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Red Cloud Securities - Investment Advice from an Institutional Mind

March 31 2020, 14:45 GMT+01:00

A conversation with Chad Williams, Chairman and Founder of Red Cloud Securities Inc. 

Sure he is not as good looking as Kate Hudson, but he is in as much demand. Red Cloud Securities offers capital markets services to mining companies. All the company does is "help mining companies." While there are around 100 services that Red Cloud Securities provide, they can be grouped into categories. These include: capital raising, M&A, marketing, strategic advisory work and equities research. There is no other group in Canada that does everything Red Cloud Securities does and has enabled them to grow to be one of the go-to companies for junior looking for capital. But woe betide a company that doesn't match up to Williams stringent assessment criteria. We think Retail Investors will find these useful too.

Marketing is particularly difficult, given current COVID-19 restrictions, but Red Cloud Securities is pushing online webinars amongst other things as potential solutions. Its team of analysts provides expert research and advice, and Red Cloud Securities has raised hundreds of millions in capital for 500 different mining companies over the last 10 years.

Williams is a mining engineer with an MBA. He has been in mining "since he was a kid," and was a top-ranked gold mining analyst at some of the world's major banks and brokerage firms. He managed mining equities and even ran a mining company: Victoria Gold Corp. He has seen the mining space from all angles.

Marketing is crucial for mining companies. How else would they manage to raise capital and fund their projects? Williams explains just how crucial telling a compelling story to investors is for mining companies the world over. When times are tough, mining companies really struggle to raise capital, and this is where Red Cloud Securities steps in.

Williams then gives some extremely useful information to investors: what criteria does Red Cloud Securities look for before funding a mining company? Williams states that he can sometimes tell within 15 seconds (YES, ONE-FIVE) whether a company will receive his investment or not. He states that he can tell by how the person is dressed, if they show up late, who is marketing with them, their age and their demographic. Essentially, "give me as few reasons to dislike you as possible." Over 30 years of extensive experience can clearly make your gut instinct a powerful thing indeed! Investors will find the human/visual side of judging potential investments very interesting.

We Discuss:

  • 2:36 - Company Overview and Chad's Background
  • 5:27 - The Importance of Marketing for Mining Companies
  • 11:50, 21:23 - "I Need Your Money": A List of What You Need to Look Into Before Investing in Companies
  • 20:13 - From Us to You: Don't Be Lazy, Do Your Homework
  • 24:58 - Promoters and Their Games: Getting Caught Out as an Investor
  • 27:28, 42:07 - Business Plans and Preparation for Success: How Will the Company Make You Money?
  • 37:30 - Timings, Urgency and Political Events: Uncontrollable Circumstances Affecting Investments
  • 45:54 - What Should You Question as an Investor?
  • 50:26 - Chad Williams On Joining RNC's Board: A View on the Company

CLICK HERE to watch the full interview.

Company Website: https://www.redcloudfs.com/

Matthew Gordon: Hey Chad, how are you sir?

ChadWilliams: I'm very good thank you. Thanksfor asking. How are you doing?

MatthewGordon: Well, we are surviving. We are surviving. We're all self-isolating inour little cabins. Now, you're up in Quebec, you mentioned earlier?

ChadWilliams: No, I'm actually North ofToronto, we call them cottages in Canada, but cabins or a lake house. And yes,so sorry for the beard and the casual look - but that's me these days. And I thinkwe'll look back, maybe even next week or in a few months on this as trulyextraordinary circumstances. But we'll get through this, humanity has gottenthrough this and this too shall pass, as they say.

MatthewGordon: We will endure and we will survive. There we go. Yes, it's interestingtimes for sure. Hey look, Chad, we caught up a few weeks ago, before you wentto PDAC, so I guess a few things have happened since then. But I know todaywe're going to talk about serious business matters. So let's kick off with aone minute summary for people who perhaps haven't heard of Red CloudSecurities, and give us a little background on yourself if you don't mind.

ChadWilliams: Sure. Yes, so little bit on me: I'ma mining engineer with an MBA and I've been in mining really since I was a kid,as far as I can remember. But of note, I was a top-ranked mining analyst, agold mining analysts at some of the bigger banks and brokerage firms. I managedmining equities. I even ran a mining company called Victoria Gold, which isstill around. Of course they're building a mine in the Yukon. So I've worn alot of hats, so many hats that it's cost me my hair, but you know, mining is mycalling.

Andwhat happened is about 10-years ago, maybe a little less than that, I had theidea to create a new type of company. It's called Red Cloud and Red Cloudoffers capital markets services to mining companies. That's all we do is helpmining companies. And literally, there are about, or there is about 100different things that we do, but generally they can be grouped into differentcategories such as capital raising. We raised you know, lots of money, hundredsof millions of dollars for dozens and dozens of companies. We do M&A, we domarketing, which is interesting in this context because we can't have humaninteraction anymore so we're really pushing video and webinars and let's callit virtual marketing. So we do marketing. We do also strategic advisory work. Iremember when I was with the CEO of Victoria Gold; you know the old cliche,it's lonely at the top - well I had no one to talk to really, so we providestrategic advisory services to mining companies and we provide equitiesresearch. We have a team of analysts as well.

Soyou know, that gives you a sense of what we do. There is no other group thatdoes everything that we do. And there are groups that do various parts of it,but we've been a big success. If I could say that; I don't think it's anexaggeration. We have over 30 employees. We've helped hundreds of mining companies,I think it's at last count 500 different mining companies over the last 10-years.So we've been very, very busy and things are actually going quite well rightnow because our clients, the mining companies are looking for alternatives forideas and we're able to offer some different ways to market and raise money.

MatthewGordon: Brilliant, brilliant. Sorry I cut in; there are so many differentcomponents that, I mean we're going to talk today about raising capital or theway that companies approach you and engage you to help them raise capital. Butyou touched upon something there: as an ex-banker it fascinated me - you talkedabout marketing. The importance of marketing must be significant if you havecreated internally a marketing function because normally you think, hey, giveus the money. That's all we need, you know, and then we'll go off. We know howto mine, we are geologists, we know how to mine, we will go off and do that andthat's all there was to it. But it strikes me, having sort of come down fromsort of, you know, the material big cap type of stuff down to the junior space,they don't all have the necessary skills in-house to, you know, as a reasonablequality or reasonable experience to deliver everything that it's union needs todeliver. So, you know, Red Cloud, being able to offer all of those things: notjust the finance, the advisory, the fundraising, but the marketing as well, Ican see why that may have been quite attractive. Were there certain times wherethat was more in need than others? You know, when times are good to people,they ignore marketing?

ChadWilliams: It's a funny thing because Imean, to be honest, we haven't had really good markets since I started thecompany. I mean, we've had a few bright spots, but generally it's been very,very tough. And what we've found is when times are really tough, miningcompanies really struggle to raise capital. So they need help and that's whenthey reach out to us. And then when markets are very strong you know, theystill reach out to us because they know we've got a big network and they wantto tap that network, and so we boost their efforts. So some people call it ‘theRed Cloud miracle’ because we've been able to not only survive but thrive inmining finance in very, very difficult times. And the reason is because we'vegot this nice niche, we're part of this, we've created a new niche in this, inthe mining ecosystem, if you will, that nobody else can satisfy in aggregate.Okay, brokers can raise money at certain times and marketing firms do marketingat certain times, but because we offer so many different services, there seemsto be a need for what we do all the time.

MatthewGordon: Yes. It's interesting actually because when I kind of stepped down tothe junior space, like I said, it's probably about three years ago, and like Isaid in a previous conversation with you, I promptly had my ass handed to me bya bunch of promoters and brokers. There's a game, there's a definite game, right?And I didn't know what the game was and we learned a lesson along the way, andthat's what happens. But because of your ability to do diligence; whencompanies come to you, you go, ‘hey, one is this a company we believe in? Andtwo, could we tell this story to wherever we go to raise our money from, whetherit be institutions or you know, wherever you go to?’

Sothere's a kind of, would you say those are kind of a stamp of an endorsementfrom you if you’re going to the market and asking, rather than this promoterroute? Because I've just seen it too many times; there's quite a few well-knowngroups who if they're involved, we walk away, we definitely avoid.

ChadWilliams: Well you know, we do prideourselves on quality, and when I started Red Cloud I said at the very beginningthat we'll do business with about only 1% of all the mining companies, andthat's sufficient. There are so many mining companies, we don't need to dobusiness with more than that. We're certainly not perfect. We're misled too: peopleare at times very convincing, and I'm being polite, at other times they'redeliberately misleading. But you know, we're not perfect but I would say ourtrack record is very, very good. I would say out of the 400 or 500 companies,I've lost track, there's only like four or five that haven't worked out at all.Which isn't bad at all in a very, very volatile industry with, you know, start-ups;because a lot of these companies are start-ups. And we have a team of technicalpeople: we have metallurgists, mining engineers, geologists, fund managers, andwe protect our franchise very carefully to the point where certain institutionswill take meetings with our mining clients site unseen. As long as they're a RedCloud client, they will take a meeting.

That'snot easy to keep that reputation up. And you know, as you can imagine as wegrow and times are good or times are bad and you know, there are alwaysdifferent agendas and problems really to keeping a good franchise. But wecertainly think that's very important.

MatthewGordon: Okay. Let's take that as a yes – a stamp of endorsement from Red Cloudworks. If you can get through doors, then it's got to help these companies,right? Because that's the trouble.

ChadWilliams: We do have an investmentcommittee, it’s called the New Names Committee where there's 10 people thatvote and it's got to be unanimous. And anyway, long story short; we do haveprocesses and you know, the truth is as well is we're a regulated broker, in Canada,it's called an IRAK dealer. The equivalent in the US is FINRA. So we have thevery highest level of designation possible as a broker dealer. So, you know, weare regulated and so we have to be careful. Plus, I was a top-ranked analystfor many years and so, you know, I've got a reputation and the people in mycompany have a reputation to maintain as well.

MatthewGordon: Yes, but you know what I mean? I've been a banker myself and it'sdifficult to, you know…there's good and bad out there. And if you find somegood ones, stick with them because the reputation clearly matters to them, andlongevity is earned, you know? You can't kid your way through that. So it'sbeen a learning experience for us and I, you know, I'm just conscious for ouraudience, which is retail investors, high net worth, family officers who don'tspend all day thinking about mining investment. It's just when it comes acrossthe table and and we're keen to help them understand who's who at the zoo,who's good, who's not so good, you know, what companies are good or not sogood. So we talk about red flags and green lights, but that's a conversationfor another day.

Todaywe're going to be talking about raising capital; so companies come to you, you'vejust explained the whole infrastructure behind Red Cloud, but companies come toyou and they pitch. They pitch their companies and their assets and themanagement team. And they say, right now you've heard this story, give me somemoney. And some are better than others. Right? So what are the things that youneed to hear? Because we need to be cognizant that this is a retail audience;slightly less sophisticated than you, so we need to put it in a language andposition it in a way that they would understand how they could translate thatinto what they should be looking for in companies too. So if you don't mind?

ChadWilliams: Sure. And you know, I believe I'vegot a lot of credibility on that front because I've been doing it for over 30-yearsand I've financed, literally there must be 20 companies that get more thanthat, that come to see us every week at Red Cloud, raising money. They are lookingto raise capital. So trust me, I've seen, you know, I can tell within probably15 seconds whether this person is going to get money, right?

MatthewGordon: Really?

ChadWilliams: Oh, I can see it. I can see, Ican tell by, you know, it's kind of an odd thing, and this is the kind ofadvice we give to our clients as well. Right? Because not all of them come in prepped,but you know, I can tell by how they're dressed, if they show up late, who ismarketing with them. I mean, even before they say anything, I have a good senseyou know, by their age, their demographic and all kinds of things.

MatthewGordon: It's a funny thing that, because my old man, we run a family business andmy old man is like; if their shoes aren't clean, they're not getting my money.If they're not presentable - you know, it's all that kind of human personaltraits where you are going, he said, ‘Give me as few reasons to dislike you aspossible. It's a funny thing that's a very visual part of the decision-making.So I'm fascinated that you said that. Interesting.

ChadWilliams: Yes. I've been doing it for so long, but what I did Matt is I was askedby the PDAC, which is the largest mining conference in the world. They asked meto give a presentation on some advice for mining companies: how to raise money.And I came up with 10 different things, 10 different lessons, if you will. Andthese lessons come out of necessity and agony in the sense that I've seen somany bad pitches and so many people do things wrong that I figured it's my dutyto fix things. So the 10 lessons, the presentation I think is probably on the RedCloud website and if it's not, we'll get it up there. But the first one is verybasic, and how I came up with this in fact, I didn't come up with any of thisreally; it's only through trial and error, but I met a very wealthy airconditioning salesman, sold air conditioner; the guy had like a Ferraricollection and a 30,000ft home in Toronto. And I said, ‘Shit, you must be areally good sales guy.’ And he said, ‘Actually, I'm terrible at sales, but I'mreally good at listening.’ And I try to figure out what people need and wantand then I give them what they need and want. So it's a very basic thing. Youcan never get someone to, you know, especially adults, maybe kids you canconvince, but adults, you can't convince them to do something they wouldn'tnormally do. But if you figure out, you probe and you figure out what theirneeds are, then you might be able to give them what they need.

Sothe first one, the first lesson is: it's never about you. As a mining promoter,it's never about you, it's always about the investor. Figure out what theinvestor needs, what their risk tolerance is. What commodities may be ofinterest, what stage, that kind of a thing. One thing that is constant forevery investor is they want to make money. So they have to figure out how theymake money and they all have risk tolerances and you know, what could beappealing, what could be too risky for them, that kind of a thing. So try tofigure out what the investor wants. It's always about them, never about you asa promoter.

Andthe next one is, this is a big pet peeve: most mining folks, most promoters ormining executives are all tech: they're technical, they're geologists, miningengineers, that kind of thing. So they have been trained and they think that toget someone to part with their money, they're going to bamboozle them withtechnical terms and alteration, and 40-page or 80-page presentations. That canonly go the wrong way. It has to be presented in a very clear manner. And theanalogy I use is; pretend that you're presenting to a 14-year old male, okay? So14-year old males have a very short attention span. They're thinking aboutpartying and thinking about a million other things. For a very brief period,they may actually be thinking about you, but don't take it for granted. So a veryshort window and make it super simple and present. And it takes a long time. Andthat's where I'm pretty good and other people at Red Cloud are good at is, isafter listening to a pitch, a presentation, we come up with the magicingredient, what will be the pitch that will work? And then we reinforce that.

MatthewGordon: It's interesting you say that because we've interviewed like 250 CEOsin the last year, and we've had a few quite capable, articulate CEOs andthey've been able to tell the story well and they make sure you understand it.And then we've had others at the other end of the spectrum, I think you'reindicating perhaps more geologically technical competent individuals and theirview is, if you're not bright enough to understand this, that's not my fault.And I would go, I would counter that and say; it's not my job to understand itas an investor, it's your job to make it clear to me because it's my money thatyou want, right? But how many times do you come across the CEO who's just, theyjust want to show you how clever they are, rather than get what they need,which is your money.

ChadWilliams: And it comes from insecurity. Butyou know, arguably the brightest guy in the history of mankind is AlbertEinstein, and he could explain his very complex theories very simply so thatanybody can understand. And if you're trying to confuse me or use big words,then I'm going to be sceptical and I'm going to be immediately nervous. And ittakes really, really smart, sophisticated people to dumb things down, but somepeople are so insecure that that they're uncomfortable with that. But anyway,it is what it is.

Theother, and I made a list here; the other one is, you have to define a clear useof proceeds. If you want my money, I need to know where my money is goingbecause I am going to believe right off the bat that you're going to be buyingFerrari's with my money. Right? And I don't trust you. I don't trust yourproviding guy. I don't trust anybody, quite frankly. But if you have a clearuse of proceeds, and you spend the money wisely and then you're probably goingto get my money now and you might even get my money later.

MatthewGordon: No, I think that's right, but that seems a very normal, everydayquestion. If you're lending someone $10, you'd be saying, well, what's it for?Right? You'd be asking that simple question, but some people hand over USD$50,000,USD$100,000, and they don't ask the question. Or even more bizarre to me is,they don't read the prospectus which they're signing up to. They'll read thesummary and go, ‘Oh, that seems reasonable.’ But in the detail, and it'sparticularly prevalent when things go wrong, right? Further down the line, likesay the market turns, there has to be some sort of, you know, merger ortakeover, or quite frankly, you know, write down, and the management team gethanded X million bucks even though the company's lost money and the shareholderare in uproar. It's like - well, that was in the prospectus. If that was evergoing to be a problem for you, you should never put your money in. And again,that's not a savoury example, but it is a good example of; read the detail.

ChadWilliams: And you're absolutely right.That being said, you know, we're all very busy and if you're going to hidestuff in a prospectus, that to me, that's, not the kind of people that I wantto invest in in the first place.

MatthewGordon: That’s true as well.

ChadWilliams: You're right: you can go back andsay, okay, well, okay, I was a dummy, I should have read page 800 of the prospectus,so shame on me. But nevertheless, that's a little bit…it could be more obvious.But other things, and we don't have to go through all of them, but the key oneis, is you have to develop trust. At the end of the day businesses, it's like aroller coaster; things go up, things go down, things go well, things go badly.But if you trust management, if you really have conviction that these peopleare going to spend your money wisely, especially with exploration; explorationby definition is risky, and you may find something or you may not findsomething, but if you're spending the money wisely, and people are managingyour money properly, that's a good use of funds, in my opinion. And that's thefirst advice I give to executives is; build trust. And trust doesn't occurovernight. It takes years in some instances.

MatthewGordon: Well, there you go. I mean, we would no sooner invest in a companywe've just met than fly to the moon. We look at the company over time, we readthe quarterly, have they consistently delivered everything that they said that theywere going to deliver? Or if not, have there been mitigating circumstance?  And then there's always deals, right? Yourmoney is your money. You have got one go at this. If you get it wrong, youdon't got any money anymore. But there's always deals, there's more dealslooking for money than there is money – that’s is my view.

ChadWilliams: Yes, yes.

MatthewGordon: So just take it easy. It'll be fine.

ChadWilliams: You're right. As an investor aswell, and I, you know, I'm guilty of that myself; I tend to fall in love withthe geology and the prospects, and it serves me well. I've made a lot of moneyon mining stocks, but the reality is most of the time, exploration does notwork. And you know, I'm actually very conservative; I don't gamble. I go to LasVegas, I don't even touch the casinos. But nevertheless, I do see the merit ina lot of these stories, but nevertheless, it's a very, very, very, very riskybusiness. And the promoter won't accurately portray the risk to you because heor she has the incentive of grabbing your money. And you've seen it, you know,you've been misled so many times.

Oh,the other thing too is, really one of my tops irritants is that the miningcompanies come in and they say, well, you know, I need let's say USD$1M or 10Mor $100M, and I need it by next week. And I'm thinking, why do you think that'sreasonable? Like, do you actually run your company with such a lack offoresight and planning that you think I'm going to come up with any amount ofmoney within a week? I don't have, you know, a bunch of cash laying aroundready to deploy at any moment here. Right? And so it really takes about sixmonths from the moment you think you need money to closing on a financingbudget - six months.

MatthewGordon: Oh, when someone says, ‘Have I got a deal for you, Matt? The returnsare astronomical but we need to close it within two weeks.’ That's the only,like I literally shut up shop at that moment. It's like the doors are closed.There you go. Because that smells of, as you say, at best mis-planning, badplanning. At worst, it sounds just almost a little bit corrupt. It's like oneof those sort of pressure sales, scarcity sales, which again, there's too manydeals out there for us to worry about something like that. But yes, I know whatyou mean. I have some sympathy.

ChadWilliams: And we get caught up asinvestors. Because I'm an investor too; I buy, you know, almost all, if not allof the deals that we work on, but, you know, you get caught up in the moment. Cobaltis up - I need a Cobalt name, or Silver is up, I need a Silver name.

MatthewGordon: Well that's the promotional world isn't it? Again, we did see that withbrokers: they're going, oh, the next thing we're going to push is Cobalt, andthen actually, Cobalt's no good anymore. Every quarter there was a new thing topush and they needed them, but it was just a case of, find me anything. Itdidn't need to be good. Just buy me anything which has the word Cobalt in it, oryou know, obviously you guys have had a big kind of cannabis run and up untilrecently.

ChadWilliams: Yes. Not us at Red Club, but yes,generally in Canada. We didn't touch the cannabis thing at all.

MatthewGordon: Well, that was the kind of thing which made me just stop and have alook about. Again, 3-years ago, a buddy of mine who runs a brokerage in Canada,he was trying to get me in cannabis and I thought, great, and it's all goingwell. And he came to me in the September before things went wrong and he said, ‘Timeto get out.’ I said, ‘What are you talking about this? This thing's stillflying?’’ He said, ‘Yes, but we're taking our clients, our good clients, out ofthis now. We'll continue to sell it but we're going to take our clients out ofit now because we're going to start dumping it after Christmas.’ I'm like, ‘Okay.I said, what happened?’ He said, ‘Well, the retail guys are going to be leftholding the baby.’ And you're like, ‘What do you mean?  Your retail guys?’ ‘Yes, that's just the wayit always works.’ I'm like, ‘Oh, that's the game. That's the game. Right?’ AndI just felt that just left a bad taste in my mouth. And I was thinking it'sstacked against retail most of the time. And I just, you know, it was a realeyeopener, but I won't talk too much more about that one for a fear of gettinginto trouble. But that was the genesis of doing what we do now, which is tosay, Hey, the little guy matters here, especially in the junior space where,especially in mining where institutions kind of stepped out on mass, you know,and for all the reasons you know.

Thenext slide I'm looking at here, which always interests me is, ‘how will I getrich?’

ChadWilliams: That's all I need to know. Idon't really need to know what you're doing or what the name of your propertyis. I just need to know how I'm going to make money because as the cliché goes,there's only one reason to buy a stock, and that's to make money. You can sella stock for a multitude of reasons: your daughter's wedding, you need themortgage payments, you’re up, you want to lock in profit, but you need toexplain to me in the next little while how I'm going to get rich. And that's avery difficult and quite frankly, non-intuitive thing for technical people todo. You know they're good at describing alteration or some sort of rock type orhow your mind's working, but I don't really care. I need to know how you'regoing to make me rich.

MatthewGordon: Yes. I agree with this. Again, the amount of companies that come in tous now, or CEO's that we talked to and I say, well, so what's the business? Haveyou got a business plan in writing? I can count on two hands the number ofcompanies who have given me a written business plan, right? Well, can you atleast articulate your plan and the strategy for delivering it? Who's going todeliver it? When are they going to do that? How much is it going to cost you?And when do I get my money? Your question? When do I get rich? Right. Again, Iwould say less than 5% of the management teams we've talked to are able to dothat coherently. And it may be a factor of –

ChadWilliams: You are being generous. You'regenerous.

MatthewGordon: I'm a generous guy.

ChadWilliams: Yes. Like honestly, 5% is a bignumber.

MatthewGordon: Yes, but don't you as an investor, as a personal investor and all sortsof with Red Cloud, you need that. That tells me where, how I'm going to make mymoney, and if you're unable to tell me that, I don't know why retail guysshould buy into this either. You know, ‘we're going to drill’, is not abusiness plan. That's not a monetization event.

ChadWilliams: And you know, I'm able to see, Ilisten to these presentations and I'm able to see through them to come up with themagic that if this works, you know, if we get a, then the outcome is be interms of share price, because I've been doing it for very long. But I can'timagine retail, let's call it, folks that aren't as familiar with mining, Ican't imagine how they would ever be able to do that. You know, they'rethinking, why did you buy these claims? Why are you drilling? Why are youbuilding a mine? What's the value proposition? Again, I've done it for so longthat I know, but I have to explain it sometimes to the mining teams. You know,this is why you're doing it, you know? They don't even know why they're doingit.  And I know that seems odd, but theyjust know that, okay, I'm supposed to, you know, drill it – that’s the nextstep. I'm supposed to drill it. Okay, well, what happens if you find something,have you ever thought of that? What happens if you get lucky? Then what? Wow,okay, that's going to be a good thing. But you know, at the end of the day, whereare you going to process it? Who's going to buy this from you? Are you going tobuild the mine? You need to prepare for these eventualities now.

MatthewGordon: It’s interesting, I had a chat with a CEO this morning. I was on themotorway in the car and we were sort of talking about an exploration play inSouth America, and talking about moving from exploration, and next year we'removing straight into development. And I was asking him, well that's great, butwhere's the evaluation phase? You know, at what point do you evaluate what itis that you've got? You know, rather than this rather broad categories ofexploration, development, production. It's not as easy as that. You know, you needto be able to assess what it is that you've got and how the hell you monetizethis at a point down the line. And whether or not you stay for the entirejourney or you bog out at a certain point.

Soplease tell us again, I'm talking about our viewers here, if the company canexplain what they are - so we are a project development, product finder - great.Project developer – fine. We will need the help of a strategic at points A, B,and C. We will need a financial partner. If you can sort of articulate whereyou sit in this, you know, large, mass of mining companies, people can then geta sense of the risk profile that they're looking at here, right? And that Ithink that's really interesting; that these senior managers who've made money alltheir lives being employed in mining companies, start up these companieswithout necessarily knowing what all these missing pieces are, and being ableto actually manage that process.

ChadWilliams: And to me, the worst crime, if Icould use the word crime, is when folks with a certain skillset, whether it'sgeologists, I'll give you an example; a good geologic team, they make adiscovery and then they make the mistake of trying to build the mine. I canbuild a business, in fact, I can almost say Red Cloud was built on the back ofbailing out, trying to fix mines that did not deliver what they were supposedto deliver because of overestimated assumptions or poor execution. You cannotcount on a geologist to build a mine and you can't count on a mine builder tofind a mine. These are very different skillsets. And you've got some high networth and family officers as clients, and honestly, there's so many wealthypeople, billionaires that have this dream of having a gold mine. It seems to bethis bucket list thing, you know. I've got to check off this box. I need to owna Silver miner or a Gold mine, and then some promoter lies to them, and Iliterally, I could have a full-time job trying to fix these messes. And the badnews I can tell you is, they're almost all non-fixable, or if they are fixable,the dilution, the equity dilution is incredibly devastating. Or you know, thecontinued capital injection, or I need to bring a team of superstars to fix it.And that isn't cheap either. It's almost like somebody saying, ‘Shit, I've gota dream of building my own house. It looks easy, right? I'll go to the hardwarestore and I'll buy some wood. I'll build my own house.’ Until you realise thatthat's a very different thing than you're trained. And building a mine is outrageous-itlooks simple. You know that it's outrageously difficult. Leave it to the pros.

MatthewGordon: Yes, I know. We had a lovely story: we belonged to a sort of familyoffice network here in Europe and one of the guys, one of the big German familyguys stood up in front of the room and said, guys - I won't do the accent - hestood up and said, ‘Guys, I have discovered this new category of investment,which I think, I don't know if anyone here has heard of it, I think it'srevolutionary. It's very green and we're going to, I think we can change theface of this industry. And it's called tailings’.

ChadWilliams: Yes, tailings and recovery: Irun, man. If somebody says tailings - I run.

MatthewGordon: I know, but this guy thought he'd discovered sliced bread, okay? Heliterally was. And I think the point here is that you know what you know, but ‘youdon't know what you don't know’. And putting your money into things that youdon't know is always risky. It comes back to my thing; you know, you've got todo your homework, you’ve got to trust the team. You've got to believe that theteam can deliver this because otherwise you're out of control. You're totallyout of control here. And I think it's the same for retail guys -you know, you havegot to know what you're getting into is what I'm saying.

ChadWilliams: Yes. And you know, the good partthough, because we've been negative really, a good part is, you know, inToronto - arguably the mining capital of the world, certainly for smallermining companies or certain size companies, long story short, there's a majorroad called University, and on University there are lots of hospitals and thesehospitals, they all carry the names of very successful mining promoters andinvestors: guys like Rob McEwen, Cheryl Assan, Seymour Schulich, Peter Monk,and so on. So the value creation in mining can be staggering. And you know,I've seen stocks go from a penny to USD$5 or 10 cents to USD$20. And so whenyou do get it right, you can create amazing amounts of wealth. And we'vetouched on certain things to look for, but you know, don't give it up, therewill be more discoveries. And I can't tell you today which one it's going tobe. And even if I did know it, I probably wouldn't recommend it because I don'tknow the criteria of the investors on your show here, but long story short; theywill be young, they're old. That's the good news - there are some good youngentrepreneurs coming up in mining. There are some properties that appear tohave merit. You know, there's every reason to be optimistic that there will besome tremendous wealth creation.

MatthewGordon: But what's your view? I mean, on one of your slides here, it talksabout the sense of urgency here. And I think that if you look at the past fewweeks, obviously with the market reset and then Covid-19, and you know, there'salways something, right? There's always something. And I think with mining,money costs, we spend a lot of money and invest in digging holes and drillingholes to find out what we've got in the ground. And you know, time is money. Soyou know,  what did you mean when youtalk about no sense of urgency in your presentation?

ChadWilliams: For mining companies, time isnever on their side because for operating companies, companies that have mines,they're depleting their asset all of the time. And it's a finite resource,right? So they need to continue exploring. And for exploration companies thatdon't generate cash, every day that they don't make a discovery, they gothrough their cash reserves and they need to either replenish those. So it'snot sufficient to be doing studies. It's not sufficient to be you know, there'sgot to be a tremendous sense of urgency for these mining companies to create value.That's what I meant.

MatthewGordon: Okay. So you would encourage investors to look to management who havegot a path to monetization and an accelerated timeline in which to do that. Imean, that's always a winner. Okay. And I guess that kind of comes onto one ofyour other points, which was around planning, which is not about just walkinginto the room and asking you for money and how they do that, but in terms oftheir ability to demonstrate how they are planning to build out this businessof theirs, right?  So what are the thingsthat you look for there?

ChadWilliams: Well you know, in terms of lackof planning, we talked about basically underestimating the time to raisecapital. I look for budgets or use of proceeds. I look for a target. It's okayto dream. It's okay to have an objective. Sure. It's okay to say I am doingthis because if I am successful, I will find 1Moz. And if I find 1Moz, it willbe worth USD$50M. And if I find 1Moz, somebody will buy me. It's okay to walkme through your thought process. As you say, drilling is not a plan. Drillingon a certain property is not a plan. That is an activity or a tactic. A plan ishaving a grand vision of, if I do certain things, then those outcomes mayhappen and therefore that's how we make a lot of money.

MatthewGordon: I guess it comes back to that point we made when we talked aboutearlier, which is something about having a business planning in place and beingable to describe the moving parts, but what is the helicopter view here? We aregoing to do M&A, we're going to acquire these money assets and we're goingto divest them by being on different continents or whatever, whatever theirthing is. But our exit point is very clear. It's here. Now working back, here'show we get there. You're looking for that kind of clarity?

ChadWilliams: Yes. And everything can bedistilled into one thing. And I know it seems overly simplistic, but again,it's taken me 30-years to figure this out: the recipe for success in mining isto increase your NAV per share - your net asset value per share. So it's okayto issue shares as long as your asset value, your net asset value grows morequickly. Okay? And why companies get into trouble is they either destroy assetvalue or they, or they issue an incredible amount of shares and therefore theydilute the asset value. And I would say the follow on is, if you get the NAVper share thing right, you need to then make sure that people are awarethatyou're doing that. There is no award for modesty or bashfulness in mining.There are something like 2,000 mining companies. So it's a very, very crowdedfield. So you could be doing all the right things in your basement -nobody willcare. You need to get out there.

MatthewGordon: So here's a question for you: if a company's got cash, do you want tosee them do cash buybacks or do you want to see them creating multiple dollarreturns for each dollar they have in the bank? And how would they go aboutdoing that for you?

ChadWilliams: Whatever, you know, I'm on abunch of boards and whatever a management team proposes to me, whether it'sdrilling or building a mine or doing nothing, or a share buyback, I don't carewhat it is, I will simply respond to them and say, is it NAV per shareaccretive? So for example, if we're trading at a fraction of NAV, then youshould be buying your stock. If you're trading at a multiple of NAV, andFranklin Nevada was famous, Seymour Schulich was famous for that. I mean, guyis a genius and you know, every time he used to watch a stock, and every timeit got to over two times NAV, he would issue securities. He would issue shares.And I said, Seymour, you don't need the money. He had USD$1Bn of cash. He said,I'm creating value by issuing securities.

MatthewGordon: Interesting.

ChadWilliams: So, you know, it all comes downto that - we don't have to overcomplicate things.

MatthewGordon: So you're looking for that one thing - that's fascinating. Okay. Ithink people watching this will note that loud and clear. And then of course,you know, not all companies are in a lucky position to be cash-producing, orhalf cash, but they all have one thing in common: they're burning through it,doing whatever they did, they hunkered down or drilling the bejaysus out oftheir assets. They're spending money. So they got to have an eye to the future.And as you say, and again we referred to it earlier, don't come trotting upsaying I need some money by the end of next week. That doesn't work.

ChadWilliams: No, it doesn't work. But, when Iwas running Victoria Gold, I used to market, and investors would say, well,you're here looking for money. I said, actually, no, I'm not. I'm here to tellyou what I'm doing and then I'll be back in six months looking for money or ayear or whatever. But I'm planting seeds to build trust and credibility so thatyou know what I'm doing. And don't forget - these Fund Managers like yourself,Matt, I'm sure, or any investor in general, we do get up in the morning and wesay we need to make money. Like you cannot underestimate the pressure thatthese fund managers are under to generate returns. They are allocated pools ofmoney and they need to generate returns. So they are desperate for ideas.

Yourjob as a mining executive is to help them out and to demonstrate to them howyou're going to create value for them. And you're not going to be atroublemaker. You're not going to be a basket case. You're not going to becalling them constantly for more money, and you're over budget or you're justtaking too long. You know, put yourself in their shoes; they need to managemoney. Managing money is an extremely difficult job. I wouldn't wish it on myworst enemy. I mean, I've done it. And your performance gets measured minute byminute, day by day, week by week. It is devastating, especially in thesemarkets.

MatthewGordon: Yes, there's nothing soft about it. The numbers are there every hour ofevery day, and people are looking at you and they know and they know. It'strue. It's true. It's not a bad job, but it's not an easy job for sure.

ChadWilliams: It’s very stressful.

MatthewGordon: Very stressful. Okay. So let me flip this on its head, Chad, which is,you know, for retail guys, they should be asking the same questions that you,as a big fund broker, M&A guy, institutional guy asks, they should beasking those questions too. And we're at least expecting to be told thosethings by the management team. And if the company can't articulate thosethings, you would say that's a red flag?

ChadWilliams: Pass. Yes. You don't need to buyany particular stock, absolutely. You know, other things that I look for are,as an investor I look for, so we've talked about things:  planning, you know, trust, we talked abouttransparency, simplicity. There will be another hot thing, whether it's Uraniumor Cobalt or Lithium. So do some research on the macro economics as well sothat you're prepared and you can have a discussion with management. And trustsome experts. I would say one of the things as well as is, you can askmanagement what is their track record of success? If a group has made money inthe past, odds are they'll do it again. It's not a certainty, but you know, ifthis person is, say they're 50-years old and they've never done anything intheir life of any note, never won any awards, or if they've never been in thetop of their class, or won the Olympics or whatever, you know, I'm makingthings up here, then odds are they're going to have a mediocre performance, right?

MatthewGordon: Yes. We see that a lot. We see that a lot. Okay, Chad, we shouldprobably wrap it up there. I mean, we've trotted and skipped through a lot ofthings there and I've enjoyed that, but it sounds to me it's like as you say,it's taken years for you to kind of distil it down into those simple headlines.But these are very basic things that you need to, we need to understand, of anyone, any group or any company to be able to say, here's my hard-earned cash - Itrust you. I'm going to give this to you because I know you're going to make merich and I know when by.

ChadWilliams: Or at least you are going togive me the highest odds of me getting rich. I mean there's no certainty; there'shope. There's no guarantee. And you know, if I lose money, I only get angry ifpeople have misled me or have failed to execute on their plan, or you know,like stuff happens, you know; look at the current economic context. Can I beupset at a CEO because it’s stock is down 50%? It's not his or her fault. Butwhat are you doing to mitigate the risks? What are you doing to preserve cash?Or even, what I prefer is, what are you doing right now to be aggressive? Whatare you doing to use this as an opportunity? Because most people are in the foetalposition right now. Very few of us are very aggressive.

MatthewGordon: You've hit the nail on the head for me; we're having theseconversations this week and last week with companies; I think the companies whoare getting out there, they're getting on the front foot. You're talking aboutgetting on the front foot, right? You're saying, I want the biggest share of voicein this marketplace because the companies which don't have anything, have gonequiet, and they have gone quiet because they've got nothing. It's very hardunder this severe spotlight to say anything believable about your company. Whenthere's money sloshing around, it's easy. Everyone thinks everything's going tomake money for everyone, right? And we've seen companies go into hiding, notjust into the foetal position. They've gone to a foetal position hiding behinda wall in the dark. They have gone. And I'm interested in hearing from thecompanies who today are confident enough to say, look, the market is themarket, but here's what we  acknowledgethat. Here's what we know. Here's what we're going to do, and this is why wethink we will eventually you know, when, or maybe when is a strong word, wewill make it through this, so trust me and trust my team. Those are the guysI'm listening to in the next, you know, last week, this weekend and next week.The ones that have disappeared; that tells me something. It tells me a lot.

ChadWilliams: Yes, yes.

MatthewGordon: Now, I also heard that you are joining the board of RNC Minerals - is thattrue?

ChadWilliams:  I did join the board on January 1st. Yes.

MatthewGordon: Well done. Well done. How are things there?

ChadWilliams: Things are, things are good. Youknow, talk about a group that's active and I've been very, very pleased. I'mobviously on the board, so I'm preaching for my own company here but they'redoing well operationally. You know, they had the fires, which was a verydifficult situation for them. So they dealt with that properly. Very well infact. Now, with the virus, they're dealing with that as well. They have a verygood operating team in Australia. We have a lot of cash and the reason I joinedRNC is that I was very close as an analyst to that company, in those days itwas called Goldcorp. I mean, it's morphed; Goldcorp had Red Lake, and Red Lakein those days it was the Arthur White mine. It was a very low quality mine in acamp, in an area that had very good quality mines, and nobody could figure outwhy Arthur White was such a dog. And then lo and behold, the geologist had atheory and he said, poke a hole here and you're going to find some high-grade.And he found an amazing, a very small but amazingly high rich ore body.

AndI find that Beta Hunt has many similarities, there is no guarantee of course,but it reminds me of the old Arthur White Mine where Beta Hunt was you know, a lowergrade Nickel mine in fact, and had some Gold in it. And then all of a suddenwe're finding extremely high grades of gold, and it's a different population ofgold. And I don't know what it means in the future, but I do find it veryinteresting. Yes. I want it to be associated with that.

MatthewGordon: Well, we're talking with Paul Hewitt next. Yes, the new guy. Well he'snot new anymore. It's been 8, 9-months. But hell of a turnaround story as well.It's been fascinating. We've been following it since the middle of last year.Great, great story.

ChadWilliams: That's a good example of, he'sdone everything right. He's added NAV per share and yet the stock is a quarterof what it was a year ago, you know? And so it's frustrating for managementteams when those kinds of things happen, but it's not his fault. He's done, inmy opinion, he's done everything right.

MatthewGordon: It'll get there. I think the good news for them is they don't need togo to market for cash. They're producing positive cash flow. And there's abunch of, I think, genuine catalyst about; you know, everyone talks, ‘oh,there's a catalyst event’  and they come,they go; no one cares. But in their case, I think there's a couple of biggiesjust around the corner. So yes, we're going to catch up with them next week andtalk about their end of year report.

Well,like say, Chad, thanks very much. I do appreciate that. I mean, it'd be lovelyto talk to you again. If you ever get a moment from your busy schedule, and itgives you a view of the markets and what you think's going on.

ChadWilliams: And I'll be I'll be shaved and…

MatthewGordon:  Oh, no way. Don't do that. Well,hopefully you're not still in your cabin there in 6-months, right? You're goingto go crazy.

ChadWilliams: Come and rescue me.

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