group has secured an injunction against further exploration work, something that is a risk factor in Canada, though not so much in Quebec where First Nations groups are much more involved in commercial activity than in northern Ontario.

As it turns out, none of these explanations apply because the news was that the best hole yet had been received for the Corvette project. The CV5 cluster which includes CV1 and CV6 has been traced over a 2.2 km strike length. Over 100 hundred holes have been drilled into the CV5 cluster, but on January 18 Patriot reported results for holes 67-83 which included several holes at the northeastern end of what technically is the CV1 pegmatite of which #83 yielded 156.9 m of 2.12% Li2O, including a sub-interval of 25 m of 5.04%. At $30/lb lithium carbonate that 5% interval has a rock value of $8,178 per tonne, while the broader interval at 2% has a rock value of $3,271 per tonne. If you want to use $10/lb as a long term price, dividing those rock values by 3 still leaves impressive figures.

The latest results represent a substantial thickening and enrichment of the spodumene zone at the northeast end. Between hole 17 and 83 there is a 250 m segment of high grade, wide pegmatite. A lake which tracks the linear trend of the CV5 cluster obscures at least another 2 km of potential strike extension at the end of which is the CV4 outcrop on the north shore that has not been drilled. A 100 m stepout in hole 93 is described as containing 52.2 m of spodumene.

If we do a back of the napkin tonnage footprint calculation where we assume 2 km of 50 m width and 200 m downdip extension with a 2.6 specific gravity, we end up with 52 million tonnes of open-pittable rock generally grading at least 1% Li2O which is $1,636 rock. With the strike doubling potential the market can dream of a 50-100 million tonne target. By Q3 of 2023 we could have a resource estimate which defines real numbers, an example of how quickly a world class near surface pegmatite can be delineated. I'm not sure the stock needed to be halted with an hour of trading left, but nothing grabs the market's attention better than being halted for an intersection that is the best yet and not an infill hole.

Patriot Battery Metals Corp (PMET-V)

Unrated Spec Value
Corvette Canada - Quebec 3-Discovery Delineation Li

Map showing main lithium deposits in James Bay Region

Geology Map for Patriot's Corvette Project

Pegmatite Locations within Corvette Claim Block

Drill Plan for CV5 Cluster

Tables for CV5 Cluster holes 15-56

Tables for CV5 Clsuter holes 57-83

Implied Project Value Chart for Patriot Battery Metals
Jim (0:14:34): Does the Patriot news have any implication for 2023 Favorite Brunswick Exploration?

Whenever a junior in a region delivers new and better results than previously known, it provides a powerful boost for area play psychology and in this regard Brunswick Exploration is particularly well positioned to benefit from the latest news by Patriot Battery Metals. I have Brunswick as a Fair Spec Value rated 2023 Favorite because the junior has been assembling land packages with LCT pegmatite potential since early 2022 when Bob Wares first wondered if he was too late for the lithium pegmatite hunt in Canada. It turns out he wasn't. Bob, his CEO Killian Charles and other members of this team have been going through the Canadian assessment archives digging up records of pegmatites encountered in the course of a century of exploration for base and precious metals deposits.

To their surprise much of the land with recorded pegmatite bodies was still open. Brunswick has staked claim packages in Atlantic Canada, Ontario, Quebec's James Bay region, and, just this week, 80,000 ha in Saskatchewan - most of the so called Trans-Hudson claims are within a triangle bounded by Flin Flon, La Ronge and Southend within which bottom-fish rated Searchlight Resources scooped the Jan Lake pegmatite field late last year when it came open. It isn't obvious that these will be LCT type pegmatites, but there is no evidence anybody ever tried to assess their potential, so who knows.

The stock took a small hit at the start of 2023 when Brunswick provided an update which reported that it has downgraded the potential of its Atlantic Canada prospects, the North Shore prospect on the St Lawrence, and the Pontiac area south of Val D'Or. This was accomplished by putting boots on the ground armed with XRF guns to see if any of the reported pegmatites kicked rubidium, meaning they were potentially LCT type, and visibly large enough to be worthwhile targets. In New Brunswick and Nova Scotia it turned out that not much was visible, meaning a lot more work to identify worthwhile drill targets is required. And at North Shore sampling did not show promising lithium values, as was the case at Pontiac. But at the Hearst project in Ontario, which they first staked in April but did not announce until October because it took that long to option an inlier claim, they have some serious size pegmatites they will be drilling by early February.

The biggest coup, however, was when Bob as an Osisko founder used his connections to secure 90% options on the Anatacau and Plex projects from Osisko Developments which inherited them when Osisko Gold Royalties merged with Andre Gaumond's Virginia Mines. The Corvette package was originally owned by Osisko which optioned it to Patriot in 2015 because Dave Hodge wanted to jump onto the Lithium Mania 1.0 bandwagon. Patriot's predecessor never got much done because lithium prices tanked in 2018 and did not revive until 2021 when Australians adopted the twice rolled back junior.

Andre Gaumond was never interested in lithium pegmatites but the claim packages he staked for their greenstone hosted base or precious metals potential typically straddled that portion where evolved pegmatites show up. Back then Francois Goulet was a junior geologist for Virginia and he recalls how Andre absolutely forbade the crew to waste time and money collecting samples from the bare ridges where they preferred to sample because there were no mosquitoes or bush but which Andre knew were pegmatites that never hosted gold or copper.

In late November Brunswick announced the Plex and Anatacau deals which are not cheap, but with the machine like method Brunswick developed in 2022 these will very quickly reveal any lithium pegmatite potential this summer. In the case of Anatacau that claim package includes a claim that adjoins to the east of the Cyr pegmatite which Paul Matysek's Lithium One delineated in the early 2010s before being acquired by ASX-listed Galaxy which ultimately merged with Allkem, currently permitting the proven and probable reserve of 37.2 million tonnes of 1.3% Li2O. On January 13, 2023 the Canadian federal government gave approval for Allkem to develop the Cyr project, though to go ahead the Quebec provincial government must also approve the project.

Galaxy had apparently intersected lithium enriched pegmatite at the eastern end of its property within 100 m of the Anatacau project but never followed up. Bob Wares thought that was strange but was happy to option Anatacau which will be drilled in late February and could have an extension or repeat of what is now called the James Bay project. In a curious turn of events Allkem came knocking on Osisko's door in early January to inquire about the Anatacau claims, and was surprised to learn they were too late. Were they just getting around to tying up a loose end that didn't really matter, or were they asleep at the switch, allowing Brunswick to snag a play will be be quick and easy to make or break with a Q1 drill program?

The Patriot news at Corvette is most relevant to the Plex project which straddles the same greenstone belt that hosts the Corvette trend, except it begins where the southwest-west trend inflects into a northwest-west trend. Being part of the Virginia land package it has never been assessed for its pegmatite potential and clearly does not have as much outcropping as the Corvette area or Patriot would have begged to option that also from Osisko. Francois Goulet who ran Harfang Exploration for Andre Gaumond until late 2021 is now Brunswick's exploration manager for Quebec with the task of figuring out all those ridges he was forbidden to prospect more than a decade ago. Brunswick finished 2022 with $10 million working capital so does not need to finance during H1. With potential results flowing from Hearst and Anatacau in late Q2, the market will be primed to see what the western extension of the Corvette trend yields. The main significance of the latest Patriot results beyond helping its stock price higher is that they elevate the market's perception of the James Bay region's potential to a new level. That news may be the tipping point that turns the James Bay region into an area play where everything gets staked up regardless of the relevance of the geology for LCT type pegmatite emplacement, and a combination of Australian, ex-cannabis and Canadian capital floods into James Bay projects. If this turns out to be true, Brunswick, which has been using geology and archival research to drive its staking and optioning strategy, should become a major target of speculators looking for the next CV5 discovery by an early stage junior.

Brunswick Exploration Inc (BRW-V)

Fair Spec Value
Anatacau Canada - Quebec 2-Target Drilling Li

Location of Brunswick's Osisko-Plex and Midland-Mythral Options

Detail Map of Plex and Mythral Projects

Map of Anatacau Option and Allkem's James Bay project

Implied Project Value Chart for Brunswick Exploration
Disclosure: JK owns shares of Brunswick Exploration; Brunswick is a Fair Spec Value rated 2023 Favorite; Eskay Mining was a Fair Spec Value rated 2022 Favortie and is now a member of the 2023 Bottom-Fish Colelction; Patriot Battery is unrated

Posted: Jan 13, 2023JK: Kaiser Watch January 13, 2023 with Jim Goddard and John Kaiser
Published: Jan 13, 2023KRO: Kaiser Watch January 13, 2023: The first grade smear of the new year!
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

Podcast Download

Kaiser Watch January 13, 2023: The first grade smear of the year!
Jim (0:00:00): How is the new year treating the 2023 Favorites Collection?

So far 2023 is shaping up to be very promising for the resource juniors. Gold has made it above $1,900 as the USD weakens against other currencies. December CPI came in at 6.5%, down from 7.1% in November and continuing a retreat the market hopes will cause the Federal Reserve to pause its interest rate hike strategy though the signaling suggests ongoing incremental 0.25 point hikes rather than 0.75 point hikes. Gold is supposedly going up because inflation is going down, which is a new story for me. During the past decade inflation below the federal target of 2% kept gold below $1,300 while the general equity market boomed. But given the costs of the energy transition and the post-globalization push to reshore into secure but more expensive jurisdictions I have a hard time seeing inflation dropping back to 2% anytime soon unless they jam rates even higher to create a recession that finally discourages workers from demanding more money.

Metal prices are shrugging off recession worries, perhaps because Xi Jinping has given up on its zero-covid policy so that the Chinese economy can grow again. Copper has clawed its way back above $4/lb. Iron ore is perking up as are other base metals such as tin and zinc though nickel is lagging because of the Indonesian expansion of supply. Molybdenum has surprised everybody with a 50% move in December that took it over $30/lb. This move is being attributed to Chinese gas pipeline construction and ship-building which seems a bit ominous. The magnet rare earths continue to inch higher. Lithium carbonate which was the only star metal performer in 2022 has eased back ahead of the Chinese lunar new year which runs January 21-27. China is not publishing any meaningful data about covid infections but it is clear that it is rampaging through the big cities. When people travel home for the new year the rest of the country will get infected so post holiday economic activity may be slow picking up and nobody wants to be holding raw material stock. The general view is that supply chain bottlenecks will disappear which could help ease inflation when goods become more readily available. The rebound in metal prices seems to be based largely on the notion that China will focus its attention in 2023 on growing its economy rather than suppressing covid and lusting after Taiwan.

Although TSXV trading volume and value have not increased significantly above levels from Q4 of 2022, resource junior traded value is now consistently above 70% of total traded value. And this week we not only had the first day since a year ago where there were more new highs than new lows, but we had two days in a row like that. Of my 16 Favorites 10 are up while 6 are down modestly with the KRO 2023 Favorites Index up 6.5% as of January 13, 2023, lagging the TSXV Index which is up 7.9% while gold is up 5.2%. We are not seeing the degree of increased market activity one normally associates with a January Effect, but at least the wind is so far blowing at the backs of the resource juniors and I am feeling optimistic we will have a good year for juniors with strong stories.

KRO 2023 Favorites Index

KRO 2023 Favorities Index Daily Performance

USD Nominal Borad Currency Index, CPI, Prime Rate

Selection of Metal Charts ordered by leaders and laggards

Relative Traded Value of TSXV Resource and Non-Non-Resource Listings

KRO 2023 Favorites Performance Table
Jim (0:05:16): What sort of wind blew Dynasty Gold up 300% from $0.10 to a high of $0.49 on Tuesday, January 10?

Dynasty Gold was a sleepy bottom-fish type junior trading between $0.05-$0.10 during the second half of 2022 which the market hijacked on Tuesday morning when it read a news release reporting results for 4 holes on the Thundercloud gold project in western Ontario just south of Dryden. It opened at $0.14 and traded as high as $0.49 on 4,250,160 share volume before closing at $0.34, up 300% from the day before. This sort of results driven upside explosion is what bottom-fishers dream of, but there is no justification for such a move. In fact, the company's largest visible shareholder, Karim Mohamedani, sold 706,500 shares that day at an average $0.34 to reduce his position to about 4 million shares, about 9% of issued stock. He has no formal insider relationship to the company so he is now free to sell the rest of his position without making further disclosures. On Wednesday the volume dropped to 2,340,431 shares, on Thursday to 866,000 shares and on Friday it traded only 488,000 shares to close at $0.285. This is not how a junior with a legitimate new discovery trades.

The stock play is evaporating because the results have been presented in a manner that creates the illusion a significant bulk mineable zone has been intersected. We call this grade smearing and juniors with professional management are very careful to avoid being accused of grade smearing. The trouble with Dynasty Gold is the board and advisory board is loaded with competent geologists so one simply assumes what look like great results are great results. But something seems to have gone wrong.

Why did the press release not include a drill plan showing the location of these new 4 holes relative to the existing 66 holes (12,093 m) into the Pelham Zone that support an inferred resource of 4,140,000 tonnes of 1.37 g/t gold updated in September 2021? The corporate presentation includes a map of the drone mag survey with all the existing holes plotted. These 4 holes were drilled in the southeastern part. If you have results you are pleased with, why not update the drill plan? And why not provide sections that show how gold grade varies throughout the hole? Serious resource juniors will provide these graphics. They don't show up in Stockwatch or other news feeds, but they will be part of the news released posted on the company's web site and Sedar. And why did the company not include drill hole angle and azimuth (direction) in its results table?

The Pelham Zone was discovered in 1937 and since then numerous companies have taken a crack at figuring it out. The last group was Laurentian Goldfields which drilled it in 2011 and dropped the option from Teck. Laurentian Goldfields subsequently did a 10:1 rollback and became Pure Gold Mining whose attempt to put the Madsen deposit into production near Red Lake failed last year. Dynasty optioned 100% from Teck in 2018 and has been trying to rethink the project's potential. They did a drone magnetic survey to better understand the controls of this system. The Pelham Zone has been invaded by a set of gabbroic sills which appear to have served as the controls for orogenic fluid flow. The most famous example of this type of system is the Golden Mile near Kalgoorlie in Western Australia. One of my bottom-fish picks called Harfang Exploration has a similar setting at its Radisson-Serpent project in the James Bay area where the company has been trying to find the source of a broad gold in till dispersal apron. They have hit short high grade gold intervals but nothing yet to explain the till anomaly.

Dynasty decided to focus on some targets in the southeastern part of the Pelham Zone. Three of the holes hit short high grade intervals, higher than has been seen on the property. Hole 2 had 3 m of 43.47 g/t and hole 3 had 1.5 m of 246 g/t gold. The rock value of these intervals at $1,918 gold are $2,700 and $15,200 per tonne respectively and these are mineable widths. If Dynasty left it at that the market would have become curious if they have finally found a new high grade aspect to the Pelham Zone. The analogy would be the initial Great Bear discovery of the hinge zone on the Dixie project south of the existing West Madsen resource which at the time spurred speculation that another Red Lake style high grade system had been discovered. Great Bear disappeared at $28 in a $1.7 billion transaction at the end of 2021 when Kinross bought it out, but that was done on the basis of the entirely unrelated LP structure.

For reasons regulators may end up wanting to know Dynasty decided to bracket these short intervals within a surrounding set of ever longer mineralized intervals. For example, the 1.5 m of 246 g/t in hole 3 was stretched into 51 m of 7.35 g/t which has a rock value of $453. That is really impressive. But when I applied my grade smearing tool the surrounding 49.5 m averaged only 0.12 g/t gold which has a rock value of $7/t and is not open pittable.

The 3 m interval of hole 2 at 43.47 g/t was stretched to 121 m of 1.31 g/t which has a rock value of $81/t, very respectable for an open pit mining scenario. But when you remove the gold budget associated with the 3 m interval, the remaining 118 m grades only 0.24 g/t with a $15 rock value, also not open-pittable. In the industry this is called grade smearing and it is done to encourage the market into believing results are more significant than they are. The grey zone emerges when narrow high grade structures repeat themselves within a halo of lower grade mineralization and the question becomes, do they repeat themselves enough that the average grade produced by mining everything as an open pit is profitable. The presence of only a single high grade interval in each of the Thundercloud holes does not allow the grey zone. When Snowline Gold Corp reported excellent long intersections for its Rogue project the first thing I did was apply my grade smearing tool which showed to my satisfaction that it was legitimate to present long intersections averaging the assay intervals. Snowline also provided sections showing the grade bars of the assay intervals which Dynasty did not do.

The reason I complain about grade smearing is that narrow high grade zones are difficult to delineate, so followup drilling in the vicinity of these holes might come up with nothing. But 51 m of 7.35 promises a sizable zone that should result in a parade of more good intersections as the rig steps out and down from the discovery interval.

Why a qualified professional would stretch short high grade intervals into broader fictitious zones escapes me. But even worse, the press release made the following statement: "We are thrilled with these outstanding results in our first drill program on the property. They are the highest gold grades, the longest and the widest intercepts ever drilled at the property. These drill results indicate a much bigger resource potential with higher grades at Thundercloud." These are not wide intercepts at all. Dynasty Gold did two full warrant private placements totaling 5.9 million units at $0.07 and $0.105 in December that come free trading in April. Only one insider participated for 357,000 units so the rest will be third parties eager to take profits. Given how long it takes for assay turnaround these days, Dynasty Gold shareholders should brace themselves not just for April showers but possibly an atmospheric river like is pounding us in California.

I use my own spreadsheet based grade smearing tool to test intersections for grade smearing, but an online version is offered by the Junior Mining Network through its Advanced Drill Hole Calculator. When using this tool be careful to include only individual interval segments. For example, with hole 22-03 with a highlighted interval if 51.0 m at 7.35 g/t, use only the 1.5 m at 246 g/t between 118.5-120.0 m. This interval is included in the other 3 "including" intervals. Do not duplicate them! The JMN tool is also very useful to determine rock values including for polymetallic intersections. Bookmark that page!

Dynasty Gold Corp (DYG-V)

Unrated Spec Value
Thundercloud Canada - Ontario 4-Infill & Metallurgy Au

Thundercloud Exploration History and Property Map

Pelham Zone Existing Drill Hole Plan and Drone Mag Survey

Thundercloud Drill Results Table and Grade Smearing Analysis
Jim (0:15:03): Endurance Gold reported an impressive gold intersection for its Reliance gold project but the stock barely moved. Does the market think this is an example of grade smearing?

Endurance Gold is run by an extremely professional team, but that did not stop a KRO member in our Slack forum from wondering out loud what happens when you apply a grade smearing tool. The Endurance Gold news release is an exemplary contrast to the Dynasty Gold news release. It included a drill plan for all the reported holes and a section for hole 58 which highlighted the sub-intervals within the broader interval. The results table includes the drill dip and you can figure out the azimuth of each hole from the horizontal trace plotted on the drill plan. Each of the sub-intervals is an independent segment within the overall reported intersection. The overall 45 degree hole of 139.9 m of 3.05 g/t which bottoms at 170.2 m hole length has a vertical depth of 120 m, so is entirely within open-pittable range. This hole was designed to intersect the shallow southwest dipping Eagle Zone and the sub-vertical Eagle South Feeder Zone which emerged in this year's drilling.

The ESFZ was an important development in 2022 because the Royal-Treasure Shear corridor that is about 300 m wide is bounded by afault to the southwest, the result of which the SW dipping Eagle Zone will disappear in this direction when it reaches the fault, and it also disappears in the NE direction because it daylights within the corridor. The market wanted to learn this year that there vertical mineralized structures that can persist for thousands of metres at depth as is possible within an orogenic gold system. The epizonal nature of the Reliance mineralization means that it is much higher within the vertical column than the prolific Bralorne vein system. The hypothesis is that when you get deep enough at Reliance you may find a similar multi-million ounce high grade gold bounty as Bralorne, but not if there is no evidence of vertical feeder structures. This milestone was accomplished in 2022 and Endurance is now preparing ground work for building roads that will allow it to spot holes in the argillic sediment hanging wall southwest of the Royal-Treasure Shear corridor and start chasing the ESFZ down plunge. The company hopes to be able to resume drilling in April with a rig dedicated to delineating the ESFZ at depth.

The news release included dud results for 5 holes that attempted to extend the Eagle Zone to the southeast, which at Reliance means up the hill. Hole 49, the most southeasterly hole, nipped 2.1 m of 3.2 g/t and is labeled as part of the Eagle Zone but Robert Boyd thinks it is a continuation of the ESFZ because the team now believes the Eagle Zone has been eroded away in this direction. The Eagle Zone now has a strike of 530 m and is cut off in this direction, while the ESFZ has a strike of 550 m and is still open along strike but not a priority to chase. It makes more sense to chase the ESFZ at depth in 2023. The company plans a second rig in 2023 which will seek to connect the area between the original Imperial Zone and the Eagle Zone. It will also conduct infill drilling within the Eagle Zone because hole 58 is the first clear evidence that the Eagle Zone may be amenable to open pit mining.

Endurance warns that the true width of the Eagle Zone is 15-30 m, which means that the 139.9 m interval of 3.05 is partly down-dip. But the sub-intervals show that there is grade zonation even in this direction. The question from a bulk mining perspective is whether or not the material between the higher grade parts is waste material. When I applied my grade smearing tool to the overall intersection and the sub-intervals, I ended up with an aggregated 35.7 m interval of 8.84 g/t with a $545/t rock value while the remaining 104.2 m averaged 1.07 g/t with a $66/t rock value, well above an open pit OpEx. This tells me that the volume represented by hole 58 is open-pittable. The market did not crank the stock up on January 12 because the company has provided sufficient geological context to allow the market to see that while this is good news for an open pit mining scenario, the constrained geometry also inhibits speculation that the Eagle Zone is going to deliver millions of gold ounces with the hellp of additional drill holes. If this were a deeper interval cutting across the ESFZ which has running room at depth and along strike, and could be characterized as close to true width, the stock would have rocketed past a buck. Note that in the Endurance results tables the set of "including" intervals are all distinct intervals within the overall reported interval. So when you apply the JMN tool to hole 58 include all these intervals (JMN, which is a web site sponsored by companies, uses the more polite term "advanced drill hill hole calculator").

Endurance Gold has about $3.5 million working capital not including the market value of its Inventus stock position, so it does not need to finance to resume drilling in April. The 2023 drilling strategy will have a twofold goal of linking the Eagle Zone to the Imperial Zone to support an open pit mining scenario and to test the Eagle South Feeder Zone at depth drilling from a less awkward angle than from within the corridor itself. The latter goal presents the blue-sky opportunity for Reliance. Once the roads are in place for the deeper ESFZ drilling it will be easy to add rigs if results show the ESFZ blossoming at depth and the market starts treating Reliance as a confirmed major discovery rather than just an emerging discovery.

On January 3, 2023 the company published results of a soil and biogenic sampling program it did on the Olympic property to the northeast optioned from Avino in 2022. The diagram shows a distinct arsenic anomaly with a trend parallel to the Royal-Treasure Shear corridor. Arsenic is a key pathfinder for gold within the Royal-Treasure Shear corridor. Endurance collected soil samples near the Carpenter Lake reservoir because the medium was suitable for sampling, and collected fir needles up the hill where the ash from a recent volcanic eruption blankets the ground. Both showed elevated arsenic levels. Sampling in the eastern part of the grid near the high grade gold-antimony Enigma showing was hampered by glacial-fluvial cover so that will require a different sampling approach in 2023 while a higher density sampling grid will be applied to the Olympic anomaly.

Endurance Gold Corp (EDG-V)

Fair Spec Value
Reliance Canada - British Columbia 3-Discovery Delineation Au

Long Section of Royal-Treasure Shear Corridor at Reliance

Drill Plan for Eagle Zone Area

Eagle and Eagle South Feeder Zone Section for Hole #58

Eagle Zone Results and Demonstratiomn why hole 58 is not an example of grade smearing

Arsenic Anomalies for Reliance and Olympic Claims

Arsenic Anomaly for Olympic Claim
Disclosure: JK owns Endurance Gold; Endurance is a Fair Spec Value rated Favorite; Dynasty Gold is unrated

Posted: Jan 6, 2023JK: Kaiser Watch January 6, 2023 with Jim Goddard and John Kaiser
Published: Jan 6, 2023KRO: Kaiser Watch January 6, 2023: Introducing the 2023 Favorites
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

Podcast Download

Kaiser Watch January 6, 2023: Introducing the 2023 Favorites
Jim (0:00:00): Why does your 2023 Favorites Collection have twice as many companies as last year?

At the end of 2021 I made a strategic decision to change the basis of the $450 annual KRO membership so that it includes only the use of KRO as a research platform covering all Canadian and Australian listed resource companies and as a bottom-fish workshop for the hundred plus juniors I tag as bottom-fish. The Favorites were a smaller group of recommendations which were not missing any key pieces that were preventing lift-off from the bottom. These qualified as traditional stock picks. I realized that my paying membership consisted of two audiences.

One is a sophisticated group that has a reasonable understanding of how the junior resource game works. Some of this group have been with me since 1994 when I launched myself as an independent analyst through the Kaiser Bottom-Fishing Report. These bottom-fishers or value hunters prefer me not to have a large number of subscribers because they don't want lots of competition while accumulating my bottom-fish ideas. Some of them are more sophisticated than I am and mainly use the search engine and company profiles as a time saving research platform.

The other audience is the more traditional retail investor interested mainly in buying something with a good story that promptly goes higher. They show up when the resource sector is hot such as it briefly was in the second half of 2020 but generally not during the past decade. This group is overwhelmed by the abundance of information, the complexity of my analysis and the conversations we have in the KRO Slack Forum. A few decide they want to learn how this works and become longer term members willing to ride out the market slumps. The rest lose interest when the market stops going up.

The result is a very volatile revenue stream which is a problem because the Kaiser Research platform has substantial expenses (KRO does not get compensated by companies directly or indirectly to endorse them). Without this data infrastructure that needs to be updated constantly I could never run a bottom-fish workshop that filters the universe of companies for candidates. The other headache was that these momentum oriented investors are inclined to post restricted members-only ideas and sometimes verbatim content in open social media forums. This annoys my longer term sophisticated membership. And of course it is no fun listening to all the complaints from this audience when the resource juniors go south.

The solution I launched with the 2022 Favorites was to make them free to the public. The $450 membership fee was for the use of the KRO research platform, access to the bottom-fish commentary, and, membership in the parallel Slack forum provided they behave themselves. Companies that had graduated from the bottom-fish workshop, which usually meant doubling or tripling from their bottom crawling level, would become part of the unrestricted Favorites collection if I had reason to believe further substantial gains were possible. When a Favorite is given a Good Spec Value rating it means that I think the market does not understand the upside potential based on the fundamentals already in place. I assign a Fair Spec Value rating when additional upside is contingent on fundamental developments that are not guaranteed to happen.

This arrangement should be a win-win for all parties. The paying membership gets access to the research platform, my bottom-fish rankings, and the collaborative Slack environment. Plus, when a bottom-fish gets its act together and gets promoted to Favorite status, the paying members who may already be sitting on a double or triple get the benefit of an open-ended audience discovering the story as to why the Favorites could end up substantially higher. The general public interested in the resource juniors doesn't have to pay anything for access to my commentary related to the Favorites. When a Favorite fails or the resource sector trends downward, they just stop visiting the web site, ignore my tweets or simply un-follow me. And I benefit because a small percentage of the Favorites audience may decide they want to be on the bottom-fishing ground floor and learn how the resource junior game works. Potential new members can Register for a Nembership and former members can Resubscribe here.

The 2022 Favorites had only 8 companies because this was an experiment. I believed that the resource sector would buck a general equity market down-trend that was inevitable as quantitative easing turned to tightening. I had a large 150 plus bottom-fish collection and I expected some of these would become 2022 Favorites. I was correct until late in Q2 of 2022 when the resource sector also fell victim to the severity of the downturn in equity and bond markets. Metal prices sagged as the Chinese covid lockdown persisted and the inflation busting monetary policy promised a couple years of economic recession to depress demand. Gold also sagged as debt yields rose. There was nowhere to hide in 2022 and the Favorites finished the year down 36%, almost as bad as the 39% decline by the TSXV Index. Only one Favorite, Verde Agritech, finished the year up at 77% after delivering a 283% gain at its peak price. Only three of the 2022 Favorites have been continued as 2023 Favorites; the rest of been shunted into the bottom-fish workshop though I will keep them unrestricted until the end of 2023.

The 2023 Favorites collection has 16 companies to cover a broader spectrum of themes and ideas. Including the five ex-Favorites there will be much more to talk about in Kaiser Watch episodes. Last year I ended up talking about bottom-fish spec value rated companies because often there was nothing to say about the Favorites. This year I am going to keep bottom-fish comments behind the KRO paywall except for lithium juniors.

KRO 2023 Favorites Index

KRO 2023 Favorites List

KRO 2022 Favorites Index

KRO 2022 Favorites List
Jim (0:04:19): Your 2023 Favorites include 3 lithium companies, Brunswick Exploration, Critical Elements and Cypress Development. Why did you pick these companies and what can we expect from the lithium sector in 2023?

During Q2 of 2022 I began to get my head around the lithium supply problem as it related to the energy transition goal of replacing ICE car sales entirely by EV sales in 2035. I ignored Lithium Mania 1.0 during its 2015-2018 run because I did not believe EV adoption would happen as rapidly as predicted. I also assumed the Lithium Triangle in South America and the Australian pegmatites would supply whatever the EV sector needed. Between 2018-2020 the price of lithium carbonate crashed from its $10-$15/lb range to below $3/lb when the Australians proved very efficient at mobilizing new lithium supply. So ignoring lithium spared me the lithium winter that followed. In 2021 two important things happened. First, Trump failed to steal the 2020 election so that he could continue his promotion of fossil fuels and climate change skepticism, and, second, more importantly, the car companies had ignored Trump and committed themselves to switching to electric vehicle fleets to such an extent there was no turning back. This reversed the lithium supply surplus and lithium carbonate prices increased more than ten-fold, spending most of 2022 in the $30-$35/lb range.

I could see that the Lithium Triangle and Australia's pegmatites could deliver the first half of the projected ten-fold demand expansion, but where was the other half supposed to come from? Goldman Sachs thinks it will come from Chinese brines and pegmatites, perhaps repeating what happened with rare earths, zinc and molybdenum during the 1980s, but I don't think that will be the case. The obvious answer was that it would need to come from pegmatites located within Archean settings in Canada, Scandinavia, Africa and South America. But because it takes 5-10 years to bring a new mine into production, if the other half is to arrive by 2030 when EV sales are supposed to go exponential, there has to be an exploration boom over the next three years that reveals the pegmatite resource base available for development.

I coined the term Lithium Mania 2.0 to reflect this pegmatite exploration boom that will sweep beyond Australia. Some people think it is impossible for a market worth only $1 billion in 2015 to grow into a $100-$200 billion annual market by 2035. Pegmatites, which you cannot easily find if they don't daylight, were frequently observed during decades of base and precious metals exploration, but ignored because the market was small less than $200 million before 2006 when usage was dominated by glassware and ceramics, and more than adequately supplied by the Chilean brines and Australia's giant Greenbushes pegmatite. It will not be hard to revisit these forgotten pegmatites and the trends within which they sit, figure out which ones are LCT type, and drill a few holes across them to establish which ones have sufficient grade and tonnage to be development candidates.

Lithium Mania 2.0 will explode in 2023 even if lithium carbonate prices drop back into the $10-$15/lb range. Usually the optics of the reversal of an exponential price rise hurts market sentiment, but so long as the price stabilizes in the $10-$15/lb range and does not crash to $5/lb as Goldman Sachs hopes, the boom will continue because at that price pegmatites grading 1% Li2O are well in the money. This is a discovery exploration boom, not a gold price gain optionality story. Brunswick Exploration is the pegmatite grassroots discovery junior in the 2023 Favorites while Critical Elements with its Rose pegmatite is the development stage Favorite. The Rose project is in the money at $12/lb lithium carbonate.

Cypress Development is included in the 2023 Favorites because it is working on a feasibility study for its claystone project in Nevada. Claystone deposits were the rage in Lithium Mania 1.0 because these are giant, open pittable systems though with a low grade. None is yet in production because they have been hung up in permitting issues involving Native Americans and sensitive habitats while less advanced ones like Cypress have been solving flow-sheet problems. Water rights are a big obstacle for developing a claystone deposit. The extraction flow-sheet is never simple for claystone deposits and has to be customized for each deposit. Cypress has water rights, is not in an environmentally sensitive area, and is on its second flow-sheet iteration which appears to have solved key problems. Costs will probably be double, but, using the ore schedule in the PFS, Clayton Valley is very much in the money in the $10-$15/lb range.

Kaiser Watch episodes in 2023 will frequently touch on lithium and discuss companies whether or not they are Favorites because the lithium topic is crucial to the energy transition which will continue to march onwards even during a recession.

Brunswick Exploration Inc (BRW-V)

Fair Spec Value
Hearst Canada - Ontario 2-Target Drilling Li
Critical Elements Lithium Corp (CRE-V)

Fair Spec Value
Rose Canada - Quebec 7-Permitting & Feasibility Li Ta
Cypress Development Corp (CYP-V)

Fair Spec Value
Clayton Valley United States - Nevada 7-Permitting & Feasibility Li
Jim (0:11:55): Canalaska Uranium is the only uranium junior in your 2023 Favorites. What are your thoughts on uranium and why pick Canalaska?

2022 was a pivotal year for the uranium sector, partly because the Sprott Physical Uranium Trust and uranium optionality companies were active purchasing uranium in the spot market for stockpiling purposes, which helped U3O8 establish a new trading range in the $45-$60/lb range. That is still below the $80/lb needed to justify developing new uranium mines, and Kazakhstan as the biggest producer with an apparent ability to lift supply to meet rising demand remains the biggest obstacle to higher prices. Much more important for the uranium juniors was that the energy transition finally got legs when Biden managed to get the Inflation Reduction Act passed, which reinforces the need for nuclear energy to provide baseload electricity when solar and wind power are not generating electricity. That does not mean places like the United States will build new large scale nuclear power plants, but the pace of decommissioning will slow, as turned to be the case with Diablo, California's only nuclear power plant. However, there is growing interest in small modular reactors, a new smaller scale technology that will take less time to permit and install. SMRs are not a replacement for large scale baseload nuclear power, but are suitable for remote locations. This could be a new source of demand for uranium.

The Russian invasion of Ukraine also helped out because it highlighted the profound foolishness of Chancellor Angela Merkel's knee-jerk response to Fukushima in 2011 when she pulled the plug on Germany's nuclear energy sector in favor of increasing dependency on Russian gas. As things turned out Merkel's pandering to the anti nuclear lobby led to increased reliance on thermal coal combustion, a step backwards for Germany's energy transition goals. The irony is that the anti-nuclear lobby overlaps with the anti-fossil fuels lobby, an example of how unthinking purist demands can backfire in the face of practical realities. Germany is in a pickle because if it chose to restart its nuclear power plants it would take several years to recertify them so that they can be restarted. On the plus side Poland, which relies heavily on coal which it also mines and has no nuclear power plants, is going ahead with two nuclear power plants. Japan, which has only 9 of 54 reactors operational, has relied on LNG imports to generate electricity from natural gas. Germany never did allow Nordstream 2 to start delivering gas, and during the summer Russia cut off Nordstream 1 supply.

The hope that Russia would one day resume pumping gas to Germany evaporated when both pipelines were ruptured by mysterious undersea explosions which were clearly an act of sabotage requiring a sophistication normally possessed only by state actors. Fingers have been pointed at both Russia and the United States who have submarine fleets capable of executing such an act of sabotage, but neither has an obvious strategic benefit from such an act and way bigger problems if proven to have been responsible. However, taking Russian gas offline indefinitely is of major financial benefit to natural gas producers who can convert domestic surplus supply into LNG and ship it to places like Japan and Germany. It's quite possible that a private sector group pulled off this stunt with the help of a mercenary group; the assumption that it required a high degree of sophistication to be undetected may be wrong. The Russians and Americans monitor everything underwater in the Baltic and North Seas, so it is odd that no grounded accusation has surfaced. It might have been an operation too low-tech to be detected, with both American and Russian officials scratching their heads about the culprits.

In any case, Japan now has to compete with Europe for LNG imports which has focused Japan's attention on the idea of restarting more of its nuclear power plants. But this faces a new challenge in that during the past decade the worker force with technical knowledge about operating nuclear power plants has slipped into retirement, and what young person will have pursued an education related to nuclear energy? In this regard the small modular reactors become important because they are likely to be installed and operated a lot longer than older large scale power plants.

Putin's noises about reconstituting the Russian Empire has made the "stan" countries like Kazakhstan nervous, and since they are all autocracies, the United States and its allies are unlikely to lift a finger if Russia were to invade any of them. But even if this were to happen, China, which eventually will be the world's biggest uranium consumer, will buy uranium from whoever runs Kazakhstan, so there really is little risk that uranium production from Kazakhstan will stop flooding the market. But the fragmentation of the global economy into geopolitically constrained trading zones could become a problem for France and the United States, which is why I am mainly interested in juniors exploring for uranium in Canada's Athabasca Basin which hosts the world's richest uranium deposits.

Canalaska Uranium is my uranium 2023 Favorite because it has an emerging high grade discovery on its West McArthur project that has a geological context which allows us to dream about a McArthur River scale discovery. Canalaska did enough drilling in 2022 with an inadequate rig to furnish data allowing management to believe it understands the geometry of this system between 800-1,200 m depth. Drilling will resume in Q1 of 2023 with a proper directional rig and by the end of Q2 we may have confirmation that the emerging discovery at West McArthur qualifies as world class.

Canalaska Uranium Ltd (CVV-V)

Fair Spec Value
West McArthur Canada - Saskatchewan 3-Discovery Delineation U
Jim (0:17:59): If you are so keen about the energy transition, why do you have Colonial Coal in your 2023 Favorites?

Thermal coal had a fabulous year as countries switched back to burning coal for electricity, a setback for energy transition goals. But these were emergency measures in response to natural gas supply disruption caused by Russia's invasion of Ukraine. The long term shift away from burning thermal coal remains intact. Colonial Coal owns two properties in northeastern British Columbia called Hugenout and Flatbed which together host 700 million tonnes of both open pit and underground coal resources for which PEAs were completed several years ago. The coal is "metallurgical" coal, a harder, cleaner burning coal than thermal coal whose most valuable use involves heating it to produce a residue called coke which can be used as a fuel but is mainly used in blast furnaces that smelt iron ore. Some of the carbon remains in the steel which makes it stronger, but most of the carbon combines with the oxygen in the iron oxide ore and blows off as carbon dioxide. While metallurgical coal is a significant contributor to global warming, like cement there is no cheap alternative while there are alternatives to burning thermal coal to generate electricity. As a pragmatist I have no issue supporting a metallurgical coal play despite my eagerness to see the energy transition become reality. The coal mines in this part of British Columbia produce metallurgical coal. The world is not going to stop using steel any time soon and coking coal is the cheapest way to make steel, so it is not really threatened by the energy transition.

Colonial Coal wants to be bought out by a group which seeks a long term supply of metallurgical coal from a secure jurisdiction. The stock was hammered in December when the BC government rejected Glencore's application to mine the Sukunka project located between Chetwynd and Tumbler Ridge on grounds it will disturb local caribou herds. At the same time Teck sold its mothballed Quintette Mine just south of Tumbler Ridge where Colonial Coal's projects are located to Conuma for $120 million implying a price of $3/lb for the remaining 40 million tonne resource. David Austin is hoping to see a $1-$2 billion offer for Colonial Coal based on a similar metric, which is why the goal is a buyout between $5-$10 per share. Chinese and Indian steelmakers are the prime candidates to buy the company, but efforts to get a deal done were undermined by the Covid pandemic which in particular chilled Chinese global travel thanks to Xi Jinping's insane quarantine requirements. Now that China has given up on its zero-covid policy there is hope that negotiations will accelerate in 2023 once the covid rampage is over and China gets back to growing its economy.

The Sukunka decision was unhelpful because Glencore has been working on its permit for a decade, jumping through all the government hoops, only to be blocked by what looks like a long ago foregone conclusion. Is this a sign Canada does not want any new coal mines, including metallurgical coal feeding the global steel industry? It may be that the Sukunka property footprint was just too small to allow adequate areas to be set aside for caribou that would be displaced; Colonial Coal has large land positions with room for habitat reserve negotiations should caribou become a permitting issue. The other concern is the hostile attitude Ottawa has adopted toward Chinese investment in Canadian resources, but this applies to critical minerals such as lithium which are in short supply relative to projected demand growth. Canada does not need to hoard metallurgical coal for domestic consumption; its only destiny is export markets. The wild card is India whose steelmakers seem to have retreated to the sidelines. India has the potential to hit a super cycle tipping point by 2030, undergoing a development boom similar in scale to what China accomplished in 2000 onwards. In an indirect way Colonial Coal is a bet that India will grow more confident in its super-cycle potential and act quickly to secure Canadian metallurgical coal supply.

Colonial Coal International Corp (CAD-V)

Fair Spec Value
Huguenot Canada - British Columbia 6-Prefeasibility CM
Jim (0:20:34): FPX Nickel is the only nickel junior in your 2023 Favorites and was continued from 2022 after a so-so performance despite high expectations. Why will this year be different?

FPX Nickel had a decent start in 2022 when Tsingshan's LME nickel short backfired after Russia invaded Ukraine and sanctions threatened to keep nickel from Norilsk out of the LME warehouses. Tsingshan is a steelmaker which relies on nickel pig iron produced from Indonesian laterites to make stainless and thought it could profit with an arbitrage trade. The unexpected Russian invasion made it impossible to resolve this short position and a short squeeze emerged that forced the LME to take drastic action to prevent financial failure among key members. Nickel prices retreated from their lofty heights but stabilized well above the $7.75/lb base case price FPX used in its PEA.

During 2022 FPX was plagued by a Utah based generalist fund that came on board through the April 2021 financing and got cold feet in late 2021. Rather than just contact management and let it know that it would like to exit the stock, the fund simply sold into the market at inopportune times. The final block came out in late December. FPX originally hoped to have a prefeasibility study done by the end of 2022, but the pilot plant study took longer than expected. The PEA, which is robust at current nickel prices even if you boost CapEx and OpEx by 20%, was based on bench scale metallurgical studies supporting a flow-sheet that involved grinding, magnetic separation and flotation to produce a 63%-65% ferro-nickel concentrate that could be fed directly into stainless steel mills. This was made possible because the nickel mineral is awaruite, a natural stainless steel alloy of nickel and iron. The Davis Tube Recovery established grade of the multi-billion tonne Baptiste deposit at Decar in central British Columbia is 0.10%-0.14%.

No nickel deposit with that low a grade has ever been mined, so there is skepticism about the flow-sheet. And because CapEx is over $1 billion for a 120,000 tpd mine that will operate for 40 years, only a major will ever build this mine. FPX Nickel is not interested in a carried to production farmout because once such a deal is done, the stock will languish because the major effectively controls the deposit and its future. A buyout of a 100% owned project is the only near term exit strategy. If you believe the PEA assumptions the stock should be trading in the $2-$3 range, but only if it is reasonable to believe a major will at some point buy out FPX Nickel with the goal of developing Decar.

The pilot plant study will be a key milestone that creates a basis for a major to sign an NDA and take a very close look. The study is expected to be complete in January 2023 and it will yield about 18 kg of concentrate which is being used for another metallurgical study, namely for the hydrometallurgical flow-sheet that will convert the concentrate into battery grade nickel and cobalt sulphate, key inputs for the cathode in the battery used by higher end electric vehicles. Those results will be available in Q2 of 2023.

Being able to convert the ferro-nickel concentrate into battery grade sulphates is not critical to the viability of Decar whose primary target market is as feedstock for making stainless steel, an alloy whose demand will track global macroeconomic trends. But because Decar could end up being carbon-neutral thanks to the carbon sequestration capacity of the brucite form of magnesium in the tailings, and because the supply would be ESG certifiable, Decar is of interest to downstream battery makers and even carmakers. In late November FPX Nickel announced a $12 million investment at a premium to the market by a strategic investor at 9.9% who has requested anonymity. The discussion in the press release and in a subsequent interview CEO Martin Turenne did with Bill Powers of Mining Stock Education largely ruled out that the strategic investor is a major mining company who has the capacity to acquire FPX Nickel and build Decar, in essence an upstream "peer". Most likely it is a downstream party with no ability or desire to build and operate a multi-decade nickel mine. No concessions such as off-take rights or rights of first refusal were granted by FPX Nickel to the strategic investor. But the financing helped FPX Nickel finish the year with $18 million working capital, more than enough to deliver the PFS by Q4 of 2023 and continue environmental baseline studies as part of the feasibility study-permitting stage in 2024. During 2022 none of the key questions about the viability of Decar were answered, but in 2023 they will be answered, and if they meet expectations, the stock will undergo a substantial upwards repricing.

Jim (0:24:12): Why do you have a tin play called Cornish Metals in your 2023 Favorites?

Cornish Metals was stuck with a Bottom-Fish Spec Value rating for years while management worked on the South Crofty tin project in the Cornwall region of England. Tin is unusual among metals in that it did not experience demand growth during the China Super Cycle on a scale comparable to other base metals such as copper and zinc. Its primary usage is as a lead replacement in solder though it has other industrial uses in chemicals that I defy anybody to name. Tin is a key alloy for copper to make bronze, but what is made of bronze these days? And tin has not been part of a "tin can" since the middle of the twentieth century. Tin seems to be a forgotten metal but it is increasingly being pegged as an energy transition metal because of its role in solder and the fact that electric vehicles have a lot of copper wiring connected with the help of solder. Demand is expected to increase when EV sales go exponential.

This could become a problem because about 70% of supply comes from southeast Asia with China in the lead at 30% followed by Indonesia at 24%. Peru, Brazil and Bolivia account for another 20%. Australia supplies just under 3%. The rest comes mainly from unstable countries in Africa. England no longer produces tin and all its former mines are flooded. Most tin production comes from small scale mines, so it is doubtful that southeast Asia will be in a position to expand supply if demand lurches higher. Given the geopolitical shift of the past decade where the west gave up believing that China would become a free market based democracy, the reliance on tin supply from this region is sketchy.

Cornish Metals wants to revive South Crofty as a tin producer. Tin has been stuck between $7-$10/lb for most of the past decade but in late 2021 tin went for a short-lived wild ride above $20/lb. It has since pulled back into the $11-$12/lb range. The fortunes of Cornish Metals changed in 2022 when it caught the attention of Sir Mick Davis, former head of Xstrata, who has been using his Vision Blue Resources company to make big equity investments in juniors with a critical metal story. He led a major financing in 2022 which makes him the largest shareholder and which allows Cornish Metals to design and build a water treatment plant to begin dewatering South Crofty by mid 2023. At the same time it is doing a feasibility study that includes additional metallurgical work. Sir Mick's goal is a 300%-500% return on his investment and that is entirely possible based on the existing tin only resource which the junior hopes to increase when the dried out mine allows underground drilling. With a backer like Sir Mick it is also plausible to entertain a scenario where rather than being bought out when it gets South Crofty into production, Cornish Metals becomes a tin aggregator.

Cornish Metals Inc (CUSN-V)

Fair Spec Value
South Crofty United Kingdom - Other 7-Permitting & Feasibility Sn Cu Zn
Jim (0:27:05): What are your thoughts on copper and why did you pick Amarc Resources and Faraday Copper for your 2023 Favorites?

The two copper juniors in my 2022 Favorites, P2 Gold with its Gabbs project in Nevada and Northwest Copper with its Kwanika-Stardust project in British Columbia, suffered as copper retreated from $4.50/lb to the $3.50/lb amid looming recession fears as interest rates were driven up to combat persistent high inflation. Both companies were supposed to deliver PEAs in 2022. In the case of P2 Gold it has a balloon payment looming in May which it does not have the money to pay; efforts to negotiate an extension have been stymied by the fact that Waterton is being wound down by its main founder while key members of the team are launching a new battery materials focused fund. P2 Gold has deferred publishing a PEA until it is no longer in danger of defaulting, so I downgraded the junior to a Bottom-Fish Spec Value rating while we wait to see what happens with Gabbs. In a worst case P2 Gold loses Gabbs and then focuses on the BAM project in the Golden Triangle for whose surface gold zone it hopes to deliver a maiden resource in 2023 before launching a drill program to test the potential for a higher grade feeder zone linked to an underlying Galore Creek style porphyry system.

I downgraded Northwest Copper to a Bottom-Fish Spec Value rating because I did not like the way the junior blew through its $20 million treasury while the stock price sank. In early January 2023 Northwest Copper did release a PEA for a combined Stardust underground and initial Kwanika open-pit mining scenario, but the project does not clear either NPV nor IRR development hurdles using the base case prices of $1,650/oz gold and $3.53/lb copper. At this point Northwest Capital is an optionality play on higher real copper and gold prices with an unhappy shareholder base and an umbrella group with a credibility problem.

Although copper is expected to undergo a demand surge when EV adoption starts to accelerate because a much bigger amount of copper wiring is used in an EV car than an ICE car, that impact will become noticeable later this decade, not during a global recession which the market expects will manifest itself in 2023. A lot of new copper supply was mobilized in response to the China super-cycle decade, but during the past decade the mining sector paused its rush to develop new copper mines. Although the copper price will track perceptions about global economic trends in 2023, significantly higher prices will eventually emerge not just because of new EV related demand and a slowdown of copper projects in the development pipeline, but because Latin America is experiencing a surge in government nationalism and local opposition to new mine development.

Due to the long time needed to permit and build a new mine and the mining industry's awareness that its supply mobilization response tends to deliver when the business cycle finally undergoes a downturn, base metal prices tend to follow a boom-bust cycle. This happened in the early 2000s when the copper producers didn't understand the super-cycle nature of China's growth trajectory until 2006 and were so busy forward selling copper that the futures curve was in constant backwardation. But thanks to new demand from China's infrastructure buildout the entire curve lifted over time, causing the producers to leave a lot of money on the table. Something similar may happen in the second half of the 2020s as the EV rollout accelerates and if India's own super-cycle expansion potential starts to get legs.

For the 2023 Favorites I have chosen Amarc Resources as my discovery exploration focused copper junior and Faraday Copper as my feasibility demonstration junior. Amarc has been an also-ran within the HDI stable for the past two decades during which it maintained a singular early stage exploration focus on British Columbia. Bob Dickinson and his HDI group have been distracted during the past decade by the frustrating opposition to Northern Dynasty's world class copper-gold Pebble project in Alaska. Amarc started to come to life in 2014 when it discovered the copper-molybdenum-silver IKE porphyry in southern British Columbia. It went on to consolidate the entire district and secured two farmout partners, both of whom were forced to drop out due to unrelated developments (Thompson was acquired by Centerra and Hudbay succumbed to a Waterton dissident proxy battle).

Amarc sank back into the gutter in 2019 but in 2021 Amarc secured a major farmout of the Joy project north of Kemess to Freeport-McMoran which has spent about $20 million by the end of 2022 delineating the Pine deposit and testing district wide targets. In late 2022 Amarc secured a similarly strong farmout deal with Boliden on the Duke copper project which started a winter drill program in late 2022. Majors can be fickle with regard to sticking with a project, and while it is possible Freeport may stall spending in 2023, Boliden will go full tilt on Duke throughout 2023. However, given the current unwillingness of the majors to buy out juniors which own existing copper pounds in the ground deposits, much of which was already done in the earlier part of the past decade before copper succumbed to a metal price downturn, it makes sense for majors to persist with district scale farm-in deals where all the money they spend goes into the ground to establish a majority interest and only a modest expense will be required to take out the junior's minority stake when it comes time to permit a mine.

Amarc plans to revisit the IKE Cu-Mo system and drill enough holes to allow a maiden resource estimate, but the discovery upside lies with the Empress area at the northern end of the IKE project where gold enriched copper replacement style mineralization sits in the older volcanic-sedimentary rocks north of the contact with the Coastal Plutonic Complex that hosts the IKE porphyry system. Amarc also quietly optioned the Hearne Hill copper breccia pipe system near the Duke project which it plans to rethink as a bulk tonnage copper system.

Faraday Copper used to be Gianni Kovacevic's Copperbank which he styled as a new version of Ross Beaty's Lumina model that was "banking" marginal copper deposits while he promoted a glorious future for copper prices with the help of his book "My electrician drives a Porsche". The most promising property he acquired was Copper Creek in Arizona which Redhawk explored during the China super cycle as a potential underground mine in Arizona. In September 2021 he handed the reins to Paul Harbidge and Russell Ball who raised $20 million at $0.80 in May 2022 from high profile investors and set to work rethinking Copper Creek as a 30,000 tpd combined open pit and underground mining scenario. They expect to deliver a PEA in Q2 of 2023. The company has been renamed and migrated from the CSE to a TSX listing. Copper Creek is located in a part of Arizona that is not proximal to areas special to Native American groups such as is the case with the Resolution underground project which Rio Tinto and BHP wish to develop. However, as a feasibility demonstration play it is vulnerable to a disappointing PEA outcome if forced to use a low copper base case price, though the calibre of the recent new backers is such that they will take the longer view of higher copper prices as Copper Creek gets pushed into the PFS stage.

Amarc Resources Ltd (AHR-V)

Fair Spec Value
Ike Canada - British Columbia 3-Discovery Delineation Cu Mo Ag Au
Faraday Copper Corp (FDY-T)

Fair Spec Value
Copper Creek United States - Arizona 5-PEA Cu Mo
Jim (0:34:39): Verde Agritech was a big and only winner among your 2022 Favorites and was continued as a 2023 Favorite. Will Verde Agritech shine again in 2023?

Verde Agritech was the star performer among the 2022 Favorites, benefiting from potash prices that began to soar in 2021 even before Putin invaded Ukraine. The company was able to sell out its 600,000 tpa capacity while pursuing imported potassium chloride parity pricing for its alternative potash product, K Forte. At its peak Verde Agritech was up 283% from the start of 2022 on speculation that Plant 2, with 2.4 million tpa output capacity, would be operational by early July, in time to supply a key planting window for the Brazilian farmers. This even led the company to boost its January guidance in May. However, Plant 2 was not operational until early September, and then the company was blindsided by underground water flow problems which compromised a key access road, forcing the company to spend September rebuilding a bridge and upgrading the road. By the time it was done the delivery window had closed and Verde Agritech reverted to its January guidance which it is likely to meet, though we won't know until April 2023 when the annual financials are due.

The full 2.4 million tpa capacity of Plant 2 is now operational, and the big question for 2023 is how much K Forte will Verde Agritech sell and deliver? The company is only guiding 2 million tonnes out of a total 3 million tonne capacity, but if it is able to sell K Forte at $100 or better, this would more than double the company's 2022 revenues, possibly exceeding $200 million with a healthy margin. Verde Agritech is a growth story that could become a billion dollar annual revenue producer as it seeks to displace more than 50% of Brazil's potash import dependency. Permitting work is already underway on establishing a future capacity of 10 million tpa. This does not even include innovations such as BioRevolution which load K Forte with micro-organisms designed to rehabilitate depleted soil, an application that could open export markets. If Verde Agritech secures a NASDAQ listing its growth story will be accessible to a vastly expanded audience, which may allow the stock to achieve a valuation that prices in the growth potential.

Verde Agritech Ltd (NPK-T)

Good Spec Value
Cerrado Verde Brazil - Other 9-Production K
Jim (0:37:52): You have two prospect-generator-farmout juniors called Eagle Plains and Kenorland in your 2023 Favorites. Doesn't this type of junior at best go sideways in an overall gloomy market?

It is true that prospect-generator-farmout juniors did not fare well during the decade long resource sector bear market that began in 2011, especially those which did private placements with five year warrants. Eagle Plains has been in this business for two decades, is a survivor and now has $10 million working capital after SSR Mining bought out Taiga Gold Corp in early 2022 for a price less than everybody had hoped for. But it left Eagle Plains in excellent financial shape as we head into a year where high interest rates fighting stubborn inflation will weigh on the market and the global economy.

Eagle Plains specializes in British Columbia and Saskatchewan with an approach that involves research of past assessment work and rethinking the potential. Its farmout partners tend to be other juniors who are looking for a discovery story to fund and promote (SSR and the Fisher project was a recent exception). The problem with this approach is that such juniors are often just looking for a project that is a stepping stone for some other acquisition and would be horrified if exploration, typically operated by a division of Eagle Plains, delivered evidence of an emerging discovery. If the bear market that engulfed the resource juniors in H2 of 2022 persists in 2023, this type of farmout partner will be scarce because its promoters will have a hard time raising money. On the plus side a lot of claims will come open as life-style juniors and armchair stakers let them lapse, giving Eagle Plains a chance to build its inventory of interesting properties.

The deals usually involve a series of cash and stock payments plus escalating exploration expenditure which allows Eagle Plains to profit regardless of the outcome, plus it gets back the property with quality work done on it. Deals either leave Eagle Plains with a temporarily carried 20%-40% net interest, or a 1%-3% uncapped royalty with limited buyback provisions when it sells 100%. In early 2023 Eagle Plains announced a plan to spin out the royalty portfolio to a new company and distribute most of the shares on a 1 Eagle Plains royalty company for 3 existing Eagle Plains shares. This spinout would be worth about $0.10 per Eagle Plains share which is not accounted for in the current pricing, so we could see a 50% gain just on this transaction alone if it is made definitive and approved.

The greatest upside for Eagle Plains in 2023 lies with the Vulcan project which is a Sullivan style play in southeastern British Columbia which various groups have explored for decades. In 2020 Eagle Plains drilled a couple holes to fulfill assessment requirements which tested an MT target near the road which proved to be caused by graphite. But the program was a success in that it answered a question about the location of the Sullivan Time Horizon which turned out to have been mistaken when past operators designed their drill programs. Flush with cash in 2022 Eagle Plains drilled additional holes based on this new understanding, with the goal of upgrading the project for a farmout to a major such as Teck. While they did not intersect Sullivan 2, they encountered sufficient peripheral smoke to be confident that they are in the vicinity of a prize with size. This became Tim Termuende's Andre Gaumond moment; drilling funded on a 100% basis will begin in June.

Kenorland has been around for only a few years and is headed by Zach Flood, son of the late Ed Flood who was part of Robert Friedland's world. Kenorland is focused on Alaska and eastern Canada where it starts with a big picture analysis of a region's geology and then conducts grassroots work to upgrade the conceptual prospectivity before seeking a farmout. Kenorland has been remarkably successful securing majors (Sumitomo, Barrick, Centerra, Antofagasta) as farmout partners, usually retaining a 20%-30% temporarily carried interest and often being the initial operator. One of them, Sumitomo, has become a 10% shareholder. When it comes to farmout deals with juniors Kenorland typically sells 100% for stock and a royalty. Although focused on precious and base metal targets, Kenorland has generated a number of lithium projects which it has been busy farming out 100% to juniors. One of the share positions it received turned into a $9 million windfall, boosting its working capital to $20 million heading into 2023.

Farming out to majors during the past decade was a slog because the majors in the face of weak metal prices arising from the supply mobilization response to the Chinese super-cycle of the prior decade took a break from exploration and development. While they are in no hurry to buy out marginal deposits while we wait for metal prices to recover from the global recession setback, they are warming up to the idea of putting money into the ground by farming into projects with district scale potential. Eagle Plains and Kenorland are very different types of prospect-generator-farmout junior. One is a market orphan guerilla outfit backed by a retail audience; the other is like the exploration division of a major with high powered backers. It will be interesting to see which one outperforms the other in 2023.

Eagle Plains Resources Ltd (EPL-V)

Fair Spec Value
Vulcan Canada - British Columbia 2-Target Drilling Zn Pb Ag
Kenorland Minerals Ltd (KLD-V)

Fair Spec Value
Frotet Canada - Quebec 3-Discovery Delineation Au
Jim (0:45:05): None of the three gold juniors in your 2023 Favorites, Aurion, Endurance and Solitario, have 43-101 ounces in the ground. Are you bearish on the gold price trend for 2023?

My gold ounce in the ground 2022 Favorites, Galway Metals and Perpetua Gold, were among the worst performers even though gold didn't crash and burn like Bitcoin and other Cathie Wood darling stocks. Galway is nowhere near completing a PEA that allows us to see what gold price is needed to make Clarence Stream be worth developing. And in late 2022 Galway suspended drilling to "save money". Perpetua Gold is now in the comment period for its latest Environmental Impact Statement, but even if it is accepted as Final in Q2 of 2023, the real question is how inflation and project changes have affected the CapEx and OpEx numbers used in the feasibility study published late 2020 when John Paulson fired Stephen Quin's Canadian technical team. When I apply a 20% cost escalation to CapEx and OpEx within the FS mining scenario the project needs $2,000 gold to be worth developing. We will probably get $2,000 gold if inflation continues to rampage, but might that not simply drag up the costs and require an even higher gold price, like chasing the setting sun? The problem for projects like Stibnite is that they require a higher real gold price, not one that is merely tracking inflation because undeveloped marginal deposits stay marginal in the latter case.

The best hope for a higher real gold price is a continuation of the central bank gold buying trend unleashed by America's sanction response to Russia's invasion of Ukraine. The US dollar is the global reserve currency, but because it belongs to the United States, it has the ability to stop it being used to settle international transactions that do not have the United States as a participant. China has explicitly thrown in its support for Putin's imperial aspirations, and is perfectly happy to buy Russian commodities at a discount to the global market price. Other countries such as India have chosen not to take sides and are more than happy to ignore sanctions if it means buying commodities at a discount to market. This means settling transactions without using the US dollar. Autocracies have taken note how the United States was able to freeze Russia's US dollar reserves and their central banks are contemplating how to reduce holding USD instruments ahead of also becoming a sanctions target. Holding other currencies such as the China's renminbi doesn't seem like a great idea, but gold is nobody's currency and so we may see central banks step up their accumulation of gold. But until we see this translate into a sustained gold price rising much faster than inflation, I am reluctant to pretend that a higher real price has to happen. So for 2023 I downgraded Galway and Perpetua to Bottom-Fish Spec Value rating to reflect the key missing piece, either an economic study that reveals development and operating costs that show the project is in the money at the current gold price, or a clearly higher real gold price.

My three gold Favorites for 2023 are all discovery exploration juniors because I want the upside to hinge on what these companies deliver, not what happens to the gold price. Aurion has a 30:70 JV with B2 Gold on the ground adjacent to its 100% owned Risti project, which adjoins to the south of Rupert's Ikarri project in Finland. Aurion spent a good part of 2022 doing basal till sampling on the overburden covered part of Risti, a strategy that led Rupert to its 5 million oz Ikarri discovery which a PEA says is worth over $1 billion. Aurion has plenty of working capital which will allow it to contribute its share of B2 Gold's 2023 spending on the Helmi discovery, which doesn't yet have the grades and widths to be comparable to Ikarri, and allow it to drill new targets on Risti. B2 Gold is the obvious party to consolidate the district by acquiring both Rupert and Aurion, but Agnico-Eagle is also potentially in the wings and it is a much bigger company than B2 Gold.

Endurance Gold has an emerging discovery at its Reliance project in southwestern British Columbia which still has 14 holes pending, all in areas where good results would expand the mineralized orogenic gold system within the Royal-Treasure Shear corridor. The drilling in 2022 has enhanced management's understanding of the geometry, and a financing in late 2022 equips the junior to carry on drilling in 2023. The company also managed to get a fir needle arsenic sampling program done on the Olympic property to the northeast it optioned from Avino in 2022. This survey revealed a parallel linear arsenic anomaly which suggests a setting similar to the Royal-Treasure Shear corridor. A knock against the Reliance project is that it is based on a single gold zone, but this development supports the idea that a district scale rethink could reveal multiple such mineralized zones. So far the company has focused on shallow drilling tracing the strike of the gold system; these epizonal orogenic gold systems have substantial vertical extent, and the chemistry indicates that the mineralization at Reliance is much higher than at Bralorne, which opens the possibility that Bralorne style veins show up at depth. 2023 promises to be the year when Endurance adopts a more aggressive drilling strategy that chases the system down plunge.

Solitario Zinc Corp has been upgraded from a Bottom-Fish Spec value rating to a Fair Spec Value rating because the company expects to have its plan of operations approved in Q2 which will allow it to begin drilling the Golden Crest project in H2 of 2023. Golden Crest is a district scale land package equivalent in size to that which represents the 100 million plus ounce Black Hills district that includes the Precambrian aged Homestake deposit, the early Tertiary aged Wharf gold-silver system, and a host of other nearby deposits. The Golden Crest property has stratigraphy at surface which is younger than anything at surface in the Black Hills district to the east because this area was not uplifted and eroded like the Black Hills. For example, in the case of the Homestake deposit the Precambrian basement that hosts it is exposed at surface whereas at Golden Crest it is hidden under at least 300 m of younger sedimentary rocks.

What makes Golden Crest potentially the last and most exciting gold exploration frontier in the United States is that Solitario has discovered high grade gold at surface since acquiring the project in 2021. This mineralization may not hang together to create an open-pittable resource or a structurally controlled underground mineable resource, but at a minimum it represents leakage from a hydrothermal system that may have harvested its gold payload from a much older basement hosted Homestake style system, dropped out gold laterally when it passed through the Wharf style host stratigraphy, and potentially zones in receptive formations just below the surface that do not exist in the prolific Balck Hills district to the east. Once Solitario has its drill permit it will drill 500 m holes to test all three target types. Golden Crest has very little evidence of prospecting by old-timers, and Homestake drilled only a few holes despite completing a BLEG survey that yielded a sizable gold anomaly.

Even if Solitario finds nothing at Golden Crest, by 2024 Nexa will be ready to undertake a district scale drill to kill program on the Florida Canyon zinc-lead-silver project in Peru. Nexa is plodding through the permitting process which it expects to have completed by early 2024; it wants to test all these other replacement style targets so that it has an idea about the scale it should choose for developing Florida Canyon (ie deplete the existing resource quickly because there will be many more tonnes to feed the mill from these other targets?). Solitario has a carried to production 30% interest which when the time is right Nexa will want to buy out. It is also a 50:50 partner with Tech on the LIK zinc-lead deposit in Alaska near Teck's Red Dog mine. Solitario has a NYSE-AM listing which makes it eligible for trading by the Robinhood crowd but also the algo traders. If the bluesky of Golden Crest starts to confirm the hypothesis that Golden Crest is a new gold frontier on a par with Homestake, the stock could explode on the upside.

Aurion Resources Ltd (AU-V)

Fair Spec Value
Risti Finland - Other 3-Discovery Delineation Au
Endurance Gold Corp (EDG-V)

Fair Spec Value
Reliance Canada - British Columbia 3-Discovery Delineation Au
Solitario Zinc Corp (SLR-T)

Fair Spec Value
Golden Crest United States - South Dakota 2-Target Drilling Au
Jim (0:53:55): Why did you include NioBay Metals in your 2023 Favorites? Isn't the James Bay niobium project hopelessly bogged down by the internal politics of the Moose Cree First Nation?

NioBay Metals deserves to trade in the $2-$5 per share range based on the PEA it completed in 2020 for the James Bay niobium project located about 40 km southeast of Moosonee in northern Ontario. NioBay was focused on the Crevier project in 2009-2012 during which it spent $9 million on a 41 million tonne dyke system discovered in the 1970's whose niobium grade was only about 0.2% NB2O5. At the time the junior emphasized the tantalum by-product but in view of the need to expand lithium supply ten-fold over the next decade to make the EV replacement of ICE a reality by 2035 there will be no shortage of tantalum supply because tantalum will be a by-product of LCT type pegmatites. James Bay was acquired in 2016 as a new focus but the company could not get any work started because the chief in Moosonee was philosophically opposed to mining in the territory of the Moose Creek First Nation and refused to engage in required consultations. She was replaced in 2019 through tribal council elections by a new chief who was at least willing to discuss exploration and development of the James Bay deposit and NioBay got a green light to do the drilling needed to support an updated resource estimate and PEA.

On the basis of the PEA NioBay got funded to pursue a PFS but could not get a drilling program underway in 2021 because of a warm winter. The reliance on an indigenous contractor who cut corners in violation of conditions set by the Moosonee community caused further problems. But NioBay did get drilling underway in Q1 of 2022 but the anti mining faction meanwhile organized an informal survey which caught the open-minded community members asleep at the switch and managed to collect more "we don't want a mine in our backyard" votes than supportive votes (reminds one of the Brex-It vote which has worked out so well for the British). Because NioBay understands that no mine will ever be developed in this region without support from the MCFN it immediately suspended work and the stock crashed to $0.10 as the market concluded the situation was hopeless. I assigned a Bottom-Fish Spec Value rating to NioBay as a bet that one day the MCFN would see the benefits of advancing James Bay not just in the form of meaningful jobs for the Moosonee community but also for the greater good in facilitating another robust supply of niobium to balance the 85% supply that comes from the monster Araxa deposit in Brazil.

It may be a little premature to elevate NioBay to a Fair Spec Value rated 2023 Favorite but in December the stock doubled when KRO bottom-fishers began to digest the implications of a news release NioBay put out about a 10 hole drill program it completed on the Crevier project. Jean-Sebastian David, who was appointed CEO in 2022, could not do anything to advance James Bay, but he decided to undertake a geological rethink of the Crevier project. The pegmatic syenite dyke discovered in 1975 is a late stage intrusion within an alkaline syenite intrusive complex which somehow acquired a modest grade for niobium and tantalum which is absent in the surrounding rock. Historical fieldwork had noted "carbonatite injections" within the complex but these were too small to be of interest. The hard nature of the syenite dyke allowed it to outcrop in the manner of similarly hard pegmatite dykes though these have a genesis unrelated to this type of intrusive complex.

JS David wondered from where the dyke harvested its niobium-tantalum payload. It turned out that the area around the existing resource had been clearcut logged so the field crew was able to discover more evidence of outcropping carbonatite within linear depressions such as creeks. Carbonatite is a much softer rock than nepheline syenite so it is easily eroded and buried by overburden. The first 4 holes drilled near the dyke didn't intersect anything interesting, but hole #5, drilled across the creek to the west of the dyke where carbonate rocks were observed did hit something that prompted the company to move the rig to the edge of Lac Touladi about 2 km west of the dyke and drill hole 6 under it. Most of this hole encountered carbonatite and bottomed in carbonatite at a vertical depth of 350 metres. Three more holes were drilled under the lake with similar results before snow shut down further work.

Pyrochlore crystals, the primary host for niobium, were observed in core and confirmed by electron scanning work. An XRF unit also registered niobium levels higher than in the syenite dyke core, but this gives only a qualitative indication. Geochemical assays are needed to establish that grades of 0.4%+ NB2O5 comparable to Niobec and James Bay are consistently present within long widths. The physical implication is that a billion tonne plus carbonatite sits underneath the lake, hidden all these decades by water, surrounding bush and overburden thanks to its recessive nature. The scale is comparable to Niobec which Magris, a 27.5% partner in Crevier, operates 150 km to the southeast. The project is located in a First Nations jurisdiction whose members are engaged in all sorts of commercial activities, unlike the MCFN in northern Ontario. There is only one cottage on the lake used for summer fishing. If assays confirm the Crevier carbonatite as a world class discovery comparable in scale and grade to Niobec, the James Bay story becomes irrelevant and Crevier turns into a new discovery delineation play in a location very favorable for development. If not the stock sags back to its bottom-fish price and a remains just a long term bet that James Bay will one day be back on track.

NioBay Metals Inc (NBY-V)

Fair Spec Value
Crevier Canada - Quebec 7-Permitting & Feasibility Ta Nb
Disclosure: JK owns Brunswick, Eagle Plains, Endurance Gold; FPX Nickel, NioBay, Verde Agritech; FPX Nickel and Verde Agritech are Good Spec Value rated Favorites; all the rest are Fair Spec Value rated Favorites


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