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  I'm Charlotte Mloud with investingnews.com and here today with me is Tavi Costa, CEO of Azuria Capital. Thank you so much for being here. Great to have you. >> Thanks for having me. Looking forward to this. >> Me as well. And I think the first thing on the list, people may notice that we introduced you with a different company. So maybe you want to share a little bit about your new venture and the goals there. >> Yeah, that was a a company that we're going to be investing in a few different

parts of the market. Uh mining is going to be a specific area that I want to be uh invested in. These uh strategies are going to be sort of aiming to deploy capital for the next 5 to 10 years. These are macro themes that I believe will unfold in markets for the long term. And I really want to make sure we deploy the capital the best way we can in those areas. So one is going to be mining, one is going to be energy and another area is going to be emerging markets mostly Latin America. So uh initially it's going to be funded uh

internally and then um at some point we're going to uh take external capital as well. So that's that's basically we're going after. It's going to be a fun time. Yeah. >> Yeah. Yeah. Very exciting. I think a good time to be starting something new and we'll try to get into all the three topics that you mentioned there. I thought we could start with your PDAC presentation from yesterday since that's where we are right now. We're at PDAC. I didn't get a chance to see it, but the

title is an inflection point for commodities. Can you describe that inflection point you're seeing? >> Yeah, I mean this was a tough one because we have to come up with the title four months before the presentation. So, um I'm I'm glad it's still relevant. Uh because it is relevant. I mean, I think we've seen gold prices go up a lot. >> Commodity prices overall have actually uh not kept up with with gold prices. And I do think we're going to see a major catch up. Um and so we are in an

inflection point for a lot of other commodities outside of metals. Even I think energy is starting to have a move, but when you start seeing uh energy uh commodities begin to move, you start to see also agricultural commodities do the same. And so there's going to be a lot of opportunities in different parts of the resource market. But I'm also very excited about things like copper. I think copper is on the verge of a major uh move as well. Um, we've seen gold, we've seen silver sort of establish

themselves in prices that I think are historically elevated obviously and mining companies are still yet to catch up to those levels when it comes to their margins are just exceptional in in these prices and so we haven't seen yet the equity value be rerated at at these uh at these price uh uh that we're seeing for metals and so that's going to be a big change and so I'm I'm really excited about all those all those parts but the inflection point in in commodities overall as we see gold

prices staying here is going to be a big uh investment thesis in my view. >> Well, and I think what might make sense to talk about in that case. So, where do you see gold in the cycle right now? We'll have all these other points following on from gold, but where do you see it at the moment? >> Well, I think there's a sense that gold has gone up a lot and and won't go up anymore. And I I don't believe in that at all. Oh, I think there's the structural demand is coming from central

banks. They still own about 20 to 25% of their balance sheets in gold. Historically, you tend to see it up to 70 plus% when they reach to a peak. So, there's a lot of room. You can also look at the gold market relative to overall market cap of equity markets. I think we're somewhere close to um you know, multiples away from prior peaks. The mining industry today is about 1% of overall global equity markets. Back in other eras when the mining industry was as relevant as is becoming now was

somewhere close to 11%. So a 1% to 11% is multiples from here. So there's a lot of um a lot of movement still ahead of us in my view. I think there's a lot of uh skepticism over the sustainability of these moves and I am not skeptical at all. I think I think we're I think institutions are catching up with the idea of owning metals, owning resource companies and it's a very complex industry. So it drove the market quite a lot recently because it's a small market but there's lags. I mean I think this is

a very capital intensive industry uh and it's going to be it's going to be attracting a lot of capital. This is going to grow tremendously in my view. So this is the time to be in my in my opinion just you know heads down trying to find your best projects and your best ways of expressing these opinions in the markets because it's going to be a long-term trend in my opinion. >> I think that's definitely a theme I've been hearing specifically here at PDAC is the larger institutions from outside

the sector are now just starting to be ready to come in. So when you look at gold and silver in terms of the prices, do you have price levels in mind or just upward? >> No, I don't I don't usually >> for me my own principles of investing. I don't think of from a price target standpoint. I guess I'm not smart enough to figure it out where the prices go. But I think from a sort of think about having a checklist of things that you tend to reach at the peak of the cycle.

So we'll give a few examples. when production begins to inflct higher in a significant way, supply will increase. Obviously, it's going to have an impact on prices. One, we're not seeing that. We're seeing contraction of of supply in most cases. When prices go up a lot in metals, there is also a rush towards discoveries and then you tend to see, you know, sort of a period of discoveries. We're not seeing that. I mean, especially in gold and copper and silver, those three metals, we haven't

seen any discoveries whatsoever. So, that's another aspect. capex. A lot of people tend to look at capex nominally, but you you got to look at capex relative to GDP, size of the economy or inflation adjusted. You can also look that relative to gold prices. And I you know that number is still, you know, really low, very depressed. We haven't seen that yet. M&A, we're seeing some M&A happen between the senior companies, but we're not seeing that go down to the path of senior companies is starting to

buy a bunch of juniors. That's yet to happen. So sort of wake me up when all these things are there and and then I will I will certainly change my view and you can also look at metal prices relative to money supply um and other factors that you can look at in in terms of I'll give you another one gold reserves in the US relative to federal debt outstanding. So today we're about 3%. So if you think about it the US debt is backed by 3% of of gold reserves. back in the 1940s was over 50%. So can

we go back to that? I mean these are big numbers and so as we see that unfolding I think I think the price is is you know is yet to reflect these changes. So >> I think it makes a lot of sense to look at it like that and I want to go back to the point you made about the lack of discoveries in gold, silver, copper. You had a good chart about that when it comes to gold on X the other day. So why why is that? Is that because we have found all the ones that are easy? Is it a lack of capital for juniors to explore

some combination? >> What is going on? >> I think it's the latter because there's plenty gold to be found. Of course, it's becoming geologically challenging to find gold discoveries. I'm not saying it's easy by any means, but there are discoveries out there to be found. Um, surprisingly, I'll give you one stat. If you look, the S&P Global has a a way of tracking exploration budgets for companies in Canada, which is majority of the the sector. And you can see that

it's at a 4-year low. So, we're we're seeing metal prices, silver prices go above 100 for the first time in history, and then we have gold prices reaching 5,000 and still exploration budgets are falling. So, you know, I think Pneumont just fired most of their exploration geologists. I mean that that's I'm talking about their exploration growth aspect of arm of their business. And so we're not in a world where um companies are desperate to find new discoveries yet which is kind of shocking actually

because of prices being so high. What level of price do we have to see until people start really you know dumping capital into this this early stage of the industry? So I don't know the answer to that but I'm paying attention to it. And the fact that we are not seeing any capital come in, that's a leading indicator for discoveries. So if there's no capital coming in, there's not going to be any discoveries. And so yeah, you can kind of time it that in the next 3 to 5 years, there's not going to be much

of a change. Maybe seven years, not much of a change of supply. So um where we have a crunch in a lot of different metals for sure. >> Right. Right. Things do move so slowly. So you can project that out into the future. All right. So we're in this situation. We've got gold moving. The rest of the commodities are going to follow. And we'll talk a little bit more about that in just a moment. But I wanted to bring up the US dollar in this context because we've talked in the past

about how it's facing a major long-term decline versus other currencies. >> Yeah, it's scary because not scary, but it's it's just part of macro cyclicality and how there are some secular trends happening right now. Gold is one of them. But the second one that I think people need to pay attention to and open up their eyes for is the derivatives of the gold trade. And one of them is the depreciation of the US dollar. Not just versus hard assets, but also versus other fiat currencies. A lot of people

have dismissed that opportunity of, you know, thinking that maybe the Canadian dollar or the Canadian peso is going to rally. Uh, and it's possible. I do believe it's possible. the Japanese yen could rally and most of the the the sort of uh you know normal people that follow markets outside of the macro people um don't believe that that's that's a reality and it is a reality. I mean we're seeing emerging market currencies do better than than the dollar. I think that a stability of the currency outside

of the US is going to be a very important theme for investing. In other words, the US economy is in a situation where in my view has to do two things. I mean, it's got two major issues. One, a deficit problem on the fiscal side and a deficit problem on the trade balance side. To fix those two problems, you needed to I think you need to do two things. One, lower rates. No matter where inflation is, no matter where labor markets are, you got to lower rates substantially. And the second thing is going to be to weaken the

dollar. So that's going to be the green light for investing in emerging markets in a big way. We're seeing that already happen in the last um call it six to 12 months. But I I think that that's going to accelerate over time. This is a structural change in the market that people are not paying attention to. And I get excited about Latin America because I think on top of it all, you also have a political shift happening in that whole area. It's Argentina, it's Paraguay, it's Bolivia, it it will

likely be Brazil, it will likely be Colombia. we're seeing in Panama. It could be in Mexico one day. I mean, look at what's going on in Mexico. It's going to be pressure for a new political leadership there at some point. And so, I'm excited about that whole region because I think it's going to be a big investment opportunity, >> right? And we've talked about that opportunity in the past. Maybe you can detail, remind us how somebody might go about getting exposure to emerging

markets like Latin America. Well, I would think from a always from a a standpoint of of of reallocation of capital. First of all, when you think about the dollar weakening, I would say that will have an impact on USbased assets, capital that will flow out of those assets and go into other countries. So, there's going to be opportunities elsewhere, even in Europe, believe it or not. Um and then you can think of emerging markets is kind of your risky bucket of the rest of the world. 80% of emerging markets index is

in Asia. And so there's going to be a rotation within emerging markets from Asia likely into places like Latin America which are only 7% of the emerging markets index. So that's why I'm so focused on that. It's like it's like looking at mining and saying it's only 1% of the overall market cap of of the global equity markets. And so I think that's going to be an important trend. I would also mention another thing. Let's look at Brazil specifically. Brazil has about same GDP

it was in 2013. Okay. So over 10 years same GDP it was back then actually was slightly higher. It begs the question why is that? And and the most normal answer people will give I know people are thinking about that would be it's the dollar and it is the dollar. The dollar had an impact on that. The dollar went up too much relative to the real but another thing is is interest rate environment. The interest rate environment in the country is about 15%. That's your risk-free rate. So you as a

company would be actually borrowing money at I don't know 25 30%. How do you grow a business with those rates of cost of capital? So once we see the US economy having to lower rates substantially, it's going to open the door for the U for Brazil and other economies to lower rates too. Once we see that, it's going to unleash those economies in a big way. I do think that's you want to be looking for interest rate sensitive assets. Real estate is one of them. There's others um in those areas that would be unlocked a

lot of value that have not been unlocked for for many many decades. So yeah. >> Yeah. Yeah. I said this earlier in a different conversation, but there's a lot of rotations going on right now. >> I want to go back to commodities. So, we have gold and silver. They're moving and we're looking at what's going to be coming next. And I'm hearing a lot about oil and gas, the energy sector, and you mentioned that as one of the places that you want to focus. So, what are you

seeing there? How are you how are you approaching that right now, those markets in energy? >> Well, energy is interesting from a lot of ways. is I mean it's very underowned uh in regards to even in the US base assets if you look at the US base assets energy is one of the lowest ownerships across sectors um I would say you're also looking at the drill drilling activity in the US which tends to lead production is contracting by about 30% in the last next in the last two to three years which will have an impact on

on production eventually um and you look at the futures market uh which we can look at how much speculators are betting on things and we had not too long ago one of the most shorted positions in history. And so there's not many themes where you have this sort of again a checklist of ideas that sort of telling you well you should maybe pay attention to this. And so when I saw that I started buying a bunch of derivatives call options on energy companies. And then the last thing I would mention, I

mean there's a lot more to mention, but the other thing I would mention is if you look at a chart of gold miners, uh, they've been going up. If you look at a chart of copper miners, they trend very similarly, but they lag a little bit gold. So when gold prices or gold miners went up, copper miners have started going up too now. And if you look at energy companies, they are sort of like lagging slightly behind. And we have seen a 2-year consolidation and now starting to move. I think it could be

explosive. I think a lot of people are dismissing the opportunity. A lot of people think that, you know, electrical vehicles and all those changes are already being priced in oil markets now. And I disagree. I think I think there's going to be lots of opportunities in the next few years here in this energy space. And so I've been very focused on that side of it. I think you can make money on the midcap and the large cap. You can still play derivatives. I think there's opportunities in oil itself or

gas, net gas. Um, refineries look attractive. You can even play the game of buying a mix of ideas. You can buy energy in emerging markets and you're playing both, you know, like petroast for instance and and other companies. And so, yeah, I think there's a lot of attractiveness in those in those thoughts. >> Yeah. Yeah. I think that gives people a lot of ideas on how to approach it. And just to be clear, so when we're talking about energy, are we looking specifically at oil and gas and related

things? Okay. So, not not so much the uranium side of things. >> I mean, I like uranium. I'm just I just think that uh in this case specific that I was making the case for was was energy related to oil and gas. But uranium looks attractive too. I mean, it's been um a good trade over the years and and it is also in a structural trend. So it's one of those just like emerging markets if you see a 10 15 20% pull back it's one of the things you want to be deploying capital again. So um yeah I

mean there's a few of the these trends and every time you have an opportunity market will give you an opportunity you come in and you know so yeah it's still attractive as well. So >> yeah it makes a lot of sense and I'll I'll just briefly mention copper and take a look at how you're approaching copper right now. I've tended to hear about it as a longer term story, but it feels like the narrative is being brought forward for various reasons. So, what would be the time frame you're

looking at for copper? >> I think in the one or two year horizon, copper is sort of where silver was not too long ago and you saw this explosive move here that could happen here. Um, certainly. And the reason for it is because we hit a phase that is called a discovery phase. when you get a discovery phasing price, none of us know where it goes. And it could be, you know, it could be a double, it could be more. I I don't know. But, uh, and it could be a little less, too. Um, but I I think it it could look very explosive.

That's why I'm I'm very um opportunistic about that. And I would mention another commodity because if you look at a course like all commodities in the last year or two years of performance, you're going to find the laggers. The laggers are not a problem. They're usually an opportunity. So you want to pay attention to that bottom. And that bottom you're going to find agricultural commodities. And when energy turns, which is turning, >> agricultural commodities turn too. So

I'm paying attention to a few things there. Yeah. >> So we're talking like pachsh, phosphate, that kind of thing or something else. >> Or corn, >> you know, things like that, too. So um >> yeah, I mean there's there's plenty plenty ways to play it. Um, and for those that understand those markets, I think there's going to be opportunities there. I mean, think about it. You got natural gas prices going up and then you have fertilizers, ammonia prices go up

and then eventually drives uh the situation with agricultural. So, that's why they're all linked to each other. And when you see something lagging substantially and you are potentially in a long-term cycle for commodities, you want to pay very close attention to the laggers. They're usually your best bet for the next one to two years. Yeah. Yeah. I think great takeaway and I just want to go back to silver. You mentioned maybe copper could be looking like the next silver. Everybody wants to know

what that could be. You had another good chart that is essentially comparing >> silver miners to silver ratio and it's it looks like it's at a low point. So what does that tell us about the price and the miners? >> It tell us that the market thinks that silver prices at these levels is unsustainable and I don't believe in that. And so if you want investing mining companies today, you have to answer that question. What's your view on that? My view is that we're no longer

in an environment where silver prices will go low like they were in the last two decades. Meaning, are we going to go back to $25 an ounce environment? I think it's highly unlikely. Some people will tell you that silver has already crashed from 120 and it's on the way down. That's not my opinion. If that's your view, miners are pricing that. If your view is maybe we'll stay where it is now. Right now we're maybe even going back to 100. I mean it's it's you know it's at a 85 and 90 and now went close

to 100 again. I don't know. Your guess is as good as mine and this is why I like the miners because the miners at this environment what who cares where it is? Some of these companies are have margins better than Google, right? I mean a lot of these companies are mining at about $15 $17 an ounce. If you're selling them the commodity 80, 90, 100, I mean, what type of margin is that? So, it just feels like that operational leverage in the market of mining is just not being priced reflecting the price

correctly. And I think I think it's going to be a lot of rerating in that aspect. So, >> yeah, I think that makes a lot of sense. And we're coming to the end. I'm going to give you before I let you go, my fun question that I'm trying to ask everybody. So, if there was a young person, yeah, they're new to the resource sector, they have $10,000 they want to deploy, how would you tell them to do that? >> $10,000, how they would do it? Um, I think I think I would deploy

in different H that's a good question. I think I would put some maybe $3,000 or so into um agricultural commodities. uh just because the timing of things, I would put another three three to 4,000 into energy and I would look for some maybe copper miners as the remainer. Um yeah, I think that that sound Yeah, I mean that would probably be one place to to to to be separating the capital. I mean, I'm just trying to think here out loud, but yeah, I like I like the symmetry of agricultural. I like this the the the

trending of energy and I like the long-term idea of mining. So, I suspect that mining that agriculture will be your most asymmetric path in the next two two years or so, but you said long term. So, I think mining looks very attractive for long term and could be your biggest winner. So, um >> Yeah. Yeah. >> Does that answer your question? >> Yeah. I think I like to hear the thought process, too. So, thank you for for handling that one. >> You know, I think there's a lot of, you

know, I invest a lot in exploration and exploration is you you you make a bunch of investments on things and and you make several mistakes, but if you get one right, that's that's what pays off everything, all the mistakes you made. Macro is very similar and people get very political and they they eventually never looking for something that is exceptionally cheap. When I apply macro analysis into markets, there's a few things that look exceptionally cheap today that could be extremely asymmetric. Again, I could be

wrong in three of them and if I get one right, it's going to go on. One of them is agricultural for sure. The second one, people are going to call me absolutely crazy, is TLT, call options. In other words, treasuries, long-term treasuries, because nobody believes that the interest rates are going to fall substantially. So, if you take the risk on the long end of the curve, which everybody's going to call me crazy, I get it. That is very cheap. Number three is Chinese equities. I know Chinese

equities is a second order effect, third order effect on the dollar weakening trade. dollar weakens, Chinese equities could explode. Now, of course, you do this call options because you don't know, I don't know if they're going to invade Taiwan tomorrow and you know, you lose all your money. So, if you do through call options, you know what you lose. And there's a fourth one that it's going to surprise you. I also like call options on German banks. That's very nothing to do

with resources. um these things you just they are exceptionally cheap. These are very very cheap two-year options that if you get one of them right, it's just um you know that's how you make most of your capital. So I like doing these things every now and then and I have this sort of kind of derivatives account that I I play these bats and it it works really well because you always get one right. If you get one right then then it sort of makes up for your losses and so because they're cheap, right? And it's

not because, you know, you you're playing a cheap market and nobody believes in it. I get it. Nobody believes in it. That's fine. But if one of them is right, it's it's a exceptional investment. So, yeah. >> Yeah. Yeah. That's really interesting. I guess if people are calling you crazy, maybe that's a good place to be. >> Oh, I love being called crazy. Yeah. >> Yeah. Well, okay. I will let us wrap it up there. I'll send you back out unless you had any very very final thoughts. Um

I don't have any final final thoughts um aside from being very focused on those these three big trends that I think are going to be remarkably important for investors and also the fact that we >> I keep thinking about a world if you think about all these trade ideas that I mentioned they kind of fall in the category of beneficiaries of two things awakening dollar and or falling interest rates in the class and so that's that's where I come from in terms of my views. >> I think that ties it together nicely.

So, thank you so much for taking the time. This was great. >> Thanks. >> Okay. And once again, I'm Charlotte Mloud with investingnews.com and this is Tabby Costa.