GOLD $3000 CRUSHING TECH (Uncut) 03-15-2025

GOLD $3000 CRUSHING TECH: Best Fundamentals I’ve Ever Seen | Michael Gentile

The Nasdaq is up 869%. That just shows you that, as we all know, tech has been the clear market leader, the clear driver of the market in the last 15 plus years. My view is that gold and gold stocks are setting up to assume a leadership role in the market and the first sign of that is over the last year, one year returns.

The GDXJ is up 49% and the Nasdaq is down nine. Free cash flow is massively expanding in real time. I mean, some of the companies we met, what’s your free cash flow yield? You know, 5%.

Oh, 5% for the year? No, 5% in Q1, in the quarter. Hello, and welcome back to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman.

I’m the Ed.J.R. mining guy over on X and of course, your host of this channel, and I’m looking forward to welcoming back Michael Gentile. He’s a co-founder and portfolio manager over at Bastion Asset Management, and of course, a strategic investor in the junior mining space. You might have read his name before because he does a lot of financing.

He’s a strategic investor in a number of companies, so I’m really excited to have him back on the program to discuss more of the micro, meaning the mining sentiment, mining stocks, regulation, and of course, where’s the money flowing and where does he see opportunities right now? So we’ll dive into that, but before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we do appreciate it. So thank you so much for that.

Michael, it is great to welcome you back on the program. It’s good to see you. Thanks so much for making the time.

Great to be back, Kai. Yeah, we got lots to discuss. We spoke in September, right before the Beaver Creek Conference.

A lot has happened since then, of course. We don’t need to talk about the macro side of things. The new president of the White House, we all know that, but the mining sector almost went through a complete cycle, it felt like.

It was an emotional roller coaster in our space because when we spoke, the sentiment was still muted. Two weeks later, the Precious Metals Conference happened. The mood wasn’t euphoric, but it was positive.

And then the market started taking off and we’ve seen a bit of a rally in the space. Run us through now where we’re at right now, Michael. Yeah, I mean, my time is very easy to get caught up in the micro cycles, I think.

We watch our screens every day, week to week, month to month. I try to take a big picture view. I have a three to 10 year horizon when I invest in a stock.

I’ve become more of a private equity type of mindset. I have a long term thesis on gold and precious metals that, at least on the physical side, has been bearing out extremely well and continues to play out extremely well. But I would say, if you look at the big picture, Kai, I think we spoke last time briefly with your viewers.

I forget exactly what we covered in our last interview, but I talked about the signposts I was looking for, for leadership change in the market or for gold stocks finally to start outperforming the market. And we talked about in 2016 to 2020, or actually 2020 to 2022, during that COVID period, the last time gold stocks had a really big run, particularly the junior mining stocks that you talk a lot about that I’m invested in. Really what happened was gold went from $1,600 an ounce to $2,000 an ounce.

And all the investors jumped on these junior resource things, because typically when gold makes new highs or has a big move, the stocks do really, really well. And they did. What happened was that move fizzled out and created a lot of disappointment because the costs, the all-sustaining cost industry, gold prices up $4 to $5 an ounce, but the cost to produce the gold went up by $4 to $5 an ounce as well from 2020 to 2023.

So that big inflationary boom that we had eroded a lot of the margins that we would have seen for investors. Investors, I think, wrongfully concluded that you can never make money in gold stocks. As gold price goes up, the costs are going to go up just as much.

You’re never actually going to make more margins. And I’ve been pounding the table since this last movement of gold, saying gold’s up about $1,000 an ounce from $1,800 to $2,900 an ounce the last kind of a year and a half. And the costs of the industry are much more controlled.

We’re not seeing the hyperinflation that we saw during COVID. And so therefore, margins are rapidly expanding. And I’ve been, on every interview I’ve been doing, I’ve been telling the viewers to say, look, look at Q3 results, look at Q4 results, look at the expanding margins per ounce that you’re seeing from the producers.

Look at the massive increase in free cash flow that we’re seeing coming out of the larger producers. And by the way, Q1 average gold is hovering around $2,800 an ounce versus $2,500 to $2,600 in Q4. So Q1 is even better than Q4 and Q3 were.

So we’re finally seeing the massive amounts of margin expansion and free cash flow expansion that I’ve been waiting for. Yet the stocks remain extremely cheap. So yeah, you’ll have these gyrations over month to month, Beaver Creek after Beaver Creek.

But the real big picture is, and you look at the market today with tariff threats, slowing economy, very high valuations in the overall S&P 500 in the market as a whole. There are very few sectors, Bastion Asset Management, my other main interest, there are very few sectors that are showing improving fundamentals. Right now, most sectors are showing either flattening or declining fundamentals, coupled with very high valuations.

Whereas the gold sector has dramatically improving fundamentals with very low valuations and very little sector interest. And I have one last fun fact for you, Kai, that I just dug up this morning before our interview. I just wanted to see cycles and markets, they kind of go over 15, 20 year periods.

These are very long cycles of leadership where certain sectors lead the market for 5, 10, 15 years in a row. And these paradigm shifts, these big changes that you see where new sectors assume leadership roles are often points of time where you can have massive multi-year gains in the hundreds of percent. And if you look at GDXJ, which is the index of kind of junior producers, the small to mid-cap names, kind of 200 million to 10 billion market cap companies, it was created on November 10th, 2009.

And since November 10th, 2009, that index is down 28.5%. So it’s had a negative return since 2009. Over that same time period, Kai, the NASDAQ is up 869%. So you can straight see that contrast between the two.

That just shows you that, as we all know, tech has been the clear market leader, clear driver of the market for the last 15 plus years. My view is that gold and gold stocks are setting up to assume a leadership role in the market. And the first sign of that is over the last year, one year returns, the GDXJ is up 49% and the NASDAQ is down nine on a one year.

I think very few investors would have guessed that on a one year trailing basis, the GDXJ is up close to 50% and the NASDAQ is down nine. So that could be the first signs of gold assuming its leadership role. And what I’ve been saying is you have to see the margins expand and you have to see investors start losing money in tech and seeing another sector making a lot of money.

That creates the FOMO effect, fear of missing out. Other best go, I’m not making money in tech anymore. What’s working? And then generous investors start to flow to what’s working.

So my view is the fundamentals coupled with the emerging outperformance of gold could be setting us up for a multi-year run where gold stocks close that massive gap, underperformance gap between the tech stocks and the gold stocks. And we can get through all the fundamentals and the micros to why I believe that, but that’s my overriding thesis. And I’ve never been more excited because truly all the stars are aligning now for our sector to take the lead and start to outperform in a big way the market.

Fantastic. We’ll end the interview right here because I couldn’t have said it any better. Fantastic.

Now, Michael, of course, but gold has outperformed the S&P 500 last year as well, and nobody really paid attention or barely anybody still knows about it, right? I think the S&P was up 25%, gold was up 27%, not a big margin outperformance or anything, but we beat the S&P 500. The point is, though, and what I want to discuss with you as well, Michael, is just how risk averse is the investor still? When does greed really kick in here to make a performance? Because the S&P 500 has been off to a slow start this year already, while the miners and gold are doing fairly well. Gold is up 11% this year already.

Yeah, it’s a great question. But if you’re an average retail investor and you’ve made 800% last 15 years in NASDAQ or 600% S&P over the last 15, 20 years, and you’re up 25% last year and gold’s up 27%, it’s not really going to cause you to look over your shoulder, over your fence. What does my neighbor own, right? So that’s why I’m really excited about the start to this year, Kai, is people are losing money.

For the first time, maybe it corrects itself, but for the first time, if you own the S&P or the NASDAQ, you’re looking at red on your screen and you go, I’m losing money. Typically, losing money causes a lot more pain than making slightly less money than your neighbor. So now that’s what causes rotations, Kai.

When you see people start to lose money or sector starts to underperform over a one, two, three year period, investors will look to what can I make money in now? And we haven’t talked about Bitcoin, but Bitcoin’s had a bit of a rough ride the last two, three months as well, despite the announcement it was treated preserved by the US, which you think would be a very positive thing. Bitcoin’s down 15 to 20%. When a stock or currency or commodity goes down on highly positive news, typically that’s a sign of a top.

I’m not saying it’s a top for Bitcoin. I’m just saying that that’s not a good sign when you have major fundamental good news and the thing goes down, typically means over-owned or maybe topping out in terms of cycle. So a lot of these things that were making investors money quite easily without a lot of thought, a lot of stress are now starting to get a little more difficult.

And the more tricky, more difficult the market gets to make money in those traditional leading sectors last 15 years, the more likely you are to see sector rotation. And that’s why when you have green versus red, positive return versus negative return, that causes more and more investors to think about maybe I should start to reposition. And you and I both know, Kai, how little investors own both in gold and gold stocks.

I think it’s like 0.5% of the average investor, investor broker’s portfolio. So it’s a very, very low allocation to gold, to what has, in my view, the best fundamentals going for the next 12, 24 months in the market. Massively under-owned, great fundamentals.

And now for the first time, we’re starting to see emerging green shoots about performance versus the market, which is, to me, the checklist you need to see to have a great run here. Yeah, absolutely. I’ve been saying forever that we need to scare the 401k money to start to move.

Because as you said, it was too easy to make 20% annually for the last 14, 15 years. I think there were only three down years. And there was one major correction in 2022 where the S&P 500 was down 22%, I believe.

And all the other years, like even the down years, there was one year it was down 0.5%. But the rest of the years, you made 25%. Like, why would you want our high-risk sector? If you look at the periods where gold’s done really, really well, like the 70s, or post the tech crash in 2001, right? There are periods where it suddenly became very difficult for investors to make money, right? So it’s super easy for investors to make money in the 90s during the dot-com boom. And so nobody cared about gold.

I remember the late 90s, gold was a relic, you know, central banks were selling, nobody wanted to own it anymore. It was a barbaric relic, right? And then the tech bust hit, people lost 60, 70% of their money, they went, oh, shoot, it’s not a one-way train to the moon here when you own tech stocks. And that caused a massive rotation to gold that kicked off that massive rally from 2002 to 2008.

And in the 70s, when you had massive inflation, and you had hyperinflation, it got very difficult to make money in the market period, multiples compressed dramatically, gold stocks massively outperformed. And so I think we’re setting up for that kind of period here, where you have different leadership. And as you know, gold stocks are not correlated to the market.

Tariffs have very little effect on gold stocks and gold performance. Economic uncertainty has very little effect on economic performance. So from a macro level, too, if you’re looking for a sector that’s not exposed to the massive headlines and tweets and news flow you’re seeing on a daily basis, gold, again, is another place, a haven in the storm.

So there’s a lot of reasons to like it. And I’m a contrarian at heart. Nobody likes it, nobody owns it, which means a lot of room for new buyers to come in, versus, you know, Bitcoin, which has a lot of following, a lot of excitement right now.

So to me being a contrarian, when you have positive fundamentals coupled with apathy, that’s an amazing setup. It’s taken longer, for sure, for these names to work. But I truly believe we’re getting right on the doorstep of a major rally here.

Yeah, no, absolutely. Like, as we speak, I think we’re $20 away from a new all time high in gold. And I don’t think anybody’s really paying attention to it.

I barely see any headlines that have gold in them. So nobody’s really talking about it on mainstream media, at least you have to follow, you know, influencers on Twitter or X or YouTube to get the news here. Before we get to some of the fundamental changes, and why you’re so positive as well, I just want to come back to sentiment real quick.

Because I know you were at the BMO conference, the Bank of Montreal conference down in Florida, I’m sure you were at PDAC, were you at PDAC? I was not at PDAC, unfortunately, my kids had spring break this year. So I spent time with them. All right.

But BMO as well, I just want to get investor sentiment, because Beaver Creek, and I’ve said that before on this program, it felt like it was the five stages of grief, we were at the last one, which was acceptance. Because after day one, I realized nobody complained, like nobody, I don’t mean CEOs, investors, nobody complained. It was just the acceptance phase.

And if you want to, you know, expand that a little bit, there was hope as well. Because hey, we got it, they’ll come. Right.

So the question for you, Michael, like, how was sentiment? What was the mood like at BMO? And is that changing now as well? Yeah, great question. So yeah, I was there, I did 52 meetings in three days. So directly from Firehose.

All one on one meetings, I do that every year, it’s a great way to get a pulse. For your viewers benefit, the BMO Mining Conference is a bit of a different list than the Beaver Creek list. So BMO Mining Conference would probably be companies that are $200 million market cap and higher, you know, all the way up to the biggest companies in the world, you know, Freeport and Barrick and Newmont are all there.

So it’s mainly a show for producing companies. It’s a show where you have all your typical, you know, focus investors like myself, that spend most of their time in commodities and mining. And you have some journalists that will come in to check in on the sector as well.

I was very fortunate to have my partner and really good friend at Bashton, Charles Hager, with me this year. He’s the lead portfolio manager, he controls asset allocation. I think he’s one of the smartest guys I’ve ever met in the business, hands down, I would give all my money to him to invest.

My wife knows if I ever die, she calls Charles and all the money goes to Charles to invest for us. That’s how smart he is. But what I bring it up is because he’s a great, you know, I kind of call him the Wayne Gretzky of investing.

He goes where the puck is going, not where the puck is. And he’s really good at identifying what things are going to work now a year or two or three years out from now. And so he allocates capital really, really well to thematic sectors.

And, you know, we’ve been investing in gold together at Bashton and encouraging him to get more involved. And he wanted to come to the show just to get a pulse of, is all this free cash flow that I’m modeling in my models and the reports that I’m writing at Bashton and talking to him about, is it real? And so we did a bunch of meetings with corporates and, you know, right from the horse’s mouth, free cash flow is massively expanding in real time. I mean, some of the companies we met, what’s your free cash flow yield? You know, 5%.

Oh, 5% for the year? No, 5% in Q1 in the quarter, they can turn a 5% of our cap in the quarter. Some mid-tier companies have free cash flow yields approaching 30, 60, 70%, 7-0 in 2026 and 2027 as their projects, construction projects are completed. So, you know, being a generalist portfolio manager, my partner can invest in any sector he wants and the free cash flow yields that we’re seeing in the gold sector, not only are they, you know, generationally attractive relative to the gold sector, they’re generationally attractive relative to any sector in the market, period.

So I view that as very positive, but I would say it wasn’t an avalanche of generalist investors. I think Charles is a very early indicator. My view, if there’s one generalist this year at BMO, there might be five or 10 next year and 30 or 40 the year after.

That’s how generalists typically move. They tend to follow performance and a little bit later adopters because they’re not in the weeds like we are. But I would say that the mood on free cash flow, the mood on profits, debt pay down, on profitability and optimism from the producers was very, very strong.

But I didn’t get the sense that the show was packed with new faces, which actually is very positive. That means all those buyers are yet to come. So I would say it’s very positive.

I would say also that the producers are more and more aggressively talking about M&A. You saw a big merger between Calibre and Equinox during the Bank of Montreal conference. You’re going to see more mergers of equals, but more and more producers are talking about the valuation discrepancy in the developer space and the junior resource space.

Many companies mentioned to me that, look, we know how hard it is to bring a project from discovery to development. We know how much money it takes, how much time it takes. Many companies I talked to were highlighting the deep value discount of developers and junior resource explorers that own resources, let’s say, or pre-PDA stories.

And so I’d expect them to get more aggressive on that because they know that they can buy these assets and maybe 10, 20% of the cost it would take them to develop them on their own. And they have a window of time where they’re doing a lot of free cash flow. Their stock prices are not up huge, but they’re up better than they were a couple of years ago.

So I expect to see a lot of that. And the main pushback I get on that theme is there’s still concern about permitting. So a lot of the companies want to know that a project is permittable.

So they could buy 2, 3 million ounces in Canada, 5 million ounces in Canada or US, wherever it is, but they want to know that, is there a permitting pathway forward? And that’s sort of one of the, as projects get permitted, Kai, you see like Artemis Gold or Skeena, these projects start to really take off as the market gets more comfortable permitting. So if we could solve the permitting compression of timelines or get more certainty on permitting, I think you’d see a dramatic increase in both M&A and valuation sector. Yeah, absolutely.

When you talk about Western Copper and Gold came to mind here. I actually own the stocks. I’m conflicted, but I’m down on it because it seems like they’re in limbo.

They’re waiting for something to happen. I think permit certainty is probably one of the issues that Mitsubishi and Rio Tinto are facing in the Yukon. So that’s what came to mind here, of course.

No, interesting observations here. And M&A, I want to stay on that topic just for a second. And I brought it up in a couple of other conversations as well, Michael, but Mark Bristow said we’re exploring for $10 an ounce right now and adding to our reserves and resources here at $10 an ounce.

Why buy something if you can add resources for $10 an ounce? So I don’t want to get into a public debate with Mark Bristow, but I would like to call for a forensic audit of that calculation. If you overlay the hundreds of millions of G&A, that Barrick puts into their exploration efforts. If you layer on all the exploration efforts, they spend money on that don’t go into discoveries.

If Barrick is spending $500 million on exploration, let’s say, you have to take the whole attributable cost that goes into exploration. Yes, you can find ounces of $10 an ounce. Many of the projects I’m invested in the junior level are finding a goal of $10 an ounce.

But if I look at the overall spend of the industry, or the overall spend of my own portfolio investing in projects that drill and don’t find anything, and you have to burden the cost there, you probably end up being at $50 to $100 to $150 an ounce if you include all the failures that you have. So it’s a bit misleading. I don’t think he’s doing it on purpose.

I think he’s making a good point that when you make a discovery and you drill it out, the finding cost can be low. But I would argue the overall costs, burden it with everything, including part of his salary and the whole exploration team and the camps he has to set up, and all the work that goes into drilling and finding and development. That’s a much, much higher number.

And if the industry truly was finding gold $10 an ounce, the gold price would be a lot lower. So I would say that’s an impossible number. But on certain projects, like 4 Mile or they have or other projects in their portfolio, for sure they’re finding $10 an ounce.

But let’s burden it with the full cost. And I think if you look at that, it’s much, much more expensive than that. Yeah, I was like, what do you have with the majors in general? When I started out in the industry in 2011, the hurdle was always 100,000 ounces a year, a million ounces in reserves.

So that’s assuming 100% recovery, obviously. But oh, and then somebody will buy us, right? A major will buy us. That has completely shifted.

We’re now at 500,000 ounces for 10 years. And if you include the recoveries and all of that, you’re probably talking about 7 to 8 million ounces in reserves. Do the majors need to do maybe a bit of a gut check, perhaps, and maybe need to rethink and come down? Because I don’t see a lot of projects out there.

I don’t see any, really, that could even fit that model these days. Yeah, I mean, I had a recent meeting with Newmont Chi, and they’ve been doing the opposite. They’ve been selling a lot of their non-core assets.

I think what’s happened is the majors have gotten bigger, right? When you’re a million-ounce-a-year producer and you’re a senior with the biggest mines companies in the world, then 10 mines at 100,000 ounces a year feels about right. Newmont’s producing, I think, 6 million ounces a year approximately of gold, and they’ve got it down to 11 mines. If you want to produce 6 million ounces of gold per year, a 100,000-ounce mine, that’s 60 mines.

For us finance guys, a spreadsheet looks easy, but operationally, running 60 separate operations in hundreds, maybe hundreds, tens of different countries, your G&A and your management becomes a major burden. That’s why the gold companies have gone to bigger mines, because you can run larger mines more efficiently, spread your G&A and get better synergies. I think the bigger question, you might be asking, is maybe the optimal gold company should not be 6 to 8 million ounces a year.

It should be a smaller company. That’s why I personally, at Bashton and other institutional money, I like to invest in companies that have two to three or four mines. That 300,000-ounce producer that gets to a million ounces or a million and a half, that’s a lot easier, a much higher ROI than being a 5 million-ounce producer trying to maintain that every year and also trying to grow.

It’s almost impossible to do that. Any company that does that really well is Agnico. They recognize that size is a hurdle and they really try to invest in concentric areas.

Brownfield have standards of excellence where they can produce a million ounces in different jurisdictions and really pool the resources, but it’s very hard to… I don’t think you’ll ever see, Kai, a 20 million-ounce a year gold producer. You’ll see it in gold equivalent ounces as they pivot more to copper. They’ll count copper as gold, but I think gold at 5, 6 million ounces a year, for me, is really the ceiling of what you can produce effectively without having a sprawl of operational difficulties to manage these assets effectively.

Yeah, it almost feels like we’ve seen peak Newmont, peak Barrick because they can’t really find those assets. And maybe as part B of that question or statement, is that why they’re going into copper? Because they can produce size? Correct. I think if you want to double from 6 million ounces of gold a year to, let’s say, double that in terms of revenue or gold equivalent ounces, copper projects are much larger.

So you’re seeing Barrick, Dubrec, Lodic, and you want a little bit more copper focus as well. Obviously, the backdrop is positive for copper. And what’s also happened, Kai, is as you know, way back in the day, we’re dating ourselves a little bit.

Gold stocks used to trade at massive premiums to copper stocks. Gold used to trade at 1.5 to 1.7 times NAV. And as a copper name, you’d be lucky to get 0.6 or 0.8 times NAV.

I mean, that valuation gap’s completely collapsed, if not inverted. I think copper names right now actually trade at higher price NAV multiples for sure off spot than gold stocks do. So they have the valuation cover to do it.

And yeah, if you want to double the size of Newmont, double the size of Barrick, double the size of Agnico, the only way I see you doing that is producing copper, because you can produce much larger quantities, dollar value of copper than you can of gold just because of the bulk nature of the commodity. So I think that’s why you’re seeing the pivot. My favorite projects are ones that have gold and copper together.

I think you’ll see the gold guys do that as well. But yeah, that’s a very good point. You can’t 10 million ounce a year, 50 million ounce a year gold producer is very, very difficult to do business.

Yeah, it turns growth companies into value companies because you only can do, you can manage, but you can’t grow anymore. Yeah. And the treadmill is very strong.

It’s very hard to replace those reserves and gold resources that are of quality ounces in that size. The treadmill is very, very difficult to run on. Absolutely.

I’ve even heard rumors that Agnico is looking at lithium. So I’ve been hearing rumors about that. And I’m not sure if that’s ever going to substantiate with their lithium price right now and Rio Tinto making a big push and what the need is for another bigger player in the space.

That’s out of my wheelhouse. It’s outside of my expertise, but I’ve been hearing rumors and I thought that was interesting. So Michael, a couple of other fundamental things have changed as well.

Of course, we need to talk about the new president of the White House, how he’s affecting our sector as well. Just this morning in the Financial Times, dig baby dig. Apparently next week, rumor in Washington has it that he’s going to come out with a new bill on critical minerals.

No idea what that’s going to look like, but he’s obviously focusing on resources and commodities, Greenland, Ukraine minerals deal. It’s all over the headlines. But A, how is that influencing your investment outlook style perhaps and portfolio? And what do you expect to happen, especially when we look a little south from where you are towards the US here? Yeah, so I’m Canadian based, but obviously Canada and the US have a very symbiotic and this time very chaotic relationship right now.

I think that’s absolutely what’s needed in the industry. We, without a doubt, need to responsibly compress the permitting timelines in our industry, Kai. It’s become almost ridiculous how long it takes from discovery to get into production.

I mean, you could be anywhere from discovery hole to the time you’re pouring your first bar of gold or producing your first ton of copper, 20 to 25 years. The tagline of the Financial Times article was it takes 29 years to get a mine into production. There you go.

29 years sounds about right. And so if you think about that for your financially minded viewers, you build a discounted cashflow model, you build a spreadsheet, say, okay, I bought a junior resource stock today at $5 million market cap. They drill a discovery hole that looks like this could be a mine, right? And then you say, okay, I can produce, I don’t know, 300,000 ounces a year for 20 years, but you got to put that production 29 years out in your model.

The time value of money will tell you that that resource is worth very, very little because you’re waiting so long for that cashflow. If you discounted at 5% or 7% or 10%, the net present value of that cashflow is so little that the stocks trade very low valuations. And so that’s one of the, other than the fact that the apathy, the lack of interest sector we talked about earlier, which I think is coming back.

One of the big issues investors have with the junior resource stocks and development stories is the timelines are so large. And 29 years, I’m all for responsible environmental stewardship. I’m all for developing resources effectively, but the timelines in particular in Canada, and they’re similar in the U S I’ve gone so out of control that it’s become a bureaucratic nightmare to permanent mine.

And so how do we, how do we make sure we’re, we’re, we’re properly reviewing all the things that need to happen environmentally, but compressing the timelines of these projects, we can shrink that, shrink that 29 years, let’s say 10 or 12 years from discovery to production. The value of these stocks would dramatically increase. And I’ll think Trump should care about that, but also that the production of copper and critical metals and gold in these types of countries will dramatically increase.

And the ability to finance these projects will dramatically increase. A big issue, the industry is facing is you make a great discovery. There’s no capital available for these years, some of these projects forward.

So part of the lag is the fact that these stocks trade such low valuations that they can’t move the projects forward. So if you’ve got the investors confident that if you make it, if you invest in a junior resource stock and you make a discovery that in your lifetime, that, or like in your, in the, before your kids become teenagers, let’s say you’ve got to produce cashflow. Then the cost of capital and the valuation of these stocks will dramatically increase, which will increase investment industry, which will create a lot more prosperity and wealth for the U S and Canada and solve the issue we have, which is a speech to be speaking or geopolitically speaking, a lack of critical resources developed in our own North American borders.

Yeah, no, there’s a lot of projects in the U S that they could definitely use some deregulation resolute or resolution comes to mind various others, twin peaks that were mentioned in the financial times article because resolution is the poster child for timelines, right? I think that’s the, the, the project everybody talks about when we talk about permitting timelines, because right now it’s going through a judicial review, waiting for a judge to make a ruling, whether some land is being affected by first nations. And we’ll see how important that ruling is. Cause if the mind does not get built and they don’t get their permit, the U S becomes completely unattractive as an investment target.

I mean, the department of defense guy in the U S is putting hundreds of millions, not billions of dollars into rare earths and critical metals projects all over the world in Africa and far flung jurisdictions in South America. And so you go as a country that strikes me as, as quite foolish when you could, you have the resources under your feet, like resolution and you’re not developing on your own. The only reason why Canada is even worse.

I mean, I’m Canadian and I’ve been a contrary take guy. Cause I, the temperature is very, very high in Canada right now, politically. But I think Donald Trump is the best thing that’s ever happened to Canada.

And it’s not because I want Canada to become the 51st state. I’m a very proud Canadian. It’s never going to happen, but I think he’s giving us a massive kick in the butt.

We have 40 million people in Canada. We have one of the largest resources in the world. We should be as rich as Saudi Arabia or some of these resource rich countries.

And yet for the last decades of time, we’ve been shooting ourselves in the foot, refusing to develop our own resources that are high demand all over the world. And you, if you take those resources divided by per capita, how wealthy our country should be, it’s, it’s, it’s, it’s actually quite a sad as a Canadian to see that. And so I think Trump pushing productivity, forcing us to drop into trade barriers and forcing us to get more serious about developing our resources.

If they’re doing that in the US, it’s like when you’re training for a marathon, the guy next to you runs twice as fast. If you want to keep up, you’ve got to train much harder. I think Canada is going to get smarter, hopefully more efficient and more productive at getting our resources out of the ground, which will create wealth for the country and will also benefit the US and hopefully lower some of those tensions we have geopolitically right now, globally.

Yeah. We have to take that into consideration, of course, when making investment decisions, because I think, and we talked about this before hitting the record button, the Canadians will be investing a lot more domestically, as well. We’ve seen that bit of an example back in 21, 22, when South America had its shift to the left money state at home, we’ve seen flow through financings, I wouldn’t say go through the roof, but increased and as part of the overall financing space, flow through financing the Canadian tax exempt investing model here, we’re about 25% of the overall investment as well.

Did you expect that to happen again, like resource nationalism, let’s call it that resource investing nationalism in Canada, especially given FX rates and the turmoil in the US right now? Do you see more money flowing into Canada exploration? I do. I see the government spending more money on key infrastructure projects. We spent a lot of money during COVID.

Unfortunately, a lot of that was I think, wasted, just throw money out the door, but like on real projects, like roads, ports, trans-Canada pipelines, access railroads, improving road access. When I say Trump’s the best thing that ever happened to Canada, I’m just anecdotally telling you since Trump came into office, BC, British Columbia put out a list of I think 15 projects that are viewed as critical to the province and fast track permitting. That came out.

Then within a couple of weeks of that, it’s not part of this discussion. I also follow oil and gas quite closely as well. Canada is trying to build a gas and oil pipeline from Alberta through Quebec for the last 25 years.

Quebec has resisted that at every single turn. Quebec’s a little bit more left leaning, a little bit socialist, a little more environmentally difficult to work in. Within two weeks, the Quebec government came out and said, we are open to supporting that pipeline.

It gives an example of resource nationalism or dropping intra-provincial pay barriers, dropping resistance to projects that can create massive wealth for Canadians, shortening permitting timelines, investing in infrastructure to develop the northern of Quebec or northern BC or different areas that need infrastructure, Yukon that needs infrastructure to develop these major projects on top of Western copper. Those are smart investments that governments can make, but you can’t build a road through the Yukon to say you want to develop your copper and gold resources there and then take 25 years to permit the project. Those things have to go hand in hand.

If the provinces actually get together, the federal government gets together, the industry gets together, how can we do this smarter, faster and cheaper while still respecting the environment, all the constituents that would go into building a mine? How can we shrink it by 50%? That would be the most valuable use of time we could have as a country. And I think the US is going to do that faster. They’re always better at us to do things quicker and more aggressively over there, but they’re going to show hopefully the way and force our game up in Canada as well.

Yeah, just connecting the Yukon itself to the national grid in Canada would be a huge step forward. Because whenever I’m in Whitehorse, I hear the diesel generators just running outside of town. It just does not fit the whole narrative.

It’s just mind blowing stuff there. But Michael, coming back to investing in the resource space, where are you allocating capital right now? What are you looking at? And part B of the question, of course, how attractive is the US still or going forward? Yeah, so two things. I think the gold producers are really attractive, per my comments on the massive expanding free cash flow margins we’re seeing there.

So I think that the mid-cap producers, I mean, recently Newmont’s, I think, undervalued as well. But I think the small to mid-cap companies, like I said, the ones that are producing 150,000 to 500,000 ounces a year that have a clear path to double or triple their production over the next three to five years, with gold prices where they are, they can fund that internally from the free cash flow they’re generating. Those look really, really attractive to me.

And then with my personal money, I’m investing in companies that are a bit too small to invest in institutionally, that we have a vast international management. I highlighted again the massive discounted valuations you’re seeing in the resource stories, so names that own resources and names that have high quality development projects, PDA or pre-feasibility stage project. I think that the best value in the gold sector is incredibly cheap overall.

So I basically buy anything in the sector, you’re going to do very, very well the next two or three years. But the best value I see is in the resource stocks, the ones that own resources, and the ones that have quality PEA, pre-feasibility type projects in jurisdictions that can be permitted. You asked a question about the US.

We talked about the high level, I think things are going to get better federally, both in Canada and the US from government support and backing of compressed timelines. But every project is local. So there’s some jurisdictions in Canada and the US that are really easy to build a mine, and some areas that are much more difficult.

So I don’t paint jurisdictions with a broad brush and say, I like US, I like Canada. I like both those jurisdictions because relative to what we have now, things are going to get better from a permitting perspective. We’ll see how much better, but they’re going to get better, unlikely to get worse.

And then there’s certain sub-jurisdictions within Canada and the US that I have a strong preference for. So I love Quebec, I like Ontario, I like BC in Canada. I think Yukon is great if they get the infrastructure in there, but Quebec, Ontario, BC has better established infrastructure today.

In the US, Arizona is a fantastic place to work in my view. It’s got great geology and very established mining culture. But even within those states, those provinces I talked about, there’s certain parts of different states that you got to be careful.

So it’s very, very local. But I think overall, the big picture is going to get much better. US and Canada looks really attractive.

And then if you can find the jurisdictions within those jurisdictions that are really supportive of mining, those are probably the best places to be investing in. Absolutely. No, Mike, I fully agree.

And if I was a new generalist investor that’s been investing in video all my life for the last few years here, and if I start to look at the gold or the mining space in general, where should I look first? Yeah, I would say don’t dive right into a microcap exploration story. You know, it’s an interesting stat from Tabby Costa, does some great work as well. The free cash flow yield on the gold sector now outpaces the free cash flow yield on the tech sector.

So for all you tech investors out there, take a look at the fundamentals of the gold sector. We’re now generating a higher free cash flow yield in the gold sector, which is widening as we speak. So that’s probably going to be increasing that delta than the tech sector.

So if you’re a generalist investor, this is a profitable, highly undervalued sector with improving fundamentals. If you want to go really passive, Tabby, you could buy GDXJ or GDX. That’s where I would probably start.

They’re passive ETFs. And then, like I said, if you have a little bit more appetite for risk and you want to get the single stocks, take a look at the fundamentals of these mid-tier producers. Like I said, they’re good growth stories.

They’re growing production, generating free cash flow with expanding margins. That’s typically what you want to see in a tech story, you know, rising sales, rising margins, rising free cash flow. That is what we’re seeing in the gold sector.

And then as you get more and more comfortable, if you want to venture down the food most value is high quality development stories in Canada and the US, especially as you get more comfortable or if you get more comfortable with the permitting timelines they’re going to compress. And then the last step, if you want to become a ninja, a black belt investor, you can go into the junior resource exploration stories that have the most torque. And that’s where you can make, you know, 20, 50, 100 times your money if you find the right stories.

Yeah, but you need a thick skin, patience and money to lose first. And a diversified portfolio. Don’t just buy one.

Exactly. Right. And you need to have some pocket change that you can lose first to learn your lessons.

I’ve lost a lot of money learning. Still not good at it. But that’s a different story.

Michael, what a wonderful conversation as always. It’s great to catch up with you on mining sentiment in general and what’s trending. We’ll have to do this again very soon, maybe just before the summer, perhaps before the summer doldrums kick in here.

We’ll see how strong they are going to be this year. But if I were to follow your work, where can I reach you? Yeah, I keep a pretty low profile. My focus is investing money.

I love doing stuff like this, especially with highly informed investors like yourself, Kai. So best way to do is look me up on YouTube. I try to do one of these interviews, you know, once a month, once every two, three weeks.

For me, it’s the most effective way to let people know what I’m thinking without having to answer the phone 100 times a day. So YouTube, just Google my name. I’m often on quite a few platforms where I’m sharing my views.

And for me, it’s the most effective way to get the message out. Fantastic. Maybe one very last question, bear case for mining stocks, anything that derail your thesis? Yeah, I would say a market, a severe market correction.

Okay, so I would say if we see, I always tell investors, you know, gold stocks are stocks, right? So when you have a 30% drawdown in the market, that’s going to hurt your stock. So don’t expect that if your view is the S&P 500 is going down 30% this year, you’re unlikely to make money in your gold stocks, my view, you’ll be outperformed the market. But losing less money, relatively speaking, is not a good thesis.

I will say that when the market crashes, the leadership, but you already saw this little mini correction that we saw, right, the gold stocks fell for a couple of days, they were the first ones to rally hard yesterday, and they’ve improved again. So they’ll widen their gap between the overall market. So I said, overall market correction would be would be highly negative.

I think unbridled strength in the US dollar, you know, would be would be probably a headwind for gold. I do think the US dollar is quite overbought. But I think that would be a negative there.

And then I would say keep your eye out for cost overruns. Like if we have a scenario like you saw in post COVID, where inflationary pressure really picks up and starts to eat away at the margins of the producers, if you start seeing their own sustaining costs, instead of being up to 3% a year, like inflation being up 8, 10, 12%, 15%, like we saw during COVID, that would be another potential negative. I don’t see that in the cards right now.

But that would be one you want to keep an eye on. Fantastic. Michael, we’ll have to do this again soon.

Really appreciate you coming on. And thanks so much for your time. And everybody else.

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