Latest / Kitco MINING / Rick Rule: “Gold Companies are  selling at the greatest discount”

Transcript

Rick Rule: “Gold Companies are  selling at the greatest discount” · Kitco MINING

• 0:05
  SPEAKER_00: Hello and welcome to Kitco Mining with me, Paul Harris.
• 0:08
  SPEAKER_00: Today is Wednesday, the 9th of September.
• 0:11
  SPEAKER_00: Summer is over, gold is breaking out, and copper is at all-time highs.
• 0:15
  SPEAKER_00: A lot to talk about today, and joining me is the one and only Rick Rule.
• 0:20
  SPEAKER_00: Rick, welcome back to Kitco.
• 0:21
  SPEAKER_00: Paul, it's a pleasure to be back with you.
• 0:23
  SPEAKER_00: Thank you.
• 0:23
  SPEAKER_00: We are here in our Montreal studio.
• 0:25
  SPEAKER_00: It's very good to do one of these in person again.
• 0:27
  SPEAKER_00: It's been a long time since we've actually sat face to face and had a good chat about what's going on in the mining space.
• 0:34
  SPEAKER_01: So true.
• 0:34
  SPEAKER_01: We need to do this more often.
• 0:35
  SPEAKER_01: Although we're getting better at remote.
• 0:37
  SPEAKER_00: We are, we are.
• 0:38
  SPEAKER_00: Let's start with gold.
• 0:40
  SPEAKER_00: Gold is starting to break out again.
• 0:42
  SPEAKER_00: And one of the sort of data points I picked up on this week, Ronnie Sturfley, a good friend of ours, who is the editor and publisher of the In Gold We Trust report, he said his model says the new base cave for the gold price is$8,900 US dollars per ounce, which roughly is about twice the current gold price.
• 1:02
  SPEAKER_00: Rick, I want to put you right on the spot, right from the get-go.
• 1:05
  SPEAKER_00: What would you say are the arguments for and against that scenario?
• 1:10
  SPEAKER_01: Ronnie is a great guy and he's young enough to publish targets.
• 1:13
  SPEAKER_01: I'm an old smart guy and I'll never do that.
• 1:16
  SPEAKER_01: If you look at the intermediate term and longer term, one needs to be a gold bull for the reasons that Ronnie has articulated.
• 1:25
  SPEAKER_01: In the very near term, I would argue, Paul, as I have in our past interview, that the gold price will fluctuate depending primarily on U.S.
• 1:34
  SPEAKER_01: nominal and real interest rates.
• 1:37
  SPEAKER_01: If the U.S.
• 1:39
  SPEAKER_01: uh Fed is institutionally able to allow the U.S.
• 1:46
  SPEAKER_01: interest rate to rise, that is to say, if there isn't too much political pressure to constrain the interest rate or even artificially lower it, then gold, I think, will be soft.
• 1:56
  SPEAKER_01: A higher U.S.
• 1:58
  SPEAKER_01: interest rate in the U.S.
• 1:59
  SPEAKER_01: ten years attracts uh capital into the U.S.
• 2:02
  SPEAKER_01: dollar, makes the U.S.
• 2:03
  SPEAKER_01: dollar stronger.
• 2:04
  SPEAKER_01: Gold is denominated in dollars, of course, but the bond becomes a more viable alternative to gold.
• 2:09
  SPEAKER_01: So I think in the near term that the gold price will be really responsive to U.S.
• 2:15
  SPEAKER_01: interest rates and the interplay between U.S.
• 2:17
  SPEAKER_01: rates and inflation.
• 2:18
  SPEAKER_01: Looking longer term, I think that the U.S.
• 2:21
  SPEAKER_01: government has no choice but to artificially intervene in interest rate markets and also continue to engage in quantitative easing.
• 2:32
  SPEAKER_01: Paul, as you and I have discussed in other KITCO interviews, quantitative easing, if we used real English, would be described as counterfeiting.
• 2:40
  SPEAKER_01: The printing of new specious currency units, unbacked by anything, irrespective of who does it, is actually counterfeiting.
• 2:47
  SPEAKER_01: And so long-term, I agree with Ronnie in toto.
• 2:52
  SPEAKER_01: I don't think that the U.S.
• 2:53
  SPEAKER_01: government has any choice but to over time maintain artificially low interest rates, but also to fund the debt and deficits through what they would describe as quantitative easing and what you and I would classify as counterfeiting.
• 3:09
  SPEAKER_00: Okay.
• 3:10
  SPEAKER_00: Well let's uh thank you for that, Rick.
• 3:11
  SPEAKER_00: Let's move on to silver.
• 3:12
  SPEAKER_00: In the past you've said that silver is effectively leverage gold.
• 3:17
  SPEAKER_00: With gold getting stronger again, does that mean silver spring is coiling again for another shot past 100 US dollars per ounce?
• 3:25
  SPEAKER_01: In my experience, Paul, when momentum is established by gold, and that momentum validates the narrative, the precious metals narrative for the generalist investor.
• 3:38
  SPEAKER_01: And the generalist investor comes down into the precious metal space, pricing leadership changes from gold to silver.
• 3:44
  SPEAKER_01: We saw that in October, November, December of 2025 and January of 2026.
• 3:52
  SPEAKER_01: My experience, and I can't tell you why this is, by the way, I'll leave that to Kitko.
• 3:56
  SPEAKER_01: I can't tell you why this is, but momentum is established by gold, by the fear buyer.
• 4:02
  SPEAKER_01: But when interest broadens to the generalist investor, perhaps because of silver's lower unit cost, uh market leadership transfers from gold to silver.
• 4:12
  SPEAKER_01: In direct answer to your question, if the momentum in gold in this run becomes strong enough to begin to attract the generalist investor again, you will see leadership change to silver if past performance is any guarantee.
• 4:29
  SPEAKER_01: And by the way, uh when I say leadership, I mean retail leadership.
• 4:33
  SPEAKER_01: I think you need to look at the physical ETFs to see when the retail physical ETFs are gaining as opposed to losing assets.
• 4:41
  SPEAKER_01: That's a harbinger of silver price performance.
• 4:45
  SPEAKER_01: Silver, as you've witnessed in your career, uh, and certainly as Kitko has experienced, silver has incredible upside volatility, which is probably why the speculators prefer it.
• 4:58
  SPEAKER_00: Now, um gold and silver, obviously precious metals.
• 5:02
  SPEAKER_00: Um gold is making the pace, as you you mentioned, silver's there coming up fast as well, but also coming up on the rails is copper.
• 5:10
  SPEAKER_00: Copper's been making new record highs of more than$6.75 US per pound.
• 5:15
  SPEAKER_00: That's more than$14,500 per ton.
• 5:19
  SPEAKER_00: Rick, why does the copper price keep pressing higher and higher?
• 5:24
  SPEAKER_01: Well, Paul, I need to admit here that in prior interviews uh I've been wrong about the copper price.
• 5:29
  SPEAKER_01: Uh I had anticipated that 2026 would be a year that had weak economic performance across the board.
• 5:38
  SPEAKER_01: The rationale for that has been a long time, frankly, since we had a uh a recession, but also because I believe that higher oil prices as a consequence of the conflict in the Straits of Hormuz would act as a tax on society and slow things down.
• 5:51
  SPEAKER_01: I theorized that although the supply of copper is fairly tight, the demand would be tighter than it has been.
• 5:58
  SPEAKER_01: The economy has surprised me to the upside, uh, and copper has done very well.
• 6:03
  SPEAKER_01: There can be no doubt at all that for 25 years we have underestimated, underinvested in productive capacity around copper.
• 6:11
  SPEAKER_01: We've underinvested in exploration, we've underinvested in development, we've underinvested in all parts of the copper business.
• 6:18
  SPEAKER_01: And you can't make up for that systemic underinvestment quickly.
• 6:22
  SPEAKER_01: There is no doubt in my mind that in five years copper prices will be substantially shorter than they are today.
• 6:28
  SPEAKER_01: I'm just surprised by the strength in copper today.
• 6:31
  SPEAKER_01: Now, part of that uh has to do with production shortfalls, the difficulty that uh Kamoa Kakula experienced, the difficulty that Grasberg experienced, the self-inflicted wounds that uh Kodelco has had from underinvestment.
• 6:46
  SPEAKER_01: Uh, but some of it is due to a much stronger global economy than I would have expected that we would experience.
• 6:55
  SPEAKER_00: Yeah, there's been a number of charts published recently.
• 6:58
  SPEAKER_00: I'm looking at one this morning from Bernstein.
• 7:01
  SPEAKER_00: Um they forecast or estimate the copper supply deficit will get more than uh grow to more than 12 million tons by 2040, which is a staggering amount.
• 7:11
  SPEAKER_00: That's uh you know about approximately half of current production.
• 7:16
  SPEAKER_00: So some very big numbers there.
• 7:18
  SPEAKER_00: Um, copper at all-time high prices.
• 7:21
  SPEAKER_00: Who else but uh our dear friend Robert Friedland to take advantage of that and some deliver some really good bullish news into this?
• 7:29
  SPEAKER_00: Um and he did so with Ivanhoe Metals, which announced an increase to the resource at its Western Falls copper discovery in the Democratic Republic of Congo.
• 7:37
  SPEAKER_00: Um the resource there up 30% to 42 million tonnes, grading 2.66% copper, and that's an indicated resource.
• 7:46
  SPEAKER_00: Rick, um Western Falls is proving to have both size and scale.
• 7:51
  SPEAKER_00: The average production grade in Chile, which is the world's largest producer of copper, is now around 0.6%.
• 7:57
  SPEAKER_00: So Western Fourlands is approximately uh what uh four times uh bigger or the grades four times better there.
• 8:05
  SPEAKER_00: Um, how unique is an asset like Western Fourland in this day and age?
• 8:10
  SPEAKER_01: Well, I'm delighted that you drew our attention uh to what Ivan Ho has been able to do.
• 8:16
  SPEAKER_01: That it's important to note that Ivan Ho, first of all, owns 100% of the Western Fourlands.
• 8:20
  SPEAKER_01: Uh they don't have to share the bounty of it with uh China International Trade and Investment or with Zhin.
• 8:27
  SPEAKER_01: It's important to note, too, that the deposit is wide open.
• 8:31
  SPEAKER_01: Uh it's important to note finally that Robert doesn't necessarily need to build uh a facility to process this.
• 8:40
  SPEAKER_01: He just needs to mine it and move it to an existing facility.
• 8:43
  SPEAKER_01: I think it's extremely important.
• 8:45
  SPEAKER_01: I think the deposit gets bigger.
• 8:48
  SPEAKER_01: As you already note, the deposit is rich at 2.3% compared to an average Chilean grade of 0.6 or an average worldwide grade of 0.43.
• 8:58
  SPEAKER_01: Uh this is a profound and profitable uh deposit.
• 9:02
  SPEAKER_01: It is important to note, too, that Robert doesn't need to uh construct a billion-dollar facility to process this place.
• 9:12
  SPEAKER_01: He's already constructed the billion-dollar facility, and in addition to that, he has a smelter.
• 9:18
  SPEAKER_01: The only possible knock that one could have on it uh is the fact that it's in the Congo as opposed to some other place.
• 9:25
  SPEAKER_01: Thus far, for Robert, the Congo has been an extremely good jurisdiction.
• 9:29
  SPEAKER_01: Uh they have done precisely what they said that they would do uh in terms of total charges, in terms of regulation, in terms of the remittance uh of uh profits.
• 9:43
  SPEAKER_01: Uh I think investors have underestimated the importance of Western Foreland, uh, perhaps because of the negative price performance that uh Ivanhoe experienced last year as a result of seismic difficulties at Kamoa Kakula, or perhaps because they have an uh inbred uh tendency to avoid Congo.
• 10:06
  SPEAKER_01: Uh your listeners need to know in terms of conflict of interest that I'm personally a large Ivanhoe shareholder.
• 10:12
  SPEAKER_00: And uh I recall there was a very, very famous uh mining investor and speculator and entrepreneur who coined the phrase no guts, no glory, and uh I think uh what Robert's doing in DRC is very much uh evidence of that.
• 10:24
  SPEAKER_00: But um I want to pick up on something there.
• 10:27
  SPEAKER_00: You mentioned the fact that Western Four Lands is currently 100% owned by Ivanhoe, it doesn't have any Chinese partners, doesn't have any government participation either.
• 10:36
  SPEAKER_00: Um, should we append to that statement for now?
• 10:40
  SPEAKER_00: Uh with uh Kumokamula, I think one of the smart rules Robert made was giving the government a percentage or getting the government a stake, which presumably facilitated the development of that.
• 10:51
  SPEAKER_00: Other big copper projects elsewhere in the world, we're seeing the governments pushing back and seeking greater interest.
• 10:56
  SPEAKER_00: Oyotogoi, another Robert Friedman project, they've been looking to increase their participation there.
• 11:02
  SPEAKER_00: Um is that something that he will have to deal with at some point?
• 11:06
  SPEAKER_00: Of course.
• 11:07
  SPEAKER_01: Uh what mining investors need to understand is that the host country ultimately is going to get about 50% of the economic value of a deposit after payout, after return of capital.
• 11:20
  SPEAKER_01: So it's very likely that by way of taxation, by way of corporate expenditure, and what are not normally corporate expenditures, uh corporate responsibilities, uh, by way of equity stake, somehow uh the Congo will get 20 will get 50 percent or so of the economic benefit of the deposit after the cost of capital.
• 11:45
  SPEAKER_01: Uh in the case of uh Congo, recoupment of capital uh comes on a 100% basis, which is to say the money is loaned into Congo at an interest rate that approximates the Congo's uh sovereign cost of capital expressed in U.S.
• 12:05
  SPEAKER_01: dollars, which would suggest that Ivan Ho will get cost of capital plus 12% compounded over time before the Congolese can expect to get their 50%.
• 12:16
  SPEAKER_01: Some of that 50% will be paid up front in some way, shape, or form, by way of a royalty, by way of import duties, by way of tax.
• 12:24
  SPEAKER_01: But ultimately, mining investors need to understand that about 50% of the value of the deposit after the recoupment of payout will accrue to the country.
• 12:36
  SPEAKER_00: Okay, um, I want to go a bit deeper on this because you know, surprise, surprise, with the higher metals prices, governments want to increase their rents, particularly in the the metal, the sorry, the gold space.
• 12:46
  SPEAKER_00: In Ghana, large-scale miners must now sell 30% of their sort of estate agency gold bond at a 0.55% discount uh to be refined domestically.
• 12:57
  SPEAKER_00: In Turkey, gold royalties uh escalate with the increase in the gold price at$5,000 per ounce.
• 13:03
  SPEAKER_00: That reaches about 30%.
• 13:05
  SPEAKER_00: And news last night from London Gold related to its Fruda del Norte project in Ecuador.
• 13:10
  SPEAKER_00: Um, the tax authority there has issued them with a sort of tax bill or a tax demand for 2023 for uh under the sovereign adjustment mechanism.
• 13:18
  SPEAKER_00: They're claiming the company owes them$73 million in tax uh and potential fines and penalties for another$81 million, so$154 million in total, excluding interest.
• 13:29
  SPEAKER_00: Um the company, of course, says that's not true.
• 13:32
  SPEAKER_00: Um, its books say something else.
• 13:34
  SPEAKER_00: Rick, with governments looking to increase their government take their take, does any of this surprise you?
• 13:40
  SPEAKER_00: Is this a natural, normal thing in a high price environment?
• 13:44
  SPEAKER_00: Um the crux of the question is to what extent do you think investors can anticipate this potentiality or even mitigate it?
• 13:53
  SPEAKER_01: Certainly investors need to consider it.
• 13:56
  SPEAKER_01: Uh governments create and maintain power by transfers.
• 14:02
  SPEAKER_01: They take money from entities that earn it and they give it to entities that vote.
• 14:09
  SPEAKER_01: It's a transfer mechanism.
• 14:11
  SPEAKER_01: Uh governments and copper companies didn't care much about copper revenue when there wasn't much.
• 14:17
  SPEAKER_01: When, in very blunt terms, when copper was selling for a dollar U.S.
• 14:21
  SPEAKER_01: a pound, there was much less to steal.
• 14:23
  SPEAKER_01: At$6.75, there's a lot to steal.
• 14:26
  SPEAKER_01: The pricing mechanism should be built in to the discussion at the beginning of the discussion.
• 14:32
  SPEAKER_01: And there's an existing financial mechanism to cause that to occur.
• 14:36
  SPEAKER_01: It's called a stream.
• 14:37
  SPEAKER_01: When the government sets up an exploitation concession, the right mechanism would be for the issuer and the government to put in place a stream where the government would participate in the price rise above X to some extent.
• 14:54
  SPEAKER_01: The advantage that that would have would be that both the company and the government would understand the nature of the government participation for the rest of time, but would also be, because those streams are readily marketable instruments, uh, it would give the ability for the government to monetize the upside now, if they needed the money now.
• 15:15
  SPEAKER_01: And I would expect a streaming mechanism in an exploitation agreement to become an important part of the transaction between the host government and the country going forward.
• 15:26
  SPEAKER_01: The reason that this instrument wasn't an important part of the discussion in the decade of the 80s was simply because the streaming agreements didn't exist.
• 15:36
  SPEAKER_01: The business now that Franco Nevada and Wheaton Precious does with regards to monetizing price increases in gold and still uh and silver would be a perfectly easy instrument uh to put into sovereign discussions around concession negotiations.
• 15:52
  SPEAKER_01: And I think uh as early as 2026, you'll see streams as an important part of exploitation agreements.
• 15:59
  SPEAKER_00: That's a very um important point, I think, Rick, and it makes a lot of sense.
• 16:05
  SPEAKER_00: So I I guess one of the questions is why doesn't it happen?
• 16:07
  SPEAKER_00: You mentioned it didn't happen in the 80s because streams didn't really exist, but uh since then they've certainly come into the the framework of things.
• 16:15
  SPEAKER_00: Is this perhaps an illustration of the asymmetrical bargaining positions between companies that really know the business well and governments that perhaps don't, and so the governments aren't necessarily aware that this is something they should put on the table?
• 16:27
  SPEAKER_01: I think it's something that both sides don't recognize they should put on the table.
• 16:31
  SPEAKER_01: Uh streaming agreements in size are a fairly recent phenomenon.
• 16:37
  SPEAKER_01: The agreement between Silver Wheaton and BHP, as an example, was a$4.2 billion transaction.
• 16:43
  SPEAKER_01: That's something that says something about the nature of it, but both parties are mostly backward looking.
• 16:49
  SPEAKER_01: Uh and the the maturity of the streaming business uh is something that's very much forward-looking.
• 16:56
  SPEAKER_01: The nature of the streaming contracts that will exist in the private sector, uh, as copper mining companies, as an example, look to monetize their gold and silver streams to acquire some of the upfront capital, are going to be of such size and scope that even the biggest mining companies in the world are gonna need to syndicate those streams.
• 17:13
  SPEAKER_01: They're gonna need to broaden the market for streams.
• 17:16
  SPEAKER_01: What that would be give a host government to do, a Ghana, a Nigeria, a Congo, a Mongolia, would be to participate as they would like in the upside in commodity prices, but it would also give them the ability to sell some or all of that upside in a readily accessible liquid market so that they could both have their cake and eat it too.
• 17:40
  SPEAKER_00: Okay, now the stream you mentioned there between weed and BHP, that's uh on Antimeter mine in Peru on 37.5% of the silver production there.
• 17:50
  SPEAKER_00: Um extending this concept, um, a lot of mining investors, a lot of companies view developing world countries such as in South America or Africa as risky, and we've seen a wave or a trend of companies looking for projects in North America, in Canada and US, because there's the perception that those are jurisdictions that are seen as safe, they're seen as stable in this regard, the rules of the game aren't going to change.
• 18:17
  SPEAKER_00: But is that misguided?
• 18:18
  SPEAKER_00: Part of our broader narrative about the gold space is about that you know the amount of debt and things of that nature, the unsustainability of the debt.
• 18:26
  SPEAKER_00: Is it misguided to think that Canada or the US will not at some point perhaps change the rules of the game and seek to increase their government take from things where they can get increased take?
• 18:39
  SPEAKER_01: The probability of the fiscal regime in the United States and Canada changing to reflect higher resource rents is 100%.
• 18:48
  SPEAKER_01: Uh in the United States in the 70s, as an example, when the oil price went up, the U.S.
• 18:53
  SPEAKER_01: government instituted something called an excess profits tax.
• 18:56
  SPEAKER_01: They didn't institute that in the motion picture business or the cosmetics businesses, other high-margin businesses.
• 19:02
  SPEAKER_01: They only did it uh to extractive industries.
• 19:05
  SPEAKER_01: The nature of what government does is that they harvest low-hanging fruit to distribute to voters.
• 19:12
  SPEAKER_01: The same thing happened in cal in in Canada and Alberta during periods of high resource rent.
• 19:17
  SPEAKER_01: So the probability that the fiscal regime in the United States and Canada changes is 100 percent.
• 19:23
  SPEAKER_01: There's a second question.
• 19:25
  SPEAKER_01: Which is to say prospectivity is often higher in geological terrains that haven't been explored as thoroughly for political reasons.
• 19:36
  SPEAKER_01: Uh part of my success in resource investing has been that I accepted more perceived political risk in return for less geological risk.
• 19:48
  SPEAKER_01: That still seems to me to be a good trade-off.
• 19:50
  SPEAKER_01: If you are an issuer, sometimes it's in your interest to take less political risk because it lowers your cost of capital.
• 19:59
  SPEAKER_01: Uh in other words, exploration capital and development capital is cheaper in the United States and Canada.
• 20:06
  SPEAKER_01: I question whether a lower cost of capital, looking for a lower quality reserve, is a trade-off that one's that is worth one's taking.
• 20:16
  SPEAKER_01: I have found that owning a deposit worth stealing in a country that you might believe might steal it is better than owning a deposit that's not worth stealing in a better country.
• 20:30
  SPEAKER_01: Uh in other words, I would rather have a very high-quality project in a country that was regarded as gamey, particularly where I believe that the market's perception with regards to how gamey it is is wrong.
• 20:44
  SPEAKER_01: I learned from the Lundine family to accept political risk in terms of in return for Tier 1 exploration potential.
• 20:55
  SPEAKER_01: We made money, a lot of money, uh, in Malaysia, we made a lot of money in Sudan, we made a lot of money in Libya, uh, we made a lot of money in Congo.
• 21:08
  SPEAKER_01: Uh so I have learned to be more tolerant of political risk, but not to accept technical risk.
• 21:14
  SPEAKER_00: And uh London Gold, of course, is making a lot of money in Ecuador.
• 21:19
  SPEAKER_00: Now, the August surge in metals prices has lifted the value of the top 50 mining companies by an estimated 357 billion US dollars back to over 2.5 trillion dollars.
• 21:31
  SPEAKER_00: Um, this means in some ways that for many investors they have recovered from the uh, let's say, the religious experience they had when markets sold down when President Trump began his war with Iran in March.
• 21:43
  SPEAKER_00: You warn speculators not to confuse a bull market with investment skill, nor to confuse a price with value.
• 21:51
  SPEAKER_00: What can people do?
• 21:52
  SPEAKER_00: Do you think what can investors, what can these speculators do to check, to a fact check or reality check that they're not becoming susceptible to?
• 22:00
  SPEAKER_00: To these things, these confusions.
• 22:03
  SPEAKER_01: I think the most important thing is to educate themselves on what makes a good mining company and to study the company.
• 22:11
  SPEAKER_01: In other words, think and work.
• 22:14
  SPEAKER_01: Two words that most investors dislike with some passion.
• 22:17
  SPEAKER_01: Price information, I would suggest, has little relevance if you don't have an opinion as to value.
• 22:23
  SPEAKER_01: When somebody says to me, XYZ company is worth$4 today, when I ask them, that$4 doesn't equate to worth, it equates to price.
• 22:36
  SPEAKER_01: Money is made on the delta between price and value.
• 22:40
  SPEAKER_01: The single most important thing that most investors and speculators could do today would be to form an opinion as to the value of the companies that they invest in, and then look at the discrepancy between price and value.
• 22:52
  SPEAKER_01: If a company is selling at a discount to what they think it's worth, they should buy it.
• 22:57
  SPEAKER_01: If the company is selling at a premium to what they think it's worth or what it's about to become worth, they should sell it.
• 23:02
  SPEAKER_01: But most important most investors conflate price and value, and they're two very, very different terms.
• 23:07
  SPEAKER_00: Okay.
• 23:08
  SPEAKER_00: One sort of final item about looking at emerging markets, and I want to bring in uh collective mining.
• 23:15
  SPEAKER_00: They're one of the participants, one of the sponsors of the Rural Symposium in July.
• 23:19
  SPEAKER_00: They announced a maiden resource yesterday for their Apollo deposit at their Guayabales project in Caldas in Colombia.
• 23:26
  SPEAKER_00: Total resource of 85 million tonnes at about two grams per ton, containing more than 5 million ounces of gold, equivalent in all categories.
• 23:35
  SPEAKER_00: A very big maiden resource there.
• 23:38
  SPEAKER_00: Half of that is gold, the rest being a combination of silver, copper, and tungsten.
• 23:43
  SPEAKER_00: Rick, 5 million ounces, more than 5 million ounces.
• 23:46
  SPEAKER_00: That's a bold initial statement for a maiden resource.
• 23:48
  SPEAKER_00: With another 40,000 meters of drilling completed since the cutoff date for that resource calculation, Guaybales Apollo looks like it's gonna get much bigger.
• 23:58
  SPEAKER_00: Ari Sussman, the executive chair, talks about it's gonna be at least a 10 million ounce district.
• 24:03
  SPEAKER_00: Rick, half of that resource is gold equivalent.
• 24:06
  SPEAKER_00: What other sort of hidden traps for investors of companies that report gold equivalents?
• 24:11
  SPEAKER_00: Um, and I'm thinking in terms of potential recoveries, the metals prices they use, etc., all these things that go into a calculation with all those commodities there, that's quite a long gold equivalent calculation.
• 24:24
  SPEAKER_00: So a lot of potential for trips and force, perhaps.
• 24:28
  SPEAKER_01: We should do a half an hour discussion about that in particular.
• 24:31
  SPEAKER_01: There's a lot of lessons wrapped up in that, but we don't have an hour, we don't have half an hour.
• 24:35
  SPEAKER_01: So let's think about a few things.
• 24:37
  SPEAKER_01: First of all, that five million ounces equivalent is, as you suggest, a spectacular maiden resource.
• 24:44
  SPEAKER_01: Does the investor believe that that will grow or not?
• 24:48
  SPEAKER_01: That's the first question.
• 24:50
  SPEAKER_01: The second question uh involves what would the likely front-end capital costs be?
• 24:55
  SPEAKER_01: How much of that uh deposit is accessible via open pit, where two grams is extraordinary, how much of it is underground, where that resource might be that that that resource number might be extraordinarily bad.
• 25:08
  SPEAKER_01: The second goes to processing.
• 25:10
  SPEAKER_01: Uh you talk about gold, silver, copper, and tungsten.
• 25:13
  SPEAKER_01: Do they report to the same stream?
• 25:15
  SPEAKER_01: If not, what is the metallurgy worth?
• 25:17
  SPEAKER_01: Is the tungsten actually worth anything given the cost to extract it?
• 25:21
  SPEAKER_01: These are all important discussions to have, but make no mistake, uh starting off in geologically permissive terrain, which they have, uh, and reducing, uh producing, pardon me, a major, uh, a maiden resource that has the potential to be tier one with upside, particularly where some of the upside is achievable with with meters that have already been drilled, is important.
• 25:46
  SPEAKER_01: Uh that goes to a larger question.
• 25:49
  SPEAKER_01: Uh exploration speculators need to be looking in terrain that is not thoroughly explored.
• 25:57
  SPEAKER_01: Uh I'm not trying to say that Chile is done, but to say it hasn't been explored thoroughly in the last 40 years would be a misnomer.
• 26:03
  SPEAKER_01: One can increasingly say that about Peru.
• 26:06
  SPEAKER_01: When you talk about Argentina, when you talk about Ecuador, when you talk about Colombia, you're talking about what is, in effect, virgin terrain with modern exploration technique and with very large exploration budgets.
• 26:17
  SPEAKER_01: What Collective had the courage to do, and what ARI has done for now 10 years, is uh apply uh modern technique in a place that hadn't been thoroughly explored.
• 26:29
  SPEAKER_01: And he's getting the resort, he's getting the rewards for that.
• 26:33
  SPEAKER_00: It does seem Rick that the market is perhaps a little bit um skeptical about that.
• 26:39
  SPEAKER_00: Uh the company sold off about 10% this morning.
• 26:41
  SPEAKER_00: Its market cap is now 1.4 billion US, still very large for uh um uh an exploration company.
• 26:48
  SPEAKER_00: Um there's a lot of infrastructure in the region where the project is, just a literally a stones throw away.
• 26:54
  SPEAKER_00: Aris mining is building uh a large underground mine at Marmato.
• 26:58
  SPEAKER_00: So it does seem to be they are in a district where mining can, large-scale mining, modern mining can occur.
• 27:05
  SPEAKER_00: And I think a large part of that initial resource is an open pittable resource.
• 27:10
  SPEAKER_01: And I think uh, in one sense, we need to turn the discussion around.
• 27:15
  SPEAKER_01: Uh I live in Puget Sound and you live in Medellin.
• 27:20
  SPEAKER_01: Uh Antiochia is a spectacularly mineralized province.
• 27:24
  SPEAKER_01: I've I invested in Mineros de Antioquia, now Mineras, when it was listed on the Colombian Exchange 30 years ago, but a lot has changed.
• 27:33
  SPEAKER_01: The arguably the sociology of Antioquia, particularly Marmado, has changed.
• 27:39
  SPEAKER_01: Uh, arguably the infrastructure has changed, and arguably Colombian politics took a turn for the better very recently.
• 27:49
  SPEAKER_01: So I would turn the question around and ask you what you can say with regards to being a Colombian resident uh about the increasing outlook for mining in Colombia given the changing politics, the improved infrastructure, and the changing sociology uh of that province.
• 28:07
  SPEAKER_01: The first time I went to Antioquia, uh I was informed very, very, very overtly of the kidnapping risk, saying we have to take you in by helicopter, we have to take you out before anybody knows.
• 28:19
  SPEAKER_01: Uh obviously, uh that was to marmato, by the way.
• 28:23
  SPEAKER_01: Uh obviously uh not a warning that's conducive uh to large-scale investment.
• 28:30
  SPEAKER_01: So perhaps I could turn the question around.
• 28:32
  SPEAKER_01: What can you tell me about the efficacy uh of exploring and developing an Anti-Achia?
• 28:37
  SPEAKER_00: Well, uh, first off, I'm not used to being put on the spotlight.
• 28:39
  SPEAKER_00: I'm used to asking the questions and answering them.
• 28:41
  SPEAKER_00: But you make a valid point.
• 28:43
  SPEAKER_00: I think there's uh definitely a perception, there's a lot of optimism with the new government.
• 28:50
  SPEAKER_00: There's a belief the government's going to get behind mining and mine development, natural resource development in general, including coal, including oil and gas.
• 28:59
  SPEAKER_00: One of the first things the government did was to reinstate the exploration concessions of Angler Gold Ashanti's Quebrona project, which the previous government refused to renew at the end of the year.
• 29:11
  SPEAKER_00: That was a very good indication of intent.
• 29:15
  SPEAKER_00: And I think there's a real feeling that the next four years is the real moment to advance your projects, get things done.
• 29:23
  SPEAKER_00: Um we get the permits or apply for the permits you require from the government.
• 29:28
  SPEAKER_00: In its announcement for its resource collective, they also said they're accelerating their permitting timeline.
• 29:33
  SPEAKER_00: I think they aim to apply for their permits mid-next year, so they've very much accelerated that.
• 29:41
  SPEAKER_00: Angler Gold Ashanti, they're gonna be in a position, I think, to apply for their environmental licence within the next year or so.
• 29:49
  SPEAKER_00: Their aim is hopefully to get through the permitting process, whether the outcomes positive or negative, to get through that during this administration that's gonna have a much more positive viewpoint about mining and its potential.
• 30:03
  SPEAKER_00: We've seen a number of companies do quite significant raises for projects in Colombia recently.
• 30:08
  SPEAKER_00: I'm thinking of Tiger Gold, thinking of um giant copper, Frank Druster's uh copper vehicle in in with the McCoa project in the south.
• 30:18
  SPEAKER_00: So there is a moment of positivity, but I think uh time will tell.
• 30:24
  SPEAKER_00: There's a lot to be done, and some of the you know, it's relatively easy to reinstate an exploration concession.
• 30:30
  SPEAKER_00: Getting projects permanently and across the line, that's going to take a bit more or quite a lot more effort on the part of government and the companies working with communities to get the all-important social license to operate.
• 30:42
  SPEAKER_00: And all of this, I think, within a context.
• 30:46
  SPEAKER_00: Um, I mentioned that um you know, Collective has a market capitalization a couple of days ago it's 1.6 billion US pre-resource today, it's 1.4 billion.
• 30:55
  SPEAKER_00: Um, and the producers in Colombia, Mineros, who you mentioned, Aris Mining, who I mentioned, these are companies that produce what, two, three, four hundred thousand ounces a year.
• 31:05
  SPEAKER_00: Um, they've been trading at a 50% or more discount to their peers, similar-sized peers in North America.
• 31:12
  SPEAKER_00: The Colombia discount has been quite significant for the producers.
• 31:16
  SPEAKER_00: And it seems maybe that uh now that Collective is having some sort of concrete numbers for people to pin valuation on, they're going to start being susceptible to that country discount as well.
• 31:27
  SPEAKER_00: A lot of potential, but a lot to do.
• 31:30
  SPEAKER_01: Uh I would agree with all that.
• 31:32
  SPEAKER_01: Uh I believe that the operating numbers that ARIS turns out, uh, if the Colombian government can resist the temptation to rape and pillage, uh, will allow Aeris to recoup a fair amount of the discount between themselves and mining in other jurisdictions, if not being competitive with the Abatibian Nevada, at least being competitive with West Africa, uh, and arguably, with the exception of the worst of the African jurisdictions, Colombian production on a enterprise value to net present value basis trades even at a discount to their West African peers.
• 32:09
  SPEAKER_00: Okay, well, let me sort of close this particular segment with a bit of shameless self-promotion.
• 32:13
  SPEAKER_00: I'll be hearing from all of these companies at the event I'm organizing in Colombia in November, the 10th and the 11th of November, the CGS conference in Medien.
• 32:22
  SPEAKER_00: Um, Rick, as as we sort of wrap up our session today, what commodities, what metal commodities are you most bullish on at the moment?
• 32:30
  SPEAKER_00: Or to perhaps rephrase that, um, if you had to sell something today, what would that be and what would you buy with the proceeds?
• 32:37
  SPEAKER_01: I'd like to turn around a little bit and focus it towards your audience because I've been investing in natural resources for 50 years.
• 32:43
  SPEAKER_01: Uh my portfolio is fairly fulsome.
• 32:46
  SPEAKER_01: Uh most of the world is underinvested in physical gold.
• 32:50
  SPEAKER_01: Physical gold preserves wealth.
• 32:52
  SPEAKER_01: It's a basic savings product.
• 32:54
  SPEAKER_01: Uh people need to save more, and they need to save more of the more in physical gold.
• 33:00
  SPEAKER_01: If you believe as I do that the gold price is going to go up, gold companies are selling, I believe, at the greatest multiple, pardon me, the greatest discount to net present value relative to the gold price than they ever have.
• 33:14
  SPEAKER_01: Ergo, uh, I think people should own more gold stocks.
• 33:17
  SPEAKER_01: I don't need to own more gold stocks because I own boatloads of them, and I have for a very, very, very long time.
• 33:24
  SPEAKER_01: In second place, uh, I would say, even despite the elevated prices as a consequence of the uh conflict in the Gulf, that the best extractive industry in the world in terms of return on capital employed is the oil business.
• 33:39
  SPEAKER_01: Uh people have avoided the oil business.
• 33:42
  SPEAKER_01: Really, on the say-so of that date that uh noted energy physicist Greta Thornburg, who suggested to us that uh peak oil demand was going to occur in 2030.
• 33:53
  SPEAKER_01: It's not.
• 33:54
  SPEAKER_01: Most people are underinvested in oil.
• 33:56
  SPEAKER_01: It's a very, very, very good business.
• 33:58
  SPEAKER_01: So I would suggest to people after the gold business that they paid attention to the oil business.
• 34:04
  SPEAKER_01: I don't want to leave copper out, though, either.
• 34:07
  SPEAKER_01: Because it's uh even without data centers, it's important to note that we are going to have a supply deficit, an increasing supply deficit for years.
• 34:18
  SPEAKER_01: And there's no way to address the deficit.
• 34:21
  SPEAKER_01: Uh Paul, we've referenced earlier uh mining week.
• 34:26
  SPEAKER_01: Uh when I say earlier, I mean in in earlier interviews, mining week in London uh at the end of 2025.
• 34:33
  SPEAKER_01: It was estimated at that conference that the top ten copper mining companies in the world need to invest a a quarter billion dollars in constant 2025 dollars to maintain their outlook.
• 34:47
  SPEAKER_01: Their output, pardon me.
• 34:48
  SPEAKER_01: The problem with maintaining their output is we have a current supply deficit, and that doesn't take into account the increase in copper demand.
• 34:55
  SPEAKER_01: I see zero way in the world, save a synchronized global depression, that we aren't rationing copper by price five years from now.
• 35:04
  SPEAKER_01: So I would have to say for most people, gold because they're underinvested, uh, oil because it's a great business, and copper, because both time and arithmetic support the investment.
• 35:16
  SPEAKER_00: Thank you, Rick.
• 35:17
  SPEAKER_00: One sort of final question on this bit.
• 35:19
  SPEAKER_00: Um oil is at$100 US dollars per barrel today.
• 35:23
  SPEAKER_00: Um, the the dividends that oil companies pay are very, very generous indeed.
• 35:27
  SPEAKER_00: With copper at record prices, the dividends that copper companies pay become quite eye-openers as well.
• 35:33
  SPEAKER_00: Um, in comparison to oil and copper, gold dividends are really, really bad.
• 35:39
  SPEAKER_00: Why are gold dividends so bad?
• 35:42
  SPEAKER_01: Because people buy gold companies for optionality of the gold price.
• 35:46
  SPEAKER_01: They buy them as proxies for the commodities.
• 35:48
  SPEAKER_01: They buy copper and oil more as yield vehicles.
• 35:53
  SPEAKER_01: Uh so copper companies uh and oil companies uh are bought more in relationship to their total return to shareholders, where gold companies are bought for optionality.
• 36:08
  SPEAKER_00: Okay.
• 36:09
  SPEAKER_00: Now um Beaver Creek, the Precious Metal Summit, is just around the corner.
• 36:13
  SPEAKER_00: I'll be there.
• 36:14
  SPEAKER_00: Kitko will be there, we'll be doing a whole bunch of interviews with the CEOs.
• 36:17
  SPEAKER_00: Um I know you're not gonna be there, Rick, but uh around Beaver Creek, a number of companies, there's a flood of news coming out, results being released.
• 36:26
  SPEAKER_00: Um, although you're not gonna be there, what companies are you eager to see news updates from?
• 36:32
  SPEAKER_01: Let me tell you a class of companies, rather than companies in particular.
• 36:36
  SPEAKER_01: I believe that we're gonna see a continuation of the orgy of MA that we've seen.
• 36:42
  SPEAKER_01: And I would be shopping at Beaver Creek for takeover candidates.
• 36:46
  SPEAKER_01: Takeover candidates will occur in two fashions.
• 36:48
  SPEAKER_01: One strategic, which is to say companies where, if they were taken over, they would enhance the acquirer's ability to utilize existing assets.
• 36:57
  SPEAKER_01: Companies in the Abitibi that are within 50 kilometers of an Agneco Eagle mill would be a classic.
• 37:05
  SPEAKER_01: Uh, but the other kind of company that's going to be taken over is going to be tactical, which is to say companies that get bigger enjoy more index buying, enjoy more passive buying.
• 37:16
  SPEAKER_01: The recent takeover, as an example of Orla and before that, Caliber by Equinox are classic examples of tactical takeovers.
• 37:25
  SPEAKER_01: Were I attending Beaver Creek, and I really wish I were, my uh mission to be there would be to understand companies that are selling at a discount to where they should be on a net asset value basis, given their stage of completion, where they are either strategically important to an acquirer or would make a nice tactical tuck-in acquisition.
• 37:52
  SPEAKER_01: And there's going to be a lot of those companies there.
• 37:54
  SPEAKER_00: I believe you're right.
• 37:56
  SPEAKER_00: Unfortunately, that's all we have time for this week.
• 37:58
  SPEAKER_00: Rick Rule, thank you very much for joining me again.
• 38:00
  SPEAKER_01: Always a pleasure, Paul.
• 38:01
  SPEAKER_01: I look forward to your reports from Beaver Creek.
• 38:03
  SPEAKER_00: Excellent, thank you.
• 38:05
  SPEAKER_00: And for our viewers, if you like what you see, don't forget to hit that subscribe button.
• 38:09
  SPEAKER_00: I'm Paul Harris, and this is Kitco Mining.