Latest / SILVER / GOLD / $UFD: Surviving Global Economic Shifts | RONS BASEMENT / ELITE MINING CEO -- What is GOING ON in SILVER, GOLD & MINING

Transcript

ELITE MINING CEO -- What is GOING ON in SILVER, GOLD & MINING · SILVER / GOLD / $UFD: Surviving Global Economic Shifts | RONS BASEMENT

• 0:00
  This is Jorge Genoza, CEO of Fortuna Silver Mines.
• 0:05
  They're a midtier gold and silver producer.
• 0:08
  Jorge has mines in Mexico, Argentina, Peru, Burkina Faso,
• 0:14
  Cote, d'ivoire, and an exciting new advanced stage exploration
• 0:20
  project in Senegal. Jorge, welcome to Ron's
• 0:23
  basement. You know, Ron, a pleasure to
• 0:26
  join you once again in the basement.
• 0:32
  How about this? Markets, huh?
• 0:38
  Oh man, it's teaching us how to be thick skinned and tough,
• 0:42
  right? It's you know, I I was at the
• 0:45
  Colorado Springs a golf forum. No, it's it's the the golf forum
• 0:54
  and I was meeting I. You know it it it was overall I
• 0:59
  think a very quiet conference. It's probably the the most
• 1:03
  important conference for previous methods in the world,
• 1:10
  but it was very quiet, very, very quiet.
• 1:14
  Having said that, we had, we had a full schedule.
• 1:19
  You know, we did have a full schedule.
• 1:24
  And you know within the 2526 meetings, we had over 2 days, 2
• 1:30
  days and a half. I had a very interesting one.
• 1:33
  I was talking with a large a portfolio manager in a large UK
• 1:38
  based fund and this fund manages about 25 billion sterling
• 1:48
  billion, right? 25 billion?
• 1:51
  And and he manages the gold portfolio within the fund,
• 1:57
  right. So he according to the overall
• 2:01
  strategy, they give him money or take away money.
• 2:05
  But it's not like outside money. No, it's money they get and they
• 2:08
  allocate within those 25 billion.
• 2:11
  So he tells me that two years ago he was managing $2 billion
• 2:17
  in mining equities in in. Precious metals mining,
• 2:22
  equities. Now he's managing only half a
• 2:26
  billion. Yeah, yeah.
• 2:29
  So he went from 2 billion to half a billion.
• 2:32
  So he's managing 1/4 of what he was managing now.
• 2:38
  And when I asked him, you know, what do you think is happening?
• 2:41
  Because there is no appetite for the mining equities and gold
• 2:46
  still trading close to nominal record highs.
• 2:50
  Yes, the miners margins have been squeezed by inflation
• 2:54
  dramatically, but still gold is close to nominal highs.
• 2:58
  So why so much apathy with the the mining equities and and his
• 3:04
  answer made a lot of sense to me, he said.
• 3:08
  The gold price, they believe, is supported by central bank
• 3:13
  purchases, not by bigger locations of capital.
• 3:21
  The of of portfolio managers, right.
• 3:24
  So he thinks the the the nominal this high price around 19118
• 3:30
  hundred if you will 1800 still a high price in nominal terms.
• 3:36
  He believes all of that is being supported by by central bank
• 3:39
  purchases. And the issue is that usually
• 3:42
  when you have, you know, money managers allocating capital to
• 3:47
  gold, they also buy mining equities.
• 3:50
  But central banks, when they buy gold, they don't buy mining
• 3:54
  equities, they just buy gold. So that's why the discrepancy
• 3:58
  between gold, where gold is and and the valuations of the mining
• 4:02
  equities. Because again, the, the, the,
• 4:06
  the central banks will purchase gold but will not buy mining
• 4:10
  equities, right? They will not buy Barrick.
• 4:15
  You know, Fortuna or or or. Like Nico Eagle, right?
• 4:19
  And they they want. That made a lot of sense to me.
• 4:24
  But favor and check out Pin Becks, the online precious
• 4:28
  metals bullion dealer and sponsor of Ron's Basement.
• 4:32
  I was a happy customer before they offered to support the
• 4:35
  channel. You'll find they have the best
• 4:38
  prices, quality, and service. I think Pin Becks is best and
• 4:42
  you will too and be sure to tell them that you're from Ron's
• 4:46
  basement. And if you think about and I
• 4:47
  know also the other statistics are showing that ETF's, the big
• 4:53
  BlackRock ETF's, the GLD and the SLV, they both have had pretty
• 4:57
  significant outflows over the last couple years.
• 5:00
  So right they from in terms of of anything outside of central
• 5:06
  bank purchases it appears that there's been money obviously
• 5:10
  coming out of out of of both the physical metal and the mining
• 5:15
  equities. You know the the silver lining
• 5:18
  that I like to remember is that you know I guess we have to
• 5:22
  accept the situation the way that it is.
• 5:25
  But the fact that we that it's been beaten down so low offers
• 5:30
  such a huge runway for improvement that you know if
• 5:34
  individual just a little improvement in terms of capital
• 5:39
  flows coming into the market from institutional and
• 5:42
  individual investors could have a major impact.
• 5:46
  But you know the waiting here is the is the torturous part,
• 5:49
  right? I think, I think it is a strong
• 5:54
  case I've been through, you know, I've been in in in the
• 5:58
  sector for over 30 years now and you know, there are times.
• 6:07
  You know, if if you're truly a contrarian, this is a perfect
• 6:11
  scenario. The mining equities right are
• 6:13
  the perfect, the perfect scenario.
• 6:15
  But you you need to have a contrarian mentality, right?
• 6:18
  Yeah. Yeah.
• 6:20
  If you have a contrarian mentality you you will be
• 6:23
  comfortable. But certainly investors in in
• 6:28
  the previous metals mining equities have been put to the
• 6:34
  test, right? And and you're, you're right
• 6:38
  when you talk about thick skin, they are all, you know, our
• 6:42
  investors are being put to the test and I think you know you
• 6:50
  need to have a strong, strong convictions on your investment
• 6:54
  thesis and and a bit of a contrary and view, right.
• 6:59
  Yeah, yeah. And a lot and a lot most people
• 7:03
  let their emotions rule their investment decisions.
• 7:07
  And right now anyone who's been invested in precious metals
• 7:11
  equities, the emotion associated with it is just a lot of pain,
• 7:15
  right. I mean even me I'm, I'm probably
• 7:17
  one of the most bullish, optimistic and I would like to
• 7:22
  think somewhat objective people when I look at at the metals and
• 7:25
  I have a big portfolio of precious metal mining stocks.
• 7:29
  And when I think about there's there's that that silent part of
• 7:33
  me that says you should you know buy a little more, buy a little
• 7:36
  more. But it's very difficult because
• 7:40
  and and you know I'm hearing everybody even you know from the
• 7:44
  conference that you reference people were saying that some of
• 7:47
  the executives, the comments from some of these executives
• 7:50
  was like they're just like throwing their hands in the air
• 7:53
  and saying this has become, you know, it's become so difficult
• 7:57
  with sentiment the way it is. You know, you think at some
• 8:00
  point we're going to reach that capitulation stage where things
• 8:06
  could turn around. And I've also heard this, it can
• 8:08
  turn you and I know because we've you've been in it longer
• 8:10
  than me. But it when it turns, it can
• 8:12
  turn very quickly as well and things can get better very
• 8:17
  quickly. And I think again since we're
• 8:19
  starting from such a low base in terms of interest and sentiment
• 8:24
  and capital flows into both, you know the, the physical metal
• 8:29
  from an individual and even institutional perspective and
• 8:32
  the equities that it's not going to take a lot.
• 8:35
  You know it's easier to go from having an F grade to A/C grade
• 8:43
  than it is to go from a B grade to an A grade.
• 8:45
  I hear you perfectly loud and clear and and I'm 100% with you
• 8:51
  and you know. There is a lot of money out
• 8:57
  there and that money is not looking at mining equities.
• 9:02
  The moment that happens, the movement is going to be
• 9:09
  exponential because to begin with there is not a lot of
• 9:13
  product for that money. No.
• 9:16
  How many really large precious metal producers are there today?
• 9:22
  How many meat size producers are there?
• 9:25
  Do they large producers, we can count them probably in, you know
• 9:31
  in in in in in two hands and that's for the world, right, Mid
• 9:38
  sized producers, probably in three hands.
• 9:41
  You know, if you lend me one hand we can count all of them
• 9:46
  and probably I I haven't done the exercise, but.
• 9:50
  Probably the market valuation of all the precious metals miners.
• 9:58
  That's an equate to I can tell you, I'll interrupt you.
• 10:04
  I read this just the other day. You know Home Depot, the
• 10:07
  hardware store in the United States, all of the precious
• 10:11
  metal mining stocks, if you combine all of their market caps
• 10:15
  together, is less than the market cap of Home Depot, the
• 10:19
  hardware store. Yeah, Yeah.
• 10:21
  Yeah. Yeah.
• 10:22
  Yeah. I yeah, absolutely.
• 10:26
  So, I mean, so, so you see when when money flows into the
• 10:32
  sector, there's just so many companies you can invest in that
• 10:40
  that gives you a sense of of the size of the of the sector.
• 10:48
  It's very small. It has shrunk dramatically and
• 10:52
  today is very small. So any, any small inflow, yeah.
• 11:00
  Will drive it exponentially. And the other consequence of
• 11:04
  that, and you correct me if I'm wrong, is that because there's
• 11:07
  so little money coming into the sector, there's been a depressed
• 11:12
  level of exploration and development over the last 5-10
• 11:16
  years as well. So from a from a future pipeline
• 11:20
  of new projects coming on board, sure there's some, but there's
• 11:24
  not like a massive amount of new projects coming in from a supply
• 11:28
  perspective as well. Yes, now that is true.
• 11:36
  And but you know what? I have a bit of a different view
• 11:41
  with respect to gold. And supply demand fundamentals,
• 11:50
  I have a bit of a different view because you know every goal that
• 11:56
  has ever been mined is sitting in a vault and when prices go up
• 12:01
  that goal starts coming out of the vault the.
• 12:06
  So I think that really the driver.
• 12:08
  So I believe what you're saying is right.
• 12:12
  But what it does impact is the size and the availability of
• 12:21
  producers. That's why I'm saying this is a
• 12:25
  sector that over the years it gets more and more concentrated
• 12:30
  in less product for the investor.
• 12:33
  Investors don't have a lot of product.
• 12:36
  If you want to invest in the seniors, who are the seniors?
• 12:40
  The seniors are Newmont Barrick, Anglo Agnico, Kinross.
• 12:54
  I might be missing right now. One now you got it.
• 12:58
  Seven and then you have the mid sized producers that those are
• 13:04
  you know are I will put Endeavor Mining in the seniors 8, I'll
• 13:09
  give you 8. And then you go into the mid
• 13:12
  sized producers. So as there is an absence of
• 13:15
  discovery, what happens is that these companies merge or or you
• 13:21
  don't see new ones emerging because there is no goal being
• 13:23
  discovered. So the amount of product
• 13:26
  available for the investor in the senior space in the precious
• 13:29
  metals industries 8 and then if you go to the mid sized
• 13:33
  producers you probably see 12. 15 companies mid size being half
• 13:43
  a million oz like us so who who so when money flows in like
• 13:49
  you're saying you know if if the entire sector has the market cap
• 13:54
  of and of the Home Depot. Imagine if we get some serious
• 13:59
  and we saw that in 2008 two thousand and three 2005, two
• 14:04
  thousand and nine 2010. I could go around the capitals
• 14:08
  of the world meeting with large institutions.
• 14:12
  I I remember meeting in Austin, TX with the US Army pension
• 14:17
  fund. I don't know how many trillions
• 14:19
  of dollars they managed and they wanted to invest in mining.
• 14:23
  Texas teachers pension fund. The you know, I mean just
• 14:28
  generalists who manage billions of dollars wanting to put money
• 14:34
  into mining equities. That has disappeared.
• 14:37
  We don't see that anymore. First, Mining Gold is a
• 14:41
  development company advancing 2 of the largest gold projects.
• 14:45
  In Canada, Spring Pole in Ontario and Du Parquet located
• 14:49
  in Quebec, each already has five. 1,000,000 ounces of gold
• 14:53
  reserves. But exploration initiatives are
• 14:57
  underway at both. Projects to find even more gold.
• 15:01
  First, mining is well financed, has zero debt.
• 15:04
  And owns an interest in four additional Canadian Gold
• 15:08
  development projects. Correct me if I'm wrong, because
• 15:11
  I've never you said something that was a new concept to me
• 15:14
  that I've never thought of. Like there's a difference
• 15:16
  obviously between all the gold that's in the vaults and the
• 15:20
  mining sector itself. And as the mining sector becomes
• 15:24
  smaller and smaller, it it, it will, it will act obviously even
• 15:30
  more independently from just the physical gold that's, you know,
• 15:34
  like you said, every ounce of gold that's ever been mined is
• 15:37
  sitting somewhere and evolved. But this mining sector just
• 15:40
  continues to contract in size. And at that point when there is
• 15:45
  new interest that that could could result in some rather you
• 15:51
  know explosive capital flows because the number so small, you
• 15:54
  know when you get to a small number it's easier to increase a
• 15:59
  small number by two or three or four times than it is starting
• 16:04
  from a huge number and and it. Yes and and you don't get as I
• 16:09
  said dilution, right, because they're not how many large, you
• 16:15
  know I mean how many multi billion dollar portfolio
• 16:20
  managers are out there. You can make sure that not in
• 16:23
  hundreds but in thousands probably.
• 16:26
  Yeah and you and you know it's something.
• 16:28
  Go ahead, go ahead, Jorge. No, no, no.
• 16:31
  And and and those guys, when they say, OK, I need to have 5%
• 16:37
  of My Portfolio in gold and equities, how many senior
• 16:43
  producers are there? 8, right?
• 16:46
  Yeah. OK.
• 16:48
  And and if I put. You know, then they'll inflate
• 16:52
  those rather quickly and then they say, OK, what's the 2nd
• 16:54
  tier of producers, the meat size, OK, how many are there, 14
• 17:02
  And what's their market caps? You know, their market caps is a
• 17:06
  billion to $2 billion and they are like well, but I manage you
• 17:12
  know 25 billion if I put you know 1% of the portfolio.
• 17:21
  No, it's it's 250 million. So how do I invest in this
• 17:28
  sector, right, You can buy the whole thing.
• 17:30
  You can have it all. You know, the other thing I
• 17:33
  wanted to interject is that that that as you were speaking
• 17:37
  another, you know, something that dawned on me as you were
• 17:39
  speaking as, yes, there's only so many intermediate size
• 17:43
  companies. There's only the eight large
• 17:45
  ones like you talked about, but there's a big Moat around those
• 17:50
  companies. You you know just because more
• 17:53
  capital comes in at some point you can't just out of nothing
• 17:58
  build a mid tier gold and silver mining company.
• 18:02
  I mean it's a, it's a it's a decades long process at best.
• 18:06
  You know what I'm saying now exploration company, sure they
• 18:08
  can pop up, but when you, but when you talk about midsize and
• 18:13
  large companies, so you just can't, you know you can't make
• 18:17
  one up overnight. So directly to the point that
• 18:22
  you brought and led us to this conversation is there have been
• 18:26
  no discoveries. So if you're not making
• 18:30
  important discoveries, you cannot grow the pool of mining
• 18:37
  companies. You know what I mean?
• 18:39
  Yeah. So are those discoveries.
• 18:45
  The few discoveries out there end up being taken by the the
• 18:52
  large producers, no, but you don't have a pipeline that lends
• 18:59
  to to diversified small universe of multiple meat size and and
• 19:09
  and large producers. It's a small concentrated world
• 19:14
  in, you know, if you want to take producers from half a
• 19:17
  million publicly traded companies, half 1,400,000 ounces
• 19:23
  and onward, you'll probably stop counting in 20 at #20.
• 19:29
  So, you know, how? How can you invest if you're a
• 19:34
  large trillion dollar, $50 billion?
• 19:40
  Fund management firm with a mandate to put 5% on gold
• 19:45
  equities or gold and equities. So that that's what we're
• 19:49
  talking about, right. So I think that the main, the
• 19:53
  main impact of the absence of discoveries is not so much on
• 19:58
  the supply and demand fundamentals of gold per se, but
• 20:03
  more on the pipeline of discoveries to have a
• 20:08
  flourishing. Mining sector with multiple
• 20:15
  companies competing, growing. No, it's really a pool.
• 20:19
  I know all the CEOs, I know all the guys, I know everybody.
• 20:24
  And it's just a very small gathering, really, right?
• 20:31
  And it's taken you a decade plus to grow Fortuna.
• 20:37
  To the size that you've that you've accounted almost 20
• 20:41
  years, almost none more than a decade, 20 years.
• 20:45
  Because it's not only about making a discovery these days is
• 20:50
  the time it takes to permit. That's why I went to West
• 20:52
  Africa. Because in West Africa I can
• 20:55
  permit under five years. I can go from from resource to
• 20:59
  production in under five years. In in North America or other
• 21:06
  jurisdictions, that process takes 10 to 15 years, right?
• 21:11
  Mmhmm. Mmhmm.
• 21:12
  Mmhmm.