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Why It’s Time to Invest in Mining · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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Speaker 2: Welcome to Meren Dorg's Money, the podcast in which people
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Speaker 2: who know the markets explain the markets.
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Speaker 3: I'm Maren Sumset Web.
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Speaker 2: This week we are spending the episode focused on one
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Speaker 2: particular market, commodities. It's been a while since we discussed
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Speaker 2: the sector, so we have invited on two experts to
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Speaker 2: join us in a conversation about everything metal and mining.
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Speaker 2: We talk about the commodities themselves, the minds they come from,
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Speaker 2: and the relationship between those minds and the equities that
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Speaker 2: represent them. We talk about copper, we talk about gold,
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Speaker 2: we talk about platinum, and we talk about silver. So
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Speaker 2: in our studio we have Nicky Shield's head of Metal
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Speaker 2: Strategy at mks PAMP, a group that specializes in precious metals,
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Speaker 2: and in our London studio we have Heavy Hamburg, who
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Speaker 2: is one of the world's most influenced mining invested Evy
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Speaker 2: is co manager of the black Rock World Mining Trust
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Speaker 2: and global head of Thematic and Sector Investing at black Rock,
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Speaker 2: as well as being head of the Natural Resources Equity team.
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Speaker 2: Nick and every Welcome to Merrin Talks Money. So Everie,
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Speaker 2: why don't I start with you and just tell me
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Speaker 2: what it is that you think of when you talk
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Speaker 2: about commodities. What are we talking about here? How is
1:22
Speaker 2: this sector different to the rest of the market.
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Speaker 4: You could go anywhere with that question.
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Speaker 3: I know I wanted.
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Speaker 2: I wanted to have fun by asking at the very
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Speaker 2: beginning of bitcoins a commodity, but I'd have heard that.
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Speaker 3: Leave that's the end.
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Speaker 4: It's fascinating if you think about commodities and the fact
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Speaker 4: that we all use them every day, and some of
1:41
Speaker 4: them are more visible to us than others. So if
1:44
Speaker 4: you go to the petrol station then you fill up
1:47
Speaker 4: your car, you know what the price of fuel is
1:49
Speaker 4: and how that changes. If you go shopping at the supermarket,
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Speaker 4: you know what the cost of agricultural commodities are because
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Speaker 4: you can see how the price changes. But most of
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Speaker 4: the commodities that we take for granted, you know, the
2:01
Speaker 4: metals and so on, have very very low levels of
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Speaker 4: visibility in terms of how we consume them. And I
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Speaker 4: think that society as a whole is rather complacent about
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Speaker 4: their supply and the invisibility of the price changes. And
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Speaker 4: I guess the fact that they're always there and we
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Speaker 4: take them for granted means that we don't pay that
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Speaker 4: much attention to them, and I think that's reflected in
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Speaker 4: how people value the companies that produce them, and so
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Speaker 4: to us, theres very very long term investors in this space.
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Speaker 4: It's quite disheartening to see how lower percentage of the
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Speaker 4: kind of global market cap commodity producers represent relative to
2:43
Speaker 4: how essential they are both in everyday lives but also
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Speaker 4: in sustaining living standards. And it's only when you know,
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Speaker 4: things go into kind of I don't know, panic mode
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Speaker 4: around shortages, or you hit the front page of the
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Speaker 4: media and so on, that people's interest levels rise and
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Speaker 4: multiples expand or greed over where overtakes, you know, fear
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Speaker 4: in terms of people wanting the exposure that the sector
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Speaker 4: becomes front of mind for most financial investors, and you know,
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Speaker 4: we're certainly seeing some early signs of that in the
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Speaker 4: government space. But to me, I find it very confusing
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Speaker 4: that something that is so essential to everybody's daily life
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Speaker 4: has such a low level of interest and low multiple
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Speaker 4: that the companies tend to trade on in the market
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Speaker 4: relative to the businesses that actually consume them. I mean,
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Speaker 4: you can't build a data center without commodities, Yet there
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Speaker 4: the data center companies trade on infinite multiples.
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Speaker 3: Yeah, that is interesting.
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Speaker 2: We had we had a few months ago, we had
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Speaker 2: ed Conway on talking about his book Material World and
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Speaker 2: talking about this difference between the ethereal world and the
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Speaker 2: material world, and the extent to which we've sort of
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Speaker 2: forgotten that the material world is the foundation of everything,
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Speaker 2: and without without the minds and without the really fealthy,
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Speaker 2: grubby bit at the bottom of everything, we could all
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Speaker 2: the other things that we like to talk about.
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Speaker 1: It.
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Speaker 2: It's just interesting how that's happened over the last couple
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Speaker 2: of decades, that the foundation, the foundations of everything have
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Speaker 2: been forgotten on the pyramid of need has been rather upturned.
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Speaker 4: Yeah, I think you're right. I mean, it's a great
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Speaker 4: book that I loved it, and I listened to it
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Speaker 4: on one of the players audible. It is amazing if
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Speaker 4: you think about how society has moved on through time,
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Speaker 4: where basic industries were such a core part of everything,
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Speaker 4: and now services are the kind of the most core
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Speaker 4: part of everything. And it's just you know, usk how
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Speaker 4: much value dis services really add?
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Speaker 2: Oh controversial or can I add anything without without the exactly?
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Speaker 4: That's what I mean.
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Speaker 2: Yeah, And I suppose the other interesting part of that
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Speaker 2: that will come onto later as well is energy, And
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Speaker 2: there's a whole justop oil excepter plava where everyone forgets
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Speaker 2: that in fact, oil is part of absolutely everything they
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Speaker 2: touch and everything they feel around them, everything they see.
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Speaker 3: Is that something to do with fossil fuels.
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Speaker 2: But nonetheless, we've moved so far away from the understanding
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Speaker 2: of the materials sector. There's a genuine belief out there
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Speaker 2: that the world could continue.
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Speaker 4: Yeah, I mean that's my foundations. I find a bad complacency.
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Speaker 2: You're beginning to see some kind of change. I mean,
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Speaker 2: I think ed Ed's book was a bit of a
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Speaker 2: turning point for starters. But also looking at the papers
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Speaker 2: this morning, one of the headlines on the front of
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Speaker 2: the FT Sorry competitor Alert was Chinese mining acquisitions globally
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Speaker 2: at their highest level since twenty thirteen.
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Speaker 3: So somebody's getting it.
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Speaker 2: The Chinese are up there looking at everything, buying everything,
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Speaker 2: beginning to monopolize as much as they can.
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Speaker 3: So let me just ask you, then, when you.
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Speaker 2: Look at the sector today, what are the parts that
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Speaker 2: you find most interesting? Where is it going to happen
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Speaker 2: that we'll see these supply demand shocks that are going
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Speaker 2: to wake people up to the importance of this area. Yeah.
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Speaker 4: I hope we don't have shocks for the wrong reason,
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Speaker 4: because that would be pretty bad for the environment or
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Speaker 4: for safety and life and stuff.
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Speaker 3: Slow surprises, let me go slow surprises. Yeah.
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Speaker 4: I think it's hard to argue against the fact that
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Speaker 4: the world's going to need more as life goes on.
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Speaker 4: That's pretty much a given. That's definitely been the history
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Speaker 4: and it's likely to continue to be the future. I
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Speaker 4: think the shape of what more is is what's interesting.
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Speaker 4: So when we think about the transition, I suppose you
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Speaker 4: away from fossil fuels, that is a transition from fossil
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Speaker 4: fuels to hard metals to industrial commodities, and the intensity
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Speaker 4: of use of those commodities rises, you know, almost vertically,
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Speaker 4: the more you move away from fossil fuels. Up to
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Speaker 4: some long.
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Speaker 2: Data can I Evie, do you mind if I just
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Speaker 2: interrupt you briefly, because we always talk about the transition,
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Speaker 2: and when we do, I think it's time we start
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Speaker 2: making it clear that we're not really talking about a transition.
6:32
Speaker 3: We're talking about an addition.
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Speaker 4: Correct, It's just the change of shape, And I think
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Speaker 4: that's it. Yeah.
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Speaker 3: Absolutely, We've never had an energy transition in history.
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Speaker 2: We've only ever had an addition that we don't use
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Speaker 2: less cold than we did, we don't use less wood
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Speaker 2: than we did, none of those things. We just use
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Speaker 2: another type of energy on top. And that's what's happening.
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Speaker 4: I mean, we can't have the future that is being
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Speaker 4: advertised to us so extensively without a net addition because
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Speaker 4: everything that is being advertised, that data sent A and
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Speaker 4: AI just use vast amounts of power and we can't
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Speaker 4: solve that with fossil fuels alone. It's got to be
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Speaker 4: other things. So the transition is the shape of those
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Speaker 4: energy molecules in terms of where they come from, and
7:11
Speaker 4: through time, I'm sure we probably will get to a
7:14
Speaker 4: point where the shift away from fossil fuel starts to
7:16
Speaker 4: become dramatic, but that's probably quite long dated. But in
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Speaker 4: that transition period, as that part is evolving and becoming
7:23
Speaker 4: a bigger component of supply, more and more metals are
7:26
Speaker 4: going to be going to be needed. And I think
7:28
Speaker 4: that's pretty obvious. So I think the demand side is
7:31
Speaker 4: very hard to argue with. I think the supply side
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Speaker 4: is equally challenging, you know, we're seeing very very long
7:37
Speaker 4: dated timeframes, so the addition of new supply of industrial commodities,
7:41
Speaker 4: it's becoming harder and harder to develop these things for
7:44
Speaker 4: whether it's the environmental permitting or the regulations attached to it,
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Speaker 4: the complexity where these all bodies are located. They're not
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Speaker 4: kind of shining out of the ground and easy to identify.
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Speaker 4: You've got to go deep underground or top of mountains,
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Speaker 4: access to water and power and people, and it is
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Speaker 4: just becoming more and more complex. So the thing that
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Speaker 4: we see that's coming back to your question that's so
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Speaker 4: fascinating is how the industry finances the growth that is
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Speaker 4: needed and are the incentives or the returns there today
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Speaker 4: at today's commodity prices to justify those investments. And when
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Speaker 4: you look across the kind of spectrum, it's hard to
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Speaker 4: see the returns for a number of the key commodities
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Speaker 4: to justify that investment. So the imbalance, the kind of
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Speaker 4: shock that you talk about, is probably going to come
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Speaker 4: from a long dated period of under investment into supply
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Speaker 4: because the returns aren't there. That coincides almost tectonically, you know,
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Speaker 4: with that sudden, you know, appearance of demand that everybody identifies,
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Speaker 4: and you then see a price response to reflect that imbalance,
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Speaker 4: and that then triggers probably a long dated period of
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Speaker 4: investment into new supply growth. In that interim period, you've
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Speaker 4: got governments running around, you know, saying that they're worried
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Speaker 4: about security of supply, trying to incentivize investment. You've got
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Speaker 4: the US trying to unblock some of the red tape
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Speaker 4: around investment of domestic resources, which might help. We don't know.
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Speaker 4: It's a very very early days in that regard, but
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Speaker 4: I still think that the challenges are very much going
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Speaker 4: to be kind of dominating the headlines, and at some
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Speaker 4: point there's going to be pressure and that hopefully will
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Speaker 4: lead to improve returns for the companies that make the
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Speaker 4: commodities today.
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Speaker 2: Yeah, I mean, the demand side will makes sense. And
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Speaker 2: I think everyone can see this. Everyone can see rising
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Speaker 2: demand from the energy transition edition, whatever we're going to
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Speaker 2: call it now, from everyone, from this rising concern about security,
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Speaker 2: from the idea that we should massively increase our spending
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Speaker 2: on defense, increase our spending on reindustrialization, et cetera, et cetera.
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Speaker 2: But when it comes to the supply side, in the
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Speaker 2: old days, we always used to saying that the alter
9:50
Speaker 2: to high prices is high prices, or the solution to
9:52
Speaker 2: high prices is high prices are shoot.
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Speaker 3: I mean, because then you get.
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Speaker 2: This massive burst of supply, but increasingly it becomes harder
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Speaker 2: and harder to incre supply for all the reasons that
10:01
Speaker 2: you mentioned, but also for environmental reasons, getting permissioned to
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Speaker 2: open new sites, getting permissions to explore, etc.
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Speaker 3: So is it the case that.
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Speaker 2: As this dynamic you've been talking about unfold, the cycle
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Speaker 2: is very significantly longer than it might have been in
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Speaker 2: the past. So, for example, all the big companies will
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Speaker 2: now say that it's very significant did you just go
10:19
Speaker 2: out and buy someone else's sites than it is to
10:21
Speaker 2: try and find another one, explore, get permissions and get
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Speaker 2: going with production.
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Speaker 4: Yeah, I'd definitely agree with that latter point. The valuations
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Speaker 4: on existing production today are much lower than the cost
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Speaker 4: of building stuff. I mean, that's a sweeping commet but
10:36
Speaker 4: there are there's a lot of data to support that.
10:39
Speaker 4: And it's not just the cost, it's the time and
10:42
Speaker 4: complexity as you mentioned about building new stuff. So you
10:45
Speaker 4: might have a project that's ready to go, but it
10:47
Speaker 4: still takes many many years to construct. There's still a
10:50
Speaker 4: lot of risk around how much it's truly going to cost.
10:52
Speaker 4: Anyone who's built a house knows that it tends to
10:54
Speaker 4: cost more than you think at the start, And it's
10:56
Speaker 4: the same with building your mind, except the numbers that
10:58
Speaker 4: just have many more zeros. When you think about that,
11:01
Speaker 4: if you're buying an asset today that's in production, you've
11:03
Speaker 4: got many many years of cash flow from that asset
11:06
Speaker 4: before the stuff you might be building from scratch actually
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Speaker 4: starts producing cash if it starts on time and at
11:12
Speaker 4: the right cost and ramps up to full production successfully.
11:15
Speaker 4: We've got a few examples recently where some of the
11:17
Speaker 4: world's biggest new copper mines have ended up costing fifty
11:20
Speaker 4: to one hundred percent more than originally planned and are
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Speaker 4: still not at full capacity two or three years after
11:26
Speaker 4: having supposedly started, Whereas if you'd gone and bought somebody
11:30
Speaker 4: else's asset and paid full price for it, you would
11:33
Speaker 4: have had three or four years worth of cashlow to
11:35
Speaker 4: help reduce that cost by the time you know, the
11:37
Speaker 4: new one might have might have started. So I think
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Speaker 4: the kind of on a risk reward basis, the assets
11:43
Speaker 4: in the market are trading a lot cheaper for less
11:46
Speaker 4: risk than building some things from scratch, which obviously is
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Speaker 4: one of the opportunities in the market that we see.
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Speaker 2: Okay, Nick, and we've talked a lot around qualities in general,
11:54
Speaker 2: about the different metals. I know you've specialized particularly in
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Speaker 2: precious metals, but in the world of metals overall, the
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Speaker 2: any that you look at and you find particularly interesting.
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Speaker 2: We're not going to go straight to gold, by the way.
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Speaker 1: No, you talked about these not to build on this,
12:08
Speaker 1: and it's sort of punnintended there.
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Speaker 3: But you talk about the slow surprises, and.
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Speaker 1: When you look at commodities sort of uros pla manus demand,
12:16
Speaker 1: you kind of fudge for macro equals price, and gold
12:20
Speaker 1: is it's less of a commodity out of all of them.
12:22
Speaker 1: But from my seat, basically what we're seeing is is
12:25
Speaker 1: platinum is really turning into a PGMs, turning into sort
12:28
Speaker 1: of that slow surprise we touch on again, it's your
12:31
Speaker 1: structural urrors of under investments in the sack. So a
12:34
Speaker 1: couple of months ago, fifty percent of the fifty percent
12:37
Speaker 1: of your supply was underwater, and so you get then
12:41
Speaker 1: you sort of have this sort of you know, really
12:44
Speaker 1: low pricing regime a sort of painful period, and you
12:49
Speaker 1: then get a catalyst, which happens to actually be the
12:50
Speaker 1: ball price, because Chinese jewelry demand is basically down like
12:54
Speaker 1: thirty forty percent given high ball pricing, and so you
12:57
Speaker 1: got your Chinese judas really looking at re stocking and
13:00
Speaker 1: going into platform versus gold. So that is the catalyst
13:03
Speaker 1: that has you know, seen almost forty percent three pricing
13:07
Speaker 1: in the last few weeks, which is pretty unprecedented.
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Speaker 3: So yes, eyes.
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Speaker 1: Are definitely on the PGM sector because again, I think
13:14
Speaker 1: that response when we talk about the supplier response and
13:17
Speaker 1: how quick that is, because when the mind does turn,
13:19
Speaker 1: it can swim pretty quickly. And in metals it's it's
13:22
Speaker 1: either scrap or it's primary. And if you just there's
13:25
Speaker 1: just no mind to bold, right there is it's just
13:28
Speaker 1: not there, and scrap for especially for PGMs, that's sitting
13:31
Speaker 1: in order cats and people are just hanging on to
13:33
Speaker 1: cars for longer because of high inflation because abound certain
13:36
Speaker 1: ty becaeuce of tariffs and that that material just isn't
13:39
Speaker 1: coming back. So we're not really seeing that the supplier
13:42
Speaker 1: responsors you generally see across the metal space industrials and
13:46
Speaker 1: precious when you get a large price free rating.
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Speaker 5: Okay, well I'll tell you what I gave in and
13:50
Speaker 5: let's talk about gold. You're I mean it's empting heavy.
13:56
Speaker 5: You're your portfolio is what the thirty percent or in gold?
13:59
Speaker 3: Gold? Like please at the moment?
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Speaker 2: Right, And Nikki, I know you're something of a gold bull, right, Nika,
14:03
Speaker 2: why don't need talk us through the case.
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Speaker 1: I think gold sort of speaks for itself in terms
14:08
Speaker 1: of its three ratings through two thousand and it's it
14:10
Speaker 1: is putting commodities back on the map in the broader sense.
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Speaker 1: It hasn't burnt itself out like every other commodity price
14:18
Speaker 1: boom or bus. So you've got investors coming back and saying, right, right,
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Speaker 1: is this time really different?
14:23
Speaker 3: And why?
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Speaker 1: And you've had a bunch of structural forces come together. Deglobalization,
14:29
Speaker 1: de dollarization, which didn't start now it's this started Brexit,
14:32
Speaker 1: like this started Brexit Trump one point zero, accelerated with COVID,
14:36
Speaker 1: accelerated with Ukraine war, the weaponization of dollars, and then
14:41
Speaker 1: just sort of ongoing geo political tensions.
14:43
Speaker 3: And I think you now have a world where.
14:46
Speaker 1: Yeah, there is it's it's each protectionism is up and
14:50
Speaker 1: again a course for those strategic stockpiling of and central
14:54
Speaker 1: banks that have been that key game changer, that a
14:57
Speaker 1: key demand game changer for whether it's a sub two
15:01
Speaker 1: thousand dollars acid or or now three thousand dollars plus
15:04
Speaker 1: ASCID and the way they're accumulating just too as a
15:07
Speaker 1: dollar hedge, but also fits currency hedge and inflation hedge,
15:11
Speaker 1: energy political hedge is kind of unprecedented, and we don't
15:14
Speaker 1: see that falling away anytime soon.
15:16
Speaker 2: You don't see it falling away anytime seeing the Chinese government,
15:18
Speaker 2: Chinese center back, for example, has been buying and buying
15:20
Speaker 2: and buying, and you see that continuing.
15:23
Speaker 1: Mostly Yeah, so it's mostly emerging markets, central banks, a
15:26
Speaker 1: lot of Africa and a lot of Asian obviously China.
15:29
Speaker 1: The interesting thing is, you know, World God Council do
15:31
Speaker 1: a great it's sort of great analysis and data on
15:34
Speaker 1: central bank buying, but it's it's official and a lot
15:37
Speaker 1: of it's unofficial. And in a Trump era, who you know,
15:40
Speaker 1: Trump has actively come out he had comments overnight related
15:43
Speaker 1: to the sort of the brick summits. But if you're
15:46
Speaker 1: actively seeing d dollarizing, which in the purest form is
15:49
Speaker 1: accumulating gold.
15:50
Speaker 3: The threats of tariffs sort.
15:52
Speaker 1: Of increases, So I think you're going to see a
15:54
Speaker 1: lot more It's it's going to become a lot more
15:56
Speaker 1: paid back to what we started off. From the conversation,
15:59
Speaker 1: I think central bank buying. You're going to have a
16:01
Speaker 1: lot of unofficial or just estimated central bank buying and
16:05
Speaker 1: won't go through the official channels.
16:07
Speaker 3: Okay, interesting, and is that what you see as well?
16:10
Speaker 4: I think I'm more bullish than that. You know, I
16:15
Speaker 4: agree with a lot of the comments I made, but
16:16
Speaker 4: I just think the scale is so much greater. You know,
16:19
Speaker 4: you look at the size of government balance sheets today,
16:22
Speaker 4: and I think that the education, a painful education that
16:26
Speaker 4: many people have been through about the loss of purchasing
16:29
Speaker 4: power over many, many years. Every year, you know, your
16:33
Speaker 4: paper currency buys you less than it did in the
16:35
Speaker 4: year before, and you know, cumulatively, it's very very expensive
16:40
Speaker 4: for paper assets. And I think the scale of government
16:44
Speaker 4: balance sheets now that need to be continually refinanced. People
16:48
Speaker 4: have learned a very very expensive lesson. We did the
16:52
Speaker 4: study of a year ago or so. I think the
16:55
Speaker 4: iPhone is now sixteen years old. You know, when it
16:58
Speaker 4: was launched, it was five hundred bucks iPhone. Now it's
17:01
Speaker 4: fifteen hundred bucks for an iPhone. You know, if you
17:04
Speaker 4: use gold to buy your iPhone, you need thirty four
17:06
Speaker 4: percent less gold today to buy today's iPhone than you
17:10
Speaker 4: did when it was first launched. That is the protection
17:13
Speaker 4: of purchasing power. Real assets have held value much better
17:17
Speaker 4: than paper currencies over time, and we all know that.
17:20
Speaker 4: And I think that people's people have started to become educated.
17:24
Speaker 4: Central banks have certainly become educated on this. And so
17:27
Speaker 4: my career is too long now, but you know, I
17:30
Speaker 4: when I started in the nineteen nineties, you know, everybody
17:32
Speaker 4: had an allocation to gold in an investment portfolio. In
17:36
Speaker 4: the early two thousands, that allocation was zero. Even the
17:38
Speaker 4: Swiss wealth managers had zero allocation to gold. Now it's
17:43
Speaker 4: getting back to two three percent some cases. More central
17:47
Speaker 4: banks have you know, stopped selling gold in the early
17:49
Speaker 4: two thousands, you know, having had whatever it was, four
17:52
Speaker 4: decades of net selling, you know, and they've been buying continuously,
17:55
Speaker 4: and they're buying at twice the average rate, or nearly
17:58
Speaker 4: three times the average rate over the last three to
18:00
Speaker 4: the last kind of seven or eight before that. So
18:03
Speaker 4: we're at a kind of a pivoting moment in this
18:06
Speaker 4: where gold has really re established itself as a financial asset.
18:11
Speaker 1: You make a really good point on a sort of
18:13
Speaker 1: the allocation to gold and sort of relative size I
18:16
Speaker 1: think of the gold market relative to other industries. I
18:20
Speaker 1: think is underappreciated. So yeah, it's just that idea that
18:23
Speaker 1: the gold space relative to the questioning of US treasuries,
18:27
Speaker 1: questioning of other assets is just it can't hold the
18:30
Speaker 1: amount of allocations if we simply just doubled investor allocations,
18:34
Speaker 1: or if Central anxious had to double their allocations to
18:37
Speaker 1: the sector.
18:38
Speaker 2: So what percentage of an ordinary person's portfolio should being gold? Micky,
18:42
Speaker 2: do you think we'll go can't?
18:44
Speaker 1: I mean the numbers thrown around is about one to
18:46
Speaker 1: five percent. I look at a very crude measure of
18:50
Speaker 1: just sort of known investor holdings, which is just simply
18:53
Speaker 1: ETF and your net COT numbers, and that's less than
18:57
Speaker 1: one percent as a percentage of equity.
18:59
Speaker 2: Hohold.
19:00
Speaker 1: But I do think specialists are somewhat involved. This is
19:04
Speaker 1: what makes me extremely polished. This isn't a gold rally
19:06
Speaker 1: that's firing on all cylinders. Retail's pretty sluggish, both in
19:10
Speaker 1: Europe and in the US. You've got central banks, you've
19:13
Speaker 1: got general investors, but I think it hasn't got.
19:15
Speaker 3: To that Fomo their phoonmo level weight.
19:18
Speaker 1: The new your taxicab is talking to me about hying gold,
19:20
Speaker 1: so really has been a sort of cold hearted like
19:23
Speaker 1: sort of allocation, very measured allocation to gold.
19:26
Speaker 4: I'd go more than that, So I thought you mightn't
19:32
Speaker 4: anywhere there enough. It's Oh. I think there's two components
19:36
Speaker 4: to that answer. The first one is that there are
19:39
Speaker 4: different ways to get exposure to gold, and to me,
19:42
Speaker 4: the optimum way is to have a mixture of exposure
19:45
Speaker 4: to physical and to gold producers. And so you set
19:48
Speaker 4: yourself a target where you want that exposure to be,
19:51
Speaker 4: and you might go with five percent, you might go
19:53
Speaker 4: with ten. I normally have anywhere between fifteen to twenty
19:56
Speaker 4: percent in my own personal portfolio, and you know, you
19:59
Speaker 4: manage the risk of those two positions. So if gold
20:02
Speaker 4: outperforms gold equity producers, then you know, you take a
20:06
Speaker 4: few profits in the physical gold and put it into
20:08
Speaker 4: the gold producers and you just manage that exposure in time.
20:11
Speaker 4: But you manage it as a number. So you know,
20:13
Speaker 4: if you get too high because something is that performance.
20:15
Speaker 4: So the gold shares are up three times the goal
20:17
Speaker 4: price this year, you know, you obviously be taking some
20:19
Speaker 4: profits and some of the gold producers and putting it
20:21
Speaker 4: back into physical if you think if they think they've
20:24
Speaker 4: gone too far. You mentioned our exposure to goal equities
20:27
Speaker 4: in the portfolio today. We went from an underweight position
20:30
Speaker 4: in gold producers at the beginning of twenty twenty four
20:34
Speaker 4: to a substantial overweight position in the gold producers, not
20:37
Speaker 4: because we had a different view on goal price. We've
20:41
Speaker 4: been bullished throughout that period. We just felt that given
20:44
Speaker 4: the move in the price, the companies were set to
20:46
Speaker 4: earn an extraordinary amount of cash flow and profits, and
20:50
Speaker 4: therefore we couldn't argue with that, and even the worst
20:53
Speaker 4: companies couldn't destroy the profitability that they were now getting.
20:56
Speaker 4: And so therefore we adjusted the position because there was
21:00
Speaker 4: value in the producers over the gold price view. And
21:03
Speaker 4: we're maintaining that we've got a very very healthy level
21:05
Speaker 4: of gold equity producer today because we think this quarter's
21:08
Speaker 4: earnings second quarter of twenty twenty five should be the
21:11
Speaker 4: evidence point. A little bit like the homework being marked
21:14
Speaker 4: by the master. You know, we will see whether the
21:16
Speaker 4: companies have been able to hold on to the price
21:18
Speaker 4: moves and convert that into cash, and the results over
21:21
Speaker 4: the next few months are going to be a real,
21:23
Speaker 4: real test for these companies. And then the second element
21:26
Speaker 4: of that test is what they do with the money.
21:28
Speaker 4: Do they waste it, which is off too often a
21:30
Speaker 4: track record of management teams, or do they give it
21:33
Speaker 4: back to shareholders with higher dividends. A lot of them
21:35
Speaker 4: are embarking on share buybacks. Most of them have paid
21:38
Speaker 4: down their debts, so there's a lot more choice about
21:40
Speaker 4: what they can do because they're not restricted with debt
21:42
Speaker 4: covenants and so on. So we actually think we're on
21:44
Speaker 4: the cusp of quite a material changing goal producer valuations
21:49
Speaker 4: if they can deliver. And when you look at the
21:51
Speaker 4: valuations relative to the past, they're trading way below their
21:55
Speaker 4: own historic levels, so there is a lot of room
21:58
Speaker 4: for them to move despite the year to date returns
22:01
Speaker 4: that they've been able to mark up. And then coming
22:03
Speaker 4: back to that question about the allocation, gold is also
22:06
Speaker 4: a risk tool but also an insurance policy. Take Nicky's
22:09
Speaker 4: number of five percent, the other ninety five percent goes
22:12
Speaker 4: really really well. It takes some profits out of that
22:15
Speaker 4: and add back to the gold to keep it at
22:16
Speaker 4: that five percent number, and you will be absolutely thrilled
22:20
Speaker 4: when the ninety five percent has that unexpected fall that
22:23
Speaker 4: that five percent over delivers view and acts like an
22:26
Speaker 4: insurance policy. And I think that's how you measure it.
22:28
Speaker 4: You don't chase gold because that is the big mistake.
22:31
Speaker 4: If you're chasing it because you think it's going to
22:32
Speaker 4: go perpetually higher, you're probably going to be disappointed and
22:35
Speaker 4: probably buying at the wrong point. But if you're managing
22:38
Speaker 4: it as part of an asset allocation in your overall portfolio,
22:41
Speaker 4: that is the sensible and smartest way to do it.
22:43
Speaker 3: Yeah.
22:44
Speaker 2: Can I ask you what the top gold holdings in
22:46
Speaker 2: your portfolio are with what of your favorite miners producers?
22:50
Speaker 4: Well, we move those around so we don't necessarily have
22:52
Speaker 4: a particular favorite name. What we do is we try
22:55
Speaker 4: and build that kind of basket of exposure. So because
22:58
Speaker 4: not every company can offer to us what we want,
23:01
Speaker 4: so some of them we own for cash flow productions,
23:04
Speaker 4: some of them we own for expiration potential, so they're
23:06
Speaker 4: going to discover more Others for growth in production, others
23:09
Speaker 4: for stability. You know, you've got to build your house
23:11
Speaker 4: on strong foundations and so on. So it's getting that
23:14
Speaker 4: mixture right. It's like baking a cake. If you're only
23:16
Speaker 4: interested in the flower, the cake's not going to taste
23:18
Speaker 4: very nice. But if you want to mix it with
23:20
Speaker 4: the right ingredients, then you're going to end up with
23:22
Speaker 4: a good outcome. So we think that kind of blended
23:24
Speaker 4: approach works well. It also softens the risk. So if
23:27
Speaker 4: you have all of your exposure in one particular name,
23:30
Speaker 4: then you can tend to be disappointed by that nicky.
23:32
Speaker 1: What about silver, silver, it's miss along the lines with platinum.
23:37
Speaker 1: I think, like I said, Goalput has put precious metals
23:40
Speaker 1: back on the map as a sort of general debasement trade,
23:44
Speaker 1: and I think silver and platinum, or obviously coming into
23:47
Speaker 1: that fors are kind of the second iteration of that
23:49
Speaker 1: general debasement trade. We had it a thirty two thirty
23:52
Speaker 1: five dollar range. It's now moved up. It's still relatively cheap.
23:56
Speaker 1: If you're talking about gold consistently hitting all time highs.
23:59
Speaker 1: The dual part, right, you've got industrial demand which is
24:02
Speaker 1: so super super strong, A lot of it is PV
24:05
Speaker 1: but again as electronics it plays a part in the
24:08
Speaker 1: transition economy, and then as well it's got that investment side.
24:11
Speaker 1: So to me, silver, if you think we are right
24:16
Speaker 1: now sort of at a macro inflection point where we're
24:18
Speaker 1: going to get sort of a series of trade deals,
24:20
Speaker 1: the FED is going to join the G ten rate
24:23
Speaker 1: cutting party. The US dollar has appreciated a ton, but
24:26
Speaker 1: it's still in his early endings of a sort of
24:29
Speaker 1: structural decline.
24:30
Speaker 3: Then your high beta.
24:32
Speaker 1: More industrial precious metals such as platinum and silver definitely
24:35
Speaker 1: have more upside than gold. So in terms of you know,
24:37
Speaker 1: it's just we're not really in that full on fear
24:41
Speaker 1: mode where where havens are being overbought, and I think
24:45
Speaker 1: I think there's there's a rotation out of sort of
24:48
Speaker 1: your pure havens into some of these alternatives.
24:50
Speaker 2: Ever's nodding away like either completely agrees or has something
24:54
Speaker 2: to appen.
24:54
Speaker 4: I think the I find silver fascinating. I started my
24:57
Speaker 4: job and take some photographs, take the camera film to
25:00
Speaker 4: the chemists and get it developed. And that was silver.
25:03
Speaker 4: Silver was foury odd percent of demand with photography. And
25:06
Speaker 4: when was the last time you took a film to
25:08
Speaker 4: the chemist to get it developed, so if you can
25:09
Speaker 4: find one that would do it. So you know, silver
25:12
Speaker 4: has that amazing ability to kind of reinvent itself with
25:14
Speaker 4: regards to demand, and today it's attached to that really
25:17
Speaker 4: really fast growing part of the market, which is solar cells,
25:20
Speaker 4: and it's the biggest part of consumption. So as that
25:23
Speaker 4: grows and the world uses more, it's great great for silver.
25:26
Speaker 4: Silver also has this other characteristic where there aren't very
25:29
Speaker 4: many pure silver mines, so it tends to be a
25:32
Speaker 4: byproduct of production of other commodities. So you have a
25:36
Speaker 4: copper mine that might produce some gold and silver at
25:38
Speaker 4: the same time, and so the kind of cost of
25:40
Speaker 4: production element doesn't apply as kind of neatly in relation
25:44
Speaker 4: to other commodities, or price falls below the cost of
25:46
Speaker 4: production production shuts. Same with copper and other things. Silver
25:50
Speaker 4: doesn't necessarily have that same extent because of that byproduct nature,
25:53
Speaker 4: and so the kind of supply side support on price
25:56
Speaker 4: from a kind of cost curve isn't really there to
25:59
Speaker 4: the same degree. So we actually are very positive on silver.
26:03
Speaker 4: We think the silver equities have been left behind and
26:05
Speaker 4: we think there is room for a more material move
26:09
Speaker 4: in the price of silver. We're actually surprised that it
26:11
Speaker 4: hasn't broken out. It's had a couple of attempts recently
26:14
Speaker 4: in that kind of mid thirties range, as NICKI mentioned,
26:17
Speaker 4: but we haven't seen that kind of big bump move yet,
26:21
Speaker 4: so we're kind of anticipating that. So in our Golden
26:23
Speaker 4: General Fund, we've actually got an active weight to silver today.
26:27
Speaker 4: That's pretty big because of that positive view.
26:30
Speaker 2: God, I'm glad you that I've been holding that Golden
26:31
Speaker 2: General Fund for decades.
26:33
Speaker 4: It's at an all time high now, mare, and so
26:35
Speaker 4: you should be pretty happy with the.
26:37
Speaker 3: I know, yeah, there were there was some not so happy.
26:41
Speaker 4: I totally agree that we've been through a bit of
26:44
Speaker 4: a roller coaster across all the commodity space, and the
26:46
Speaker 4: Golden General Fund has been one of those. But I'm
26:49
Speaker 4: very pleased to see twenty two quid or whatever the
26:51
Speaker 4: unit price is today.
26:53
Speaker 3: Yeah, me too, Me too, Nikka.
26:54
Speaker 2: Outside precious metals, are there any any metals.
26:57
Speaker 3: That you're particularly interested in?
26:58
Speaker 2: I mean, obviously the big one there as copper, and
27:00
Speaker 2: I'll come back to you every on this a big
27:02
Speaker 2: part of your portfolio.
27:03
Speaker 1: But is that interesting to you, NIGGI, Yes, I mean
27:05
Speaker 1: it's it's definitely interesting sort of fits. That's that similar
27:08
Speaker 1: framework with platinum and with silver in terms of if
27:11
Speaker 1: you're looking for a reflation trade. Again, these are metals
27:14
Speaker 1: that are generally constrained. You have a strategic stockpiling globally
27:20
Speaker 1: occurring in critical metals and so yes, I think do
27:23
Speaker 1: you like corperate, constructive and positive to it, but yeah,
27:27
Speaker 1: probably add that in industrial metals, we like some of
27:30
Speaker 1: the opgms with thurniums is really a big part. Again,
27:34
Speaker 1: there's no listed commodity that's very niche. It's basically I
27:37
Speaker 1: call it the in video of the PGM sector, but
27:41
Speaker 1: it's a big part of sort of data centers and
27:43
Speaker 1: again the South African mining complex. I mean, they can't
27:46
Speaker 1: mind these metals in isolation. It's mined as a basket
27:50
Speaker 1: similar to what we're if it was referring to in
27:52
Speaker 1: in silver as in their byproducts.
27:54
Speaker 3: So yeah, generally constructive. Yeah, it's interesting.
27:58
Speaker 2: I mean going back to going back to that, I mean,
28:00
Speaker 2: we read so much about the rare earth metals, which
28:02
Speaker 2: as we all now know, on't exactly rare but only
28:04
Speaker 2: minded particular places. How does it reacha out of us
28:07
Speaker 2: to get exposure to the.
28:10
Speaker 3: Rare earth metal story.
28:11
Speaker 4: There are a handful of listed companies around the world
28:13
Speaker 4: that you can get exposure to. The quality of the
28:16
Speaker 4: assets is very variable. The challenge with the rerror space is,
28:19
Speaker 4: you know, there are lots of different elements to the
28:21
Speaker 4: supply chain, so it's not necessarily the mine. It's downstream
28:24
Speaker 4: from that. It's the processing and conversion of that of
28:28
Speaker 4: those products into usable items, and it's that element that
28:32
Speaker 4: China controls. So China controls that intermediary step between the
28:36
Speaker 4: raw production and then conversion into something that's usable, and
28:39
Speaker 4: then the sale of those into other formats, whether it
28:42
Speaker 4: goes into magnets or other applications. And that's the kind
28:46
Speaker 4: of huge strategic win that China's had over the years.
28:49
Speaker 4: They've realized that if they can dominate the control of
28:52
Speaker 4: the supply of that, they don't need to own the
28:54
Speaker 4: minds as such. They just need to own that intermediary
28:56
Speaker 4: step and that gives them that long term power base.
29:00
Speaker 4: So you've got to think about where is the margin made.
29:02
Speaker 4: Is the margin made in digging the stuff out of
29:04
Speaker 4: the ground, or is the margin made in converting into
29:06
Speaker 4: something that's usable, And that's where you need to think
29:09
Speaker 4: about your exposure. So we do have exposure to rare
29:12
Speaker 4: US across our portfolios. Some of them are in the
29:17
Speaker 4: mining companies. We have two pure play exposures, both listed
29:20
Speaker 4: in Australia, where the one is exclusively a rare US
29:24
Speaker 4: producer and the other one is building out a rare
29:27
Speaker 4: US facility both downstream processing and the mining of the product,
29:33
Speaker 4: and that will come into production in the next kind
29:34
Speaker 4: of year and a half. So those two companies are
29:37
Speaker 4: kind of ways of playing it. We haven't gone into
29:39
Speaker 4: the kind of more exotic ways of doing it because
29:43
Speaker 4: it's just a bit of a challenge that some of
29:45
Speaker 4: those companies, but that's how we're doing it.
29:47
Speaker 2: But you should see an awful lot more of the
29:50
Speaker 2: mining and the processing of all these commodities coming back
29:54
Speaker 2: into Western countries, right and that would make sense if
29:56
Speaker 2: everyone is concerned about energy security. In particular, we're going
30:00
Speaker 2: have to mine and process on our own land, which
30:03
Speaker 2: is a grubby thing to do, and we don't like
30:04
Speaker 2: doing these things because they're all dirty, and we prefer
30:06
Speaker 2: to outsource all the dirty work to China in particular,
30:09
Speaker 2: but we're going to have to bring it back on Shore.
30:11
Speaker 4: Yeah, there's definitely that, and I agree with what you've said.
30:13
Speaker 4: The challenge is the price. You know, at the moment,
30:16
Speaker 4: the prices of these things are not high enough to
30:18
Speaker 4: justify the investment to build that onshoring of capacity. I mean,
30:22
Speaker 4: nowhere near high enough. If you look at the share
30:24
Speaker 4: prices of some of the rare producers, they have not
30:27
Speaker 4: been good performers at all. In fact, they've been completely
30:30
Speaker 4: the opposite, and that's because China doesn't want that supply built.
30:34
Speaker 4: They like the fact that they control the industry, and
30:36
Speaker 4: so the last thing they want is to lose that
30:38
Speaker 4: kind of ad plus percent market share position. So it
30:41
Speaker 4: will require some incredibly low cost capital or huge grants
30:45
Speaker 4: and subsidies or whatever from Western world countries to be
30:47
Speaker 4: able to build that, plus you know, some changes around
30:51
Speaker 4: the regulation I suppose in terms of the processing capacity,
30:54
Speaker 4: because it isn't the cleanest of industries, it will take
30:58
Speaker 4: some change and that change will take a lot of time.
31:01
Speaker 4: So I think the supply side response is relatively inelastic
31:04
Speaker 4: in the near term.
31:05
Speaker 3: Yeah, although I suppose it is possible.
31:07
Speaker 2: And we've talked a lot on the part of the
31:08
Speaker 2: last couple of months about the mooted rise in defense
31:11
Speaker 2: spending and if you're going to be spending five percent
31:13
Speaker 2: of your GDP on defense, body you're actually talking about
31:16
Speaker 2: And the answer, of course, is that you're not really
31:17
Speaker 2: going to spend five percent of your GDP on tanks.
31:19
Speaker 2: You're going to spend it on exactly that, providing locust
31:22
Speaker 2: capital or very large grants to securing your supply of
31:26
Speaker 2: the metals and minerals that you need for energy security
31:29
Speaker 2: as well as physical security.
31:31
Speaker 4: Yeah, that's definitely going to form a large part of that.
31:34
Speaker 4: As you say, you're not going to be necessarily building
31:35
Speaker 4: the tanks, you're going to be building the drones. And
31:38
Speaker 4: you know the drones will not use that much steel,
31:40
Speaker 4: but they will use a hell of a lot of
31:42
Speaker 4: magnets and chips and so on, and then you've obviously
31:45
Speaker 4: got the explosives and everything else that goes with it.
31:47
Speaker 4: So the shape of spend is going to be different
31:49
Speaker 4: to the past in defense.
31:51
Speaker 2: Do you hold any renewables equities or is that outside you're.
31:54
Speaker 4: In there that we've got a large renewables listed equity
31:59
Speaker 4: business on the team, and that's actually going through a
32:02
Speaker 4: bit of a renaissance right now. I think everything that
32:05
Speaker 4: was talked about in the context of sustainability, you know,
32:07
Speaker 4: has been through a bit of a downturn over the
32:10
Speaker 4: last few years, and you know, it's kind of reached
32:13
Speaker 4: that kind of low point where things are starting to change. Obviously,
32:16
Speaker 4: the shift and the backwards and forwards in the US
32:19
Speaker 4: with regards to regulation there looks as though it's reaching
32:21
Speaker 4: a point where it's going to be less bad and
32:24
Speaker 4: the equities are starting to kind of reflect that. So
32:26
Speaker 4: our exposure there is really starting to improve. And I
32:30
Speaker 4: think when you look at the valuation of those businesses,
32:33
Speaker 4: they've been so heavily penalized now for the last three
32:35
Speaker 4: or four years, it's kind of hard to see them
32:37
Speaker 4: go any lower. So I think that's actually a very
32:39
Speaker 4: good opportunity in that space.
32:41
Speaker 3: Hard to Stephen goingilwer is not the same as being
32:43
Speaker 3: able Stephen going out.
32:44
Speaker 4: No, No, I think I think they've gone so low
32:47
Speaker 4: that the next move is up. And I think it
32:49
Speaker 4: goes back to that question we were talking about earlier
32:51
Speaker 4: on all the other topic around the energy transition. The
32:54
Speaker 4: only way to fill the energy needs in the near term,
32:57
Speaker 4: you know, in terms of extra molecules, is by adding
33:00
Speaker 4: renewable capacity, and so the growth that's going to come
33:04
Speaker 4: through from the deployment of money into building out the
33:07
Speaker 4: renewables is going to be the solution. I mean, try
33:09
Speaker 4: and get a gas turbine and how long you know
33:12
Speaker 4: it takes to get hold of that. It's super super hard.
33:14
Speaker 4: Reactivating the nuclear which we are very optimistic on, you know,
33:18
Speaker 4: for the outlook for the uranium is definitely coming, but boy,
33:21
Speaker 4: it's going to take a long time. And so unless
33:23
Speaker 4: you're going to build a whole bunch.
33:24
Speaker 3: Of it, does it have to take a long time.
33:25
Speaker 2: I mean, we have talked about this quite a lot
33:27
Speaker 2: on the pot about that about uranium, and I've loved
33:30
Speaker 2: for Nicky's opinion on uranium.
33:31
Speaker 3: In a minute.
33:32
Speaker 2: And with that, you know, we talk about the energy
33:35
Speaker 2: mix endlessly.
33:36
Speaker 3: We must have this mix of different sources, et cetera.
33:39
Speaker 3: But do we really really need.
33:41
Speaker 2: An energy mix if we actually went full on with nuclear,
33:44
Speaker 2: if we really focused on SMRs, if we put out
33:46
Speaker 2: new nuclear blands at the same speeders as South Koreans,
33:49
Speaker 2: for example, which is very significantly cheaper than the way
33:53
Speaker 2: we do it in the UK, and you can get
33:55
Speaker 2: them up in five years. If we did that, we
33:58
Speaker 2: could solve all our problems in it relatively short amount
34:01
Speaker 2: of times. It's not that it's not possible, it's just
34:03
Speaker 2: that we won't do it.
34:04
Speaker 4: I agree with you, and you mentioned the UK, and
34:07
Speaker 4: obviously the disaster of Hinkley Point in terms of its
34:09
Speaker 4: costs brings us immediately to mind. But you also said
34:12
Speaker 4: five years. You know you can build a hell of
34:13
Speaker 4: a lot of data centers in five years, you know,
34:16
Speaker 4: much quicker than you can build the nuclear Even at
34:18
Speaker 4: the SMRs.
34:18
Speaker 2: It takes you five years to put up a great
34:20
Speaker 2: wind farm, takes you five years to get planning permission
34:23
Speaker 2: for a solar farm. Values is nothing in the world
34:25
Speaker 2: of the UK's planning permission. If you decided to solve
34:29
Speaker 2: your problem, you could solve your problem very fast. Like
34:32
Speaker 2: everything in the UK, the problems are easily solvable by
34:36
Speaker 2: policy changes. I'm so, I'm way off into politics now.
34:39
Speaker 2: All of our problems are solvable with fast, sensible, data
34:44
Speaker 2: driven policy change, which is not matter anyway, but they'll
34:47
Speaker 2: be that isn't me.
34:48
Speaker 3: You must have exposure to uranium in their portfolio.
34:51
Speaker 4: We do have exposures to uranium in the portfolio, and
34:53
Speaker 4: the uranium side is really interesting. You know, if you
34:55
Speaker 4: talk about a commodity that's had zero investment in for
34:58
Speaker 4: an incredibly long time, some of the world's biggest minds
35:01
Speaker 4: were kind of put on care and maintenance because the
35:04
Speaker 4: demand was just so bad, and they're now being reactivated
35:07
Speaker 4: because the demand is coming through. The restocking cycle is very,
35:10
Speaker 4: very long dated. And what's interesting is, I think it
35:13
Speaker 4: was two years ago now that we attended a conference
35:16
Speaker 4: here in the UK for the uranium companies and it
35:19
Speaker 4: was the kind of a little bit like the kind
35:20
Speaker 4: of mating season where the uranium companies meet the utilities
35:23
Speaker 4: and they work out what their needs are and so on.
35:26
Speaker 4: What was fascinating is meeting with the uranium producers who
35:29
Speaker 4: were now having requests for supply coming from technology companies.
35:35
Speaker 4: Because the technology companies had worked out that one of
35:37
Speaker 4: the challenges was power and if they needed to solve
35:40
Speaker 4: the power, they needed to solve it with long dated,
35:42
Speaker 4: low carbon, reliable base load power and nuclear as the solution.
35:47
Speaker 4: So they were actually pitching direct to the uranium producers
35:50
Speaker 4: for access to units of supply to be able to
35:52
Speaker 4: meet their future needs. And then two weeks later we
35:55
Speaker 4: saw the announcements about the reactivation of capacity in the US,
35:59
Speaker 4: and so this is absolutely moving forward and it wouldn't
36:02
Speaker 4: surprise me that we see more growth coming out there,
36:04
Speaker 4: but again it's going to take time.
36:06
Speaker 3: So we should all hold chemic coal.
36:08
Speaker 4: We do have that in the portfolio. Absolutely.
36:11
Speaker 2: We let me ask you about the future. So we're
36:14
Speaker 2: going to have a lot of mining companies out there.
36:16
Speaker 2: We talked about gold companies in particular. There's going to
36:18
Speaker 2: be a lot of cash piling into them. So we're
36:21
Speaker 2: going to see a lot of companies in this sector,
36:24
Speaker 2: massive bounce of cash on their balance sheet.
36:25
Speaker 3: What do you think they're going to do with it?
36:27
Speaker 4: What I think is going to happen is different to
36:28
Speaker 4: what I would like to happen. And I think what
36:31
Speaker 4: I would like to happen is that the company's are disciplined,
36:33
Speaker 4: they give returns to their shareholders who've invested in their businesses,
36:38
Speaker 4: and they manage those cash flows sensibly and an investment
36:41
Speaker 4: in the right way. That's what I hope will happen.
36:44
Speaker 4: What I think will happen is that the companies will
36:46
Speaker 4: repeat what they've done in the past. Not every company,
36:49
Speaker 4: but I think we are seeing today a rise in
36:53
Speaker 4: capital expenditure across the industry with questionable returns, and I
36:58
Speaker 4: am worried that this is a trend that might come
37:01
Speaker 4: back to levels that we saw in previous cycles. Why
37:05
Speaker 4: I'm worried about that is because a lot of money
37:07
Speaker 4: was destroyed when the companies were generating great margins because
37:11
Speaker 4: of poor thinking and capital allocation. And I really hope
37:15
Speaker 4: we don't see a repeat of that. It's a message
37:17
Speaker 4: we're trying to get through to the companies as frequently
37:19
Speaker 4: as possible. Absolutely, there are companies out there that will
37:22
Speaker 4: not do that, and they will be disciplined and they
37:24
Speaker 4: will be great businesses. And we're really happy shareholders in
37:27
Speaker 4: those companies. And if the companies can be disciplined and
37:31
Speaker 4: return the money, then the shareholders will do very very well.
37:34
Speaker 4: The host nations will do very well, the employees will
37:37
Speaker 4: do well, good taxes will be paid, and the shares
37:40
Speaker 4: should re rate. The risk is that they don't and
37:43
Speaker 4: the opposite happens and.
37:44
Speaker 3: We don't get those dividends we've been looking forward to.
37:46
Speaker 4: Yeah, and the gold companies a great I mean, my
37:48
Speaker 4: old boss was a wonderful man called Julian Bearing, and
37:51
Speaker 4: he was absolutely table thumpingly strong on this topic. He
37:56
Speaker 4: was the the great creator of this, of investing in
37:59
Speaker 4: this in the gold space, and he would always hold
38:03
Speaker 4: companies to ransom with regards to dividends, and because they
38:06
Speaker 4: are a fair way of sharing the spoils that the
38:09
Speaker 4: companies make. And they're a great discipline too. If you
38:12
Speaker 4: don't do a dividend because you badly invested the money
38:16
Speaker 4: you're making, then you owe your shareholders and apology. And
38:19
Speaker 4: so a discipline around dividends is like handcuffs on management.
38:23
Speaker 4: If you know the dividend is sacrosanct, then you've got
38:25
Speaker 4: to pay it. Then that reduces the amount of free
38:27
Speaker 4: money that you have to reinvest, which means you can
38:30
Speaker 4: therefore only make smaller mistakes if you're going to make mistakes.
38:33
Speaker 4: And so dividends are absolutely essential component of returns. And
38:37
Speaker 4: if you look at the industry as a whole through time,
38:40
Speaker 4: the mining industry greater than fifty percent of the returns
38:43
Speaker 4: that the industry generates a dividends. And if you're not
38:45
Speaker 4: paying the right amount, then you're really going to going
38:48
Speaker 4: to let yourself down.
38:48
Speaker 2: Okay, we'll keep an eye on that. Let me just
38:51
Speaker 2: ask you one last question both of you. Nikki, do
38:53
Speaker 2: you see bitcoin as a competitor to precious metals?
38:57
Speaker 1: We look it into you look at liquidity in the
38:58
Speaker 1: system like global but it is consistently reaching all time high.
39:02
Speaker 1: There is there is a space. This is a space
39:04
Speaker 1: where both can survive. They basically complement each other, Bitcoin
39:08
Speaker 1: and goal. They should be the same hip in terms
39:11
Speaker 1: of what they kind of stand for anti fear to
39:13
Speaker 1: sort of a verte against the system. But one is
39:17
Speaker 1: extremely volatile, the other one is a bit of a
39:19
Speaker 1: more safe haven. So I think in a portfolio there's
39:22
Speaker 1: enough space for both of them, depending on yours profile,
39:24
Speaker 1: depending on what you're looking at.
39:27
Speaker 3: So I don't.
39:27
Speaker 1: I don't really see it as a competitor in a
39:29
Speaker 1: world where there's a consistent search for US dollar hedges
39:33
Speaker 1: and it's just there's there's a of reliable US dollar
39:38
Speaker 1: hedges out there.
39:39
Speaker 3: Yeah, okay, thank you. And I think would you put
39:41
Speaker 3: it in I mean, you know, is it a commodity?
39:43
Speaker 3: I mean you mind it right?
39:44
Speaker 4: Yeah, I wouldn't. I would say a minor would argue
39:47
Speaker 4: with that. I think it's a word rather than an action.
39:49
Speaker 4: Crypto as a whole is sold on the same basis
39:52
Speaker 4: as gold and bitcoin in particular, and as a result
39:57
Speaker 4: of that, there are characteristics that you could see in
40:00
Speaker 4: a similar light. I think gold is the original. Gold
40:03
Speaker 4: will be around for thousands of years, as it has
40:06
Speaker 4: already been around for thousands of years. I think it's
40:09
Speaker 4: re earning its place in people's portfolios with the moves
40:12
Speaker 4: that it's had. I look forward to the day where
40:15
Speaker 4: you are able to pull out your debit card and
40:19
Speaker 4: spend gold. I think that's a really, really exciting time.
40:23
Speaker 4: I know there are some companies that are doing that already,
40:26
Speaker 4: but it isn't mainstream in the same way that you
40:28
Speaker 4: pull out your your card and you can swipe on
40:31
Speaker 4: your phone to spend euros or dollars or pounds or whatever.
40:34
Speaker 4: Why can't you swipe to spend gold.
40:35
Speaker 2: I have the answer for you that I have the
40:37
Speaker 2: answer for you to that question, and the answer is
40:39
Speaker 2: capital gains liability.
40:41
Speaker 4: Hell not, but not if your gold exposure is held
40:45
Speaker 4: via coins, because there's no CGT on gold coins.
40:48
Speaker 2: Fair enough, fair enough, Seeing've got coins backing up your card.
40:51
Speaker 3: This is too complicated. We're going to leave it here.
40:53
Speaker 3: We're going to leave it.
40:54
Speaker 2: Yeah, Evy, Nikki, thank you so much for joining us today.
40:58
Speaker 3: Hugely appreciate it. Thanks for listening to this week's Marin
41:12
Speaker 3: Talks Money.
41:12
Speaker 2: If you like us show, rate, review, and subscribe wherever
41:15
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Speaker 2: commiments to Merin Money at Bloomberg dot net. You can
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Speaker 2: at Marinus w and John is John Underscore Steppe. This
41:27
Speaker 2: episode was hosted by me Maren Sumset Web. It was
41:29
Speaker 2: produced by Someasadi, Moses Ander and Tala Amarari. Sound designed
41:34
Speaker 2: by Blake Maples, Bestial Thacts, Sineky Shields and to Ev
41:37
Speaker 2: Hambroke