Brad Cooke is a legend in the mining space. He has been active for 40 years, which means that he has witnessed many cycles of mining. Brad is the Founder and CEO of Endeavour Silver (NYSE:EXK), one of the world's fastest growing silver producers. Additionally, Brad is the Founder and Chairman of Canarc Resources (OTCQB:CRCUF), a Mexican silver play that is prepping for production.
The Dow has had a major correction this year - a pattern similar to 2008, but stretched over a longer time period. However, things will turn upward for the miners in the near term. The pending upwave in commodities should reward carefully selected stocks in a big way. According to Brad, it is time to start positioning yourself. Canarc is one of those opportunities that precious metals investors ought to look at.
Palisade Radio Host, Collin Kettell: Welcome back to another episode of Palisade Radio. This is your host Collin Kettell. On the line with us today is Brad Cooke. He is a professional geologist and has about 40 years of experience in the mining industry. Most notably he founded Endeavour Silver Corp. which hit an excess of a billion dollar market cap just a very few years ago; one of the fastest growing silver companies. Brad, welcome to the program.
Brad Cooke, CEO of Endeavour Silver Corp.: Thanks for inviting me on.
CK: We are recording this on Tuesday, Jan. 19th, and gold is steady. Silver is up a little bit. As we record this the stocks, the associated stocks, represented by the HUI is down by about 6%. It is a pretty catastrophic day and that really underlies the market we have been in the last few years. It has been a treacherous market. Brad, just some general discussion on the market, have you seen this before in your forty years of experience? Is this a normal happening?
BC: Well, I wish it was not normal, but, yes, I have since seen this several times typically on a spike down capitulation in any market, especially the broader markets. It turns into a liquidity event where people just sell anything because they need cash to cover marginal for safety or they are just afraid. Not that I feel there are a lot of calls in the recent weeks, but the very few calls that I have had were from shareholders very concerned about what is going on. They do not understand why their hedge against disaster; gold and silver investments being a hedge against the broader markets. Why those hedges go down in value short term as well? That is simply a function of markets looking for liquidity.
Yes, we have seen it before. We are seeing it again. It is usually the hallmark of a bottom of a market. I am hoping that we do not have to put up with much more of this by the end of January. I would not be surprised if not only the precious metals sector but the broader markets turn around and start resuming their upward course again.
CK: Brad, I do not know about you. A lot of our listeners are worried about a potential crash in the general markets, kind of like what happened in 2008. I am no expert in the space. I know a lot more about mining. But I do remember that when that crash happened it really dragged the mining stocks down. Now at that time the mining stocks were in a much better shape than they are now. It is hard to imagine them going down much further from here. Is that something that worries you though if we do see the Dow have a severe correction?
BC: Well, the Dow has had a severe correction, so I think there is a parallel between 2008 and today except that in 2008 the entire correction was compressed into six months. Here we have been looking at the broader stock markets compressing now for most of the year, certainly Shanghai and the precious metals markets. This marks the fifth year of correction for the precious metals stocks. I think it is just like 2008 except stretched out over a much longer period. I still hold the view that such liquidity events as we are experiencing right now typically mark the bottom.
CK: Brad, can you tell us a little bit about the story of you founding Endeavour Silver Corp.? I know that our listeners are keen on listening to stories that are marked by such success. We will also touch on another company that you are working on now. But I love to hear a quick story on Endeavour.
BC: Oh, by all means! I am a geologist obviously. I have been in the business since 1976. I went back for my Masters Degree in 1980, graduated in '84, worked as a consultant in the '80s, and basically started Canarc in 1987. It was primarily an exploration company all the way up until the last year when we decided to focus on near term production for the company. Later on 2002, 2003, at the bottom of the last market cycle, by the way, just coming off bottom, I had the idea that with gold on the move and silver still flat on its back at $4.5 an ounce in 2002, that was a good time to have a silver company.
Actually, I had proposed to the Canarc board that we turn Canarc to silver and at that time I had both support of this early base totally focused on gold so they basically said no. Because I wasn't doing anything with my time we had elected to just go into a quiet period for Canarc at that time. I said, "Well, look, I need to do something so I am going to start a silver company." The Canarc board basically said, "Well, if you are going to do that then I think we would like to be involved. Why do we not become shareholders through the seed stock?" Endeavour was basically seeded by three groups of which Canarc was one.
We got our start in 2003 with basically myself and my COO, Godfrey Walton, with an idea to go to Mexico and seek out strategic silver and gold assets before the price of silver took off. At that time the stock was a 10-cent company, shell company, no assets to speak of, $300,000 working capital mostly our own money.
Fast forward to today and we built a real and growing silver mining company out of Endeavour very quickly. We acquire, refurbished and expanded three historic mines in Mexico. We have now made a bonafide new virgin discovery, grassroots discovery of Endeavour called Terronera that we hope will become our fourth mine even though Endeavour's market cap peaked at north of a billion dollars in 2011 and the stock is now priced at over $13. The correction since 2011 has been harsh on everybody and Endeavour did not escape that obviously. But we have a good, strong company, 1700 employees, 1000 contractors, very strong revenue base and growth opportunities. I have been through these cycles before where I feel right near the bottom of this particular cycle, and the next up wave, three to five year up wave in commodities should be very, very rewarding for people who position themselves now.
CK: Great! Thank you for that, Brad. You were just discussing Canarc Resources which just a little background on that you helped to find in 1988. You are now the Chairman of Canarc Resources. It has been a pretty big week despite bad market conditions. Canarc has just put out a PEA on a new project. I want to start by structuring the conversation around the type of projects that are finance-able right now. That is why I find this project to be exceedingly interesting. It is going to cost less than $10 million to put into production and, well, it is a small scale production. It is nothing that should be overlooked. It is very profitable operation. Brad, tell us a bit about Canarc.
BC: Sure! Strategically, we actually started three years ago looking for more advanced or in production projects to make that transition from explorer to producer. We did not have a lot of success in early attempts to acquire such projects, but this acquisition of the El Compass Mine in Mexico, a dormant but fully permitted mine, right on the outskirts of a famous mining center in Zacatecas that was consummated in the third and fourth quarter of last year. That really got us I think going in the right direction. Kathlyn was able to secure a long term lease on a government-owned processing plant less than 20 kilometers away from the El Compass Mine, so then we did not have to raise the money to build the plant. We already have one ready to go.
The real virtues of the El Compass Mine of Canarc are that it will now transform Canarc from explorer to producer this year subject obviously to financing. But with the mine being fully permitted and the plant already being built and permitted, the capital and time needed to go to production is a very short period of time - measured in months, not years - and a very small amount of capital, less than $10 million. I think that even though it is a bite size project it will produce about 18,000 ounces of gold equivalents per year for seven years. It is a great project for Canarc to get started on.
CK: Yeah, that is great. Just to highlight some of the numbers that I saw in the PEA, you are talking about a total cash cost of gold equivalent an ounce at well under $600. In fact, quite close to $500 per ounce. That is a hard project to find, so congratulations to your team on putting something together that was certainly finance-able for this environment and profitable. Where does a company though with a mine of this size go moving forward after successfully meeting production, maybe there is exploration upside, and what about future acquisitions?
BC: Well, currently, we think in terms of long term growth opportunities for the company. Assuming financing and construction this year and the start of production then we would turn our attention to two things primarily exploration on the existing properties. We have almost 3,000 hectares. That is over 7,000 acres in the Zacatecas area and there are a number of defined drill targets that have never been tested. We have some opportunities right beside the mine to find more ore. That is priority number one. Priority number two is that we have knowledge of several stranded resources owned by other junior companies in Zacatecas who will never develop them. They are too small or too deep or what have you to try and build their own mine and mill. But in terms of trucking ore to an existing plant we think those could be pretty interesting acquisition opportunities for Canarc to look at potential expansion in the future.
CK: Okay, Brad, I want to end with an open-ended question for you and that is after looking through several cycles you are a veteran to the mining space. What do you say to people that are just playing scared at this point or dejected because great stocks even like Canarc are teetering around a 52-week low. What do you do in the past when it gets close or at the bottom in order to stay in the game and keep your head straight?
BC: I will wax philosophical for a moment here. There are lots of famous sayings from Wall Street as to what to do in tough markets like this: buy when there's blood in the streets; buy low, sell high. But it all comes down to an individual investor's priorities and liquidity, cash and they are investing goals. Canarc is, I think, a great way to enter the gold and silver business. This is certainly a good time. But do not expect to turn around in days or weeks; I am talking about months to see finally the other side of this broad value correction that we are in. That is the period of time that Canarc wants to transition from explorer to producer so that when we see metal prices on the uptick and our stock price on the uptick we are driving the boat.
We have already done what we had to do. We are not just promising to do something. We have already delivered and we will start seeing rising cash flows which funds more exploration, more acquisition, more growth. This is like setting the stage for us right now. We think that for a company point of view these next few months is the time to set the table and prepare for dinner. As an investor I would say the same thing. If you have the means and the interest this is the time to get ready to start positioning yourself.
CK: Well, Brad, always a pleasure having somebody with the expertise that you have on the program. That is Bradford Cooke. He is a geologist. He is the CEO of Endeavour Silver and also the Chairman of Canarc Resources. If you would like to find out any more information about either of those, it is www.edrsilver.com or www.canarc.net. We will put the links to that in the summary of the video. Brad, thank you so much for coming on the program.
BC: My pleasure, Collin.
Mr. Cooke began his career as project geologist in 1976 managing mineral exploration programs for uranium, base metals and precious metals across Canada with Noranda Mines, Shell Minerals and Chevron Minerals. He later owned and operated Cooke Geological Consultants Ltd., discovering several high grade gold vein deposits. In 1988, Mr. Cooke launched Canarc Resource Corp., a junior gold exploration and mining company focused on exploring and developing prospective gold properties in the Americas. Mr. Cooke founded Endeavour Silver Corp. in 2003 for the purpose of acquiring high-grade silver-gold projects in Mexico. Since that time, the Company has acquired, rebuilt and expanded three silver-gold mines, making Endeavour Silver today one of the world's fastest growing silver mining companies.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.