Is It Time to Sell Mining Stocks? | Rob Bruggeman (The Wealthy Miner) Interview
Summary
Precious Metals Bullishness: The guest is strongly bullish on gold and precious metals, citing macro drivers like dollar debasement, diversification from U.S. treasuries, and rising debt/inflation.
Gold Upside Case: Historical analogs and ongoing central bank buying support the potential for materially higher gold prices, with momentum and money flows likely to persist.
Copper Tailwind: AI infrastructure and data centers, along with grid upgrades, are expected to drive long-term copper demand, though near-term prices may be volatile.
Producers Over Juniors: Preference for gold producers and near-term producers due to better leverage to current prices, financing access, and index inclusion benefits (e.g., GDXJ effects).
Company Highlights: Notable mentions include AEM (Agnico Eagle) on steady valuation multiples versus rising EPS, AGI (Alamos Gold) as a potential outperformer targeting 1Moz/year, GOLD (Barrick) with a potential asset separation catalyst, and EGO (Eldorado) shifting toward more copper exposure.
M&A Candidates: Potential takeout names discussed include IAG (IAMGOLD) and ARTG (Artemis Gold), with jurisdictional strengths and reserve growth potential seen as attractive to acquirers.
Jurisdiction and Project Quality: Emphasis on Argentina improving policy (benefiting ABRA (Abra Silver)), and strict filters on size, grade, metallurgy, permitting, and timeline to avoid projects that could “waste” the bull market.
Transcript
[snorts] >> Today on Resource Talks, I'm hopefully getting a wake-up call regarding valuations in the mining space right now, as well as hopefully I'm going to learn what other mistakes I'm making in picking stocks during what seems to be a a very volatile bull market because apparently it's not as straightforward out there. And later I'll also be telling you about Terra Hutten, today's sponsor who makes the invisible investable. Joining me is Rob Brogeman whose uh claim to fame was becoming a director of Abra Silver in 2018, later on chair and then staying on as chair up until very recently, about 6 months ago. He now runs a research platform under the name The Wealthy Miner while also staying involved at the board level with Abra. And which is actually an interesting mix, Rob. This is might maybe a good point to kick it off, but why why build a research platform instead of kind of staying purely on on the issuer side? Sure. Hi, Antonio. So yeah, I guess at the crux of that is really that I'm an analyst. My background is analysis. I studied engineering as well as business, but I'm an analyst and I love it. I love researching things and then um to monetize that I like investing. So I used to look at everything in Canada pretty much, but especially a lot of mining oil and gas and then I decided when I left the research world and Bay Street that there was a lot of money to be made in the mining sector. And so I said I'm going to focus on that exclusively. Um but when you look at and again this is all my self-analysis, but when you look at investment um really what it's about is uh it's quasi gambling and it's all about odds. So you want to get as much information as possible um through understanding, through network, etc. so that you have an information advantage relative to other investors. And so let's say you're right 2/3 of the time and wrong 1/3. Well, if you're gambling, those are fantastic odds. And if you do it repeatedly, you should make a bunch of money. So that's really my approach to investment. Um and in fact I don't gamble because I get much better odds in the market than say going to a casino. Um but you know, the the devil's in the details and so when I decided to focus on the mining sector, I said, well, I need to understand it better. I need to get that information advantage. So what I decided to do is um become a consultant to mining companies so that I could kind of see firsthand what was going on and in the process also up my game in terms of what I knew. Um Started out a bit bumpy. You know, realize the importance of um CEOs and boards. Um but yeah, learned a lot along the way, kind of refined things um and then typically would get sucked in um where I would go from being just a consultant to um well, in in the case of Abra Silver um first I became interim CEO, had to restructure it. Um But I mean it worked out very well. It was a great asset. Um joined the board and turned it around and it's great success, but um to answer your question it's it's actually a lot easier to analyze than to do the work. And then the other aspect of it is um there's a lot of risk in obviously this space. And even if you have a great team and great geologist, you know, something that looks like an interesting project, there's no guarantee that it's going to be big enough or the grades are going to be there. I mean you don't know until you test it. And so you know, I've tried that approach. Um I was CEO of a a greenfields exploration project in uh Newfoundland. It was a lot of work. It was very interesting. Learned a lot about grassroots exploration. Um but I realized it was going to take a lot more money and a lot more time to find the gold that was there somewhere on this you know, 900 square kilometer project. So I decided to kind of re-trench and yeah, I'd rather look at a whole bunch of companies, figure out who's doing good work, let them do the work and then I'll invest alongside. Well, and and and look, I'm I'm pro I promise I'm not trying to be annoying here or not more than usual, but kind of the obvious pushback in this in these situations is like if if if you have the track record and and you know how to do this, if your stock picks work, why do you have to charge for them? Why not just do your your stock picks instead of starting a you know, a research platform? Yeah, no, I think that's a great question. And I guess I mean the easiest answer is I don't want to just give them away for free. Um you know, if I'm going to publish something, then might as well charge for it. Um but the real reason that we set up the platform that I set up the platform is um you know, probably the most formational role that I had was when I became a an analyst for proprietary trading group in Toronto for one of the major banks. And um I had a call it investment committee or I had a group of traders and so I'd have to formulate ideas and run them by them before investing. And I found that the discipline that that instilled and the accountability was super useful. So in terms of you know, getting this information advantage um sticking with ideas um there was even though it was more work, there was substantial value in that. And so I'm trying to replicate something like that here where I do make you know, make much more money investing than I do off subscriber fees. Um but I think part of my investment success comes from the fact that I have to pitch the ideas to my subscribers. And then if something goes wrong, you know, if I'm saying, oh, these drill results are going to be great and then they come out and they're not. Um okay, well, how do I respond to that? Am I sticking with the idea? Has something changed? Am I selling? It it's very valuable. And then I guess a secondary um not necessarily ego-driven. I think more again going back to information advantage. Um I don't want to disappear from the industry. I'd like to have people in the mining space say, okay, yeah, we know who Rob Brogeman is. You know, he's an analyst. He looks at companies, invests in them. And so I think it it gives me some credibility and some relevance. It keeps my name out there. Mhm. Um but yeah, really at the heart of it is you know, I my goal is to make money from investments. Mhm. >> Um with kind of you know, supplemented I guess with some uh some subscriber fees, but that's not really the primary goal. Yeah. And sorry, if I can just add to that. Um sorry, I just thought of this because originally you when I was thinking of the idea really you know, the problem with being a newsletter writer or this kind of an analyst is you know, it's great when the market is good. And then it's very problematic when you're in a bear market. So typically what happens is you've seen people effectively implode or in some cases become paid analysts or paid newsletter writers during bear markets just because they have to eat. Mhm. Um and so I realize that's you know, potentially the case here too. So at some point when we go to a bear market, I don't really expect people to pay me for ideas that aren't forthcoming because guess what? When things are going down I'm not going to tell you to buy something. I'm going to tell you to sell everything hopefully. You know, if I'm giving good advice, sell everything, get out. Wait until it bottoms and then we'll buy back in. And so obviously people don't want to pay for that and I wouldn't want them to pay for that. So I realize you know, with this service probably at some point we're going to have to just suspend the fees or um do something, but we'll cross that bridge when we get there. That's an interesting take. I think it's it's better than better than most. I think a lot of the times it's a focus on how great everything is. Rarely it's like, oh, time to sell, like the bad times are about to start. I appreciate the honesty there as well. Um I do want to know more about that, but people listening should also want to know more about Terra Hutten who doesn't only make the invisible investable, but they've made this video free of YouTube ads by sponsoring it. Terra Hutten is built for the people who are tired of going through boring PowerPoint decks and geological jargon when they're analyzing mining companies. It's a digital platform where the data, the story, and the context sit together so mining investors can use visuals to understand the why without needing a geology degree or a week off work. And if you're on the company side, it's a great way to present your project like a serious operator with everything investors keep asking for in one place. Contact them at terrahutten.io. It Are we there now? Like is it is it time to I mean it it doesn't seem like it is given that you're you're still running it. And uh but yeah, are we are we there now? Is it time to sell and get out? No, I don't think so. Um so, I think what's important is to understand what is really driving the market. Um and in the mining sector, it's all about money flows. So, you know, it feels like 90% of the time, it's a a small pool of investors and people, and it's just money sloshing around, but not a lot of new money coming in. What happens in the bull market is new money comes in. Um things go up, and it'll continue to go up as long as that new money is coming in. Um because especially if, you know, it tends to be generalist money. It's like new people coming in don't really understand mining. They may not buy specific stocks. They may buy an index or um they may follow certain people, but um what you need to understand then is what is driving that influx of capital beyond just momentum. You know, some people will just buy in because it's going up. And so, when we look at precious metals specifically in gold, um you know, why is it going up right now, and why has it gone up so dramatically over the past year? Um there's a guy who used to be commodities analyst with Goldman Sachs called Jeff Currie, and I like the way he characterized it. He just calls it the three D's. So, there's debasement of the US dollar. There's dollar diversification. Um and then the third D is um I'm drawing a blank here for a second. Um Uh well, I'll call it debt, but um it's really those things that are driving gold prices higher. And so, we've seen central banks buying a lot of gold, specifically countries like China, um Russia, and non-Americans, and anybody who's kind of enemies with the uh with the US. And in the process, what they're doing is they're moving away from US dollar denominated investments, specifically treasuries. And so, we've really seen that with China over the past decade. Um but the numbers are still small. It's like if you look at China's central bank reserves, only 9% of it is gold. And so, there's lots of room for it to grow. Um and with other nations, if you look at, say, the Europeans, uh same thing. It's like you don't you know, you no longer have a reliable ally in the US. Um you know, my it's been trade has been weaponized somewhat, all these tariffs. And so, you um you can kind of weaponize a currency, but also to become more self-dependent, um it makes sense to hold gold instead of the US dollar. Yeah, the other big thing is the Republicans and Trump have actively been trying to devalue the dollar. They've said, "We want a weaker dollar because we want to onshore production." So, as an investor, if somebody says, "Yeah, there's this asset or instrument, in this case the US dollar, we want it to be cheaper." I don't want to buy that. If you're trying to make the value go down, why would I want to hold it? It makes no sense. I want to hold stuff that's going up. But, what are the alternatives? I mean, the euro? Good idea. It was meant to be an alternative, but it's such a disparate group of countries still trying to get their act together. It's not really a a great alternative to the US dollar. The Swiss franc is, and there's been lots of buying on that, but it's too small. So, you come back to gold, and um I guess the other, you know, the big factor is you know, take whether it be the US, Canada, Europe, um government spending since COVID. The governments have figured out that people like handouts. People like spending. They don't care how you're going to pay for it. So, what we've seen is deficits are massively rising, and debt levels are going up. Well, they're at the point where the only way out of that is really inflation. And even though we're not seeing official inflation numbers really be that high, yeah, you can feel the inflation. And at some point, when it comes time to repay this debt, the easiest way, say, for the Americans, when they've got close to 40 trillion dollars of debt, the easiest way to repay that is going to be let's print more money, and so we're paying this 40 trillion off with cheaper dollars. So, when you have those inflationary forces, the things you really want to hold are hard assets. So, real estate, infrastructure, you have thing tangible things that will hold their value. So, it doesn't matter where the US dollar and other currencies are trading, and gold is a perfect example of this. >> [gasps] >> You know, if those currencies, those fiat currencies are devalued, whatever you're pricing them in, say, US dollars, the gold price is going to be much higher because the currency is actually much lower. Um so, yeah, that's a these are macro, like tectonic shifts that are happening in geopolitics, um government, etc. And so, the question is, if that's what's been driving gold, are they likely to continue? And I would argue yes, for the foreseeable future, anyway. So, you know, I think the Republicans in the US are going to do whatever it takes to make sure that they have successful midterm elections. They're going to be giving handouts um to packs, taxpayers. Um you know, it's tax breaks, whatever they need to do. They're trying to push um credit card companies to lower rates, um trying to influence mortgage rates, trying to bring the cost of living down so they get reelected. Um also trying to push US dollar down. So, I think you're going to see debt go up. US dollar value is going to go down. There's going to be crazy, you know, it's Trump, so there's going to be crazy stuff going on probably for the rest of this year. Who knows what happens with Iran? Who knows what happens with Russia? Um the other thing kind of that I'm curious about is um you know, when you have the US talking about potentially taking over Greenland, also, you know, snatching Maduro out of Venezuela, does that kind of greenlight China to say, "Hey, now's not a bad time to go after Taiwan." Um you know, if something like that happens, again, good for gold. So, I see, you know, other than the gold price being high, I see all these forces continuing to push gold higher. Um the other thing as an analyst, you know, I'm always looking at information. Well, we've had two previous significant bull markets in gold. Um one in the '70s, and then one in the early 2000s. In both of those, the gold price went up six to seven times. So, when we look at the current bull market, um it started when gold was about $1,600 an ounce. Multiply that by six, you've got 9,600. So, call it 10,000. So, I think if history repeats, you know, we've got these forces pushing it, there's no reason why we can't see gold at 10,000. Now, maybe it's because you know, the US dollar weakens that much more or other stuff happens, but um we've got momentum. So, I I expect it's going to go higher. It's getting increasingly volatile, but until I see otherwise, I see gold continuing to go up. It's going to drag silver along with it. Um PGMs as well. You know, silver, I think it's great. It's high beta. It's very scarce. Um It's wildly volatile now. Um but yeah, I think the trade for today definitely is gold, precious metals. Um and then I like to say the trade for tomorrow is copper. And that one is different. And again, it's it you know, the macro drives these things. Um so, what is it with copper? AI. AI, you got mediocre um electricity infrastructure that needs to be upgraded anyway. Um but I mean, you look at the billions, like hundreds of billions that each of these companies, like Google, Microsoft, are spending. It's going in data centers. It's going to consume a lot of power. You're going to need a lot of copper. Um so, yeah, copper long-term, I think looks fantastic. I think, you know, short-term, a little less so, and that's because um the threat of tariffs pulled a bunch of copper into the US. So, I think um you know, the short-term price could be volatile, could pull back, but long-term, you're going to need just a lot copper. Um it takes a long time to bring on new mines, especially because most of them are porphyries. So, that's great. I mean, you're going to get this period where copper prices, I think, could be sharply higher than where we are. Um and then again, with these US dollar, you know, multiple forces driving down the value of currencies, it is another hard asset. So, that's another reason you I think it's going to do well. Well, the there's a lot of stuff happening online when it comes on to macro. A lot of people have have opinions and directionally they turn out to be right sometimes. But rarely is someone correct on the timing of it all as well as the exact spot that it that it's going to go and I know that you don't try to forecast metal prices 3 months out or 3 years out. So, you don't have a crystal ball that gives you an edge here, but what does what's what's your process that doesn't require being right on on macro or metal prices exactly? Yeah, I guess yeah, you have to be um you have to be reactive or um I guess willing to Well, you have a thesis and you're always analyzing it to see if it it's still correct and you have to be willing to change when it's not. Um and to go back to my trading days um you know, at the time I was a an equities analyst and yeah, it was all about valuation whatever and um there was interesting working with these these traders because I said, you know, the market is getting it wrong. This thing is worth you know, much more much less and they said, you know, what? The market can remain irrational far longer than you can remain solvent. Mhm. Yeah, and I think that's an interesting point. So, it isn't even about what's right or wrong. What what should the gold price be? I have no clue. I see forces driving it and I see money coming in and as long as that continues to happen, price is going to go up. Um so, what I mean by that is um if that changes, then you have to you know, you can't fall in love say with $10,000 or so $10,000 gold as a target. If something changes, you say, okay, it's changed. What do I do next? And so, you know, I'm a fan of technical analysis as another tool in my toolkit as well and you can just apply basic technical analysis to So, I mean, if you plot the gold price, it's hitting it's got a nice trendline that's up. And generally when you're in a momentum trade, what you want to see is certain patterns. So, you know, you can have a pullback like we're getting now. Um but what we don't want to see down the road is a lower low because that's an indication of a trend change. Um so, I look at all these things and I say, okay, right now gold is in an uptrend. Um if I see something change on the fundamentals, so say in October, let's say the Republicans lost the midterm elections. Okay, well, that's a pretty fundamental change. You know, Trump can't do all these executive orders anymore. That's not going to be good for gold. So, that's a fundamental change or even otherwise, if I see um gold hitting a new lower low, that's a trend change. I'm going to reduce my positions at that point. I'm going to hold off and wait. I'm not going to go short. Um but I'm going to reduce my exposure to see if that changes. Um you know, maybe I trade around things, whatever, but I I just I react I I analyze, I react, I adapt. Um And then the the key thing is um I mean, it's good to make money, but you want to keep money and you know, to do this long term, you always need to preserve your capital. How do you how do you treat that more specifically though when you look at let's say PEA stage assets right now? Is there a reality check discount to to the presented MPV 5 rate that it might be or how do you how do you even deal with those economic reports? Like if I see a billion dollar MPV 5 in a gold project right now, do I just immediately apply a 20% discount or yeah, how do you look at that? Well, if it's PEA, it's PEA to begin with, right? And it's um PEAs are notoriously unreliable. Um but what's happening right now is when companies are doing PEAs, they're applying current costs. So, your capital costs and your OPEX projections. Now, the good thing is you know, we're not using spot prices as base case assumptions. We're using some discounted numbers. So, let's say right now PEAs are coming out they're probably about using say $3,000 per ounce of gold. Um maybe slightly below that. If you're driving an MPV off of that, take it with a grain of salt because it's a PEA, but aside from that, you know, it's it's a good estimate, right? The problem is right now that companies are taking these and they're saying, here's our PEA, it looks good. Plug in spot prices, it's phenomenal. It's like, yes, it is phenomenal, but the reality is you're going to see massive CAPEX inflation as long as the gold price is going up. So, I estimate right now probably seeing about 20% a year CAPEX inflation is what I expect. So, if you're pitching a PEA for a project that's 5 years out, you're keeping costs the same, you're keeping your CAPEX the same and you're saying, oh yeah, let's use $5,000 gold. Wow, look at this, you know, the IRR is huge and the MPV is through the moon, therefore buy the stock. In 5 years, I mean, who knows what the gold price is going to be? Um but if it's significantly higher, I can tell you your costs are also going to be vastly higher because margins over time stay the same. Um it's just you know, it's the way the industry has worked, it'll continue to work that way. There's just a lag between them. So, I think there's a disconnect there. Um you know, I think PEAs are fine, but taking PEA costs and then applying spot prices, it's not real. Um Now, if it's a feasibility study, then yes. You know, if you can build it quickly, if you're in a good jurisdiction, you can get your permits, it's a relatively straightforward project, yes, that's different. And in fact, then you're in a sweet spot. So, I like advanced exploration, near-term production because those are the companies that will benefit from the higher gold prices and their costs aren't going to change that much. In fact, you know, let's say there's a a project you're going to build and it's 500 million in CAPEX. If gold prices remain strong, which for the foreseeable future I think they will, well, in a few years out, let's say 5 years out, that 500 million CAPEX build could very well be a billion. Mhm. So, I think existing producers, near-term producers, advanced exploration with a short lead time to production and obviously a good project, I think that's going to be the sweet spot in the market today. It's not you know, I've got a PEA on some big project, most of the resources are inferred, it's going to take 8 years before we get there. It's like, okay, yeah, I could make up some numbers and they're probably just as reliable as that PEA. What's a reasonable price for them to use then in that case? Like is it 20% below spot? 50? Is it a long-term average of sorts? What should they be using? No, I think you know, what they're using now, say um $3,000 gold, I think is fair. Um and it's I mean, the problem is you can't really Well, in theory what should happen is if you're projecting something that's many years out, theoretically, you should estimate what metal prices are then and then what your costs are going to be. And it's virtually impossible, right? So, the best solution is what they're doing today, which is use today's costs. You know, it's kind of the best estimates that we have. Um and then use some number that we think um implies a long-term average for the commodity price because when you build a mine, usually they're multi-cycles long and you have to make money through the cycle. So, I think yeah, I think right now using $3,000 gold, let's say for a gold mine, today's costs, that's fine. Um I definitely don't think you should use $5,000 gold. Mhm. Unless it's very near-term, I suppose. Um what would that be actually like in in production within 18 months, 36? What would that look like? Yeah, I think you know, the next 1 to 2 years, um again, if you look at historic bull markets, um you know, they can last many years, but um from an investment perspective, time [snorts] is the enemy, right? Um I'll take a year over 3 years for sure. Um the other thing is right now, if you're going to build a mine, there's plenty of money available. Um if you have a good project and you want to raise money, it's there. I don't know. In 2 years yeah, let's say you have big capex built. There's no guarantee that you're going to be able to raise the money for that. So, you may not have it mined. So, yeah, shorter is better and I wouldn't yeah, I probably personally wouldn't go out much beyond say well, I guess you'd want to be building it within the next 2 years. Yeah. Well, that introduces I suppose a different challenge is that management's going to tell you they're going to build it within 2 years and if you don't know better, you're going to believe them. What are the What are the specific kind of gates I suppose that must be cleared for you to actually believe them? Like are you looking for permits? Are you looking for power that's ready? Their water, roads, social licensing, financing in place? What is kind of that those gates that you're looking for? Yeah, so every project is different, right? But it's all of those things. So, if um yeah, if you're PEA stage, um yeah, some companies will try to jump to right to a feasibility study and skip the pre-feas, which there are reasons pre-feasibility studies exist. Um and you can't do let's say a good feasibility study in 12 months if you only have a PEA so far. Just Yeah, unless it's a very small project. So, you just have to look at it and assess yeah, how complicated is the project? How long is it reasonably going to take to get to construction decision? And then jurisdiction is a big factor as well. So, there are some jurisdictions where permitting is quite fast and streamlined. Other places it's going to take years. Yeah, you look at um and temp depends on the metal, too. I mean, you look at NexGen in the uranium space. Yeah, I think they're still they've got their part of their permits, but yeah, it's that's like a 10-year process. So, if somebody has a new Athabasca style uranium project management may tell you, yeah, we can get there in 3 years. It's going to be 10. So, it it varies. Yeah. Yeah. I I suppose size changes things as well. I mean, some some things smaller things can be built more quickly, I suppose. And also what could happen though is that it could be built more quickly, but it could end up being economically mediocre, right? While still carrying the risks of mining. It's the good old Rick Rule quote where he says both big mines and small mines have big risks, but it's only big mines that can make you big money, right? So, what would you be interested in in smaller projects that can be built more quickly now because of this price environment? Yeah, I think yeah, it's funny because metal prices are so much higher, but the criteria for junior mining still remains the same. And many investors don't understand that. They they look at something that wasn't economic say at 2,000 or $2,500 gold and they say, okay, well, now because gold is 5,000 all of a sudden this piece of garbage is yeah, it's it's attractive. No, it's not. It's still not going to get built. Um it's yeah, we're still looking for economic projects, which means size, grade, infrastructure, jurisdiction, yeah, no metallurgical issues. Um you're looking for the same things. That's what's going to get built and that's what will get built um relatively quickly. Um those will be takeover targets um and those will be what attract financing. Um I guess yeah, existing districts, those are good as well. Um there probably are some opportunities um if companies can if they have high-grade projects where maybe they direct ship ore leverage somebody else's infrastructure just get to market faster. There will be some some opportunities like that. Um but yeah, I think um to to answer your question in terms of big or small um bigger is almost always better within reason. And then yeah, the other big factor, we talked about money flows and ETFs, but index inclusion is such a big factor. Um and it's part of what's going to drive M&A as well. So, if you're if you're small you're not going to make it into an index. You're always going to have to be marketing, you know, getting people to trade your stock. Otherwise, if you're a bigger mining company and you can become part of the GDXJ or some index, life becomes a lot easier. You know, you're constantly you're seeing your liquidity jump up. Um you're seeing buying, it's much easier to finance. Um a lot of benefits. So, yeah, generally bigger is better. I guess um yeah, if maybe if you can find a more obscure small company, um then yeah, there's more value there, but uh I like I like liquidity. I like size. I I also understand that you like producers right now, that the people who are actually making money off off the these gold prices being where they are. How do you avoid overpaying for them though, especially given that we're talking about price taking cyclical businesses here, right? Which means that the valuation metrics like let's say a P/E ratio or even an EV to to FCF ratio, they're largely useless and and might even be contrarian as in that at these metrics producers look the cheapest at the top at the top of the cycle and then they look the most expensive at the bottom of the cycle. So, so how do you know what the right producer is to bet on right now? Well, you can again, you can just buy the index, right? You can get diversification. Um and it's a good approach. And so, yeah, if the thesis is gold is going up um at least for the near term um and if the valuation looks fair, um then all things being equal, gold price is going up should mean that gold producers go up. And so, for example, Agnico Eagle, great mining company, announced quarterly results today. Earnings per share were I think 270 and when you look a year ago, I think it was a um it's a dollar 34 or something. When you look at the increase in the earnings per share and then you look at the share price, the percentage is almost the same, which means on a price-to-earnings basis Agnico is trading today at the same multiple that it was a year ago. If and which is not not well, it's it's fair. It's not pricing in a lot more upside. Um so, if you think that gold price is going to go higher then I think there's value. If you believe that we're close to the top and they're going to go down then yeah, you're paying for call it $5,000 gold right now. If you think that's going to go a lot lower, then it's overvalued. So, that's kind of the way I I see them. Um yeah, if you don't want to buy an index, then you can look at um well, the other way to view them is reserves. So, I recently looked at what is the um if you take a company's reserves and you divide them by the gold price, um how much are you really paying? And we're we're near all-time lows. So, again, if you think gold prices are going to go up, those gold reserve ounces should be worth more and you're not really paying for that. So, that's why I like the producers. Um if you don't want to buy the ETF, there are certain things like you know, if you think a company's going to turn around operations or somebody's in the penalty box short-term, such such as like Alamos Gold. Um Alamos, yeah, I think it's a good team with a great track record. They've had some short-term um issues, but yeah, they've been talking about how they're going to get to a million ounces a year. I think the market likes that. Um I think they'll probably outperform other producers if they can pull that off. Um you know, Barrick Gold is an interesting one. They're they've been a laggard up until recently and then Mark Bristow left the company. Um and now they're talking about separating the high-risk African assets with the debacle they've had in Mali um from their low-risk North American assets. And I think yeah, that is something that could serve as value as well. So, you can play some thematic type things like that. Um yeah, you can look at what in some cases now you're getting gold producers that aren't purely gold producers. So, some have more exposure to silver, which is is beneficial and actually gives them a premium. Others have more exposure to copper. So, for example, Eldorado just recently announced the deal for foreign mining. It's going to up their copper production. So, if you like copper, then that's good, but the market generally didn't like it and the stock sold off because you they want gold exposure. Um So, you kind of have to, you know, look at um what you're paying for as well. If if you want just pure gold or gold silver, then yeah, you can stay away from those that might be you know, significant base metals as well. Mhm. What about the ones that are going to waste a bull market, if you will? What what is a tell for you that a company is going to waste a bull market as in doing too much M&A not the right M&A, not doing enough M&A or any M&A? Is it is it blowing out capex, hedging away too much of the upside, political mis- I mean, there's so many things that companies can do wrong, right? What are kind of the the tells for you that that you'd be looking for before going in? So, the companies seem to be a lot better. Like the big producers are way more disciplined now than they were 15 years ago. Um It I mean to name names, companies like Barrick, Kinross, some horrendous acquisitions. Um and it took them years to recover um from those acquisitions and right the ship. We're not seeing that now. Um it's very positive. In fact, you know, all the money they're printing, they're using it for things like share buybacks, um some internal growth, but you will see and we are seeing um some M&A, but it's going to be um probably lower risk jurisdictions, um augmenting maybe operations they already have. Um The other big driver is index inclusion. So, you know, bigger is better in terms of um indices. Um So, I could see Actually, um again to use some specific names, um TD wrote a report, I think, last week on the back of their mining conference. And they had pulled investors as well as corporates on what are some of the big takeover names potentially. And the two companies that seemed to be at the forefront of those discussions were Iamgold and um Artemis. So, predominantly Canadian assets, um so good jurisdictions. Um Artemis, I guess, would be kind of a single asset producer. Iamgold still has some assets in Africa, but they're winding down. Um and big um big upside in Quebec. So, that makes sense and I don't think um those would be missteps or misallocations of capital. Somebody will probably maybe buy those and and grow and add reserves. Um you're probably going to see newspaper for that as well instead of cash. Um But yeah, I think there's a lot more discipline with the producers now. Um Where I think you're going to see wasted bull market is in the juniors. And probably, you know, 90% of the juniors shouldn't be trading where they are. And once the bull market is over, um they're going to go right back down. Um you know, the the thing that benefits them right now is there's lots of money available. So, if you're ever going to drill and see what you've got in your properties, now is the time and there will be new discoveries made, but if if you don't discover something, you know, grow your projects, um advance them in this market, then yeah, you should probably be looking for new projects. Look for a new job. That's what that's what your professional opinion is for those people. That's kind of funny. Um what That's 90% of the juniors shouldn't be trading where they are. How do I recognize those 90% or how do I recognize the other 10%? So, again, it's you know, I think time is the enemy. So, if you're um Yeah, grassroots exploration is a little bit different because it's all about discoveries and a discovery in any market um generates value. But if if you're a an explorer and you have a marginal property, you know, it's not big enough, um maybe doesn't have the grade or it's got metallurgical issues. The mar- this market doesn't change those things. Um you know, unless you can raise money, which is available, and you can find something better. Um Yeah, just because gold is $5,000 versus say 2,500, um your your project's still not viable or you know, if you're if you're always going to have permitting issues and it's going to take forever, this probably makes it worse because you know, now people look at metal prices. So, whoever's opposing your project, um you know, if it's because of economics, they're going to be putting their hands out. You know, and jurisdiction, I think, is more important than ever um because the other thing you're going to see now is um in cases where you have less stable governments, um you know, less rule of law, um in places like Africa, parts of Latin America, you're going to see new taxes, new export duties, um expropriations. They're going to change the rules on you because they're saying, "Hey, look at all the money you're making. We can't control our spending, so therefore, you know, you're in our in our crosshairs." Um So, you know, even good projects in bad jurisdictions, I think this is this is actually going to be worse for them. Um It's yeah, whether bull market or bear market, it's projects with size and grade, no real metallurgical issues, no jurisdictional challenges, you know, those will always have value. Um and retain their value. The stuff that doesn't meet those criteria, you're putting lipstick on a pig. And once the bull market is over, and you know, this is again money flows. When the money flows out, um yeah, this everything's going to go no bid. Then the next thing that's going to happen is whoever stays in the sector, you're going to high grade your portfolio, certainly I would. Um You know, maybe I keep money in the sector, but yeah, I'm going to sell the higher risk stuff and buy stuff that looks better. Um And so, yeah, ultimately, well, I think everything goes down. Um you know, the 10% with quality assets will do better. And then you know, the stuff that wasn't good before is still not going to be good. You make an interesting point on jurisdictions there as well. What's the What are you looking for? What's the minimum bar that a gate that a jurisdiction has to pass in order for you to get interested? Yeah, so there's no specific bar. I mean, the um when you look at um jurisdictions, you know, it varies. In some cases, it's country. In some cases, it's you know, you look at the US or Canada, it's um state or province. Um yeah, I think the Fraser Institute, their rankings, they're not perfect, but they're pretty good. And you know, it's maybe stick to the top half of those at the very least. Yeah, if something is I don't know, 50 and below, why would you bother? Um Yeah, it's just not worth taking that risk. But even um in the better jurisdictions, um you have to be very careful with um yeah, what factors are going to have an impact. Um So, you know, even within Canada, um yeah, you can take provinces and say, "Yes, they're very good." Well, okay, but you know, what Aboriginal groups are you going to have to deal with? What are historically, you know, what are they What's their disposition towards mining? Are they in favor of it? Um Are you near environmentally sensitive areas? Um because you know, looking at some projects in the rainforest. Um You know, as soon as you mention that, you know, there's going to be NGOs that are saying, "We don't want this to go ahead." Um you're naturally going to have opposition. So, it's um Yeah, jurisdiction is a tricky one. It's case-by-case basis and unfortunately um Yeah, that's an area where management doesn't tell tend to be the most forthright. Everything's always great. Yeah, everything's great. It's like yeah, the government's supportive. Yeah, the local people, they're mostly supportive. We don't see any problems and um Not always the case and it's it's hard to vet. Um yeah, unless something is is publicly stated. Um I guess Yeah, I've noticed with some companies they do a pretty good job of um early engagement of say First Nations or government groups. Um So, that that helps. Um What is the highest rated jurisdiction for you? Again, Fraser Institute. Oftentimes it's a bit of a self-fulfilling prophecy cuz it's a bit of a study of of the industry by the industry type of thing. So, I I don't put a lot of importance on it. What about for yourself personally? What's your highest rated jurisdiction right now? So, I mean the the easy one is Nevada. It's like nobody opposes mining. Uh yeah, the government supports it. There's I don't know what environmentally you're going to hurt in Nevada. It's mostly big desert. Um But yeah, it's an easy place to develop and build a mine. Um Nevada's an easy one. Um Yeah, beyond that and it changes, right? It's um you know, so Chile and Peru used to be great places to build a mine. Well, Peru's a gong show now. I wouldn't I'd be reluctant to invest in Peru. >> [gasps] >> Um and then Chile, they're they're improving again, but they took a a turn for the worse um politically. Um And you've got water issues. So, it's you know, Chile, you got to look at is there water available? Um even Mexico now actually, you got to look um is there water available? Is there going to be opposition to us using water? And then um you know, security issues. I mean, Mexico, you got a lot of mining, but look at what happened um recently with Vizsla. Um Yeah, 10 engineers went missing. That's and unfortunately um it looks like they were killed. I mean, that's not good. Um Now, there may be a project yeah, that's 50 km away that maybe isn't as impacted by whatever is going on with the cartels there that's going to be fine. Um But yeah, anytime you see those things, when you see um well, in that case cartel violence or you see you know, Mexico um to use it again, I mean, talking about water rights and um open pit mining bans, those aren't good things. Um When you see um countries and there was a wave of this in Latin America where they're talking about rewriting constitutions. That's not good for mining. So, you know, those are things you want to avoid. Um with Abra Silver, we're active in Argentina. So, fortunately Argentina has gone the other way. Um you know, the government is is much more stable than it was before. Um we are in provinces that are pro-mining and not all of them are. And you know, incredibly the government has implemented this incentive regime that actually boosts the value of our project by hundreds of millions of dollars. So, yeah, there are s- Sometimes um when these things are favorable the US. Another good example now, right? Because China has weaponized um some of the rare earths. You're seeing the American government talk about you know, potentially spending 12 billion dollars to um stockpile some rare earths. They're putting money into companies um who can secure supply of certain rare earths. So, those are all very positive factors. Um I think you know, Europe is another interesting example, probably more so on the oil and gas side, but maybe on the minerals side as well. Um yeah, with moving away from Russia. What does that mean? I think there's um there's a different attitude towards mining and oil and gas is because you're forced into it um because you don't necessarily want to rely on Russia or maybe even now the US and certainly China for things that are very important to industry and defense. Mhm. >> [clears throat] >> Yeah. It seems like there's like I'd like to nitpick on every one of those jurisdictions and and and talk about them all all in depth. Um but in the end it I think it comes on to um in large part to can can can you keep the asset? Like if you discover something, can you keep it to yourself? And can you generate any kind of economic value out of it? As in you know, is it is it it Can you do that on time? Um are you going to be able to do it within in the current gold price and so on and so forth? So, that ties nicely into the beginning of our conversation here. And um I think I feel like there's a lot more in in in your head that I'd like to that I'd like to get out. So, maybe we should book like a 2 and 1/2 hour conversation next time and and uh do a longer pod here. Um I am looking toward wrapping it up though here, Rob. What am I um What am I forgetting to ask you? What did you come here hoping to talk about that I failed to bring up? No, you I can't think of anything. I think you know, it's those are very good questions. Um it's funny because people have asked me before and they've said, "Well, can you come up with a checklist as to what we need to look for in a good mining investment?" And it's you know, it's not that simple. Um I mean, if it was that simple, you wouldn't need you know, me looking at companies and saying, "Yeah, this is good. This is bad." Um as well as you know, you and your interviews. It's it's a very complex industry. You got all these variables. Um you know, but then the good thing is when when they work in your favor um the returns are phenomenal. And that's the only reason people invest in this, right? So, but that again going back to valuation um yeah, that's part of why there's still lots of juniors that I don't like today. I mean, maybe some are trade at best. They've got momentum. But you know, I always look at things in terms of risk-reward. You know, the reward needs to be there. It needs to be justified by the risk I'm taking. Um risk by very very definition in mining is always high. Um And so, yeah, it's um you know, we need we need those tailwinds in terms of commodity prices. Um those certainly help. And then within that, yeah, you just uh Yeah, unfortunately, you have to look at a lot of companies to find the good ones where yeah, they've got the best chance of reward. And it's just you know, don't take risks on metallurgy, jurisdiction um you know, bad management, anything you don't need to. Um minimize the risk, maximize the rewards. It's that simple. Yeah. I wish it was that simple. Um I think we might not I I I wouldn't have to be a podcaster for a living if it was that simple, I think. But that's maybe a conversation in and of itself. Uh no, I do I really do appreciate you stopping by, Rob. It is uh thewealthyminer.com for people who want to know more and yeah, thank you so much for doing this. Thank you. It's fun.
Is It Time to Sell Mining Stocks? | Rob Bruggeman (The Wealthy Miner) Interview
Summary
Transcript
[snorts] >> Today on Resource Talks, I'm hopefully getting a wake-up call regarding valuations in the mining space right now, as well as hopefully I'm going to learn what other mistakes I'm making in picking stocks during what seems to be a a very volatile bull market because apparently it's not as straightforward out there. And later I'll also be telling you about Terra Hutten, today's sponsor who makes the invisible investable. Joining me is Rob Brogeman whose uh claim to fame was becoming a director of Abra Silver in 2018, later on chair and then staying on as chair up until very recently, about 6 months ago. He now runs a research platform under the name The Wealthy Miner while also staying involved at the board level with Abra. And which is actually an interesting mix, Rob. This is might maybe a good point to kick it off, but why why build a research platform instead of kind of staying purely on on the issuer side? Sure. Hi, Antonio. So yeah, I guess at the crux of that is really that I'm an analyst. My background is analysis. I studied engineering as well as business, but I'm an analyst and I love it. I love researching things and then um to monetize that I like investing. So I used to look at everything in Canada pretty much, but especially a lot of mining oil and gas and then I decided when I left the research world and Bay Street that there was a lot of money to be made in the mining sector. And so I said I'm going to focus on that exclusively. Um but when you look at and again this is all my self-analysis, but when you look at investment um really what it's about is uh it's quasi gambling and it's all about odds. So you want to get as much information as possible um through understanding, through network, etc. so that you have an information advantage relative to other investors. And so let's say you're right 2/3 of the time and wrong 1/3. Well, if you're gambling, those are fantastic odds. And if you do it repeatedly, you should make a bunch of money. So that's really my approach to investment. Um and in fact I don't gamble because I get much better odds in the market than say going to a casino. Um but you know, the the devil's in the details and so when I decided to focus on the mining sector, I said, well, I need to understand it better. I need to get that information advantage. So what I decided to do is um become a consultant to mining companies so that I could kind of see firsthand what was going on and in the process also up my game in terms of what I knew. Um Started out a bit bumpy. You know, realize the importance of um CEOs and boards. Um but yeah, learned a lot along the way, kind of refined things um and then typically would get sucked in um where I would go from being just a consultant to um well, in in the case of Abra Silver um first I became interim CEO, had to restructure it. Um But I mean it worked out very well. It was a great asset. Um joined the board and turned it around and it's great success, but um to answer your question it's it's actually a lot easier to analyze than to do the work. And then the other aspect of it is um there's a lot of risk in obviously this space. And even if you have a great team and great geologist, you know, something that looks like an interesting project, there's no guarantee that it's going to be big enough or the grades are going to be there. I mean you don't know until you test it. And so you know, I've tried that approach. Um I was CEO of a a greenfields exploration project in uh Newfoundland. It was a lot of work. It was very interesting. Learned a lot about grassroots exploration. Um but I realized it was going to take a lot more money and a lot more time to find the gold that was there somewhere on this you know, 900 square kilometer project. So I decided to kind of re-trench and yeah, I'd rather look at a whole bunch of companies, figure out who's doing good work, let them do the work and then I'll invest alongside. Well, and and and look, I'm I'm pro I promise I'm not trying to be annoying here or not more than usual, but kind of the obvious pushback in this in these situations is like if if if you have the track record and and you know how to do this, if your stock picks work, why do you have to charge for them? Why not just do your your stock picks instead of starting a you know, a research platform? Yeah, no, I think that's a great question. And I guess I mean the easiest answer is I don't want to just give them away for free. Um you know, if I'm going to publish something, then might as well charge for it. Um but the real reason that we set up the platform that I set up the platform is um you know, probably the most formational role that I had was when I became a an analyst for proprietary trading group in Toronto for one of the major banks. And um I had a call it investment committee or I had a group of traders and so I'd have to formulate ideas and run them by them before investing. And I found that the discipline that that instilled and the accountability was super useful. So in terms of you know, getting this information advantage um sticking with ideas um there was even though it was more work, there was substantial value in that. And so I'm trying to replicate something like that here where I do make you know, make much more money investing than I do off subscriber fees. Um but I think part of my investment success comes from the fact that I have to pitch the ideas to my subscribers. And then if something goes wrong, you know, if I'm saying, oh, these drill results are going to be great and then they come out and they're not. Um okay, well, how do I respond to that? Am I sticking with the idea? Has something changed? Am I selling? It it's very valuable. And then I guess a secondary um not necessarily ego-driven. I think more again going back to information advantage. Um I don't want to disappear from the industry. I'd like to have people in the mining space say, okay, yeah, we know who Rob Brogeman is. You know, he's an analyst. He looks at companies, invests in them. And so I think it it gives me some credibility and some relevance. It keeps my name out there. Mhm. Um but yeah, really at the heart of it is you know, I my goal is to make money from investments. Mhm. >> Um with kind of you know, supplemented I guess with some uh some subscriber fees, but that's not really the primary goal. Yeah. And sorry, if I can just add to that. Um sorry, I just thought of this because originally you when I was thinking of the idea really you know, the problem with being a newsletter writer or this kind of an analyst is you know, it's great when the market is good. And then it's very problematic when you're in a bear market. So typically what happens is you've seen people effectively implode or in some cases become paid analysts or paid newsletter writers during bear markets just because they have to eat. Mhm. Um and so I realize that's you know, potentially the case here too. So at some point when we go to a bear market, I don't really expect people to pay me for ideas that aren't forthcoming because guess what? When things are going down I'm not going to tell you to buy something. I'm going to tell you to sell everything hopefully. You know, if I'm giving good advice, sell everything, get out. Wait until it bottoms and then we'll buy back in. And so obviously people don't want to pay for that and I wouldn't want them to pay for that. So I realize you know, with this service probably at some point we're going to have to just suspend the fees or um do something, but we'll cross that bridge when we get there. That's an interesting take. I think it's it's better than better than most. I think a lot of the times it's a focus on how great everything is. Rarely it's like, oh, time to sell, like the bad times are about to start. I appreciate the honesty there as well. Um I do want to know more about that, but people listening should also want to know more about Terra Hutten who doesn't only make the invisible investable, but they've made this video free of YouTube ads by sponsoring it. Terra Hutten is built for the people who are tired of going through boring PowerPoint decks and geological jargon when they're analyzing mining companies. It's a digital platform where the data, the story, and the context sit together so mining investors can use visuals to understand the why without needing a geology degree or a week off work. And if you're on the company side, it's a great way to present your project like a serious operator with everything investors keep asking for in one place. Contact them at terrahutten.io. It Are we there now? Like is it is it time to I mean it it doesn't seem like it is given that you're you're still running it. And uh but yeah, are we are we there now? Is it time to sell and get out? No, I don't think so. Um so, I think what's important is to understand what is really driving the market. Um and in the mining sector, it's all about money flows. So, you know, it feels like 90% of the time, it's a a small pool of investors and people, and it's just money sloshing around, but not a lot of new money coming in. What happens in the bull market is new money comes in. Um things go up, and it'll continue to go up as long as that new money is coming in. Um because especially if, you know, it tends to be generalist money. It's like new people coming in don't really understand mining. They may not buy specific stocks. They may buy an index or um they may follow certain people, but um what you need to understand then is what is driving that influx of capital beyond just momentum. You know, some people will just buy in because it's going up. And so, when we look at precious metals specifically in gold, um you know, why is it going up right now, and why has it gone up so dramatically over the past year? Um there's a guy who used to be commodities analyst with Goldman Sachs called Jeff Currie, and I like the way he characterized it. He just calls it the three D's. So, there's debasement of the US dollar. There's dollar diversification. Um and then the third D is um I'm drawing a blank here for a second. Um Uh well, I'll call it debt, but um it's really those things that are driving gold prices higher. And so, we've seen central banks buying a lot of gold, specifically countries like China, um Russia, and non-Americans, and anybody who's kind of enemies with the uh with the US. And in the process, what they're doing is they're moving away from US dollar denominated investments, specifically treasuries. And so, we've really seen that with China over the past decade. Um but the numbers are still small. It's like if you look at China's central bank reserves, only 9% of it is gold. And so, there's lots of room for it to grow. Um and with other nations, if you look at, say, the Europeans, uh same thing. It's like you don't you know, you no longer have a reliable ally in the US. Um you know, my it's been trade has been weaponized somewhat, all these tariffs. And so, you um you can kind of weaponize a currency, but also to become more self-dependent, um it makes sense to hold gold instead of the US dollar. Yeah, the other big thing is the Republicans and Trump have actively been trying to devalue the dollar. They've said, "We want a weaker dollar because we want to onshore production." So, as an investor, if somebody says, "Yeah, there's this asset or instrument, in this case the US dollar, we want it to be cheaper." I don't want to buy that. If you're trying to make the value go down, why would I want to hold it? It makes no sense. I want to hold stuff that's going up. But, what are the alternatives? I mean, the euro? Good idea. It was meant to be an alternative, but it's such a disparate group of countries still trying to get their act together. It's not really a a great alternative to the US dollar. The Swiss franc is, and there's been lots of buying on that, but it's too small. So, you come back to gold, and um I guess the other, you know, the big factor is you know, take whether it be the US, Canada, Europe, um government spending since COVID. The governments have figured out that people like handouts. People like spending. They don't care how you're going to pay for it. So, what we've seen is deficits are massively rising, and debt levels are going up. Well, they're at the point where the only way out of that is really inflation. And even though we're not seeing official inflation numbers really be that high, yeah, you can feel the inflation. And at some point, when it comes time to repay this debt, the easiest way, say, for the Americans, when they've got close to 40 trillion dollars of debt, the easiest way to repay that is going to be let's print more money, and so we're paying this 40 trillion off with cheaper dollars. So, when you have those inflationary forces, the things you really want to hold are hard assets. So, real estate, infrastructure, you have thing tangible things that will hold their value. So, it doesn't matter where the US dollar and other currencies are trading, and gold is a perfect example of this. >> [gasps] >> You know, if those currencies, those fiat currencies are devalued, whatever you're pricing them in, say, US dollars, the gold price is going to be much higher because the currency is actually much lower. Um so, yeah, that's a these are macro, like tectonic shifts that are happening in geopolitics, um government, etc. And so, the question is, if that's what's been driving gold, are they likely to continue? And I would argue yes, for the foreseeable future, anyway. So, you know, I think the Republicans in the US are going to do whatever it takes to make sure that they have successful midterm elections. They're going to be giving handouts um to packs, taxpayers. Um you know, it's tax breaks, whatever they need to do. They're trying to push um credit card companies to lower rates, um trying to influence mortgage rates, trying to bring the cost of living down so they get reelected. Um also trying to push US dollar down. So, I think you're going to see debt go up. US dollar value is going to go down. There's going to be crazy, you know, it's Trump, so there's going to be crazy stuff going on probably for the rest of this year. Who knows what happens with Iran? Who knows what happens with Russia? Um the other thing kind of that I'm curious about is um you know, when you have the US talking about potentially taking over Greenland, also, you know, snatching Maduro out of Venezuela, does that kind of greenlight China to say, "Hey, now's not a bad time to go after Taiwan." Um you know, if something like that happens, again, good for gold. So, I see, you know, other than the gold price being high, I see all these forces continuing to push gold higher. Um the other thing as an analyst, you know, I'm always looking at information. Well, we've had two previous significant bull markets in gold. Um one in the '70s, and then one in the early 2000s. In both of those, the gold price went up six to seven times. So, when we look at the current bull market, um it started when gold was about $1,600 an ounce. Multiply that by six, you've got 9,600. So, call it 10,000. So, I think if history repeats, you know, we've got these forces pushing it, there's no reason why we can't see gold at 10,000. Now, maybe it's because you know, the US dollar weakens that much more or other stuff happens, but um we've got momentum. So, I I expect it's going to go higher. It's getting increasingly volatile, but until I see otherwise, I see gold continuing to go up. It's going to drag silver along with it. Um PGMs as well. You know, silver, I think it's great. It's high beta. It's very scarce. Um It's wildly volatile now. Um but yeah, I think the trade for today definitely is gold, precious metals. Um and then I like to say the trade for tomorrow is copper. And that one is different. And again, it's it you know, the macro drives these things. Um so, what is it with copper? AI. AI, you got mediocre um electricity infrastructure that needs to be upgraded anyway. Um but I mean, you look at the billions, like hundreds of billions that each of these companies, like Google, Microsoft, are spending. It's going in data centers. It's going to consume a lot of power. You're going to need a lot of copper. Um so, yeah, copper long-term, I think looks fantastic. I think, you know, short-term, a little less so, and that's because um the threat of tariffs pulled a bunch of copper into the US. So, I think um you know, the short-term price could be volatile, could pull back, but long-term, you're going to need just a lot copper. Um it takes a long time to bring on new mines, especially because most of them are porphyries. So, that's great. I mean, you're going to get this period where copper prices, I think, could be sharply higher than where we are. Um and then again, with these US dollar, you know, multiple forces driving down the value of currencies, it is another hard asset. So, that's another reason you I think it's going to do well. Well, the there's a lot of stuff happening online when it comes on to macro. A lot of people have have opinions and directionally they turn out to be right sometimes. But rarely is someone correct on the timing of it all as well as the exact spot that it that it's going to go and I know that you don't try to forecast metal prices 3 months out or 3 years out. So, you don't have a crystal ball that gives you an edge here, but what does what's what's your process that doesn't require being right on on macro or metal prices exactly? Yeah, I guess yeah, you have to be um you have to be reactive or um I guess willing to Well, you have a thesis and you're always analyzing it to see if it it's still correct and you have to be willing to change when it's not. Um and to go back to my trading days um you know, at the time I was a an equities analyst and yeah, it was all about valuation whatever and um there was interesting working with these these traders because I said, you know, the market is getting it wrong. This thing is worth you know, much more much less and they said, you know, what? The market can remain irrational far longer than you can remain solvent. Mhm. Yeah, and I think that's an interesting point. So, it isn't even about what's right or wrong. What what should the gold price be? I have no clue. I see forces driving it and I see money coming in and as long as that continues to happen, price is going to go up. Um so, what I mean by that is um if that changes, then you have to you know, you can't fall in love say with $10,000 or so $10,000 gold as a target. If something changes, you say, okay, it's changed. What do I do next? And so, you know, I'm a fan of technical analysis as another tool in my toolkit as well and you can just apply basic technical analysis to So, I mean, if you plot the gold price, it's hitting it's got a nice trendline that's up. And generally when you're in a momentum trade, what you want to see is certain patterns. So, you know, you can have a pullback like we're getting now. Um but what we don't want to see down the road is a lower low because that's an indication of a trend change. Um so, I look at all these things and I say, okay, right now gold is in an uptrend. Um if I see something change on the fundamentals, so say in October, let's say the Republicans lost the midterm elections. Okay, well, that's a pretty fundamental change. You know, Trump can't do all these executive orders anymore. That's not going to be good for gold. So, that's a fundamental change or even otherwise, if I see um gold hitting a new lower low, that's a trend change. I'm going to reduce my positions at that point. I'm going to hold off and wait. I'm not going to go short. Um but I'm going to reduce my exposure to see if that changes. Um you know, maybe I trade around things, whatever, but I I just I react I I analyze, I react, I adapt. Um And then the the key thing is um I mean, it's good to make money, but you want to keep money and you know, to do this long term, you always need to preserve your capital. How do you how do you treat that more specifically though when you look at let's say PEA stage assets right now? Is there a reality check discount to to the presented MPV 5 rate that it might be or how do you how do you even deal with those economic reports? Like if I see a billion dollar MPV 5 in a gold project right now, do I just immediately apply a 20% discount or yeah, how do you look at that? Well, if it's PEA, it's PEA to begin with, right? And it's um PEAs are notoriously unreliable. Um but what's happening right now is when companies are doing PEAs, they're applying current costs. So, your capital costs and your OPEX projections. Now, the good thing is you know, we're not using spot prices as base case assumptions. We're using some discounted numbers. So, let's say right now PEAs are coming out they're probably about using say $3,000 per ounce of gold. Um maybe slightly below that. If you're driving an MPV off of that, take it with a grain of salt because it's a PEA, but aside from that, you know, it's it's a good estimate, right? The problem is right now that companies are taking these and they're saying, here's our PEA, it looks good. Plug in spot prices, it's phenomenal. It's like, yes, it is phenomenal, but the reality is you're going to see massive CAPEX inflation as long as the gold price is going up. So, I estimate right now probably seeing about 20% a year CAPEX inflation is what I expect. So, if you're pitching a PEA for a project that's 5 years out, you're keeping costs the same, you're keeping your CAPEX the same and you're saying, oh yeah, let's use $5,000 gold. Wow, look at this, you know, the IRR is huge and the MPV is through the moon, therefore buy the stock. In 5 years, I mean, who knows what the gold price is going to be? Um but if it's significantly higher, I can tell you your costs are also going to be vastly higher because margins over time stay the same. Um it's just you know, it's the way the industry has worked, it'll continue to work that way. There's just a lag between them. So, I think there's a disconnect there. Um you know, I think PEAs are fine, but taking PEA costs and then applying spot prices, it's not real. Um Now, if it's a feasibility study, then yes. You know, if you can build it quickly, if you're in a good jurisdiction, you can get your permits, it's a relatively straightforward project, yes, that's different. And in fact, then you're in a sweet spot. So, I like advanced exploration, near-term production because those are the companies that will benefit from the higher gold prices and their costs aren't going to change that much. In fact, you know, let's say there's a a project you're going to build and it's 500 million in CAPEX. If gold prices remain strong, which for the foreseeable future I think they will, well, in a few years out, let's say 5 years out, that 500 million CAPEX build could very well be a billion. Mhm. So, I think existing producers, near-term producers, advanced exploration with a short lead time to production and obviously a good project, I think that's going to be the sweet spot in the market today. It's not you know, I've got a PEA on some big project, most of the resources are inferred, it's going to take 8 years before we get there. It's like, okay, yeah, I could make up some numbers and they're probably just as reliable as that PEA. What's a reasonable price for them to use then in that case? Like is it 20% below spot? 50? Is it a long-term average of sorts? What should they be using? No, I think you know, what they're using now, say um $3,000 gold, I think is fair. Um and it's I mean, the problem is you can't really Well, in theory what should happen is if you're projecting something that's many years out, theoretically, you should estimate what metal prices are then and then what your costs are going to be. And it's virtually impossible, right? So, the best solution is what they're doing today, which is use today's costs. You know, it's kind of the best estimates that we have. Um and then use some number that we think um implies a long-term average for the commodity price because when you build a mine, usually they're multi-cycles long and you have to make money through the cycle. So, I think yeah, I think right now using $3,000 gold, let's say for a gold mine, today's costs, that's fine. Um I definitely don't think you should use $5,000 gold. Mhm. Unless it's very near-term, I suppose. Um what would that be actually like in in production within 18 months, 36? What would that look like? Yeah, I think you know, the next 1 to 2 years, um again, if you look at historic bull markets, um you know, they can last many years, but um from an investment perspective, time [snorts] is the enemy, right? Um I'll take a year over 3 years for sure. Um the other thing is right now, if you're going to build a mine, there's plenty of money available. Um if you have a good project and you want to raise money, it's there. I don't know. In 2 years yeah, let's say you have big capex built. There's no guarantee that you're going to be able to raise the money for that. So, you may not have it mined. So, yeah, shorter is better and I wouldn't yeah, I probably personally wouldn't go out much beyond say well, I guess you'd want to be building it within the next 2 years. Yeah. Well, that introduces I suppose a different challenge is that management's going to tell you they're going to build it within 2 years and if you don't know better, you're going to believe them. What are the What are the specific kind of gates I suppose that must be cleared for you to actually believe them? Like are you looking for permits? Are you looking for power that's ready? Their water, roads, social licensing, financing in place? What is kind of that those gates that you're looking for? Yeah, so every project is different, right? But it's all of those things. So, if um yeah, if you're PEA stage, um yeah, some companies will try to jump to right to a feasibility study and skip the pre-feas, which there are reasons pre-feasibility studies exist. Um and you can't do let's say a good feasibility study in 12 months if you only have a PEA so far. Just Yeah, unless it's a very small project. So, you just have to look at it and assess yeah, how complicated is the project? How long is it reasonably going to take to get to construction decision? And then jurisdiction is a big factor as well. So, there are some jurisdictions where permitting is quite fast and streamlined. Other places it's going to take years. Yeah, you look at um and temp depends on the metal, too. I mean, you look at NexGen in the uranium space. Yeah, I think they're still they've got their part of their permits, but yeah, it's that's like a 10-year process. So, if somebody has a new Athabasca style uranium project management may tell you, yeah, we can get there in 3 years. It's going to be 10. So, it it varies. Yeah. Yeah. I I suppose size changes things as well. I mean, some some things smaller things can be built more quickly, I suppose. And also what could happen though is that it could be built more quickly, but it could end up being economically mediocre, right? While still carrying the risks of mining. It's the good old Rick Rule quote where he says both big mines and small mines have big risks, but it's only big mines that can make you big money, right? So, what would you be interested in in smaller projects that can be built more quickly now because of this price environment? Yeah, I think yeah, it's funny because metal prices are so much higher, but the criteria for junior mining still remains the same. And many investors don't understand that. They they look at something that wasn't economic say at 2,000 or $2,500 gold and they say, okay, well, now because gold is 5,000 all of a sudden this piece of garbage is yeah, it's it's attractive. No, it's not. It's still not going to get built. Um it's yeah, we're still looking for economic projects, which means size, grade, infrastructure, jurisdiction, yeah, no metallurgical issues. Um you're looking for the same things. That's what's going to get built and that's what will get built um relatively quickly. Um those will be takeover targets um and those will be what attract financing. Um I guess yeah, existing districts, those are good as well. Um there probably are some opportunities um if companies can if they have high-grade projects where maybe they direct ship ore leverage somebody else's infrastructure just get to market faster. There will be some some opportunities like that. Um but yeah, I think um to to answer your question in terms of big or small um bigger is almost always better within reason. And then yeah, the other big factor, we talked about money flows and ETFs, but index inclusion is such a big factor. Um and it's part of what's going to drive M&A as well. So, if you're if you're small you're not going to make it into an index. You're always going to have to be marketing, you know, getting people to trade your stock. Otherwise, if you're a bigger mining company and you can become part of the GDXJ or some index, life becomes a lot easier. You know, you're constantly you're seeing your liquidity jump up. Um you're seeing buying, it's much easier to finance. Um a lot of benefits. So, yeah, generally bigger is better. I guess um yeah, if maybe if you can find a more obscure small company, um then yeah, there's more value there, but uh I like I like liquidity. I like size. I I also understand that you like producers right now, that the people who are actually making money off off the these gold prices being where they are. How do you avoid overpaying for them though, especially given that we're talking about price taking cyclical businesses here, right? Which means that the valuation metrics like let's say a P/E ratio or even an EV to to FCF ratio, they're largely useless and and might even be contrarian as in that at these metrics producers look the cheapest at the top at the top of the cycle and then they look the most expensive at the bottom of the cycle. So, so how do you know what the right producer is to bet on right now? Well, you can again, you can just buy the index, right? You can get diversification. Um and it's a good approach. And so, yeah, if the thesis is gold is going up um at least for the near term um and if the valuation looks fair, um then all things being equal, gold price is going up should mean that gold producers go up. And so, for example, Agnico Eagle, great mining company, announced quarterly results today. Earnings per share were I think 270 and when you look a year ago, I think it was a um it's a dollar 34 or something. When you look at the increase in the earnings per share and then you look at the share price, the percentage is almost the same, which means on a price-to-earnings basis Agnico is trading today at the same multiple that it was a year ago. If and which is not not well, it's it's fair. It's not pricing in a lot more upside. Um so, if you think that gold price is going to go higher then I think there's value. If you believe that we're close to the top and they're going to go down then yeah, you're paying for call it $5,000 gold right now. If you think that's going to go a lot lower, then it's overvalued. So, that's kind of the way I I see them. Um yeah, if you don't want to buy an index, then you can look at um well, the other way to view them is reserves. So, I recently looked at what is the um if you take a company's reserves and you divide them by the gold price, um how much are you really paying? And we're we're near all-time lows. So, again, if you think gold prices are going to go up, those gold reserve ounces should be worth more and you're not really paying for that. So, that's why I like the producers. Um if you don't want to buy the ETF, there are certain things like you know, if you think a company's going to turn around operations or somebody's in the penalty box short-term, such such as like Alamos Gold. Um Alamos, yeah, I think it's a good team with a great track record. They've had some short-term um issues, but yeah, they've been talking about how they're going to get to a million ounces a year. I think the market likes that. Um I think they'll probably outperform other producers if they can pull that off. Um you know, Barrick Gold is an interesting one. They're they've been a laggard up until recently and then Mark Bristow left the company. Um and now they're talking about separating the high-risk African assets with the debacle they've had in Mali um from their low-risk North American assets. And I think yeah, that is something that could serve as value as well. So, you can play some thematic type things like that. Um yeah, you can look at what in some cases now you're getting gold producers that aren't purely gold producers. So, some have more exposure to silver, which is is beneficial and actually gives them a premium. Others have more exposure to copper. So, for example, Eldorado just recently announced the deal for foreign mining. It's going to up their copper production. So, if you like copper, then that's good, but the market generally didn't like it and the stock sold off because you they want gold exposure. Um So, you kind of have to, you know, look at um what you're paying for as well. If if you want just pure gold or gold silver, then yeah, you can stay away from those that might be you know, significant base metals as well. Mhm. What about the ones that are going to waste a bull market, if you will? What what is a tell for you that a company is going to waste a bull market as in doing too much M&A not the right M&A, not doing enough M&A or any M&A? Is it is it blowing out capex, hedging away too much of the upside, political mis- I mean, there's so many things that companies can do wrong, right? What are kind of the the tells for you that that you'd be looking for before going in? So, the companies seem to be a lot better. Like the big producers are way more disciplined now than they were 15 years ago. Um It I mean to name names, companies like Barrick, Kinross, some horrendous acquisitions. Um and it took them years to recover um from those acquisitions and right the ship. We're not seeing that now. Um it's very positive. In fact, you know, all the money they're printing, they're using it for things like share buybacks, um some internal growth, but you will see and we are seeing um some M&A, but it's going to be um probably lower risk jurisdictions, um augmenting maybe operations they already have. Um The other big driver is index inclusion. So, you know, bigger is better in terms of um indices. Um So, I could see Actually, um again to use some specific names, um TD wrote a report, I think, last week on the back of their mining conference. And they had pulled investors as well as corporates on what are some of the big takeover names potentially. And the two companies that seemed to be at the forefront of those discussions were Iamgold and um Artemis. So, predominantly Canadian assets, um so good jurisdictions. Um Artemis, I guess, would be kind of a single asset producer. Iamgold still has some assets in Africa, but they're winding down. Um and big um big upside in Quebec. So, that makes sense and I don't think um those would be missteps or misallocations of capital. Somebody will probably maybe buy those and and grow and add reserves. Um you're probably going to see newspaper for that as well instead of cash. Um But yeah, I think there's a lot more discipline with the producers now. Um Where I think you're going to see wasted bull market is in the juniors. And probably, you know, 90% of the juniors shouldn't be trading where they are. And once the bull market is over, um they're going to go right back down. Um you know, the the thing that benefits them right now is there's lots of money available. So, if you're ever going to drill and see what you've got in your properties, now is the time and there will be new discoveries made, but if if you don't discover something, you know, grow your projects, um advance them in this market, then yeah, you should probably be looking for new projects. Look for a new job. That's what that's what your professional opinion is for those people. That's kind of funny. Um what That's 90% of the juniors shouldn't be trading where they are. How do I recognize those 90% or how do I recognize the other 10%? So, again, it's you know, I think time is the enemy. So, if you're um Yeah, grassroots exploration is a little bit different because it's all about discoveries and a discovery in any market um generates value. But if if you're a an explorer and you have a marginal property, you know, it's not big enough, um maybe doesn't have the grade or it's got metallurgical issues. The mar- this market doesn't change those things. Um you know, unless you can raise money, which is available, and you can find something better. Um Yeah, just because gold is $5,000 versus say 2,500, um your your project's still not viable or you know, if you're if you're always going to have permitting issues and it's going to take forever, this probably makes it worse because you know, now people look at metal prices. So, whoever's opposing your project, um you know, if it's because of economics, they're going to be putting their hands out. You know, and jurisdiction, I think, is more important than ever um because the other thing you're going to see now is um in cases where you have less stable governments, um you know, less rule of law, um in places like Africa, parts of Latin America, you're going to see new taxes, new export duties, um expropriations. They're going to change the rules on you because they're saying, "Hey, look at all the money you're making. We can't control our spending, so therefore, you know, you're in our in our crosshairs." Um So, you know, even good projects in bad jurisdictions, I think this is this is actually going to be worse for them. Um It's yeah, whether bull market or bear market, it's projects with size and grade, no real metallurgical issues, no jurisdictional challenges, you know, those will always have value. Um and retain their value. The stuff that doesn't meet those criteria, you're putting lipstick on a pig. And once the bull market is over, and you know, this is again money flows. When the money flows out, um yeah, this everything's going to go no bid. Then the next thing that's going to happen is whoever stays in the sector, you're going to high grade your portfolio, certainly I would. Um You know, maybe I keep money in the sector, but yeah, I'm going to sell the higher risk stuff and buy stuff that looks better. Um And so, yeah, ultimately, well, I think everything goes down. Um you know, the 10% with quality assets will do better. And then you know, the stuff that wasn't good before is still not going to be good. You make an interesting point on jurisdictions there as well. What's the What are you looking for? What's the minimum bar that a gate that a jurisdiction has to pass in order for you to get interested? Yeah, so there's no specific bar. I mean, the um when you look at um jurisdictions, you know, it varies. In some cases, it's country. In some cases, it's you know, you look at the US or Canada, it's um state or province. Um yeah, I think the Fraser Institute, their rankings, they're not perfect, but they're pretty good. And you know, it's maybe stick to the top half of those at the very least. Yeah, if something is I don't know, 50 and below, why would you bother? Um Yeah, it's just not worth taking that risk. But even um in the better jurisdictions, um you have to be very careful with um yeah, what factors are going to have an impact. Um So, you know, even within Canada, um yeah, you can take provinces and say, "Yes, they're very good." Well, okay, but you know, what Aboriginal groups are you going to have to deal with? What are historically, you know, what are they What's their disposition towards mining? Are they in favor of it? Um Are you near environmentally sensitive areas? Um because you know, looking at some projects in the rainforest. Um You know, as soon as you mention that, you know, there's going to be NGOs that are saying, "We don't want this to go ahead." Um you're naturally going to have opposition. So, it's um Yeah, jurisdiction is a tricky one. It's case-by-case basis and unfortunately um Yeah, that's an area where management doesn't tell tend to be the most forthright. Everything's always great. Yeah, everything's great. It's like yeah, the government's supportive. Yeah, the local people, they're mostly supportive. We don't see any problems and um Not always the case and it's it's hard to vet. Um yeah, unless something is is publicly stated. Um I guess Yeah, I've noticed with some companies they do a pretty good job of um early engagement of say First Nations or government groups. Um So, that that helps. Um What is the highest rated jurisdiction for you? Again, Fraser Institute. Oftentimes it's a bit of a self-fulfilling prophecy cuz it's a bit of a study of of the industry by the industry type of thing. So, I I don't put a lot of importance on it. What about for yourself personally? What's your highest rated jurisdiction right now? So, I mean the the easy one is Nevada. It's like nobody opposes mining. Uh yeah, the government supports it. There's I don't know what environmentally you're going to hurt in Nevada. It's mostly big desert. Um But yeah, it's an easy place to develop and build a mine. Um Nevada's an easy one. Um Yeah, beyond that and it changes, right? It's um you know, so Chile and Peru used to be great places to build a mine. Well, Peru's a gong show now. I wouldn't I'd be reluctant to invest in Peru. >> [gasps] >> Um and then Chile, they're they're improving again, but they took a a turn for the worse um politically. Um And you've got water issues. So, it's you know, Chile, you got to look at is there water available? Um even Mexico now actually, you got to look um is there water available? Is there going to be opposition to us using water? And then um you know, security issues. I mean, Mexico, you got a lot of mining, but look at what happened um recently with Vizsla. Um Yeah, 10 engineers went missing. That's and unfortunately um it looks like they were killed. I mean, that's not good. Um Now, there may be a project yeah, that's 50 km away that maybe isn't as impacted by whatever is going on with the cartels there that's going to be fine. Um But yeah, anytime you see those things, when you see um well, in that case cartel violence or you see you know, Mexico um to use it again, I mean, talking about water rights and um open pit mining bans, those aren't good things. Um When you see um countries and there was a wave of this in Latin America where they're talking about rewriting constitutions. That's not good for mining. So, you know, those are things you want to avoid. Um with Abra Silver, we're active in Argentina. So, fortunately Argentina has gone the other way. Um you know, the government is is much more stable than it was before. Um we are in provinces that are pro-mining and not all of them are. And you know, incredibly the government has implemented this incentive regime that actually boosts the value of our project by hundreds of millions of dollars. So, yeah, there are s- Sometimes um when these things are favorable the US. Another good example now, right? Because China has weaponized um some of the rare earths. You're seeing the American government talk about you know, potentially spending 12 billion dollars to um stockpile some rare earths. They're putting money into companies um who can secure supply of certain rare earths. So, those are all very positive factors. Um I think you know, Europe is another interesting example, probably more so on the oil and gas side, but maybe on the minerals side as well. Um yeah, with moving away from Russia. What does that mean? I think there's um there's a different attitude towards mining and oil and gas is because you're forced into it um because you don't necessarily want to rely on Russia or maybe even now the US and certainly China for things that are very important to industry and defense. Mhm. >> [clears throat] >> Yeah. It seems like there's like I'd like to nitpick on every one of those jurisdictions and and and talk about them all all in depth. Um but in the end it I think it comes on to um in large part to can can can you keep the asset? Like if you discover something, can you keep it to yourself? And can you generate any kind of economic value out of it? As in you know, is it is it it Can you do that on time? Um are you going to be able to do it within in the current gold price and so on and so forth? So, that ties nicely into the beginning of our conversation here. And um I think I feel like there's a lot more in in in your head that I'd like to that I'd like to get out. So, maybe we should book like a 2 and 1/2 hour conversation next time and and uh do a longer pod here. Um I am looking toward wrapping it up though here, Rob. What am I um What am I forgetting to ask you? What did you come here hoping to talk about that I failed to bring up? No, you I can't think of anything. I think you know, it's those are very good questions. Um it's funny because people have asked me before and they've said, "Well, can you come up with a checklist as to what we need to look for in a good mining investment?" And it's you know, it's not that simple. Um I mean, if it was that simple, you wouldn't need you know, me looking at companies and saying, "Yeah, this is good. This is bad." Um as well as you know, you and your interviews. It's it's a very complex industry. You got all these variables. Um you know, but then the good thing is when when they work in your favor um the returns are phenomenal. And that's the only reason people invest in this, right? So, but that again going back to valuation um yeah, that's part of why there's still lots of juniors that I don't like today. I mean, maybe some are trade at best. They've got momentum. But you know, I always look at things in terms of risk-reward. You know, the reward needs to be there. It needs to be justified by the risk I'm taking. Um risk by very very definition in mining is always high. Um And so, yeah, it's um you know, we need we need those tailwinds in terms of commodity prices. Um those certainly help. And then within that, yeah, you just uh Yeah, unfortunately, you have to look at a lot of companies to find the good ones where yeah, they've got the best chance of reward. And it's just you know, don't take risks on metallurgy, jurisdiction um you know, bad management, anything you don't need to. Um minimize the risk, maximize the rewards. It's that simple. Yeah. I wish it was that simple. Um I think we might not I I I wouldn't have to be a podcaster for a living if it was that simple, I think. But that's maybe a conversation in and of itself. Uh no, I do I really do appreciate you stopping by, Rob. It is uh thewealthyminer.com for people who want to know more and yeah, thank you so much for doing this. Thank you. It's fun.