Gold news

 [Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Jo zunder editor of exploration insights thank you so much for being here great to have you thank you very much for inviting me yes it's really good to be catching up I think we last spoke in the summer of 2023 so it's been a little while and 2023 was kind of a tough year for many of the Juniors so I wanted to start there with just a little bit of a look back and talk about what trends you saw who was seeing success and and who was

not in terms of types of companies yeah I mean intersections like still high very high you know a couple of standard deviations better than the peer average those intersections still move the market um you know like like the Hercules silver intersection that ended up getting a private placement by baric near the end of last year um work done by uh Southern Cross gold ASX listed company that I visited recently in Victoria um uh so there are moments uh that you know that that uh that sparked the market but the issue in the sent like

it's a weird sort of environment especially for gold where the gold price is doing fairly well continues to do very well uh but the equities are not and and there's that dichotomy say where's the leverage and that leverage has died in the last latter part of last year and what I've seen is that some of that leverage died because people's costs have gone up and so the producers are having a harder time showing margin leverage because it's actually gone down their margin's not up um and then also

they can't show Reserve growth uh because of higher costs uh so people are looking at well you know gold price doing fine you know why aren't you doing great and those are some of the reasons uh but now people are going is I mean is everything very highly undervalued so I think this is a good moment to review the gold sector find those quality plays and and start accumulating because I mean the gold price is there you know uh and and then last year we had a lot of Central Bank buying you know even though

the real interest rates were going up gold was still going up because it was Central Bank buying and they don't buy equities so that would never spill over into equities so that's part of the reason that we didn't see the leverage but I can see that changing right and I think I think the followup after explaining the why of why we have that disconnect between gold price and gold stocks is so it's going to start changing any any further thoughts on when or what might cause that to change

well absolutely uh like for me in the uh in the junior sector more m&a would help and so we've seen m&a uh you know uh small m&a but now recently uh you know aseno resources is open pit uh I mean not huge high grade it's like one grish open pit grade in Namibia I think it was million plus ounces of reserves maybe over 3 million in in global resource um it got a positive bid from dunde precious metals which was a premium which was all good uh half cash I think half shares which is also good

but then last week or the week before last week uh they got a uh they got an extra bid uh a competing bid uh that was even higher and it was all cash so we start seeing multiple bids all cash that's a good sign you know we just and then people will start thinking well I and this was a development play you know because they had reserves that retail doesn't like they want the grass they want the expiration stuff they don't want development so it's nice to see and I think in this market the development

guys have been hit even harder so if you can find a quality development play now they a good jurisdiction that can get get funded this is a good environment that they could get taken out okay okay so opportunities in Gold stocks right now time for people to making think about positioning I want to talk about your presentation here at PDD as well I didn't get a chance to to see it unfortunately I got stuck here at this stage but you know the title why the nickel market sucks so we have to go

into that based on the title alone so why why does niichel suck well I mean niichel was down about 45% uh last year it was next to lithium carbonate equivalent in the Commodities ETFs and other asset classes I cover on a weekly basis in the letter that was the second worst performing asset and so I own one nickel play and then I started digging into it more to find out well what's going on here and as I dug into it you know then I'm finding that even though we nickel is a critical mineral we

needed for the EV batteries uh you know and the more nickel you have the denser the battery and makes the battery increases the longevity you could drive farther you know and it could hold more power so nickel's a great thing and what we were buying into before was a difference between class one nickel and Class 2 nickel like these will not you need this one but the investment in Indonesian nickel production which was about I want to say about $30 billion of announced potential Investments Downstream and Upstream you

know that's flooded the market with nickel and this nickel is going even though it might be lat right it's going straight into Chinese batteries you know and and that's basically flooding the market and also what we're seeing is China making less of the nickel batteries the nmc's and now they're looking more at what they call the lfps the lithium iron phosphate batteries and so they less demand from China and so you've got Surplus coming from destocking from China as well that's

layered on to over production from Indonesia but on a positive sign positive is you know at current market prices 35% of nickel production right now doesn't make any money if you drop that price down maybe another Buck like almost 70% doesn't make any money so these are drastic prices that that you know that that we're getting to and so we're seeing the production Cuts so we probably need to see those production Cuts hit the market for to us to get that overhang on the Surplus down and then potentially we can

then see uh you know production coming back up okay a couple of this is really interesting to me so I have a couple of follow-up questions so I was reading all these articles that were coming out the past couple of weeks about all this Indonesian Supply and then large miners who are having to make cuts and they're they're very patrolled by all what's going on and one thing that was mentioned is you know they produce a Greener product but people are not willing to pay up for that which is

interesting from an ESG standl so I wonder your thoughts there yeah well that's the thing is that you know you can go in and say hey we we we're doing this and this it's a little bit more costly I mean uh but it'll get you a green uh nickel commodity uh but the problem is that people don't care because I mean if you're a purchase manager and you're building a car you know if you can get something for a dollar you're not going to pay a125 for it because you want to keep your job so

that premium doesn't exist you know uh they want it but at the same price uh and then the other potential issue uh right now uh that could help the nickel Market is apparently permitting in Indonesia is getting harder that could slow down production there and the other thing is if people start taking seriously the IRA uh sub subsidies for electric vehicles and components because the big thing is Indonesia I'm pointing back here is Indonesia is uh does not have a free trade agreement with the US

and the Senate stopped that from happening so if they do not have a free trade agreement then you do not get that subsidy if you have an EV battery built in a car that goes to the states and you need it to be competitive in the states so then where do you get the nickel from cuz everywhere else is not producing at that kind of level you know so do these other projects start getting looked at or built okay very interesting and one one more point on Indonesia because you know we we've been fearing more about supply

chain security especially for these battery Metals in in North America and Europe and things like that and worrying about can we accomplish that and it seems like we've seen this really impressive ramp up in production from Indonesia and so were they able to do that just because maybe they have lower regulations or standards over there it seems like it's doable if if you put your mind to it I guess as my coin um yeah the the problem that I'm see with a lot of the nickel outside is it's

very expensive to build you know like the projects that we have in Canada are huge low grade we're talking you know two3 billion dollar for some of these you know and and who's going to fund it and none of these guys you might get funding from the K government you might get funding but that little bit of equity does doesn't exist and until the us or some of these other guys come and say we'll help you build it I don't know how these projects get built and the other problem that I've seen there's a really

good book that somebody put me on to called the war below about pering in the US and there was an interesting statement in there that the US Biden Administration is actually you know very PR critical minerals green you know energy and blah blah blah blah blah electric vehicles the problem is that they'll permit and fund processing but they've gone out of their way not to fund mining because they have to satisfy another part of their party that doesn't want Mining and so it's an interesting you

know conundrum that they're living in right now and then you know people are wondering well who what what what's going to go into that processing PL if you don't permit a mine and so I don't know if they've thought this completely true okay per perhaps not yeah okay that book is that's on my reading list so I got to push it up there okay thank you for going through that I think that helps me understand a lot and so nickel nickel market sucks okay we've gone through that there's other metals that

are kind of not doing so hot including lithium which we spoke about this past summer so maybe if we could look at other metals that you're seeing that are kind of in that situation what what is going on there well I think with with lithium specifically U you know 90% down probably but but we got to understand the 45% drop in nickel and the 90% drop in lithium are coming from very high peaks you know so we're you know we're coming down but you know we're coming down off youed now have to

be a lower quartile producer probably to make you know decent money but nickolls probably risk is technology so the technology to produce and the technology in the battery so one risk is the direct lithium extraction so if people start being able to use that commercially then potentially that'll put a lot of pressure on the sping stuff that'll be higher cost and might not be viable and if you know the exons and the oil companies start you know pumping out a lot of lithium from their brins like

they're doing in southern eastern states and the smack over you know then that could put more lithium on the market and if they start making newer batteries like the sodium you don't need lithium anymore and if you know Japan is not even using those lithium batteries they're using they're going straight into hyu so that's the big deal for me in in this critical mineral thing is that technolog is not constant so people have a risk in terms of a middle commodity or something like that technically they'll

look for a way to put that thing outside of what of the product if they can't secure the supply chain right and and on the technology angle we were were talking just before we turned the camera on about Ai and how it can be used in mining and I'm wondering if you can talk a little bit about that it's so it's so new and I will say I'm I'm an AI skeptic in many ways but I can also see there are ways that it can improve yes so I I wrote like a little bit of a negative comment on AI because there's an AI

Silicon Valley based company that's doing mineral exploration called Cobalt and they've been doing it for a while you know uh and you know big land packages and stuff like that but they need the data so they're getting data and they're trying to find and trying to make let's say exploration more efficient and because you know just like in the retail Market people have no patience exporation which you know could require 3 to 5 years the next thing they do is they they buy an old project for $150

million uh between upfront payment and expiration requirements in Zambia which is a known deposit and people have worked on it and walked away from it and now at indaba they were calling it a discovery so that does not paint AI favorably so people who are skep Skeptics would just say no but what I've seen is uh there are opportunities if you think about AI as a tool if if you if you refine it as a tool and understand it its limitations and and always looking at it uh it has useful applications yeah I think I think that's

an interesting one that we'll have to see develop so yeah I guess you'll be watching that as well yeah I mean the thing is I'm I'm already looking at bringing this into the letter potentially on using AI to model a potential resource tonnage and grade from drill intersections uh and see what the probability of of of this grade or that tonnage to see you know on a on a high level how big the thing could be uh and and if I could make that work with this guy who's developing it U that

could be a great tool for for people looking at inves in these companies where they only have intersections and there's no resource right and that's that's very interesting so that that does sound like it could be a great tool and then I think the important thing to remember with AI though is you do need that that additional context like you were mentioning with the zandia how people knew about this deposit and they know the other fact yeah yeah exactly but I mean but they were supposed to

come in saying we're using AI to to do Grassroots exploration this is not a Grassroots Discovery that's it you know you can say AI generated this yeah okay really good to make that distinction I think Okay so we've G kind of some overarching things that we're looking at and one thing I really wanted to bring up with you was this is an election year in the US but it's also an election year in many other parts of the world and I know you you keep a pretty broad look at what things are going on so for the

mining industry what should we be watching in terms of some of these elections well I mean the US elections obviously very big and on the mining side it's permitting like recently resolution under the Biden Administration uh a court has basically rejected you know the First Nations group you know uh that didn't want the the the permit of approved of uh for them um you know to advance their project and that was overturned um I think it probably can be you know um appealed again hopefully not U you know

then this project can finally get going um and it's a big deposit the resolution copper mine and and so that should be good and so if we can see you know and so people are waiting like if the Trump Administration comes in do some of these projects that are sitting on the fence start getting permitted so for some people that's something that they're waiting for and in in other jurisdictions like in Africa and that the problem is that you know even when you have an election some people don't

stick around for more than 18 months and you've can have the election but you that's going to change and then in companies that you know look for projects that are going to last 10 to 20 years that uncertainty is not is not comforting and it's not comforting for potentially the share owners or the investors that are looking to invest in Youth and so that's why nowadays because all of expiran expenditures have gone down specifically for gold less so critical minerals you know uh people are

putting more money in companies working in Premier jurisdictions so what I've noticed in when exploration expenditures go out then everybody gets funded so suddenly all the high-risk places in Africa and Asia and that start getting funded but when all the money comes in the Canadas the US the australas get all the money and everybody's left with like maybe 35% of their Peak you know so that's sort of what we're in right now okay and just to translate all of this information into something for invest

how are you strategizing in 2024 and again keeping in mind I know you're not looking necessarily for companies focused on Commodities where the price is going to go up you want to find companies that will be successful regardless so what is your strategy looking like well right now I mean because even though you want to find something that doesn't need the price to go up 20% to be viable you still need the price to be positive so you can get that sentiment behind so they can actually raise money the problem is most

of the things that we invest in are non-cash flowing constantly have to go back to the market so if the sentiment is there they can fund and their cost of capital is lower but if the sentiment is not there then the cost of capital goes up a lot and for so what I've been doing to sort of mitigate that risk of higher cost of capital because of higher financing risk is I've been trying to you know uh you know get out of companies that are in remote projects where the drilling costs are much higher

such that if they raise money they'll have less of a drill program and you know in Grassroots exploration you know the more you drill the better and so those guys are sign kind of restricted you know and so I I've tried to get more companies that are in places you could drill more year round and and cheaper you know so if you do find something or you know you have a better chance of finding it because you got you can you can you can drill more meters where okay that's interesting I I really have no

idea where it's easier or cheaper to drill any anything you can oh yeah I mean what's weird is that you know in in Idaho Southern Idaho in some parts of Nevada even though we're talking the US you can drive to the project there's no helicopters they're right now paying about 600 to 800 bucks a meter all in that is very high and so I think it's part of its labor I'm I'm not quite sure sure why it spiked but everyone's told me it's just gone through the roof and

and I was just talking to somebody in BC that's drilling uh you know in in central BC you know they can drive and everything like that no cams and they're paying maybe 250 us a meter you know like nothing compared to these guys so there's a bit of a you know CU I would have thought these guys would spend so yeah it's kind of weird yeah but if you're in the Yukon you know and you're remote you know easily a th000 bucks a leer Canadian you know so okay okay really interesting I think that's that's

all I was going to cover today but did you have any thoughts that you want to leave investors with uh you know as I'm walking along you know there's all this like getting back to critical minerals like you know that we had a lot of because the last time we had an interview uh was I think at bua at Rick R's uh uh Symposium and and uh one of the big companies I was getting uh talked about was meteoric resources Rare Earth ionic clay in uh in Brazil and so as I as I've been digging into more rare

earth and this could be important for a lot of these uh critical minerals is to know more about the individual markets to know what they're actually producing and to understand you know what the end product is because there's a there it seems to be a big difference between the light and the heavy rare Earths and what they present in terms of the battery and what the mind or the project has to produce and so to understand that better might make you help you with better decisions in terms of which of these

projects to pick if you're interested in in things like Rare Earth yeah yeah a lot more digging and that's probably why people love gold and don't like they stuff that's more complicated yeah I mean there's gold as one and there's 17 re Earth so yeah okay okay well maybe we'll come back and talk more rare Earths at a different time this was great thank you very much thank you very much of course and once again I'm Charlotte McLoud with investing news.com and this is jumar with exploration

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