Transcript:
Introduction
The Canadian Securities Exchange presents your go-to source for trends in junior and small cap markets each month. Join host Anna Serin and financial expert Bruce Campbell in partnership with Stockhouse.
ANNA:
Hi, my name’s Anna Serin and I’m Director of Listings Development with the Canadian Securities Exchange. You’re joining us for our first episode of 2025 for the market this month. I am joined by none other than my wonderful co-host Bruce Campbell with Stone Castle Investment Management. Thank you for joining me,
BRUCE:
Yeah, it’s awesome to be here in our brand-new format.
ANNA:
It is our brand-new format. We’re going to bring you an episode every month. We’re going to highlight a theme that is happening and trending in the markets right now. We’ll also talk about CSC news and other trending topics. Bruce is going to guide us on how we should be thinking about investing this year. So, very excited to get things going again with you, Bruce, for the first episode of the year, I feel like a trending topic that we should dive into is the word tariffs. What do you think?
BRUCE:
That’s a big one. I think there’s going be a lot of talk this year about that.
ANNA:
That’s right. Okay. So just to give you a little bit of a background on what’s been going on as most people are aware, Trump’s administration came into the Oval Office in January. And before he even came into the Oval Office, he was talking about some proposed tariffs that he would impose on both Canada and Mexico. We got pretty close to those imposed tariffs, and he has now backed down, I believe we have another month before they could come back to light. We have since made some efforts to hopefully sway those. But just wanted to give a little bit of an insight into tariffs and the history on tariffs, just so we can set the tone a little bit for today. Throughout history, tariffs have been used as a tool to raise revenue, protect domestic industries, and retaliate against foreign competitors.
One downside can lead to higher prices for consumers and reduce trade. The sectors that this affects are automotive, which relies heavily on parts from Canada and Mexico. Energy, which prices could spike as well as given that over 70% of US oil imports come from these two countries. On food, Mexico supplies over 60% of the fresh vegetables and nearly half of all fruit and nuts consumed in the us. Although there are many consequences to these proposed tariffs, one of the main consequences is potential trade wars. About half of America’s annual imports, 1.3 trillion annually come from China, Canada, and Mexico. China has already retaliated imposing its own tariffs on US goods. These include 15% duty on coal and liquified natural gas, as well as a 10% tariff on agricultural machinery, crude oil, and some vehicles. In general, the economic impacts for a country imposing import tariffs depends critically on how easily businesses and households can find non-tariff substitutes.
When substitutes do not exist or cannot easily be produced in higher quantities due to capacity constraints, tariffs are more disruptive to the real economy and lead to higher inflation. In contrast, the effects are more muted when close substitutes are readily available. This would have a significant impact on the Canadian economy as the US accounts for about 75% of all Canadian exports.
Okay, so now that I’ve given the nuts and bolts of what tariffs are doing and how they could affect us, now Bruce is going to give us the real information. Bruce, first of all, what are your thoughts on these proposed tariffs? And let’s talk about how this is going to trickle down into the markets, both globally and locally.
BRUCE:
I guess my initial thought is what’s he really after with these tariffs? I don’t necessarily know if anybody knows except for him. So that’s the first point. The second point is the markets made it pretty clear that they don’t like the big overlying theme of tariffs, and investors don’t like this. If you remember when initially he said, yeah, it was going to go into effect February 1st, and then as we were leading up to the end of January, the White House came out with a statement that, no, it was going to be March. The market was fine. And then, it became a rollercoaster. When it was decided it was February, the market immediately sold off that Monday. But then when Mexico came to an agreement with the border and Canada came to an agreement, the market recovered. So, the markets are showing you that they don’t like tariffs, but if ultimately, they do end up being put into place in whatever level that is, it’s going to have a significant impact on the economy and on stocks.
ANNA:
Alright. And will this affect currency? We’ve seen some currency issues since Trump even got elected. The Canadian dollar hasn’t been doing so well. Do you see those further impact in currency?
BRUCE:
Yeah, certainly it could. If you look at what’s gone on, the Canadian dollar has basically dropped off a cliff since just before Trump was elected. As you know, it was really almost a foregone conclusion that he was going to be elected. The Canadian dollar started selling off and the US dollar was shrinking that whole time. Whether or not that continues is going to be interesting. It has been pushed to some technical levels that it’s kind of at the higher end of, doesn’t mean it can’t go through that level and go higher up. It’s something that we’re watching closely because that has an impact on Canadians in a fairly significant way, in a few different ways.
First off, if you’re a consumer, you know, obviously if we’re bringing in goods from the US, if we wanted a vacation in the US, anything that’s embracing the US dollars is so much more expensive. But if you’re actually someone that has Canadian costs and sells into the US is actually a pretty big benefit for you because you’re getting US dollars for your goods that are worth more.
ANNA:
And would that counter some of the tariffs if they do come into place?
BRUCE:
Yeah, potentially.
I don’t know if there’s enough weigh off there because the tariffs, if they come in, maybe not immediately, but as replacements are found for those goods domestically, then you’re going to start to see the amount of supply and demand really go in the favour of the US and out of the favour for Canada. That’s where things will really get hurt.
ANNA:
Right. Now, are there any sectors in particular that we might see from a market standpoint that might suffer or benefit from this?
BRUCE:
Well, the first one obviously is steel because he’s already put the steel tariff in. And so that’s a fairly significant impact. We do export a lot of steel to the US.
Then the one that you know that you’ve already touched on is the automotive sector. So much goes back and forth like your average car, even though it might say it’s manufactured in this country or that country, the parts go back and forth month by month as that car’s being assembled.
Then the last one that will be interesting to watch from my perspective is softwood lumber. And there’s always been lots of tariffs and talk about that. And where it’s going to be interesting is, is both from the rebuild for the LA fires, but also as we’ve seen our forestry sector get more hurt over time with multiple different kind of natural reasons and the US sector continues to build up, it’s now becoming a real viable alternative to Canadian timber. And if that tariff goes into place, it could really hurt the Canadian timber industry.
ANNA:
Interesting. Now, if this does go into place and we end up in a trade war, we start imposing our own tariffs. How do you think that could affect the markets?
BRUCE:
I don’t think anybody wins in that scenario. Hopefully cooler heads start to prevail in a case like that because now all of a sudden companies and investors who might not even be recognizing where they’re going be damaged or where the damage could come from, bang, all of a sudden a tariff gets imposed and now it affects the prices that we pay in Canada, but also potentially, the prices of goods that are being imported. Also, how that might, impact companies that are importing those goods, or ones who might have production in the US versus in Canada. It really creates a lot of challenges.
ANNA:
From your years of being in the space and analyzing economic turns; the one thing this has done as you mentioned, is it’s created a lot of chaos and that can be damaging for the markets. Is there any sector where there’s some benefit that can come from this chaos?
BRUCE:
Well, certainly if you’re a trader. The CSE is not publicly listed, but if the CSE was publicly listed, investing in that might be somewhere there is benefit from chaos because there’s lots of volatility. Beyond that, it doesn’t, because there’s no defined and clear cut to show exactly what the rule book is and what the playbook is. It just creates a lot of volatility and it’s really challenging for business leaders to constantly be thinking about two steps ahead on that chess board for what potentially President Trump does and what our leadership does to counter that and what impact that could have on multiple different industries.
ANNA:
And the final thing I want to ask on this question is about how this could affect the energy sector, including what’s happening with China as well. Do you see the energy sector benefiting from this?
BRUCE:
Well, it’s interesting because in the short term it could potentially be an issue that could hurt the energy sector. Longer term, I think it’s going to be positive no matter what happens with the tariffs if they go into place, or they don’t. I say that because right now we are very reliant on our energy products going south, and we need to probably be more reliant on them going east and west and leaving Canada in that direction. Governments hopefully will start to wake up to the fact that we have a concentration of customer, which is the US and they’ll be able to sell outside with the fact that they’re talking about the tariffs not being that big on energy. That certainly helps because the US does need our energy product and even with a 10% tariff, it still is probably more competitive than it would be to bring it from elsewhere in the world.
ANNA:
Interesting. Okay, so what is the next thing we need to pay attention to in the land of tariffs? Because he’s given a 30 day extension which would take us into early March.
BRUCE:
What you must pay attention to really is the headlines and what can happen with those headlines. He originally said he would be pausing those tariffs once they talked about the border and securing the border. Then all of a sudden, bang, we had these steel tariffs, he signed that off, put those into place.
Now it’s a function of what’s going to happen with the other tariffs? Will there be other areas that tariffs could be added, what areas are going to have tariffs and then what counter tariffs get added as a result of our governments trying to retaliate or try to, suppress his trade war.
ANNA:
We’re going to have an interesting first part of the year, that’s for sure. Okay, let’s jump into the resource sector. I feel like this has been a conversation we’ve been having for quite some time on our online content. Gold continues to live at all-time highs and we’re still kind of waiting for that to trickle down into the junior markets and to the explorers. Talk to us about what you think about what’s going on in the gold market.
BRUCE:
The gold market’s been really interesting. If you go back in history and take a look at where gold is priced now, it’s hit a new high, you would’ve expected that gold shares of gold companies would be doing much better than they have. And there’s reasons for why that’s the case. Some of it is share structure, some of it is cost structure, but they still haven’t really participated to the same degree that you would’ve expected. We’re starting to see that happen just in the last few months, obviously in 2024, gold went up and a lot of the gold shares had really nice moves, but more probably focused on the seniors and intermediates. The juniors are now starting to see that trickle down a little bit. We’re starting to see more financings happen on the intermediate and junior level. The next thing that we would look for is some M&A. If you’re a major and it’s so difficult to bring a mine into production, if you can go and buy something that’s mid or small and it’s still attractively priced, well maybe that starts to bid up some of these other juniors and intermediates that are out there right now.
ANNA:
Well that’s pretty exciting to hear. And while we’re talking about gold, let’s talk about copper. Copper has been doing pretty well itself.
BRUCE:
Part of my personal theory, and I know we’re maybe running a little bit out of order here. If you look back in history of what’s gone on is that we had really talked so much about recession, but we never really saw the overall economy hit that recession. What we did see is manufacturing, there was a definitely a manufacturing recession, and we saw that manufacturing dip down and now it started to recover. We actually saw that in the ISM numbers first time it’s been over 50 for multiple months now. That’s when manufacturing starts to happen, all that needs minerals. All that needs metals. And I mean, Copper’s one of those big ones. From reducing or changing power lines, improving the power grid system, all the electronics that require copper, the new homes that are going to be built in LA that are going to require copper, all that drives copper.
If you look at the supply and demand worldwide, it is out of balance right now. There’s going to be more mines that need to be built in the years to come. And again, right now, the senior copper miners have done relatively well, the really big ones have seen this, it’s starting to come into the mid-tier, but hasn’t really gotten into the smaller companies yet. It’s the same scenario as with gold. It costs so much to bring a mine into production. You start seeing some of the bigger companies buying into the mid-tier and lower tier to just buying it as opposed to building it. Then you start to get a bit of an M&A revaluation from those companies.
ANNA:
Okay. Let’s talk about some pretty exciting news here in BC and I think good for Canada altogether. BC’s Premier came out and announced or his office announced that he has a list of 18 resource projects that he says the province will be fast tracking in order to reduce our reliance on trade with the United States. They are a blend of energy mining and critical mineral projects that are already on the books, but which the government says it will be working to expedite through the approval processes. Now, historically, Bruce, in BC and many parts of Canada, permitting has been a real issue in the resource sector, hasn’t it?
BRUCE:
Yeah, especially in the last decade and even kind of the last two decades, it’s becoming more and more challenging. More layers of bureaucracy have been layered on there, which just slows things down, makes it more difficult, more hoops to jump through. A lot of these bigger major projects have just been slowly getting to where they get to production, if they even do.
ANNA:
I mean, if they’re capital intensive, having something like a permit hold you back, it can make the project incredibly expensive and your margins smaller and smaller.
This is pretty exciting. I know that Trump has, has spoken as well about easing permitting in the us. Do you think that we’re going to start seeing this adopted in other provinces in Canada?
BRUCE:
Well, this is where I talked about energy. The fact that we have one major customer for energy, which is the US and we need to start expanding that out. The same thing might happen as other provinces recognize that. Oh, hey, you know, our production only goes to the US or its major focus on going to the US. We need to find other avenues for trade around the world just to move from that reliance. For the last probably 60 years, we’ve been very tight with the Americans and had a real reliance and a real community feel that they were kind of our big brother and that we could trust them. I think a lot of people now feel that maybe that was a little bit false in doing that, that we should have been more diversified. That’s where the premiers talked about potentially fast tracking these projects so that we do start to diversify away from just having one customer.
ANNA:
So I know in my conversations with CEOs of exploration companies and mining companies with analysts and letter writers, permitting is kind of the one thing that they feel has really held things back. Do you think this could be a really big boost for the junior markets and the resource sector if they start opening up permitting?
BRUCE:
Yeah, there’s lots of projects that are sitting beside some of these major projects that are really economic based on where materials are and the commodity prices. Now if we’re getting the major projects moved through the regulatory process faster, it could mean that these smaller projects do as well. It could also mean again, that if your proximity to one of these bigger projects maybe that now that that bigger project is getting moved ahead, they start to look at acquiring more land, more property around you, especially in the mining area.
ANNA:
Absolutely. I think the 18 projects alone in BC would be an estimated 20 billion in value and employ 8,000 people. So my hope is that we continue to see an ease in this permitting and allow us to further foster that. Okay. Before we get into some CSE issuer news, which is always my favorite part of our time together any thoughts on what you’re looking at these days as we go into next month as investors are finishing off the first few months of the year. What are things to think about going into March?
BRUCE:
A few things. Volatility seems like it’s definitely going to be on the forefront. We’re always trying to manage volatility with our positions, so part of that’s position sizing and what you do with your position sizing your portfolio, maybe don’t let things get too big and if they sell off, you can add to them.
That’s certainly one thing and paying attention to all the news. We continue to see a broadening out and we will try to bring you stats in the future. We saw for the last couple of years where the market was very focused, especially in the US, on these big cap companies, and now those big cap companies look like they’re starting to like, maybe not lose their leadership, but other leaders are starting to come up. That’s also happening in the Canadian markets where we’re seeing more financings in the junior and intermediate level, which is just getting more people interested. We’re also seeing some companies being taken out. And so as those companies get taken out, then that’s money that goes into other companies in the market.
ANNA:
Well that seems like good news to me, Bruce.
BRUCE:
Yeah, it’s great news.
ANNA:
On that note, we saw two financings of note on the CSE in the beginning of the year. The first one was sole strategies. They announced on January 9th, the $27.5 million private placement with Purify Capital, a leading global blockchain investment firm committing the entire amount. The financing is to be used to increase the company’s treasury holdings for organic and inorganic expansion of its revenue generating validator operations, as well as general working capital purposes. Then again, on January 17th, they closed a secondary tranche of the financing for $2.5M. So in total they raised $30 million. This stock has done very well.
There are maybe some thoughts that it’s done really well, just the timing of being able to raise this capital with Trump coming in and the view around cryptocurrencies. What are your thoughts?
BRUCE:
There’s multiple different things happening there, but part of what is unlocking a lot of these companies especially in the sort of smaller area, is that access to capital. Once they get that access to capital, it really allows them to expand their business. We’ve seen this in multiple different areas of the Canadian markets in, in the last year. Then clearly with their interest and their focus on cryptocurrency and Trump coming in and talking about cryptocurrency and a lot of the people who are part of his leadership team, all really supporting cryptocurrency. Those have obviously taken off and it’s having a big impact on, multiple different areas, not in that sector.
ANNA:
That’s exciting. Congratulations to them. They have an excellent team. We also saw another fantastic financing Vireo Growth Inc. They announced a closing of an oversubscribed securities offering of $81 Million US dollars. The company intends to use the net proceeds from the offering for business developments, including organic and acquisitive growth investments, as well as working capital and general corporate purposes. Those are always good signs that they are ready to grow. Their United States based multi-state cannabis company with significant operations in three core markets, Maryland, Minnesota, and New York. They are science focused and dedicated to providing patients and adult use customers with high quality cannabis based products. Now this one’s interesting to me, Bruce, because I know that you are very well versed in the space and we haven’t seen a financing like this in the cannabis industry in a minute. So tell us what you think about this?
BRUCE:
It is exciting. The cannabis sector has been from a stock price perspective, has just been destroyed in the last few years. The underlying businesses, continue to expand. They clearly have their issues with taxation in in some of that in the US if that ever gets fixed, it’s going to be to the moon for some of these stocks based on what will be profitability. In the meantime, it’s been difficult for a lot of these companies to raise any significant amounts of money. The fact that these guys were able to raise that amount of money is fairly significant that investors are there and that they’re not looking, three to six months out, but they’re looking, three years and six years out and giving them the capital now for what could potentially be a big return down the road.
ANNA:
I’m really excited for them because all the multi-state operators that have grown on the CSE, they’ve been incredible stories to watch and they’re incredible teams and operations. So I’m very excited to hear that. Finally, I just want to welcome some new family members to the CSE. We had quite a lot of new listings since the year has begun, which to me is a great sign. They are all in the resource and energy space, which I think we probably could have predicted. Welcome Rio Grande Resources (CSE:RGR), Barranco Gold Mining Corp (CSE:BAR), Viridian Metals Inc. (CSE:VRDN), Anteros Metals Inc. (CSE:ANT), and Great Northern Energy Metals, Inc (CSE:GNEM).
Welcome to all of these wonderful companies. I think this is a good sign, don’t you?
BRUCE:
It is, yeah, for sure. The more listings we see, the more financings that’s all positive.
ANNA:
Wonderful. Listen, Bruce, thank you so much for making your way to Vancouver early this morning and joining me in person. As I mentioned, you will see us sometimes together in person, sometimes virtually.
We will have an episode per month if you go to our YouTube channel and hit subscribe, we will notify you when the next episode comes out.
Bruce, as always, thank you so much for joining
BRUCE:
Thank you!
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