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Steve Todoruk of Sprott USA, and the 2019 Pezim Award winner sits down with Maurice Jackson of Proven and Probable to discuss the Significant New Discoveries and the impact on your portfolio. Mr. Todoruk has a proven pedigree of identifying promising new discovery plays for gold miners time and time again. His unique insights and deep understanding of the mechanics driving the sector make the interview an invaluable source for junior gold miners and investors alike. Mr. Todoruk conveys some of the unique, qualitative criteria for identifying new gold deposits, building new mines, and spotting promising gold miners and mining companies worth investing in. His in-depth overview of the industry and major mining companies participating made him one of the most highly regarded, sought out investments minds in the space.

Transcript: 

Maurice Jackson: Today we will discuss the correlation between performance and companies that have identified significant new discoveries. Joining us for a conversation is Steve Todoruk of Sprott USA.

Now, before we delve into performance and discoveries, allow me to congratulate you, sir, on winning the prestigious 2019 Pezim Award. What an honor to have your peers and industry professionals recognize your contributions as being a great steward for the natural resource space. For the person reading, tell us about the Pezim Award, and share some of the previous winners.

Steve Todoruk: Quite humbling, for sure. Murray Pezim was a well-known financier based out of Vancouver. About 30 years ago he had up to 50 junior mining companies in the stable, and Murray would raise the money for the different companies and go out exploring, trying to make new discoveries of gold and silver deposits. His little company in Eastern Canada discovered the famous Hemlo gold mine, which is still in production. Then in the 1980s a couple of his companies discovered the Eskay Creek mine, which went on to become the richest gold mine; I think it was the fifth-largest silver mine in the world. One of the stocks literally went from $0.25 cents to $72 a share!

I had the pleasure during those days when I was a geologist in Vancouver and I was conducting quite a bit of the exploration work for Murray's various companies. I had firsthand experience with them, I would say that during that time I was younger and a couple of friends, and we started up a little investment club and we started buying some of Murray's stocks, which introduced us into investing in the sector. Murray passed away in the 1990s, and after that in honor of them, the Pezim Award was created, which is to recognize various individuals more on the financing side of the mining industry, in particular, people who are involved in raising money for junior mining companies, as well as going in the market and buying shares, supporting the companies that they liked.

I'm kind of surprised and very humbled to join that list because some of the previous winners were obviously Murray Pezim, John Tognetti of Haywood Securities, Ian Telfer, Ned Goodman, Adolf Lundin, my boss Rick Rule, Eric Sprott, Mark O'Dea, Clive Johnson of B2Gold, Rod Netolitzky, John McCluskey. It's a pretty prestigious group of guys there.

Maurice Jackson: It certainly is, sir. Again, congratulations on that coveted decoration. Sir, you are one of Rick Rule's hand-selected investment executives with a proven pedigree of success. Share with us the makeup of your clients and your investment thesis that separates you from your peers.

Steve Todoruk: Well, I think my strength is the fact that I'm a geologist. I went to university in Vancouver to study and become a geologist and then worked in the field for several years for mining companies looking for deposits. Then I transitioned into getting involved in running my own junior mining companies as a president of two junior miners for about 12 or 13 years. Then in 2003 Rick Rule asked if I'd consider crossing the street to become a stock broker to help pick gold mining stocks for our clients to invest in.

As of today, I've got a 40-years' experience, it's all been in the mining industry. I've never done anything else, and I am glad to say I have one of the most exciting jobs in the world. I love it with a passion. Getting to go out and visit projects, and always talking to people in the industry. Those attributes I would say distinguish myself in providing my clients a leg up on helping to pick good stocks to invest in. This can be a very trying sector, especially when metals are out of favor. But over the decades doing this, my niche is to identify the small exploration companies that make what I think are going to be the significant discoveries, that major mining companies will want to come in and take over a said junior mining company to acquire new deposits and expand their resource portfolio to build into big new mines for the big company shareholders.

It's a pretty niche sector. There's a lot of companies out there, but over the years I've come to learn and convince myself that this is the best place to be, in significant new discoveries. If you're an investor, you want to get in right around the time of that discovery, now it's usually meaning the first good drill hole that indicates a significant new finding and sit back, and see if the company can successfully keep moving the drill over, which usually takes about two years of drilling to defy those horrific odds and successfully find a big significant deposit, and more times than not, you see a major mining company come in and take them over to build that mine.

Maurice Jackson: You said key words here, a significant discovery. What are the attributes that you're looking for that constitute a significant new discovery?

Steve Todoruk: Well, as a rule of thumb, I think that if a company's going to build a brand new gold mine, it's got to be at least 1 million ounces of good grade gold, and that factors in the location, the infrastructure, and a number of other factors. When a company announces that first good drill hole, I want to have sort of a good gut feeling that we've got a shot of a million ounces at least. For example, there's a recent discovery that I can't provide the name for compliance reasons, but the first four drill holes were on the order of 20 meters, 25 meters of 5 to 8 grams gold; 20 meters, 25 meters wide is not really wide, that's not this stuff that giant gold deposits are made out of, but that is the stuff that one million ounce deposits are made out of. That's kind of what I'm looking for when I reference a significant deposit.

The spectacular discovery back around 2008, a little no-name junior called Aurelian Resources announced a drill hole, I think it was about 242 meters of 5 grams gold, including about 60 meters of around 30 grams gold; that's a giant drill hole, that's the stuff that multi-million-ounce deposits are made out of. That kind of a drill hole actually makes my job easier when I see something like that because big drill holes like that don't tend to be in the middle of small deposits, they tend to be in the middle of the really big to giant ones.

Maurice Jackson: Not asking for a shopping list, I just want to know some of the ingredients that have made your clients some handsome returns over the years. Do you have some examples to provide readers on the merits of adding companies with significant new discoveries to their portfolio?

Steve Todoruk: Well, that's a bit of a tricky question, if investors are going to try doing that on their own to identify significant new discoveries, even looking for that first drill hole, in a news release headline, that's tough if you're not a geologist. For me it's second nature, there are a number of current significant discoveries to my standards, I'm quite happy and my clients are almost full right now. If there's a brand new, good-looking discovery, and now it's tomorrow I have a bit of a problem because my clients don't just continuously send money into me, they tend to say, okay, sounds nice Steve, what do we sell to fit that in? It's almost to the point where I like the ones we have, it better be really good if I'm going to say let's sell someone one of our current positions.

Maurice Jackson: Mr. Todoruk, this has certainly been an eyeopener and is quite intriguing. Before we close, what keeps you up at night that we don't know about?

Steve Todoruk: My hockey team, the Chicago Blackhawks, they won three Stanley Cup Championships, and as a result of being successful, they had to let their good players go.

Maurice Jackson: I'm not a hockey fan, but I tend to be inclined to Detroit teams, I always liked the Detroit Pistons, the Detroit Lions, don't laugh, and the Tigers. I'll go with Red Wings, although I'm not a hockey fan. Last question. What keeps you up at night that we don't know about?

Steve Todoruk: What keeps me awake at night? Not much, I sleep pretty well. I believe gold is going higher. I'm not a raging gold bull. When I started working for Rick 16 years ago, gold was $425 an ounce, it's almost $1,700 today. From the simple geological perspective, there's lots of gold deposit out there to find yet, but they're getting harder and harder to find. Mostly meaning they're getting deeper and deeper. That means that if investors, for whatever reason, want gold in their life or in their portfolio, they're going to have to pay the going rate for it. Mining companies are not going to dig gold out of the ground, losing money just to give people gold. Then you add in all the other reasons why gold probably continues to go up like it as the last 16 years. In general, I feel good about investing in this sector, I think it will always be around in a good place, and for a portion of investors investing dollars. Pretty happy overall.

Maurice Jackson: Last question, sir. What did I forget to ask?

Steve Todoruk: Who's going to make the next significant discovery? I don't know. We'll have to wait and see. You never know. You can never predict, but that's what I do every day when I get up. First thing is, is today the day that some no-name junior has announced a good looking discovery?

Maurice Jackson: If you could pinpoint, if you were to say, generally speaking geographically, is there a region that kind of has your attention, at least?

Steve Todoruk: I would absolutely love a giant gold discovery in the Carlin Trend in Nevada by a little junior. Everybody loves Nevada, everybody knows all about the Carlin Trend there, that's where the giant gold deposits are, that Newmont and Barrick own. The problem is that they've had all the real estate tied up for 50 years. There's a couple of juniors poking around, but I'd love to see something come to fruition right in the middle of Nevada. Eastern Canada is a good place. Australia, we've got two very nice looking gold discoveries happening down there. I love Australia.

Just touching on that, for the last three years in my books, I would say that there's been a lot more money spent in Australia exploring, spending money drilling then there has been in Canada, the U.S, and we hadn't really seen any significant discoveries, but all of a sudden here we're starting to see the reward just spending all that money with significant new discovery by Rio Tinto, their Winu copper-gold discovery. BHPs announced a newish Olympic Dam type of discovery, their big Olympic Dam Mine. Then on the juniors, I can't mention the two that referred to a few times here, a couple of nice-looking discoveries, so that that's good to see. I love Australia. In general, I want a low-risk country. Mining companies are trying to reduce their overall risk profile by shedding some of their riskier mines, non-core assets in trying to acquire those mines where their shareholders feel more comfortable.

Maurice Jackson: Mr. Todoruk, for someone listening that wants to further today's discussion, how many they get in contact with you?

Steve Todoruk: You can give me a call in our California office at 1-800-477-7853 or email me at STodoruk@SprottGlobal.com.

Maurice Jackson: Sir, if someone has a natural resource space portfolio that they like to have graded, can they contact you and have that graded, sir?

Steve Todoruk: By all means, it doesn't take me long at all, and happy to chat about them.

Maurice Jackson: Please make sure you put in the Subject Line: Proven and Probable.