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James West of Midas Letter Live @ PDAC

James West of Midas Letter Live @ PDAC

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Resource Intelligence Interviews James West of MidasLetter.com

RI: What is the Midas Letter and what does it do?

JW: Essentially, I select five stocks on the first Sunday of every month that I expect to double or better nine times out of ten within twelve to eighteen months. These stocks are exclusively resource stocks on the TSX and TSX Venture in Canada.

RI: Is this is a service that you provide for visitors and subscribers to your site?

JW: My paid subscribers are individual investors, high net worth individual investors and institutional investors. My free list is open for anyone to try and they see a sample of a letter that is about three months old so they can see what they missed out on.

RI: Do you guarantee your success rate in choosing stocks?

JW: What I say is that nine times out of ten the stocks will double or better in twelve to eighteen months. In the last 24 months we’ve selected just over 80 stocks and out of those 80 stocks over 50 percent have already doubled in less than a year. The rest of them are either ratcheting up more slowly or they’ve gone even beyond that. In fact, we’ve had three 1,000 percent winners this year.

RI: I was at a talk with you the other day and I saw you had your crystal ball with you. Is that how you get your picks?

JW: The crystal ball is an interesting technology and in the hands of the uninitiated it’s completely useless but in the hands of an expert it’s spectacular. [Laughs] I was using the crystal ball in my presentation to make a point about the importance of quality information. The point I was trying to make in using the crystal ball as a metaphor is that a lot of the investment advisers and the analysts and a lot of the media who interpret the events that determine values in resource companies, make broad sweeping judgments and claims that can’t be verified and aren’t really that relevant in the case of making money. For example, I tell my subscribers that I don’t care about geology in that if a company is going to go out and explore a property and try to find minerals, I’m not so much interested in what the geology turns up outside of what it’s going to do for the stock. So whether it’s geology based or whether the fact that some high-profile investor joins the board or based on the fact that they acquire something in a country that is prolific for a certain commodity, to me that’s more important than geology in the finite window.

RI: Geology is an important element but you’re saying a change in management or jurisdictional issue could have just as much of a factor on stock price?

JW: I’m trying to downplay the significance of geology when it comes to making a stock go double or better. Geology is what attracts everybody to the project to begin with but in the window where a stock doubles or better it’s not necessarily the geology that is going to be a driving factor. In fact, there have been cases where the geology looks great but the stock is going nowhere. I can point to companies where the geology is completely unknown but the stock has done 300 percent. Why? Because of the people behind the company, because of location and because of their track record. Geology matters, but when it comes to identifying these companies geology is not one of the key factors that I use to determine a company as a pick or not.

RI: We’re at the PDAC and it has been a massive event with 25,000 plus investors. Are there any signals that this market is overbought?

JW: When you see the increase in visitors go from 22,000 last year to over 30,000 this year it certainly demonstrates that there is a lot more interest in this market. But is this market over? Absolutely not. We’ve reached the point in our evolution as a species where all of the big deposits are known. We know where the economic stuff is on the large-scale close to the surface so right now what we’ve got going on is a global competition for these large resource assets.

RI: Are you a gold bug to some extent?

JW: People say I’m a gold bug but if gold was not an appreciating asset I would unceremoniously abandon it. Right now I am best described as a commodities bug. I believe that given the nature of the inflated supply of money in the world that is flowing into asset classes such as financials, insurance and technology vs. commodities where everything that is bought is either grown or mined. In other words, these are tangible things with value that are used whereas the other asset classes are more based on what is somebody willing to pay. It is similar for commodities but people need to eat, drive, heat their homes and people need clothes so you can’t live without these things. Technically you could live without commodities although most people would say they can’t live without their BlackBerry or their iPhone.

RI: Why don’t we talk about a company that you find interesting these days?

JW: A company that I have the following for years which has really started to make some serious headway is Tinka Resources (TSXV: TK). This company has been exploring a project in an area of Peru that is prolific for copper, gold and other base metals. The Colquipucro project is the first silver dominant resource play in that entire region of Peru.

What’s happening now with Tinka is that they already have 30 million ounces in a very mining friendly place with a very low strip ratio but they just discovered that they have a region one and a half kilometers to the north that has the same geological setting but is three times the size of the existing 30 million ounce deposit. This April they are going to start drilling this new zone and they are also going to start to drill the extension of the known zone. The potential for this company at this time is really substantial.

RI: I’m looking at their stock and I see a lot of interests and growth with lots of volume lately. Is that an indication of interest in the upcoming drill program?

JW: Absolutely. In fact, I was speaking with the president of the company, Andrew Carter, and at the same time I was there a CEO of one of the world’s biggest silver producing companies was talking to him and was clearly interested in what Andrew had to say. I think a lot of the volume you’re seeing in the stock over the last few days is indicative of the fact that this company is finally getting traction with the retail market and institutional side. At this point in my book Tinka is a real buy because we know they’ve got 30 million ounces and that’s just from what’s known. We’ve got so much upside in this company. This is a company where I can say in confidence to my shareholders that this is a company that the share price is likely to double or better in 12 to 18 months.