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 [Music] I'm Charlotte McLoud with investin news.com and here today with me is private investor Don Hansen at pdac good to see you yes thank you delighted to be here it's been a great always happy to to have you here and I know that our audience is going to be excited to see you as well and maybe we'll begin it's kind of an interesting story how we decided to do this interview because we at first weren't we're planning on it right now correct totally spontaneous just from our

interactions of yesterday afternoon and and and uh last evening and so on and um and I'm really excited to do a spontaneous one where we just start to talk about the things of it I thought it would be interesting to explain to the audience how did it happen that we decided to do this because it resulted from the fact that I realized that a question you asked me yesterday when I went back to my hotel and had a one hour rest and I realized that what I told you was wrong and so I thought you know I

have to talk to her about that and correct myself and then we were lucky enough to meet at the party last night at the pureo uranium thing so anyhow the the issue that you asked me about was what impact the US election had on all the things that we've been talking about the gold price the stock market all that sort of stuff and my answer was it didn't have any and that's when I went back and thought about that and I'm saying that's not right that I've missed something big there and we need to

discuss that but I also might want to explain why I reacted that way if you remember in a previous interviews I had collected the US money supply data versus time over 50 years and there was a data point every five years and we you connected the dots it made a perfect exponential curve very smooth and I'm thinking well all sorts of stuff happened in between there but yet it was still steady so I guess it doesn't matter and the debt will held hands with the money supply and went right up right

alongside of it as well and so I think you know there's something going on here that doesn't seem to care about that but I think what I'm missing is the fact that those data points were 5 years apart but that there's a lot of things going on particularly because in the US our system is different than Canada and Europe whatever with we don't have a parliamentary system we have an election cycle that goes four years and so everything is built around that and the other thing that I

realize I'm I'm a great fan of Warren Buffett and Charlie Munger if you and there's a great quotation that everybody quotes of Charlie Munger who's now a deceased in his late 90s but he said when somebody asked him uh to explain what was going to happen in a particular situation and his answer always was tell me what the incentives are and I'll tell you what the answer is so in politics what is the incentive what is the primary thing that the politicians care about it's to get

reelected exactly yeah okay so okay so here you have a system that it has a four-year pattern to it and you want if to get reelected for the good news to happen in the election year right which means if you want are going to have any bad news you want it to happen in the first year exact so then I went back and looked at at political history let's see Reagan was elected in in in 1980 so first year 81 and he and he was there's a change of political party a new person that was terrible year I was in

manufacturing business we nearly went broke because it was a really bad year stock market went down and all this stff so you had that example then in 2000 we went from Clinton to Bush 2001 we had the dotcom crash and it was a really bad year then we get to the GFC 2009 we go from Bush to Obama 2009 was terrible then we get to 20 2021 and that doesn't happen and I'm but but I know the answer because the Biden Administration did something that nobody has ever done before in the US if you go and add up

the uh government spending annually it from 2016 17 18 19 divide by four you get 4.1 trillion average per year and it didn't vary enormously up and down okay and then you look at 2020 21 22 23 divide by 4 you get 6.5 trillion 57% of an increase that stayed up that high for four and without a war so you see what that Administration did was they basically prevented a recession by increasing government spending astronomically the whole GDP system isn't set up to deal with that and if you know how to calculate GDP which I

looked up of course 60% is got consumer spending 177% is business investment 18% is government spending so here you have an Administration that goose government spending 57% for four years and a lot of the money that the government spent gets spent by consumers so so is it any wonder that we never had any negative growth deals in GDP and therefore we didn't have a recession everything was wonderful right well of course that's nonsense it was all created and of course we then grew our national debt astronomically because

that money didn't produce anything so now it's 37 trillion and and it's unsustainable but I missed that issue because to see the thing is now we in another turnover with a new Administration from a different party and here we in this 2025 are we going to have the same thing happen absolutely because you have an unsustainable debt you can't keep doing that but you're really not going to be able to back it off very much for a combination of reasons which I'll explain but it told me that and then you

look and see what Trump is doing he's trying to clean everything up they're goingon to have layoffs they're going to have the terror all that stuff he wants to do right now so that in four more years there the his political movement which isn't really Republican anymore by the way that's that election was not about Republicans and Democrats it was about establishment and anti-establishment that's something a lot of people in the US haven't figured out yet but in order to to sustain what he's

created he needs for the really bad news to be over with in three or four years so and in 2026 when you have a congression elections again even if he loses to Congress it won't matter if he does something they want don't they want but he doesn't he'll just be to it so you know you can have a two-year period where basically nothing happens but he won't care because he did everything he wanted to do the first two years because that's what they always do and that's why the election mattered and that's

I had to correct myself as I'm thinking about this saying I told Charlotte wrong that ain't the way it works it's not going to Happ so I think the probability of is having a recession in the US in 2025 I used to think was maybe 25 or 30% now it's 75 or 80% maybe 90 because the other thing is that the US Stock Market is so extremely overvalued based on things like the Schiller PE which is a very famous and the um PE is like 35 or something which is normally 20 one or two um and 40% of the value of the S&P

500 is on 10 names 10 names and the US Stock Market and those indexes that are now the way people invest in the states most often it being so-called passive investing when those indexes take your money they're going to put 40% of it in those 10 companies that's what market capitalization waiting means a lot of people who are investing passively don't understand that that that causes those big companies to get yet bigger and bigger at an exponential raate and that's going to mean when that

it goes backwards it's going to be accelerated on the downside for the same reason it got accelerated on the outside but most investors don't know there and don't they don't understand that that was one of the consequences of being inde passive well you just buy the market and it'll always go up and everything but the other one that I would like about my slide number five if you'll remember where it showed where there's a perfect inverse correlation between gold and the stock market where

the stock market's in a bull Gold's in a bear and then they would re invert back and forth and they've done that routine several times and we're about to revert again and so yes we're going to the stock market's going to go down going it's so overvalued and and gold is already going up but and that's an interesting one because the last time we saw that in 2000 the stock market went down and it took several years for gold to go up so they don't happen to switch

at the same time but in that particular case there was a significant delay oh but I already know the reason you remember what the Central Bank buying and selling looked like okay so during that time the Central Bank were still selling so you didn't have a Tailwind on gold now you do and that's why the gold went up first before the stock market went down okay so I think it it's pretty straightforward why that's happening that way yeah so that's what I wanted do failure yeah that's that's so good and I

appreciate you coming back and you know taking some time to think come back and and tell me your your new thoughts and because it does as always it makes sense very logic when you lay it out all together and so also also part of our conversation because I think everybody always wants to to come back and tell them more and more we had said before you know the the interview we did in November in New Orleans was something that everybody should probably return to so I'll I'll have the link to that yes

so people can go visit it but just on the the golden precious metal side is there anything that you would want to leave people with just little little pieces of anything that you would want people to know right now okay um I think I don't think there's any question that we're going to continue to see gold going up because the money supply growth is still going on and and we're not going to be able to change that that's that's in in the cards the other thing that I think is interesting to me I am I

invest in silver too but not as much as gold and one of the patterns that I've noticed is they say well in a bull market for gold silver under overperforms but not until the last 15% and then it goes way up and then it stays there for six months and then it goes back down again because of the nature of of silver and the fact that 70% of it comes from byproducts and the concern about Silver's Supply is that we're doing the electrification deal right so we need a lot of copper guess where most of the silver comes from it's

a byproduct of copper production so how's the silver going to go I don't know I I believe in in silver and I think that it will do okay but the reason why I'm over invested in the gold sector is that it is truly monitary and the and the supply is what it is it goes up maybe 1% a year or less whereas silver is all over the place and you have another so I I like silver and I like particular silver companies but just a few and the ones that I like have a byproduct only of gold I'm I'm not

interested in investing in zinc and Lead yes yeah you know so and there's and there's four that I like one of them is pure silver the other three is the byproduct of gold that's just fine with me I'm I'm I'm good with that but the other thing I wanted to share about my own investing philosophy is that um I've realized over my 23 years of investing in the sector is that I haven't had much success in explorers and I talked about this in the past but the idea of making uh

investment decisions which is decisions that incorporate risk is to know how to incorporate that in your uh evaluation and calculation of what kind of return I can expect and that's the expected value and if you remember that I want to repeat that because it's so important and so many people don't think about it this way but it's it's absolutely if most people understood that they would never buy a lottery ticket and they would never go into a casino because the probability of them winning is really

bad that's why these casinos have palaces well they they they got that from your monies honey okay so let's do an example just to illustrate the concept we can say that there's an explorer that you really like looks good good location some pretty good grade daada da daada and you think you know I could make 20 times my money in that okay but what's the probability of it actually achieving that because of all the time that it takes and all the rest of it maybe 5% and that's probably generous people like

Rick rule say it's maybe two 3% so let's then the the expected value concept is take what you expect and multiply that times the probability so that would be 20 times 0.05 that gives you 1.0 right okay but why I'm attracted to what I am now is practicing what I preach and saying okay there's a lot of gold producers now that are making a lot of money and nobody's figured that out yet but the thing is there are some who actually have an exploration and development story under their

umbrella that when they bring that online it will increase their production by two three four times and they don't have permitting problems they don't have the financing problems they don't have the infrastructure problems they don't have all this other stuff that goes sideways plus being spuck in the Valley of the Lan curb and I always like to to talk whenever I talk about an explorer developers show me what the Lan curve for your company looks like because I like to see pictures and the thing is

with the kind I'm talking about there's no Valley because they're producing successfully so there isn't any Valley and that's that's where you get stuck that's where you get in the valley and then it takes them longer to get the permits it takes them longer to get the financing pretty soon they've deluded you to Oblivion and so they did hit it but by the time they did the the share prices ballooned and you didn't make any money so you need to think about it so

that like if I'm saying that a company like I'm suggesting could easily do six times my money because they're probably going to Triple their uh gross margin because of the increase in production and the multiples on earnings is going to go up because it's depressed now and the gold price is going to go up so I could easily see six times and yet the probability of that happening is like 60% 70% that's probably conservative well it was 60% that's 6 * 6 that's an expected value of

3.6 compared to 1.0 is that a hard Choice then well no but there aren't a lot of companies like that I search this place because most everybody out there is explorers I mean 80% at least explorers and developer there not that many producers a lot of them don't even show and some of them that I I like but I have four companies that I really like that are going to do extremely well and they don't have any value Valley of the lon curb that get stuck in so I'll tell you the names please do you okay so

let's talk about them one of them is called K92 mining it has a project that they think they producing 150,000 ounces of year gold now deposits in puua New Guinea a lot of people oh my God it must be awful it used to be part of Australia it's English speaking 90% Christian wonderful place and there's lots of gold mining there and and there and when they get through expanding in the next few years they'll be producing 450,000 ounces a year and yet their multiple on gross margin is low it's like two and a

half compared to Alamos which is my standard if I compare everything there's is 7.6 in a normal market for stock price mining stocks it would be 10 to 12 so we know that the multiples are really depressed so you look at all that and say h K92 has got in checks as all the boxes I really like that one another one is called G mining Ventures relatively new company uh has a great project in Brazil and also is going to grow into its resources and uh but extraordinary management team this company is is called G because there's a

a French family that g would I don't know how to pronounce French things very well but anyway the thing is that they have another company called G mining services and what that company has been doing is building big mines for big mining companies that's their business so when they decide gee I think we'll go into the mining business for ourselves that's when they got started to do that and the Market loves them because these guys are going to come in on time and on budget because they know how to do that

they've been doing it for decades and so that when again and and and AK 92 G mining low all sustainia cost the all checks all the boxes and and they' again have this exploration development under their umbrella and then another one is aerys mining that's that's similar situation not quite as attractive they have a little bit more debt and uh not as low a cost and so I don't I'm not as heavily invested in that one but the management is extraordinary in that the two men who

are the driving force and the primary shareholders one of them is Ian Telfer of the gold porp Fame who built that one another one is Neil woodier who's another legend in the mining industry and those two are doing it well they aren't going to have any problem with money they're probably both billionaires I far as I would soon Ian tord certainly would be okay and they're in their early 80s but I'm 84 and I'm still making it so I think they're probably going to do all right yeah but they're not as as

quite as attractive as the first two and then there's a fourth one that I like and it is not quite in production yet so it sort of deviates but it really doesn't and I like it for a number of reasons one of which that in previous four or five years when I wasn't making money on anything that management team made me money in a company called Rio Alto that was in um Peru I think or or Colombia I can't remember which but anyway but that's been five years ago maybe so I really was appeal to the to

the management man named Alex black and he acquired a property in chake and it's 5 million ounces open pit oxide it checked all the boxes and I I bought into it like four years ago the only thing that happened was that he got into permitting hell when the government in Chile went socialist and he got stuck for a year but now that's all changed and he's financed he's got everything going and it's an absolutely great project and it has big scale up potential it's going to produce

990,000 ounces initially but it can potentially as he builds that to go to 250 and it will be in production either late this year early next year but it's again it's open pit Heap bleach good grade you know all the the things so there's a lot less risk in the open pit Heap bleach projects and a lot less capex for them than underground and all you know all the all the issues with rat and and and this guy is a great manager so those are the four that I like the best but the most interesting one right

now actually is R2 because they're going to be actually in production sooner and yet their multiple is lower than the other three because they're smaller and they don't and they had a problem and and interesting enough I've talking about pering I've had two other investments in in in the mining sector that weren't in production yet that also ended up over the last couple years in permitting hell so I'm I'm you know one of them was in Nova Scotia another one was in um Mexico so this is the problem

with you know the exploration and development this is how the valy of the Lan curve you get basically stuck in it if you have financing or permitting or these kind of problems it's difficult so that's where my focus is in actually switching to these country companies where I'm managing my risk and and I really encourage more people to look at it that way because most people don't so you if you do that it'll affect the way you allocate your money so you'll do better well thank you so much and I

always I love how you explain the numbers because I'm not such a numbers person and the way you outline it always makes it even I can understand it so I always appreciate that this was really good I I will still encourage everybody to go back and watch that other very extensive interview please do because that it had all of the data that you really needed to know I had pulled into that particular interview it was like all the previous eight sort of came together with that but uh but things are

still changing and this is going to be a very very Dynamic year there's no question about it and and as you probably familiar with the fourth turning book okay as um Strauss and how said we were going to be in one now and we are and so that's why 2025 is going to be such an event for year so many things are going to happen but a lot of times people ask me well okay Don you're going to have all this stuff is going is it going to go on forever well of course not and that's because ludic Mami says

the eventual outcome of every Fiat monetary system is a crackup boom and that crack up comes when the debt level is unsustainable and that's where we are so all the things point to that and of course now the US is having to roll over a lot of debt because it was maturing of course it was doing that because the bite Administration couldn't sell de treasuries to the central banks the the amount of the dollar value of the Holdings of central banks of us treasuries is the same last year 2024

than it was in 2014 what did they do they bought gold with their excess dollars instead of us treasuries so now who's buying the US treasur IES it's very interesting there's there's three foreign buyers and I mean and you won't believe who the names the first one is London okay not that many people in the UK who who's hiding money there oh then then the second one is elstein okay then the third one is even more remote Cayman Islands right so you know the treasury is having a hard time

finding buyers with this stuff clearly yeah and the and the predicament that the US government has is they need the interest rate to be higher in order to attract buyers except the government can't afford higher interest rates because they can't pay the interest expense and and this is all magnified by the elephant in the room which is the um [Music] um the what I'm trying to say the popul population deal the domestic well I'm trying to think of the right word when the where the where when

in fact the distribution of Ages demographic shift the demographic shift okay well that's never happened before so that adds an enormous complication to this whole predicament about the fact that the monetary system has led us into this huge buildup of debt that now what how can we service that and yet we can't afford to have a rate so that that means that the government is going to have to do extraordinary means but this is the this is mis's crack up boom thing okay and and so how that's going to sort out and

the timing we don't know exactly but I think the probability of it shaking loose is probably this year and I know I you interviewed Rick rule a number of times one of his favorite sayings was something that's inevitable is not necess the imminent but because I'm in the probabilities I can say yeah Rick it might I don't know when except that the likelihood of sooner has just gone up a bunch because of the administration that's now in Washington because they're going to what they're doing is going to

force all those things to come into a big you know what are we going to do now and and none of the things that we do is is going to turn out nice of the difference between a predicament and a problem problems have Solutions predicaments have have nothing uh no outcomes that are nice and and we're unfortunately in one of those periods so but so how do we take care of and look after ourselves buy gold and the gold miners well this is I we can full circle there as we often do so I think that was

that was really good I so appreciate the update we can we can wrap up here and I'll send you back out onto the show floor pdac I know there's still time there's still time to take a look at some of the companies I I have looked to find the the special type they're just not very many yeah but that's okay that's okay because you know the the reason Warren Buffet was so successful is that he didn't believe in diversification he would he would find something that fit exactly what he

wanted and then he would go all in or in many cases he bought the whole company which he did in many can that's an insurance business and seize candy and I don't know how many others that he would do but that's what he did find the right one and then buy that instead of mixing yourself that's also why buying the index is lousy because you get The Good the Bad and the Ugly all in the same pot well or GDX why would you buy GDX do some homework buy the good ones and let the other people buy those other

guys that are you know that have an all in sustaining cost of 700 an ounce or whatever I like the ones where it's under a thousand that makes me sleep better so yeah anyway anyways well really good to have you once again and we'll be checking back in with you good and yes I'm Charlotte mclog with investing news.com and this is Don Hansen thank you [Music] bye for