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Gold...are you ready for a rebound? · The Money Puzzle

0:09
Speaker 1: Hello and welcome to the Australians Money Puzzle Podcast. I'm
0:12
Speaker 1: James Kirby. Welcome aboard. You know, just about every listener
0:16
Speaker 1: to this show either has gold or has considered gold.
0:21
Speaker 1: And maybe you missed the last rally when it went ballistic,
0:24
Speaker 1: basically in late 2025 and earlier this year. In the
0:29
Speaker 1: mid year, it has been drifting throughout the year and
0:33
Speaker 1: actually had been dropping for some time. Then in August,
0:36
Speaker 1: And we saw a bounce. Is this a rebound? Or
0:39
Speaker 1: better still, you know, maybe this is a moment you
0:41
Speaker 1: could gainfully top up or get involved for the first time.
0:45
Speaker 1: It's up to you. My guest today is Cameron Judd.
0:48
Speaker 1: He is the fund manager at the Victor Smorgan Partners
0:53
Speaker 1: Resources Gold Fund. It's a six-year-old fund. It produced a
0:57
Speaker 1: mighty 18% PA return since it commenced in 2020. Though
1:02
Speaker 1: obviously this year... Not looking as good as that. Obviously, mid-year,
1:06
Speaker 1: there was that soft patch. But we're going to talk
1:09
Speaker 1: about gold and we're going to talk about gold mining stocks, both.
1:13
Speaker 1: How are you, Cameron?
1:14
Speaker 2: I'm very well, thank you, James, and nice to be here.
1:16
Speaker 1: Nice to have you on the show. I've talked to
1:18
Speaker 1: both gold mining specialists, bullion specialists, depending. And I like
1:24
Speaker 1: the fact that you do both, though actually the amount
1:26
Speaker 1: of pure gold you have in the fund is really
1:28
Speaker 1: quite small. It's mostly mining stocks, right?
1:30
Speaker 2: Correct. That's right. That's where we think we can get
1:32
Speaker 2: the leverage on the gold price, which we are positive on. Yes.
1:36
Speaker 1: Yeah, well, I would expect you to be. Though I'm
1:37
Speaker 1: sure there's times where you can't be. But OK, so
1:40
Speaker 1: let's just start on gold, because I think most listeners
1:44
Speaker 1: would know, you know, there was this amazing period and
1:47
Speaker 1: it did one of its extraordinary rallies. But very broadly,
1:50
Speaker 1: of course, per annum every year, it's quite a good return.
1:55
Speaker 1: Gold itself, in whatever form you have it, over a
1:58
Speaker 1: long period of time. Very roughly, what's the number? Is
2:01
Speaker 1: it 8% or 9% PA?
2:03
Speaker 2: About 9%. It has done for many years. That's right.
2:07
Speaker 2: Since 1980, I think it is. I think the last
2:09
Speaker 2: numbers I saw, it's about 9% per annum on average.
2:12
Speaker 1: And so the everyday listener would say, well, you know,
2:14
Speaker 1: that would sound so attractive. And also, obviously, it doesn't
2:18
Speaker 1: pay an income. So this is something that weighs against it.
2:21
Speaker 1: It's pure price, but I think a lot of our
2:24
Speaker 1: listeners would understand that. And I always hark back not
2:27
Speaker 1: so much to gold bulls or gold bears, but some extraordinary,
2:32
Speaker 1: very powerful wealth managers who have said that you should
2:36
Speaker 1: have five, 10 more percent of your diversified portfolio in gold.
2:41
Speaker 1: To the extraordinary, Mike Wilson, the most powerful in the world,
2:44
Speaker 1: Morgan Stanley's wealth manager, who said you could have up
2:47
Speaker 1: to 20, which was quite amazing. He said that before
2:50
Speaker 1: the rally, which was a very good time to say it.
2:52
Speaker 1: So let's just talk about gold. I mean, tell us,
2:55
Speaker 1: for the casual observer, this year it hit a soft patch, right,
2:59
Speaker 1: through the year. But in August, we saw a bounce.
3:03
Speaker 1: What happened there? And has that bounce in the gold
3:07
Speaker 1: price kept going?
3:09
Speaker 2: Yeah, it's a good question, James. We would suggest that
3:12
Speaker 2: the movements in gold this year have been cyclical. We
3:16
Speaker 2: maintain that our gold thesis, which we established, I think,
3:20
Speaker 2: back in 2017 as a group, still is the underlying driver.
3:24
Speaker 2: So the structural reasons for gold, we're still very positive on.
3:28
Speaker 2: And that is unsustainable debt levels, low economic growth, sticky inflation,
3:34
Speaker 2: and more recently, in the last couple of years, overlaying
3:37
Speaker 2: all that as geopolitical risk. And I think those reasons,
3:41
Speaker 2: I suppose, explain, I think, most of the gold price
3:44
Speaker 2: movements we see, or help explain it, at least. And
3:47
Speaker 2: so when I think about the movements this year, in 2026,
3:52
Speaker 2: I mean, we had an extraordinary 2025. We had Fed
3:57
Speaker 2: cutting rates. We had central bank continuing to buy. Really,
4:01
Speaker 2: that was because trying to diversify away, central banks trying
4:04
Speaker 2: to diversify away from US dollar and also diversify their
4:08
Speaker 2: reserve base. And that went parabolic, as we saw in
4:12
Speaker 2: sort of January. We then, of course, had the war
4:15
Speaker 2: with Iran. And then that caused a spike in inflation
4:18
Speaker 2: through the oil price. And I think that's, you know.
4:22
Speaker 2: A lot of it can be explained by real yields.
4:25
Speaker 2: And of course, with inflation spiking and nominal rates increasing,
4:30
Speaker 2: I think we saw there was a headwind for the
4:32
Speaker 2: gold price, particularly with the new Fed chair, indicating that
4:36
Speaker 2: it had been quite hawkish.
4:38
Speaker 1: So if you were explaining to someone, someone didn't know
4:41
Speaker 1: anything at all about gold, and you were pitching your
4:45
Speaker 1: case to them, And you would say, OK, you've made
4:48
Speaker 1: the obvious explanations there that global uncertainty, central bank buying,
4:54
Speaker 1: the debasement trade, as they call it, basically at the
4:58
Speaker 1: epicenter of this perhaps is worries about the U.S. financial policy,
5:03
Speaker 1: the stability of the U.S. financial system, which is the
5:06
Speaker 1: heart of the global system, and then particularly inflation. One
5:12
Speaker 1: of the factors you mentioned there was rising rates. Now,
5:16
Speaker 1: rising rates isn't good for gold, right? So one of
5:18
Speaker 1: the things you mentioned, too, was that was good for
5:20
Speaker 1: gold at 25 was that rates were dropping. Now, that's turned.
5:25
Speaker 1: And certainly global rates, they are not going down, it
5:29
Speaker 1: would seem. So is that A factor that has cooled
5:33
Speaker 1: it again in recent weeks after the little bounce in August.
5:37
Speaker 1: You could actually tell us a little bit more about
5:38
Speaker 1: that bounce. What was the bounce and how important was it?
5:40
Speaker 2: I think it was very important. And again, I emphasize
5:43
Speaker 2: the point that we think gold structurally is very positive
5:46
Speaker 2: going forward. So I think what we're seeing at the
5:49
Speaker 2: moment is a, well, we saw the treasury collapse. indicating
5:52
Speaker 2: that they wanted to get yields lower. I mean, they
5:55
Speaker 2: intervened in the yen, the Japanese yen, and more recently,
6:00
Speaker 2: they've indicated they're going to be doubling or increasing their buyback,
6:03
Speaker 2: particularly the long end of the yield curve, and that
6:05
Speaker 2: is to reduce yields. You've then got the Fed indicating
6:09
Speaker 2: that they're quite hawkish as well. So you've got basically
6:13
Speaker 2: competing forces, if you like.
6:14
Speaker 1: Big bond fight, basically. Exactly. The bond market and what
6:17
Speaker 1: the Fed wants, yeah.
6:19
Speaker 2: Exactly. And neither of them want to break the economy.
6:22
Speaker 2: But I think it's going to be interesting to see
6:24
Speaker 2: who effectively wins out from there. In our view, at least,
6:27
Speaker 2: we think that interest rates can't go much higher. The
6:31
Speaker 2: Treasury has indicated that. Real rates appear to have peaked,
6:35
Speaker 2: in our view. And I think it's the direction of
6:38
Speaker 2: real rates is the real driver of the gold price.
6:41
Speaker 1: Right. That's what really matters.
6:43
Speaker 2: Yeah. Yeah. And I think we have peaked in terms
6:45
Speaker 2: of real rates, because as we've seen, we've got to
6:48
Speaker 2: a real pinch point. The Treasury now As I said,
6:51
Speaker 2: they're intervening to keep along the end of the yield
6:53
Speaker 2: curve down. So I think that is a real indication.
6:56
Speaker 2: And the reason why we saw the recent bump, why
6:58
Speaker 2: we're seeing a little bit of softness now is because
7:00
Speaker 2: of what the Fed's commented at Jackson Hole last week
7:04
Speaker 2: in terms of rates potentially going up, I suppose, and
7:07
Speaker 2: maintaining that hawkish sort of stance. But it's a real
7:10
Speaker 2: conflicting forces there.
7:12
Speaker 1: Do you believe that gold is a non-correlated asset? Do
7:16
Speaker 1: you believe that gold.
7:18
Speaker 2: Yeah.
7:19
Speaker 1: Generally sinks as markets are stronger and generally rises as markets, basically,
7:26
Speaker 1: if the markets drop, gold goes up. That's its defensive power.
7:28
Speaker 1: Do you think that's still there? Or do you think
7:30
Speaker 1: it's really more a wealth preservation tool now?
7:34
Speaker 2: No, we definitely think it is an uncorrelated asset. I mean,
7:36
Speaker 2: the numbers that we look at definitely suggest that. And
7:39
Speaker 2: so we do think that it is a store of value.
7:43
Speaker 2: And it's also a level of trust. And that trust,
7:45
Speaker 2: I suppose, in the financial economy I think, is lost.
7:48
Speaker 2: That's why we're seeing central banks continuing to diversify away
7:52
Speaker 2: from the US dollar, is that level of trust. If
7:55
Speaker 2: I'm a central bank, unlike sovereign currencies, gold carries no
8:01
Speaker 2: political allegiance or bias. I suppose unlike government bonds, there's
8:05
Speaker 2: no counterparty risk to gold. Unlike bank deposits, gold can't
8:09
Speaker 2: be frozen or sanctioned if held domestically. From that perspective,
8:13
Speaker 2: it's a very attractive asset, particularly as levels of trust
8:18
Speaker 2: globally are declining.
8:19
Speaker 1: But if it is non-correlated, why did it have a
8:22
Speaker 1: fabulous year in 2025 when the markets also had a
8:25
Speaker 1: fabulous year? It's not a problem if you own it,
8:29
Speaker 1: but it's a problem for the theory that it's a
8:32
Speaker 1: non-correlated asset.
8:34
Speaker 2: I think, again, my view is that apart from the
8:39
Speaker 2: AI space, there is a lot of instability in the
8:41
Speaker 2: global economy. And I think the smarter investors are seeing that.
8:46
Speaker 2: And if you like, investing in gold, but then also
8:51
Speaker 2: that AI is driving the economy. So it's effectively, it's
8:53
Speaker 2: almost a hedge both ways. Right. Yes.
8:57
Speaker 1: Okay. Interesting. And that, folks, I think is hopefully useful
9:00
Speaker 1: to you as a sort of a preamble, basically, to
9:02
Speaker 1: what we're going to talk about now. What we're going
9:03
Speaker 1: to get into with Cameron is how people are getting
9:07
Speaker 1: into gold. And obviously, there's bullion. To some extent, there's
9:11
Speaker 1: jewelry in that. But for serious investors, basically, there's two
9:13
Speaker 1: ways in, bullion and shares. Shares might be in the
9:16
Speaker 1: form of a fund or Like Hazel, they may be direct.
9:19
Speaker 1: We're going to talk about that in a moment. Back
9:20
Speaker 1: in a second. Hello, welcome back to the Australian's Money
9:35
Speaker 1: Puzzle podcast. I'm James Kirby. I'm talking to Cameron Judd
9:38
Speaker 1: of the Smorgan Gold Resources Fund. So we were talking
9:43
Speaker 1: about how you had, I think it's only about 5%
9:45
Speaker 1: of your $ 200 million In pure gold, right? And the
9:49
Speaker 1: rest then is miners all around the world. That's how
9:51
Speaker 1: it goes.
9:52
Speaker 2: Pretty much. I mean, we do have a brisk jurisdictional
9:55
Speaker 2: risk aversion. So we prefer to maintain exposure to Australia.
10:00
Speaker 2: and probably tier one.
10:01
Speaker 1: Yeah, I noticed that. You're literally half, 50% Australia, huh?
10:04
Speaker 2: Yeah, that's right. So Australia and also North America as well.
10:08
Speaker 2: So we're not going to go to places like Africa.
10:11
Speaker 2: We understand it's very prospective, but just from a risk aversion,
10:16
Speaker 2: we're not going to go there and participate in Africa. Exactly.
10:21
Speaker 1: So if we talked about gold and people can make
10:23
Speaker 1: their own mind up if they wanted to buy gold, right?
10:25
Speaker 1: Gold bullion. And we've talked about the basics there. And
10:29
Speaker 1: there are other ways in, but primarily it's gold or
10:31
Speaker 1: maybe an ETF over gold bullion to straight gold, physical gold.
10:34
Speaker 1: You mentioned at the very start, the reason you do
10:37
Speaker 1: what you do in gold mining stocks is leverage. Now explain,
10:42
Speaker 1: if you would, to the general listener, the big difference between...
10:48
Speaker 1: buying gold and buying gold miners.
10:52
Speaker 2: Yeah, I mean, like I said, the gold miners are
10:55
Speaker 2: a leveraged play on the gold price. So obviously the
11:00
Speaker 2: gold price drives revenue and you've then got a largely
11:03
Speaker 2: fixed cost base. So any increase in the gold price,
11:08
Speaker 2: you'll see it leveraged about two to three times historically
11:12
Speaker 2: through the gold equities. So hence we prefer to play
11:15
Speaker 2: in the gold equities just due to that leverage really.
11:17
Speaker 1: Right. And they run ahead of, do they, or do
11:21
Speaker 1: they lag?
11:22
Speaker 2: They have periods where they lag. But in general, and
11:26
Speaker 2: we've seen it in previous bull markets, the gold equities,
11:29
Speaker 2: you'll see that two to three times outperformance from the
11:32
Speaker 2: gold equities compared to the gold price.
11:34
Speaker 1: But do they run up ahead of the gold price
11:37
Speaker 1: or behind it?
11:38
Speaker 2: I would say behind it.
11:39
Speaker 1: Behind it, after it. Okay. So once everyone knows that
11:42
Speaker 1: gold has gone up by 20% or whatever, then they say, oh, well,
11:45
Speaker 1: that gold miner over there, its costs are X. And
11:49
Speaker 1: its revenue is suddenly X plus 20%. There's your leverage.
11:52
Speaker 1: And so to some extent, I put it to you
11:54
Speaker 1: that your single biggest challenge in your job and your
11:59
Speaker 1: biggest risk for all the investors that are with you,
12:01
Speaker 1: and we'll assume the gold, let's just assume the gold
12:04
Speaker 1: price that it takes up, right? Generally over the years,
12:07
Speaker 1: every year, that mightn't do it every year, but it
12:09
Speaker 1: will do it over a trend basis. And let's say
12:12
Speaker 1: it will do at least what it's done in the past,
12:16
Speaker 1: been coming up on 9%, maybe it will do better
12:18
Speaker 1: than that. But your big risk is operational risk, right?
12:21
Speaker 1: Because unbelievably, gold miners are, I wonder, I'd love to know,
12:28
Speaker 1: are they particularly bad among miners for blowing it? Huh?
12:34
Speaker 2: Tell me. Oh, I've got to be careful what I say.
12:38
Speaker 2: You don't have to mention names.
12:39
Speaker 1: Yeah.
12:43
Speaker 2: I would agree that, yes, we do prefer to play
12:46
Speaker 2: the gold miners. Historically, they don't have a great reputation.
12:50
Speaker 2: If you're thinking about post the GFC, when the last
12:53
Speaker 2: gold bull run we had, a lot of the miners
12:56
Speaker 2: grew for growth's sake, if you like, and they over-leaguaged
13:00
Speaker 2: their balance sheets. And then when the gold price turned,
13:04
Speaker 2: they were in trouble and then they blew up effectively.
13:06
Speaker 2: What we're seeing now, though, I would say, is that
13:09
Speaker 2: the discipline in the gold space has is very strong.
13:12
Speaker 2: We're seeing incredible strength in the balance sheet. The miners
13:15
Speaker 2: are generating enormous cash flows. And they're the miners that
13:19
Speaker 2: we're attracted to, obviously. And we're seeing dividends and buybacks occurring.
13:24
Speaker 2: And the miners, when I say maintaining also their discipline,
13:27
Speaker 2: in terms of M & A, and that's obviously another
13:29
Speaker 2: hot topic, when is the M & A space coming?
13:32
Speaker 2: And we are seeing it. But I think they've been
13:35
Speaker 2: very disciplined deploying into M & A. the gold miners.
13:39
Speaker 1: As a class of miner, is it something to do
13:41
Speaker 1: with how gold is mined that they seem to have
13:43
Speaker 1: more operational problems and floods and closures compared to, say,
13:48
Speaker 1: iron ore? Is it just riskier in that way?
13:50
Speaker 2: Yeah, I would say definitely it is. If you're comparing
13:52
Speaker 2: it to iron ore, yes, I think it's a riskier
13:55
Speaker 2: mining operation than iron ore or the bulk commodities like
13:59
Speaker 2: coal as well.
13:59
Speaker 1: Yeah, it's riskier than, it's precious metal rather than the
14:02
Speaker 1: bulk metal and it's riskier on that basis. And the
14:05
Speaker 1: other thing they seem to get wrong is hedging and
14:08
Speaker 1: currency and Again, is there something about gold that makes
14:12
Speaker 1: that more of an issue?
14:13
Speaker 2: I would say at the moment, hedging is not something
14:16
Speaker 2: that the gold miners are seeking. It seems they've heard
14:19
Speaker 2: it loud and clear from investors that we don't want
14:22
Speaker 2: you to hedge. We want the gold exposure. Therefore, we'd
14:26
Speaker 2: prefer you not to hedge.
14:28
Speaker 1: I'm sorry, Cameron, and that's been down good for a
14:31
Speaker 1: long time, but isn't the Australian dollar now rising against
14:34
Speaker 1: the US and gold is priced in the US? So
14:36
Speaker 1: do you think hedging could come back into play?
14:38
Speaker 2: I have a very good friend at Noah's Rule that
14:40
Speaker 2: would maybe argue that point as well, who does advise
14:43
Speaker 2: a lot of companies on hedging strategies. But I still
14:46
Speaker 2: maintain the point that investors want that exposure to the
14:49
Speaker 2: gold price. Now, obviously, if you're a mining company looking
14:53
Speaker 2: for financing and the banks to provide debt want a
14:57
Speaker 2: level of protection for themselves, the downside, they do require
15:01
Speaker 2: sometimes a level of hedging. So that is probably at
15:05
Speaker 2: the moment the only reason why gold companies would take
15:10
Speaker 2: on hedging. I would say on the whole, as a general,
15:14
Speaker 2: I'm talking about the Australian industry here, and I think
15:16
Speaker 2: also the North American, the hedging is, not many companies
15:20
Speaker 2: have active hedge books at the moment.
15:22
Speaker 1: Okay. And you mentioned, we're nearly there, folks. We will
15:27
Speaker 1: talk names. Don't worry. In the next section, we will
15:29
Speaker 1: talk stocks, right? Individual stocks. But there's something very important
15:32
Speaker 1: that Cameron brought up, which was mergers and acquisitions and
15:35
Speaker 1: takeover plays. The King Kong of the sector, the Goliath
15:41
Speaker 1: of the gold sector, was always Newcrest. And they somehow
15:45
Speaker 1: managed to sell themselves right smack before the best gold
15:51
Speaker 1: rally we saw for whatever, 30 years. Do you think
15:56
Speaker 1: that's true, first of all? I mean, Newmont is now
15:58
Speaker 1: the big one, right? Because they bought Newcrest. Give us
16:00
Speaker 1: an idea of what the sector looks like. I mean,
16:02
Speaker 1: people who don't know it, they know BHP and Rio
16:05
Speaker 1: and Fortescue and Arnor. Give us a helicopter view of
16:08
Speaker 1: the stock picture that you look at every day.
16:11
Speaker 2: Yeah, I mean, look, you definitely have, I mean, we're
16:13
Speaker 2: classified as a senior producers and that's probably anything above
16:17
Speaker 2: a million ounces a year of which, you know, that's
16:20
Speaker 2: North America, predominantly North American because you've got, as you mentioned, Newmont, Barrick,
16:25
Speaker 2: Agnico Gold, et cetera, those sort of companies that are
16:29
Speaker 2: producing well over a million ounces. Newmont's 6 million. Kinross
16:32
Speaker 2: is at 2 million ounces a year. The only Australian
16:36
Speaker 2: that meets that threshold, a million ounces a year, is
16:40
Speaker 2: Northern Star.
16:41
Speaker 1: And they have been particularly riddled with both management and
16:44
Speaker 1: operational issues, haven't they?
16:46
Speaker 2: They have, unfortunately.
16:47
Speaker 1: Where are they now? How do you read them now?
16:49
Speaker 2: Look, a lot is going to depend on how they've
16:52
Speaker 2: done a massive growth project, the Kalgoorlie Super Pit. Now,
16:57
Speaker 2: I was there just a couple of weeks ago. It's
16:59
Speaker 2: an amazing project. The size of it is enormous. The
17:03
Speaker 2: performance of Northern Star going forward will depend enormously on
17:06
Speaker 2: the success of that ramp up. So that will be
17:10
Speaker 2: the interesting one to see.
17:11
Speaker 1: Do you have it weighted in your fund as pro
17:14
Speaker 1: rata market cap or lower or higher than it might
17:18
Speaker 1: naturally be?
17:19
Speaker 2: No, we're benchmark agnostic. At the moment, I don't have
17:22
Speaker 2: exposure to Northern Star, but I think that there will
17:25
Speaker 2: be a time when I'm comfortable with the ramp up
17:28
Speaker 2: of KCGM, that it will generate a lot of cash.
17:32
Speaker 1: Okay. And one other very interesting company you might tell
17:35
Speaker 1: us about is Genesis and this extraordinary entrepreneur who's sort
17:39
Speaker 1: of putting all that together. Could you tell us a
17:40
Speaker 1: little about that story, basically?
17:42
Speaker 2: Yeah, I could go on forever here because we've had
17:44
Speaker 2: a very close association with it. We have been quite
17:48
Speaker 2: a large investor in Volt. which was originally the Red 5.
17:51
Speaker 1: So this is V-A-U-L-T, Volt.
17:53
Speaker 2: Yes, Volt, which Genesis is merging with currently at the moment.
17:56
Speaker 1: Yes, so Genesis was the gold miner. It's merging with Volt.
17:59
Speaker 1: When this is over, it becomes what? How big is
18:01
Speaker 1: it in terms of the pecking order?
18:03
Speaker 2: It will become probably, I'm going to say, 700,000 ounces
18:07
Speaker 2: a year producer from an area about 300km north of Kalgoorlie,
18:12
Speaker 2: Leonora and Laverton in that region. They've got an enormous
18:15
Speaker 2: resource in that region. producing 700,000 ounces, but with numerous
18:21
Speaker 2: growth options that they are sorting through at the moment,
18:24
Speaker 2: I suppose.
18:25
Speaker 1: And there is a single Dynamo manager in the middle
18:28
Speaker 1: of all that. Could you tell us about who that is?
18:30
Speaker 2: Rayleigh Finlayson, yes. He was ex-Sarrison, which was the company
18:34
Speaker 2: that merged with Northern Star a number of years ago now.
18:38
Speaker 2: But he looks to be doing the same again, which
18:40
Speaker 2: is building from a low base, another very significant mid-tier
18:45
Speaker 2: gold miner. in the Leonora-Leverton region. And really it's underpinned
18:49
Speaker 2: by what Volt brings to the merger, which is the
18:52
Speaker 2: King of the Hills mill. They've recently expanded it to
18:55
Speaker 2: 8 million tonnes per annum, but I expect it to
18:58
Speaker 2: probably go closer to 10 million tonnes per annum when
19:00
Speaker 2: it's actually operating. And really that will be the hub,
19:04
Speaker 2: if you like, and then all the assets around it
19:07
Speaker 2: will feed into that hub or that mill and feed it.
19:10
Speaker 2: And I think you're going to see an amazing growth
19:14
Speaker 2: There are so many options that Riley now has in
19:16
Speaker 2: front of him. Well, sorry, I shouldn't say now he
19:18
Speaker 2: has in front of him. The deal is yet completed,
19:21
Speaker 2: but I expect it will.
19:22
Speaker 1: We'll soon have in front of him.
19:25
Speaker 2: Exactly, soon have in front of him.
19:26
Speaker 1: And this Riley Finlayson, to what extent your whole proposition
19:29
Speaker 1: is that you add value? I don't buy an ETF.
19:33
Speaker 1: I just don't buy an ETF on gold miners because
19:37
Speaker 1: your proposition is you will do better than passive investors.
19:42
Speaker 1: So you're going to handpick. the best companies. How important
19:46
Speaker 1: is someone like Riley Finlayson to you where you see
19:48
Speaker 1: a manager who is literally extraordinarily ambitious, but managing to
19:53
Speaker 1: pull off amazing deals, buying a company that's as big
19:55
Speaker 1: as his own company, et cetera? How important are they
19:58
Speaker 1: to you in your selection of your main picks?
20:01
Speaker 2: Management is critical, absolutely critical for any dog owner. And
20:05
Speaker 2: Riley does definitely Tick that box here. He's got a
20:08
Speaker 2: very good record for that. And so, yes, management for
20:10
Speaker 2: us is critical, but it also depends on the stage
20:13
Speaker 2: of life for what manager you need for the gold project.
20:18
Speaker 2: So if I'm an explorer, I prefer probably a geologist
20:21
Speaker 2: to be the CEO. Whereas, you know, Genesis is now
20:26
Speaker 2: obviously a producer and Rayleigh being a mining engineer, I
20:29
Speaker 2: probably prefer somebody who really understands the operations to be
20:32
Speaker 2: running the company. So management is absolutely critical.
20:35
Speaker 1: And then at the very top basis, at the very top,
20:38
Speaker 1: when you've got Newmont and Barrick or whatever, you're really
20:40
Speaker 1: talking about global technocratic executives that could be running anything.
20:44
Speaker 1: I'm guessing, but I presume it gets to that level.
20:47
Speaker 2: I wouldn't disagree with that. That's right.
20:49
Speaker 1: Yeah.
20:49
Speaker 2: Okay.
20:50
Speaker 1: Very interesting. Well, what we're going to do is we're
20:52
Speaker 1: going to take a look at a few of Cameron's favorites, basically,
20:55
Speaker 1: who he likes, who he doesn't like. And we'll be
20:57
Speaker 1: back in a moment. Hello, welcome back to the Australian's
21:06
Speaker 1: Money Puzzle podcast. I'm James Kirby and I'm talking to
21:09
Speaker 1: Cameron Judd, who is the fund manager at the Smorgan
21:13
Speaker 1: Gold Resources Fund. Okay, let's have some fun. To the
21:17
Speaker 1: extent you can tell me, do you publicise your top
21:19
Speaker 1: 10 holdings?
21:20
Speaker 2: No, we don't. We do talk about some of our
21:23
Speaker 2: positions and I'm happy to do so.
21:24
Speaker 1: Yes.
21:25
Speaker 2: Probably our more favourable.
21:26
Speaker 1: Ones, yes. Okay, and to the extent you can tell
21:29
Speaker 1: us who you don't like, that would be good too.
21:30
Speaker 1: But you have the floor, Cameron. Oh, wow.
21:35
Speaker 2: Look, one of the ones that we like in North
21:37
Speaker 2: America is Equinox. I think that company there has recently
21:41
Speaker 2: merged with Orla Mining, another North American listed gold producer.
21:47
Speaker 2: The company together will produce about 1.1 million ounces of
21:50
Speaker 2: gold a year. Again, similar to what I spoke about
21:52
Speaker 2: earlier with Genesis, I think it has a number of
21:55
Speaker 2: levers it can pull to realize greater value there for
21:58
Speaker 2: the shareholders. And one of that is its growth profile.
22:02
Speaker 2: It has in my view, a very clear pathway to
22:06
Speaker 2: grow from 1.1 million ounces a year to 1.9 million
22:08
Speaker 2: ounces a year. When I look at it on its valuation,
22:12
Speaker 2: it's trading on a less than one times price to
22:15
Speaker 2: NPV valuation, whereas the senior gold, and so as I said,
22:19
Speaker 2: it reaches that threshold of greater than a million ounces.
22:22
Speaker 2: So I think it's a senior gold producer. When I
22:24
Speaker 2: look at what the others are trading on, it's sort
22:26
Speaker 2: of closer to 1.1 times price to NPV. So I
22:29
Speaker 2: think there's a re-rate opportunity for Equinox.
22:32
Speaker 1: Is that more important than PE ratio for you? Yes,
22:36
Speaker 1: it is.
22:37
Speaker 2: Yes. I mean, I do also look at earnings metrics,
22:39
Speaker 2: but I prefer an EV to EBITDA.
22:41
Speaker 1: Why is that? Just to explain to listeners what you're
22:43
Speaker 1: looking at there, what you're really trying to excavate.
22:46
Speaker 2: Yeah. I think the EV to EBITDA metric is a
22:50
Speaker 2: better reflection on cash flow. And it's before the accountants.
22:55
Speaker 2: I'm a simple engineer, background and old engineer from a
22:57
Speaker 2: long time ago. I understand the cash flow. Once the
23:00
Speaker 2: accountants get hold of it and it comes down to
23:02
Speaker 2: the earnings line, it gets a bit messier, I suppose,
23:05
Speaker 2: in my view.
23:06
Speaker 1: Yes. So many additions, no subtractions. And what about on
23:09
Speaker 1: the ASX?
23:10
Speaker 2: Yeah, look, I mean, we spoke about Genesis. And again,
23:13
Speaker 2: I think that they're a really very strong outlook, particularly
23:16
Speaker 2: when that merger is completed. And I expect it will,
23:18
Speaker 2: as I said, later this year. Riley is, as I said,
23:21
Speaker 2: sorting through the numerous options that he has and the
23:24
Speaker 2: synergies that he'll be able to achieve. And he'll update
23:27
Speaker 2: the market first quarter of next year, I understand. on
23:30
Speaker 2: the outlook for the new company, assuming everything goes ahead.
23:34
Speaker 2: And I think that will surprise a lot of it
23:36
Speaker 2: in the market in terms of the upside to that
23:38
Speaker 2: and what he can achieve there. Another company I particularly
23:41
Speaker 2: like is Remelius.
23:43
Speaker 1: Yeah, Remelius, yes.
23:44
Speaker 2: Yeah, the current pricing, I believe it's undervalued. The company
23:49
Speaker 2: is looking to grow its production profile to 500,000 ounces,
23:53
Speaker 2: it's stated, but I think it'll grow closer to 600,000
23:55
Speaker 2: ounces a year by 2030. It's got a very strong
23:59
Speaker 2: balance sheet so it's fully financed and i think that
24:02
Speaker 2: you know again the company will it's under promising and
24:06
Speaker 2: i think it'll overachieve.
24:07
Speaker 1: Right right tell us about to take over targets i
24:10
Speaker 1: know it's very hard to pick them but i suppose
24:12
Speaker 1: new crest was a sitting duck wasn't it looking back
24:15
Speaker 1: do you regret that it's gone do you regret that
24:17
Speaker 1: it was taken out so smartly by by newmont Oh, look, I.
24:21
Speaker 2: Don't regret it. The space is always evolving.
24:25
Speaker 1: Yeah, sure. I know it's healthy, but do you think
24:27
Speaker 1: they got it cheap?
24:28
Speaker 2: I do think they probably got it cheap, yes. I
24:30
Speaker 2: also think, though, that Newmont was very opportunistic. You know,
24:34
Speaker 2: there was a... A new CEO coming in, and I
24:38
Speaker 2: think it was just an opportunistic acquisition for them.
24:41
Speaker 1: Right. And just to cover off all the other very
24:43
Speaker 1: big mining stocks, we mentioned North Star, we mentioned Genesis,
24:46
Speaker 1: we mentioned Bromelius. What are the others? Evolution, where do
24:48
Speaker 1: you stand on that?
24:49
Speaker 2: Evolution, look, yes. Evolution, I respect. They are very good operators,
24:53
Speaker 2: and they have copper exposure as well. But I probably...
24:57
Speaker 2: I think they're fully valued at the moment, in my view,
24:59
Speaker 2: at least.
24:59
Speaker 1: Okay. Gold and copper are often found together, aren't they?
25:03
Speaker 1: What do you do about that? Do you try and
25:04
Speaker 1: find pure gold plays, or how do you do it?
25:06
Speaker 2: No, look, we don't mind. I mean, copper, absolutely. We're
25:09
Speaker 2: very favorable as a house on copper as well. And
25:12
Speaker 2: it acts as a byproduct to reduce those costs. So,
25:15
Speaker 2: you know, I think that's always a positive as well.
25:17
Speaker 2: It's not as common as you'd expect, the gold and copper.
25:21
Speaker 2: I mean, obviously, we prefer the gold companies, which, I
25:25
Speaker 2: sort of rank them as if they've got 70% of
25:27
Speaker 2: their revenue coming from gold, then I classify them as
25:30
Speaker 2: a gold company.
25:31
Speaker 1: Right. You have the AI, whether you want it or not,
25:34
Speaker 1: you have the AI.
25:35
Speaker 2: Correct.
25:36
Speaker 1: Clay on top of it, don't you?
25:38
Speaker 2: Which Evolution absolutely benefits from when I look at their
25:40
Speaker 2: cash cost.
25:41
Speaker 1: Yeah, I never really thought about that. We're running out
25:45
Speaker 1: of time. It was really good to talk to you, Cameron.
25:47
Speaker 1: Thank you very much for coming on the show.
25:49
Speaker 2: Not a problem, James. Hopefully that was helpful and thanks.
25:52
Speaker 2: I hope I don't get too many follow-up phone calls
25:54
Speaker 2: from some of the miners.
25:56
Speaker 1: You might get the sort of follow-up phone calls you want,
25:58
Speaker 1: I imagine. Very good. Thank you very much. That was
26:01
Speaker 1: Cameron Judd, folks, from the Smorgan Partners Gold Resources Fund,
26:07
Speaker 1: specialist fund that invests in gold, but particularly in gold miners. Okay,
26:12
Speaker 1: keep the emails running. I haven't come to do any questions,
26:16
Speaker 1: but I will very soon. I'm just collecting them for
26:18
Speaker 1: the moment and curating them for future guests. The moneypuzzle
26:22
Speaker 1: at theaustralian.com.au is the address. Today's show was produced by
26:27
Speaker 1: Leah Samaglou.
26:28
Speaker 2: Talk to you soon.