Gold news

 [Music] I'm Charlotte McLoud with investing news.com and curity with me is Don Hansen Don is a private investor who's been investing in the gold and silver mining industry for more than 20 years I think many people in our audience will be familiar with Don because we've done a number number of interviews over the past year focusing on his strategies for evaluating gold and silver stocks as well as building a portfolio for this interview today we're going to build on a couple of interviews

that we've done recently so we're going to start by going over some information covered previously and then we'll get into some new data from dawn on gold stocks so I will share my screen bear with me for a moment while I do that and if you can just prompt me to move to the next one when it's time okay um I wanted to start this particular interview by reviewing a couple of things that I did in two previous interviews with you um and let's start with and and and what I was looking for in this first one was

the relationship between gold and the S&P 500 and so what we're going to look at here is the SSV 500 from 1972 to 2000 and what this is defining is basically a cycle from bear to Bull as you can see the first um 18 years was uh basically a bare market for the S&P 500 it basically ended about where it started that's why the 0% on the other side and then the second phase of course was a bull phase where it was up 220% for 10 years one other comment I would like to make about this is and I don't

show this but uh there was another cycle almost identical to it that went from 1945 to 1972 27 years of course I didn't really get into it because there there was no gold price change all those years it was $35 an ounce so was a straight line but um the interesting thing about that was that that Cycles 27 years about 17 years worth of a bear for the S&P and then a 10 year from about 19 62 to 72 was a bull market and uh so we have I think uh more credibility for the fact that there really is this 25 to 27e cycle that's

going on with the S&P and we're now and when you turn up the next one on the S&P uh the next slide you'll see that um we're almost at the end of the Third cycle this one starting in 2000 and and uh now of course it's 2024 so we've got a a cycle that went to 2014 again where we got back to where we started on an inflation adjusted basis remember and then the bull phase of course goes uh from 2014 to 2024 now and shows a 93% increase that actually if we uh would update that

to April the increase would be something like 100% but a lot less than the bull phase for the previous cycle if you remember in the earlier one it showed a 220% increase for that bull s and only about 100% here and the reason for that is that the GDP was growing in the US in the 1990s very rapidly we had like 5% five or six% a year GDP growth and so naturally you would have a greater growth in profits and sales and everything for the S&P 500 stocks in this last bull cycle the GDP growth was

M 2% or less and and and there's a significant reason for that that we'll get into uh subsequently the that's but let's look at the gold ones because I'm I'm gearing all the Cycles based against the S&P because it's the master cycle it's an enormous Market versus the gold market gold market is just responding to it so but let's look at the gold as well and here we have the opposite of the S&P for that first 18 years gold was up 187 but down in the last 10 years at

negative - 47 then let's look at the um the next one and there is the the 2000 that 2 214 we see that the gold was up within a bull phase is Up 179 and interestingly enough even in its bare phase when you compare it dsb was up some and so you would say well gee why is that that the bare phase for gold was a negative in the first cycle but a positive in this cycle and there's a very simple explanation for that prior to 2010 between 1990 and 2010 the world's central banks were selling gold

every year starting at around 2010 they started to buy every year and in the last two years 22 and 23 they increased their buying by 100% they went from 500 tons a year to 1100 tons a year so you're that's the reason why even in a what we would call a bare phase because it was alternating with the bull phase of the S&P it still was up anyway because of of that factor and there's another interesting one here to look at the um the gold of phase actually high and low is a little offset

from the S&P which is not a surprise but if you look at the January 2012 and you'll see that the peak of that cycle was 2360 and where we are right now in April is about 2350 so it's it's and and way these Cycles tend to work is that you you're in a bare phase until the uh variable whatever whichever one it is gets back to where the previous Peak was and that seems to be the trigger point that then the market says oh we're to the raises again and so we are like right now at

that point so I thought that was interesting as well so then the other thing that I was thinking about as I'm looking at all this and saying gee the price of S&P 500 is going up the gold is going up what's the US dollar doing because they're both denominated in dollars so that's what we're looking at so then we'll go to the next set of slides this is probably the most important slide on to show anybody today and that is that we have the US money supply the M2 is plotted Against Time

all the way from 1970 into U well 2022 was my last number but the interesting thing is how clearly the growth follows the uh what is it exponential growth curve and that that's a really big deal and um it's a big big deal for a lot of different reasons but it seems to be inexurable it's just going to keep going up and it's now starting to approach the point where it's going vertical and uh let's see the next slide then you'll see something else that also looks interesting to it what I did in

this slide was I plotted the US debt alongside of it and and you can see how it tracks perfectly so what we're looking at is that the US debt has pretty much been financed by printing all the money I mean they they track right right on and we know that the US debt is growing at a very rapid level now uh in fact over the last 10 years from 2014 to 2024 the US debt in 2014 was 17 trillion and in 2024 it's actually almost 35 so it is going to double in 10 years what it took 200 years to get to in the

beginning so obviously the debt is going exponential and is is as the money supply doing the same because that's how they pay for it so um that's a really important thing to understand it's also the reason why the GDP growth was low I mean in the most recent bull market for S&P and and uh much higher in the 90s for the S&P because the level of debt is so high and what economists have learned is that when as the debt gets higher economic growth gets more difficult and when the

uh debt the GDP ratio gets over 100% which it is well over now then it becomes very difficult to get economic growth so that all fits in terms of okay why was that growth so much different it's because the debt level has been so much different in the last decade and then one more slide which we it finalizes kind of what we're looking at here is I plotted then gold against the money supply and it's fascinating to see how although the gold was kind of higher and lower uh at different points than

the U money supply curve uh back in the recent decade if you can see like 2015 would be the plot there where the gold and the money supply are very close and then the next two postings are almost identical so for some reason the market has had the gold and the money supply tracking right on the uh money supply curve so what that tells me is we should expect that the gold price is going to go up and it's going to go up faster and faster because it's an exponential curve so that was the context I wanted to

start with as we then get into what I wanted to discuss today which is the gold binding shares which we haven't talked about yet okay thank you so much for doing that I think that takes steps through our review of information and that helps set the foundation for what we're going to look at moving forward so we'll now move on to looking at your new data focusing on gold stocks so here we go with this slide and what I was interested in doing is relating again to gold as I'm doing it in all of this data

and the Hui is the uh the gold bugs so-called gold bugs index it was started back in 1996 and it's 100% gold miners and they're all the bigger ones and what you see in the data that I'm showing there during the bull market uh in gold in the early uh part of the the century we had an average on that ratio about 2.3 and then in 2010 but it was it started to go up and and then in 2016 we really got up so that was that number's a little off but uh anyhow the uh bull phase of course with

gold got started in the 2016 period and then more recently we're in the neighborhood of 8 and 8 and a half and within average over 2014 to 2022 of 7.4 so three times so what happened of course here is that we get into a bare phase for gold and the uh mining stocks uh were not uh keeping up with the gold price because of cost increases and and also and I think quite significantly the multiple of earnings was much lower and then that's normal in in Bull phases the uh multiple of earnings is much

higher than average and in the bare phases it's much lower than average for the S&P for example uh one of the reasons why we think that the bull phase in uh the S&P is about ending is because the multiple of earnings is over 25 with a long run average of 17 and if you looked at the bare phases in the S&B it would be down around 10 when it's in the the lowest point so we we think that uh that then the multiple on the uh gold mining starts is well below the long run average so they're just inverted like

they have on the rest of the Cycles but um the interesting thing then is I'm looking at the uh another way of of evaluating the uh profitability of the gold miners to compare it to what we're seeing above and I'm doing that uh using the gross margin which you've seen me do before Charlotte which is I'd like to do that because uh the Allen sustaining cost is uh abundantly available in all the data on the mining stocks they always have that in their corporate presentations everything it's very easy

to get it and it's a pretty good number the only thing it doesn't include in cost is GNA and taxes but that isn't necessary and uh I don't need to know all that and I've been using that for some time and it's a good uh way to get this glow margin which uh has told me a lot about Trends and even the degree of Trends over the years so I I like to use that so what I'm doing here is uh calculating the gross margin using the All sustaining cost and uh as a percentage of the gold price and so in

the uh bull market phase in the 20 2000s to 2010 oh we had that calculating around 50% well then we got down into the bare phase where um the uh gold price was down and that cost had gone up and we saw that that w got all the way down to actually 20% they are way down then we get back into um the current time and we can see that the uh gross margin has improved and now is the as of April 2024 it's actually 43% of the gross margin and yet the um ratio between gold and the Hui is still high it's in fact in April here it's

like eight and a half or thereabouts so I'm I'm asking myself why is that because that doesn't make sense and part of it is I'm sure because of the fact that the U multiple of earnings in a bare phase is much much lower than it is in a bull phase and so that probably explains most of it there's some issues with the cost but the cost in terms of all this stating cost in the recent years has been around $1,300 an ounce there's certainly some companies that are much higher than that but I don't

follow those anyhow because I don't I'm not interested in the high cost producers I am I'm fond of the ones that are on the lowcost side uh for a lot of reasons one of which is if times get tough they will survive and the others won't so anyhow there's obviously something there I think is a mispricing which will be explained uh as we go along with the fact that uh we get into a new bull market in gold and that should change so that there's a potential to see a substantial increase

in the gold shares gold bing shares when we get it into a gold bull market phase so um yeah I think we can see uh then when you go for all the way from eight and a half to two and a half that that's going to be a big a big shift okay then um once I came up with that part of it I'm thinking well there's certainly an opportunity for substantial uh profit if that occurs which I believe that it will because it always seems to when you change from be to Bull phase so then I I did something else that's what we can

look at the next slide where I just said okay how would I recommend and how do I practice the buying and selling of gold mining shares um based on the cycles that they tend to follow and so this Mr L per Lon came up with this a cycle many years ago he was the founder of fragma NADA which was the first royalty company company in the gold mining space and a legend in the industry and and his cycle really ended uh where where I have D and I extended that because of what I like to do in terms of investing that I'm

looking to um find companies that actually are going to move it up to the E level and he doesn't cover that most everybody is just talking about the first part of it that gets up to uh to the D level and so I'll talk about that and one of the things that I'm showing there is that there's about a 15-year cycle that goes from where the uh Explorer first is starting to drill holes and uh and find gold in the ground to where they're actually producing it is approximately 15 years on average for resource

companies that's a long time sometimes it's shorter sometimes it's longer depending on of the project on the location on the conditions in the market and the availability of funding and all that kind of stuff but you know over the long run all the experts at resource tell me that yeah it takes about 15 years when you start from scratch so that's my timing on that and what I'm looking at over here if we look at an exploration company that's trying to find gold has no Revenue uh I think that the a good place

if you can find one that has a good management and a good location and all that it has the prospects to do well if you can buy it at a point then that's a great time because you want to you want to write it up and the peak part is when okay they have found what they're going to find and uh they're ready to uh do the engineering studies and raise the money and all that sort of stuff and that is the period where you want to try to sell that be before it gets into what they call the Valley of the Lan so on

curve that is where as an investor you do not want to be and that can last for three or four years in some instances sometimes takes a long time to do the financing and and to do the permitting and and then the Staffing in fact the Staffing is a much bigger problem today than most people realize over the last decade because the uh gold market has been in a bare phase a lot of geologists and Mining engineers got laid off they retired they got a job in something something else and during that period of

time in fact very few young people studied you mining engineering and geology so now that we're starting another bull phase we think in resources of all kinds including gold and silver there's a shortage of such people and that's a big issue that nobody talks about very much but anyhow then if you if they get to where they have gotten the permiting and Fin Ing and Staffing going and it really looks good then the investor would want to buy somewhere in that c range where it's now starting to

go up but most of the it's been drisk as they say and uh so that's a good time if you believe they're going to get to that first plateau and then if you say they got there and the price is probably going to stabilize to some extent then the question is uh is there a company that has the potential to expand up to the next plateau and some do and not very many though and then those are the ones that I like and so I'm going to talk about those and my recommendations uh because those are ones that I think

can get up to that uh other uh plateau and so we'll look at the the next information then what I'm um showing here is the uh was I mentioned the buying at Point a and selling at B and so forth the criteria of course is at buying at a you want management jurisdiction and the ability to raise money which is probably the most important one because they're going to have to raise money for a long time before they get into production they're going to be raising money for exploration and and Staffing and and

everything that of course the other part is infrastructure and AA labor availability um you don't want to be in a in a location where you don't have power or water or all these other kinds of things and then the other thing you'd like is for this project to have size potential so that the bigger miners might actually want to acquire it if this people that are doing this exploration are not uh experts in building and operating mines they're two different skill sets so then if you buy

at Point C of course again we're always looking at financing but our management but then we got the financing completed permitting completed and Staffing in place then we're ready to go then at at at d uh again it's in profitable production but we have a significant production increase uh from the initial mine capacity to get us to that next Plateau okay here's the companies that I like and that I have my money invested in and I'm just pointing out where I bought them uh K9 2 and ays I bought

where they were already in production and and doing profitably well uh man Alamos and Rio 2 are not fully underway there but I like them a lot because of the management both of them have management that has been highly successful at doing the same thing they're trying to do now so they know what they're doing they've made the mistakes and all that and I'm very confident that they will be able to pull it off uh in terms of uh ays they actually in terms of management have the most extraordinary management team you

could imagine the CEO is a man named Ian Telfer I know you would have heard of him and and the CEO is a man named Neil woodier those two plus a man named Frank dustra over 20 years ago uh started a company called Wheaten river that evolved into two two companies that were highly successful one being the silver Wheaten which was the streaming company and the other being uh uh uh uh uh uh gold Corp which was one of the most successful minining companies in the Press plast past 20 years and Ian Telfer

was the CEO of that so these two um are this phenomenal and and uh they've been through it all they both are 80 years old but I'm not concerned about that because they have the ability to find really good people and the really good people want to work for them because of what they can learn and so they're able to hire the very best and and money raising money they probably both billionaires already anyway but so that's not even remotely an issue um and uh so I I like that one a lot and K92 as

well is excellent company that is operating in in um uh Papua Nini which is actually formerly a part of Australia an English-speaking company a country uh 95% Christian uh other mining projects there and it's a very high-grade mine all in sustaining cost in there is only $800 an ounce whereas Aris and all these other people that I'm on this list are closer to 1,200 so a really extraordinary company uh and and uh so I those are my personal favorites in the gold mining sector but I like them because they have this extra

opportunity to increase your Share value when they take that next step to get up to the uh third level that second level there I should say so uh yeah so the reasons why these companies can achieve significant uh increase in value the production increase which I'm saying here couldn't get three times the multiple of of earnings uh that we showed on slide three potentially could be three times a gold price increase of 50% it went from $2,400 now to $3,600 in two years that would increase

the gold price by 50% but the um gross margin by 100% so at two times and then I like them because I feel like the risk is relatively low low especially for the interest is issues such as financing permitting and stabing which is the Bugaboo of all the companies and the valley of thean curve that isn't there anymore so there's always risks in mining but I think relatively low and considering the potential that they have so that ends up being a lot of multiples you add it all up it's like eight times

so there's a lot of reasons to believe that this is a great time to be investing in mining stocks gold mining stocks particular now here I wanted to study where we were in terms of the current situation with um the market caps and gross margins and so what I did I've got the uh market caps for each of the companies plus another one did for uh comparisons purposes and then I figured the gross margin based on their uh expansion that's what they were were would be in 2026 if everything goes according to

plan and then I calculate basically a multiple of earnings using the market cap divided by the the gross margin and and I you can see that in the first two uh the it's only 2.4 in the other smaller companies it's much lower than that at 1.7 1.8 but um the thing that I would wanted to emphasize here is Alamos is a great gold mining company uh and they are operating at uh a C Level of five down below you'll see 540,000 ounces of gold per year but they've been there for a while they're right stable and the

market loves them and the multiple there is 10 well then you say oh gee if K92 and ays do what I think they're going to do they should get the respect that alabamos gets by that time and then you could see three or four times multiple in their share price now in in the Rio 2 and Manera it could be even greater but they may not be as high in 2026 but I still see them substantial growth potential and you can see in the bottom there what the 20 the forecast of production would could be the Alamos is 540 but K92 and

AAS are 400 and uh so they should be somewhere in the wallpark but the multiple thing it doesn't need to be 540 it's just the multiple of what the gross margin the gross margin is more because they produce more but uh in terms of being in in that category I should think that K92 and ays would be able to do that the uh rio2 and Monera are smaller but their gross margin would still grow and be what it if it is what they showed there then if he' got even a seven multiple it would still be four times for them so uh

that's why I I I like these four companies and I thought it was useful just to see well what does the rest of the market do with somebody that produces 500,000 ounces of gold and Alamos is a good candidate for that just to give the viewers an idea of well okay relative to what and I think that's a good uh comparison to uh to consider that was great I always I always love how you set the stage for what we're going to talk about and then give us the data and and this time some actual information that people can really use I

think to hopefully start organizing their portfolios so once again thank you so much for going through this it's just really helpful was there was there any other points that you wanted to cover yes I would like I would like to kind of summarize what uh I've done over these last three interviews which is that I'm very confident that we are about at the end of one of those grand cycles of which would be the third one here in the S&P 500 and that when that happens then we're going to go into

another bull phase and and and that is going to result in major increases in the mining shares which I have noted and then was once they get into my base then the multiples get higher and of course the you uh all with the if you buy the right ones that have the option of increasing their production in in near year two years or three years whatever something like that then you you're going to make a lot of money in other words what I'm trying to get across is that this is a special time in history that comes

around once a generation it happened back in 2002 or three and for me I was very fortunate and that's when I started to follow silver in particular and gold and I invested heavily in in that especially silver and it made a lot of money and and for me and allowed me to basically live very well without a paycheck for 22 years and so what I'm saying to viewers is this is an opportunity for you particularly if you sell your stocks and then put your money in gold and gold miners that you have an

opportunity to make lifechanging profits for yourself because I did it and I I lived through that I made some mistakes but but you know it's a good point to start if you aren't already doing it because it can make an enormous difference in your life and I hope that people will take advantage of that because that's why I like doing this kind of thing just to hopefully help other people because as you know I I don't get paid to do this I'm not selling anything I'm just trying to share what I've learned over

the last 20 some years so that people can hopefully uh make good money protect themselves in a view of things getting really difficult by a gold bullion uh and also just to summarize I tend to hold about uh onethird in gold and silver bullion and 2/3 in the mining stocks at a point like this and in terms of the mining stocks I do about two-thirds gold and onethird silver silver will go up because it always does during a gold bull market but it's more volatile and I would even tend to sell some of that whereas I would never sell

my gold bullion I consider that to be family wealth that should be held for a serious Emer of any whatever it might be uh that's what gold has been used for for thousands of years as family wealth that is there if there's serious issues that the family needs that they can get through and survive and prosper so anyway okay I think I think that's a perfect summary of all the concepts we've been going through and as you mentioned we've talked about these topics in previous interviews so as I

usually do I'll include the links to the previous ones in the video description so that people could hopefully go back and watch them and of course thank you thank you for me for for going through all of this information I find it really helpful and I think I can also speak for the viewers who I believe are also finding all of this helpful so thank you once again Don you're very welcome thank you you've been great to work with I really enjoyed it oh well thenk we'll have you back on at some point in the

future I know you're always looking for new topics so we Contin then perfect I will definitely look forward to seeing you then and once again I'm Charlotte moud with investing news.com and this is Don Hansen thank you for watching if you like this video make sure you subscribed to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music]