GoldSpot Discoveries Inc AI Platform with First Mover Advantage in Mining Industry

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

GoldSpot Discoveries Inc is a technology platform using artificial intelligence and machine learning to make mining exploration more efficient. President and CEO Denis Laviolette provides an introduction to the company and explains that GoldSpot is the first and only AI company in the mining space. Lucrative deposits are growing harder to find and mining companies have collected considerable data in the pursuit of discovery. GoldSpot’s value proposition is that it uses AI and machine learning to find patterns in collected data that humans cannot locate. GoldSpot has raised $7.5 million as a private company and is already generating revenue. The company counts industry leaders like McEwen Mining Inc (TSE:MUX) (NYSE:MUX) (FRA:US8A) as clients and has an investment arm, Resource Quantamental.

Transcript:

Narrator: GoldSpot Discoveries, Inc. is the first AI company that focuses on mineral exploration. The private technology company uses machine learning to reduce capital risk, while working to increase efficiencies and success rates in resource exploration and investment.

GoldSpot has developed a monetization strategy into multiple verticals of the mining and investment industry, including service offerings, staking and royalty acquisition, and the development of its own artificial intelligence-driven trading platform.

The company was founded in 2016 and is headquartered in Toronto, Canada.

Ed Milewski:  Hey, howya doing?

Denis Laviolette   Good, how are you?

Ed Milewski:  I’m good. So this is kind of a unique, a new approach, and I see you had no trouble raising money.

Denis Laviolette   Well, we had no trouble raising money? You know, it took a while. It’s a new concept, right, for the market.

Ed Milewski:  So it’s GoldSpot, and there was a capital markets company that was, was it a three-way merger?

Denis Laviolette   Yeah, it’s called a three-quartered amalgamation. There was a CPC, or a capital pool company, and we essentially take that over.

Ed Milewski:  Okay.

Denis Laviolette   So yeah, it’s an RTO.

Ed Milewski:  And do you, like a traditional mining company, you have prospective ground, etcetera?

Denis Laviolette   Actually, no. so we’re a technology company.

Ed Milewski:  Okay, this is why we’re interviewing you – I’m learning, and I’m very interested in, because of my age, I’m interested in – I’ve always sort of followed the gold, the mining. Canada, you know, is sort of the mining capital of the world, Toronto, or it used to be, in terms of raising money. You know, PDAC, etcetera, etcetera. So go ahead, tell me about the value proposition here.

Denis Laviolette   Yeah, well, so, with GoldSpot, it’s an interesting company. We formulated the company; I historically was a geologist working in multiple camps across the globe, big companies, small companies, and then I transitioned into capital markets with Pinetree Capital, where I got to see this massive transactive of –

Ed Milewski:  So you worked at Pinetree?

Denis Laviolette   Yeah, with Sheldon, yeah, for Sheldon.

Ed Milewski:  Oh, no kidding! Okay, no, no, okay.

Denis Laviolette   Yeah, I was a mining analyst over there, yeah, so.

Ed Milewski:  No kidding.

Denis Laviolette   I kind of joined late game, but you know, when I came into the company, we had over 400 junior mining investments and it was massive.

Ed Milewski:  Listen, Sheldon is legendary in the mining sector in Toronto, there’s no question.

Denis Laviolette   For sure.

Ed Milewski:  PNP, I think, was the symbol.

Denis Laviolette   Yeah, PNP, and we cut a big cheque into a lot of companies, and so –

Ed Milewski:  I think there was a time, if I can interrupt you quickly…

Denis Laviolette   Sure.

Ed Milewski:  Where markets were so hot, anybody that walked through the door, Sheldon would give them $1 million. I don’t know if that’s true, but –

Denis Laviolette   It was a different approach, it was a different climate. I mean, that was the fabric of the bull market, right?

Ed Milewski:  Yeah.

Denis Laviolette   And a lot of these junior companies went, you know, 3 to 5 X overnight. And so, you know, the idea there, and I think the investment strategy was, you know, superior deal flow, and you had a lot of companies coming through the door, and if you could, you know, bet on a lot ponies, then all the races won, you know.

Ed Milewski:  Sure. So what’s your unique approach?

Denis Laviolette   Well, we noticed that a lot of companies in the space had collected huge amounts of data. So over time, we’ve seen this coming, it’s called, the concept is really called peak discovery, or peak gold. And really what had happened, in 2010, the exploration expenditures had really peaked out, and the resulting deposits that were discovered were few and far between.

And so what was going on was that –

Ed Milewski:  Right, right, I remember this, yeah.

Denis Laviolette   And predominantly, companies were spending huge amounts of data, collecting super-sophisticated remote sensing data types, you know, other types of data, and really it was this, you know, time where all this, you know, spending was going on. Deposits were getting deeper and deeper and harder to find, and for some reason, we weren’t finding many, even though we were spending money collecting the data.

And so, what happened in the last couple of years is that there’s been huge inroads in the whole machine learning and AI space in other industries, and we’re seeing industries ripe with large data sets, leveraging machine learning and AI to find patterns in that data that the human couldn’t possibly find.

So naturally, you’d assume that mining and exploration would be a good fit. We have all of this data, we’ve paid a lot of money to collect it, and as an industry we weren’t using it to its fullest potential to find new deposits.

Ed Milewski:  Right.

Denis Laviolette   So we partnered up with a team based out of the Institute of National Research in Quebec City called the Data Miners, and together we competed in the Integra Gold Rush Challenge, which was, Integra launched that challenged at PDAC a few years back.

Ed Milewski:  Okay.

Denis Laviolette   And that was essentially, they opened up their library, their data, to the world for everybody to look at and see if they could find a new, you know, a new pod of mineralization, and there was a grand prize for that.

So, long and short of it, we competed in that challenge, and we came in second place using machine learning to find new zones of mineralization. So that was a huge accolade for us, and we took that concept and rolled it out and formed GoldSpot proper. And now we’ve been providing this service for a lot of big companies in the space: Yamana, Hochschild, McEwen, Sprott, a lot of different entities that have taken us on, opened up their libraries to us to work with to help them find new deposits.

Ed Milewski:  So are you going to be generating revenue in your first, like, just so I get this right, so if this is just about to be kicked off; you’ve raised about $7.5 million, correct?

Denis Laviolette   Correct.

Ed Milewski:  So will you be generating revenue in your first 12 months?

Denis Laviolette   Absolutely. We’ve already been generating revenue.

Ed Milewski:  Okay, okay.

Denis Laviolette   So as a private company, we’ve grown tremendously since those very early days.

Ed Milewski:  Right.

Denis Laviolette   So when we started off, we were about 4 people on the team.

Ed Milewski:  Right. And where are you now?

Denis Laviolette   Twenty-two.

Ed Milewski:  Wow.

Denis Laviolette   So we’ve grown in revenue –

Ed Milewski:  Are you based here?

Denis Laviolette   Here in Toronto, and our technical office is in Montreal. So most of the people are in Montreal.

Ed Milewski:  So you pretty well know who the who’s who are in the mining sector.

Denis Laviolette   Yep, pretty much, and a lot of them are in our deal, thankfully for us, and they believe in what we’re doing, and they believe that AI and machine learning is going to have a big impact –

Ed Milewski:  In how to find gold. Is it mainly precious metals?

Denis Laviolette   Everything. You know.

Ed Milewski:  Copper?

Denis Laviolette   Copper, it doesn’t matter. We’re commodity-agnostic.

Ed Milewski:  Base metals?

Denis Laviolette   Yep, and base metals, doesn’t matter; the methodology still works. The reason we named ourselves GoldSpot was, gold was kind of the biggest, baddest bully in the room.

Ed Milewski:  Sure, sure.

Denis Laviolette   Gold deposits are the most challenging, most complex of all, and so we decided that, if we could be good at that –

Ed Milewski:  So, how many shares are in your company?

Denis Laviolette   Now we’re going to be closing with 94 million shares outstanding, yeah.

Ed Milewski:  94 million shares. And where do you see this thing starting to trade, at what price?

Denis Laviolette   About $0.40.

Ed Milewski:  So, 90 million, $0.40, $36 million market cap.

Denis Laviolette   Yep, about 37.5.

Ed Milewski:  And you’re going to have about $7.5 million cash?

Denis Laviolette   We’ll have about $10 million. So we have $3 million already, and then 7.5.

Ed Milewski:  Okay, okay, good. So this is, you know, like, unfortunately, and I’m not saying this as a judgmental thing, but when I see a company in the mining sector, usually they’re underfunded in today’s world. But you’re hitting the road running.

Denis Laviolette   Right. Well, we’ve got great partners, great revenue pipeline with service clients.

Ed Milewski:  Can you comment on what you think the revenues will be in the first year?

Denis Laviolette   Sure, absolutely. Right now, we’ve got 2.1 million in contracts for this fiscal year with major clients. So that’s major companies that are just paying us a service fee to handle their data.

Ed Milewski:  And can you say how many clients you have?

Denis Laviolette   Right now, five.

Ed Milewski:  Okay.

Denis Laviolette   And the list is going to be growing. We’re booking out into 2020 already. So it’s a really interesting time.

Ed Milewski:  There’s no debt in the company?

Denis Laviolette   There’s no debt in the company.

Ed Milewski:  That’s probably a good thing for a start-up.

Denis Laviolette   Sure, yeah. There’s no debt in the company.

Ed Milewski:  And really, you don’t have any competition, do you?

Denis Laviolette   Nope, not so far. Yeah, and we’ve taken on a couple different aspects of the sector. So one is the exploration side, the other one is the investment side. And so we’ve built a platform we call Resource Quantamental, and it’s really a quantimental approach to mining investing. It’s a screener. So we’ve got every shred of data on every public company since 1999 until today, every drill result, every press release, every share that’s ever traded, the macro-market information, the financials, it’s all in this database.

Ed Milewski:  Just help me out here: give me two or three lines to describe your company in the easiest terms possible.

Denis Laviolette   Sure. We’re the first and only AI company in mining. We’re basically a quant shop that’s going to be analyzing every single junior issuer out there and picking the best ponies. Pound for pound, the best discovery opportunities. We’re making investments in those companies, we’re going to get royalties back, and we’re bringing our team that’s paid for by the big –

Ed Milewski:  Royalties? Right, why wouldn’t you?

Denis Laviolette   Sure! Well, all the big companies are paying our bills, and we’re bringing this great team of 22 people that we’ve assembled, 9 PhDs, into these stories to –

Ed Milewski:  How many PhDs?

Denis Laviolette   Nine.

Ed Milewski:  That was my next question: what would be the major skill set of your team? Like, you’ve got 22 people, you’re a geo, and so of the 9 PhDs, what are their areas of specialty, various?

Denis Laviolette   Various, but always smarter than me, I’ll say that now.

Ed Milewski:  [laughter]

Denis Laviolette   But basically, you know, they’ve all got a very special blend. So whether they have expertise in data science and geosciences, so we have geophysicists, with, say, a PhD in geophysics as well as, they publish articles in machine learning and artificial intelligence. And so they’ve got this special blend of both, and so, our entire team, we’ve got PhD structural geologists, geochemists, we’ve got geophysicists on staff, we’ve got the whole bang shoot across the spectrum. So when we get involved with a data set, we take all of that data, we re-process it in-house, we clean it all up and then we bring it together and use machine learning to find patterns.

Ed Milewski:  Is this your brainchild?

Denis Laviolette   Yep.

Ed Milewski:  Do you have someone that you worked – like –

Denis Laviolette   A huge team. A huge team.

Ed Milewski:  So you’ve gone from 4 to 22 people in how long?

Denis Laviolette   Three years.

Ed Milewski:  That’s very impressive. That’s very impressive.

Denis Laviolette   Yeah, three years. It’s been a lot of fun.

Ed Milewski:  I’m going to give you a call.

Denis Laviolette   Sure.

Ed Milewski:  Give me your card, make sure I have your card. I’m around here, and I’m pretty sure, again, you know, this is a judgment thing, but I think before this whole thing, who knows what? I gotta believe that we’re going into a commodity bull cycle.

Denis Laviolette   I think so.

Ed Milewski:  That would make things –

Denis Laviolette   Well, you know, that’s the thing. So if we can build a nice basket of mining equities with our strategic investment platform, if we can build a nice basket of royalties and we can be activist investors where we bring in our team and help make things better, I think we can create a lot of opportunities in the space.

Ed Milewski:  Sure. Sure. Yeah.

Denis Laviolette   If we’re heading into a bull market, then our portfolio should do quite well.

Ed Milewski:  Well, you know, and – listen, if you can get options on companies for remuneration and things like that, you know, when, there’s a chart around, and I’ve tried to find it, where it says that basically junior resource companies, relative to the S&P, are as cheap as they’ve ever been. Like a 100-year low valuations. So that’s when you want to buy something cheap, you go to where it’s, you know –

Denis Laviolette   Well, you know, it’s an interesting time in the space, because the traditional audience that used to invest in mining is really very fractured. A lot of that community that we used to lean on to support our discovery plays are out of the business.

Ed Milewski:  Yeah, yeah, I know.

Denis Laviolette   You know, they may have ventured into medical marijuana or other things.

Ed Milewski:  Exactly.

Denis Laviolette   And there’s a younger generation coming up.

Ed Milewski:  I know, and they don’t even know what the value of minerals and base metals, etcetera.

Denis Laviolette   Sure.

Ed Milewski:  Denis…

Denis Laviolette   Yeah?

Ed Milewski:  I’m going to leave it there, I really appreciate you coming on. I’ve learned a lot today, I hope the viewers have.

Denis Laviolette   Thanks.

Ed Milewski:  You and I are going to be in touch.

Denis Laviolette   Sounds good.

Ed Milewski:  All right?

Denis Laviolette   Thanks very much for having me on.

Ed Milewski:  Okay!

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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