What Recent Rise in Gold Price Means for Mining Industry and Investors with Brent Cook | SNN Network



this is Robert Kraft and I'm your host on SN Network and today for this Wall Street view I have Brent Cooke from exploration insights regular on the program we've had him on the podcast as well as doing interviews like this at conferences so with that Brent welcome back how you doing hey thanks thanks to be here Robert good to see you good to see you too it's been way too long my friend well I guess you waited until gold hit 1400 to call me back I mean now you know it hit mainstream right I mean that well with that but before we get into some of the recent news and kind of covering what's going on in both the macro for gold and other commodities you know for those who don't know what your background tell us a little bit about exploration insights right my background I'm an exploration geologist economic geologist I've worked in something like 70 countries across the world for major mining companies for juniors been involved in bank studies audits feasibility studies as well as grassroots exploration in ninth in 1997 I joined up with Rick rule of Sprott global as his analyst and subsequent to that started writing exploration insights an investment letter focused on the mining space took in the junior space that was in about 2008 and three years ago Joe Mazumdar another excellent job smarter than me joined up and is taking over a lot of the dollars the writing and exploration insights the letter is about basically what we are actually doing with our money in the sector what we're buying selling avoiding plus comments and such so the only money we make is what we do in our investments as well as subscribers that's the letter and that's us perfect well you know so it's been like I said about I think a little over six months since we had you on and got your insights as to what's going on in the markets you know it's it's you know I you can attest this I hit you up to do this interview before this week you know but you know with the news this week about you know gold having some bigger days and then in the last couple years you know what's been going on let's give everybody who hasn't seen the news what's been going on in gold and then maybe some of the implications from from a macro perspective right well in terms of US dollars goal is within or at its six-year high but gold in other currencies and seventy two other currencies is at its high or close to its high all-time high so gold has really been strong and everything except the US dollar US dollar and and gold are basically reciprocal and I think what we're seeing here is that it's been coming for a while in that the US dollar is the most liquid and viewed as a safe haven investment on a global basis so when there's any fear countries people go in to the US dollar US bonds that sort of thing but what's been happening is slowly over the past couple of years faith in the US dollar and the US economy and in the US policy basically has been going negative if you will our our allies can't trust us anymore we're reneging on deals the policies are erratic for instance speaking today we were 10 minutes within bombing Iran and Nelson decided not to bomb Iran I mean these sorts of inconsistencies and uncertainties are really causing the rest of the world to view the u.s. newest economy and the US dollar you know somewhat worse the suspect light and so what's happening is they're moving into goals what goal is the big safe haven and I think that's about that should continue over the next you know next while so so then you know for as you said on here and also when you talked about the reciprocal relationship with the US dollar and gold and and how gold is seen really as this safe haven I mean it has this been you know for the last few years because as as some of us may know you know gold and some other commodities or it's really been a tough market right and and so I mean are these some of the things that you know gold bugs people who really follow gold and that's where they they know and like to invest I mean are these some of the things that they've been waiting on to see not not hoping for necessarily but waiting to see well certainly on the you know the debt us debt is a huge issue and there's no way let's pay that back but we can continue printing money and inflating our way out of this that's going to get harder if foreign countries aren't buying our bonds so it's you know that's that sort of thing starting to happen in China is the biggest holder of US currency outside of the u.s. well that's a bit of a problem too and that they've got us in a situation where if they wanted to they could start dumping dollars or not buying our debt and that would be as well so you know those things have been happening for a while and and that's kind of what the gold bugs have been watching but with the US Federal Reserve's just recently stating they are probably going to cut rates indicating exploding economic you know global economy and such plus the problems in the Middle East and trade wars etc all that starting to pile up on it and that's kind of why it's happening now got it so then what what's the implication then for the gold industries as for miners companies that are mining for gold that are drilling for gold you know what what does this mean for them well I'd say for half the gold miners probably this goes straight down to their bottom line this is you know six percent increase in the gold price or let's call it $100 increase in the gold price is a hundred more dollars per ounce that they're making and that's probably half the companies the other half the companies they've been struggling as soon as they get a rise in cash flow they're gonna fix up what they have been avoiding not fixing and lower so you got to be careful which companies you buy if you're looking for an increased cash flow but it's certainly a positive in terms of companies mining gold and it gives the miners more leverage if you're more current you know in terms of currency and cash to buy the deposits that they need because that's really to me that's that what we're focused on exploration insights is these companies are mining in the order of 90 91 million ounces a year and they're finding in the order of 40 million ounces a year this has been happening for the past decade so there's a deficit there that they need to fill by buying and putting new deposits into production as their old ones start to die off and gap that gap is really key to people investing in this sector especially the Junior and exploration side of it so that's the relationship right now is that these majors are still looking because we talked about this a couple times on here and in that you know majors are stout now looking for minors to add to their portfolio so that they can you know hopefully they bring these these projects along to eventually become a mine you know so where are we at currently I mean what are some of the key things that the majors are looking for in these mining in these junior mining companies as potential acquisitions that's a good question I think I think that's an important point as well as the past two or three years we've seen major mining companies investing more and more into juniors in terms by in terms of you know joint ventures or actually equity placements that sort of thing doing it in there being very selective and they're doing it in companies that have land packages that are large enough that it makes a difference if they discover something mm-hmm generally what they want is a whole district so if you can make a discovery they'll pay up for that discovery if the land package in geology is such that they can see you know additional discoveries coming down the road as they continue exploring that land package so looking for land packages they're looking for a geologic environment that is conducive to multimillionaires deposits if we're talking go older you know multi-billion pound copper deposits that's the thing they're looking for big deposits that they can put into production and will last 20 years down the road mm-hmm consider if some company makes a discovery today it's probably two to three years before they drill it define it another two years of studies to make the economics right another two to three years of permitting depending on what country and location you're at and then the race and the money and building it so on average it's taking ten to twenty years from discovery to production for a decent sized deposit and and and that's only if the company as a junior stated junior you know even even if they but but if they joint ventured with these major mining companies does that process does it get expedited or is this still take that long it still takes that long I mean one company were invested in that was active in in Serbia made a discovery this is reservoir minerals with their joint venture partner and it took probably six years to define it and get it ready and another two years before was bought out by one company and then outbid by another company and and that's sort of what you want to do we ended up I think we started off with a 60 second investment and this thing was eventually sold for a little over $9 mm-hmm but there's got to be a big solid deposit so how did the major mining companies then forecast this because if it's you know these can be long bull and bear cycles so how do they forecast like all right Gold's going up now now I'm interested that doesn't make any sense you I mean you guys are all-natural contrarians why would they go in now if they've seen a spike and then and then look at it just help me figure this out I don't think they know I mean really you're looking at the economics of a potential discovery mm-hmm and your number one input is call it the gold price but you know that's not going to be in production for call it 10 years so you're looking 10 years out and trying to decide what the gold price is going to be so I think generally what you use is close to spot right now let's call it 1,400 and the assumption being that you're going to have a good enough to pause it that you're all in in costs are below a thousand so you've got a $400 to play with there and with gold and certainly with copper and other base metals the fact that we're findings less than were actually finding not enough to replace what's being mined you've got to think that the gold or copper price is gonna be going up in order for them to put these into production and sell the copper and such at a reasonable price so I think you know the project of you know looking forward with ignoring this two dips the busts and booms these prices are going to continue going up and that's kind of what companies like Rio Tinto and BHP are looking at and for full disclosure you shareholder and bhp or Rio Tinto know they're way too big for me well another question that we always talked about on here is and you actually alluded to this a little bit already is the finding of new discoveries you know and how difficult that is to find and it sounds like that equation is made even harder because the majors are really only looking for district scale type projects you know so help me out here I mean what are you seeing right now in terms of the I guess the business strategy for these junior miners when they're going out to look at potential new discoveries and then wanting to juvey like how is that working right now yeah well I think if you know they're people watching this or thinking much time to invest in mining companies or junior exploration companies you've got to understand that there are probably a third of the companies listed in Canada that are just going out and recycling old crap hoping to get enough money you know to pay themselves and maybe make the stock run somehow and get off you know get it off on a double you got to be real careful of those there's another half or a third that are just not doing anything useful at all and there's another third that are probably doing that that are doing good solid work where they're conceptually coming up with ideas and targets that offer the potential of a major discovery now the problem we face is that you know in the late 90s most of the world opened up to exploration so there is a flurry of discoveries because we could go into other countries in Africa and Europe and South America and these deposits were more the sitting and surface ok we've run through those and then lastly Landsat imagery came in and they gave us the ability to see alteration and such in areas we hadn't been before so there was a third the skyways after that but now we're at the point where I would guess 80% of discoveries are gonna may be made under blind conditions meaning we can't see the rocks we're looking for they're hidden by something else so you're taking geology from one environment call it you know you're looking at something in the Andes and you're projecting the geology the volcanic Skol it under more recent cover of lava or hash or something and doing some geophysical work and saying okay under this barren rock the geology is right for discovery but it's gonna cost a lot more and take a lot more time to do that so junior companies are now faced with how are they going to raise the money to do that exploration what would it cost used to 1 millions gonna cost 3 million so bringing in partners like new crest you know different coming Newmont Anglo they're coming in and partnering with these companies so that the companies themselves they don't dilute their shareholders out of the possible discovery but if they do make a discovery they've got a strong partner with the technical and financial ability to bring that into production and they end up with a call that 20 30 % of the deposit which is big win so and and for full disclosure do you own a the companies they just mentioned the things said new crest Anglo and Newmont no I don't I've to ask compliance number of companies their joint venture with ok those are sorts of things we're looking for is the ones that are you know 10 to 50 million market cap that if they make a discovery we've got a 10 bagger got it yeah yeah I was gonna say it like what you know I haven't asked you this in a while and for those again who this might be their first time seeing you know what what is your criteria other than you know 10 to 15 million market cap you know what are some of the things that you look for as a geologist because you have that background well certainly the geology has got to be right I'd rather see a geologic environment an office of potential of a real discovery that makes a difference you know there's a lot of people out there with nice properties but if they're even if they're successful if the risk the Lord isn't worth the effort you know they might make a discovery and find a vein that's got a million ounces that seven grams and in the end they've had to issue so many shares that despite the run-up in the market cap the share price is flat down that's the thing you want to avoid so so then adding that economic side to the economic geologists that you are you know it's not just about seeing a potential real discovery you also look at share structure you see how they've allocated their capital you see how much ownership it is so you really take some traditional value metrics when you're assessing what how the company is at least from a capital structure side of things certainly I mean that's that's key right that's how you make money stock I mean you know it took me a while and I've had some hard lessons I'm I got the geology up right but to stop wrong it's all got to come together got it all right so one one more question to when it came to the 80% of the discoveries that have been made that you know most of them at surface ones are gone you know one thing we've talked about before was going to various new jurisdictions to go and find new potential deposits or real discoveries I mean where we are right now is it loosened a little bit or is it gotten tighter why enlarge a lot of the countries that had opened up are getting more difficult it seems to be a counter cyclical thing let's do is when the gold price or copper prices ramping and a lot of companies come in and start looking for stuff and start finding things they look at it and decide we can get those tax them or do something to give our money out of that they usually do that as the mark as the bust is coming and so they're increasing taxes or making it more difficult to explore or costly to explore just when they shouldn't be so in general is getting tougher to find the right jurisdiction to make you know to go explore I'm ready discovery plus it's cutting word or dangerous some of the countries in the West Africa that we're opened up and looked pretty good like Molly or Burkina Faso they've kind of gone down downhill in terms of security in that likewise Colombia had opened up and looked real safe but it's gotten more difficult on the other hand I was in Japan just last year looking at some projects and Japan is just opening up so that's a great place to go look Western Australia is looking pretty good the western US well I should say Nevada Idaho and maybe Arizona or get to be exploring Canada is always good Quebec's good Alaska's good I mean you know there's still good places to be Chile Argentina is getting more difficult Nicaragua Zara you know you've gotta be you gotta know where you're going I mean I think any more restrictive because they just they see that you know prospectors are coming in and looking around and seeing you know good quality projects or it I mean is that really why they're tightening up because they want to keep they want to nationalize it and keep it for themselves or you know what's the what's the reasoning why it's like that it can't just be the price of gold going up no it varies from country country I mean Zambia now is trying to impose taxes and such on some copper mining companies down there in Ecuador the government local government tried to restrict mining in the mate and the national government came in and he said you know kind of put a halt to that so it's it's it's it's variable it's really variable you just have to know you have to know where you're going and what the policies are all right Brent so we'll wrap up here because I'm gonna see you very shortly again actually probably in about a month to get another update but you know until then you know what's what are some things to look out for that our Investor audience should know when considering maybe looking at junior mining share structure is it tight who owns the shares there's a lot in to come out on good news so you want to know who owns the stock and how much is likely to come out you need to know what sort of cash balance they got and what their funding requirements are I suspect over the next three weeks we're gonna see a rush of financings come in to these broke juniors so there's a bunch that he can fill money right the jihad' environment is it conducive to the people running it know what they're doing and can it explain to you I mean I think you're you're going to the Sprott conference is that right yep okay so I'll be there as well I'm so Joe that's a great place to meet companies and see what's really going on so I would definitely suggest anyone go to that Joe and I all speaking we're speaking two or three I think four times they're gonna have a couple of workshops and such so that's really the best way to do is look at that look at actually educating yourself and Vancouver is beautiful at that time of the year did better be well Brent thank you again for joining me today I'm excited to go to see you up in Vancouver as well where can my audience gonna find everything they need to know about you and exploration insights right it's real simple websites exploration insights calm there's a lot of information available their presentations things we've written about it's all there the subscription is monthly you can try it for month if it doesn't work for you quit and with the subscription you get to see everything we've ever written BA sold our history etc so you know go there and see what you think perfect and I'm gonna get you on Twitter one of these days I swear I signed up actually you did are you what's your account I don't know I don't see that I I don't get much value out how that use it I guess well you know will do I'll do a workshop with you in Vancouver that sounds good I'll see out there okay hey thanks Robert thank you

Author Since: Mar 11, 2019

Related Post