Title: Michael Gentile: Gold Suppression, Bond Markets 'Revolting' & Why Juniors Will Outperform Show: Palisades Gold Radio (host Stein; show sponsored by Palisades Goldcorp) Guest: Michael Gentile (strategic investor in junior mining companies; co-founder, Bastion Asset Management; Saturday Morning newsletter) Date: 2026-09-19 (YouTube publish date; recorded the week of the Sep-16 FOMC hike) URL: https://youtu.be/nkIft2M-9iM Length: 50:45 Note: YouTube auto-transcript pasted by Stephen; fillers (um/uh, "you know" interjections) and stutters/false starts removed; wording otherwise verbatim; (mm:ss) cues kept in place. ">>" marks a speaker change. Garbles fixed: "Bassin"=Bastion, "Genta"=Gentile, "Wars"=Warsh, "Bessant"=Bessent, "Igno/Nico/Magneto Eagle"=Agnico Eagle, "Rison Mines"=Radisson Mining (Agnico's ~C$57-60M for ~10%), "Gallian Gold"=Galleon Gold (West Cache, going underground for a bulk sample), "group 11 resources"=Group Eleven Resources, "North Copper and Gold"=NorthIsle Copper and Gold, "Arizona Son"=Arizona Sonoran, "Newf Finland"=Newfoundland, "Cedar Plus"=SEDAR+. "Rupert Resources ... Igno Eagle, the largest mining company in the world" is as spoken. "Big Ridge Gold" and "McFarland and Lake Mining" (=McFarlane Lake Mining) rendered as the companies' names. Palisades sponsor reads kept, marked [Sponsor].
00:00 I think the bond markets are revolting and saying we're not going to buy your bonds because you're going to pay us back with massively devalued paper currency. 40% of the revenue of the US government will go to pay off the interest on their credit card. That is completely unsustainable. That money supply needed to keep up with the deficits and the structural issues you have in the economy will need to accelerate.
00:21 So I do expect it to go from 7 to 8 to 10 to 12 over time. If you're smart and you have a rising tide, that's how you really create generational wealth. That's the second part of the trade that I've yet to enjoy that I'm looking forward to. >> Michael Gentile, strategic investor in the junior mining sector as well as co-founder of Bastion Asset Management.
00:39 It is a true pleasure to host you on Palisades Gold Radio today. >> Great to see you again. >> Certainly great to have you back, Michael. Now, there are a lot of topics I would like to put in front of you today, but perhaps it's best to just get started talking about gold. We find ourselves in the middle of quite a painful consolidation that has lasted us since around the end of January, beginning of February.
01:01 Even today, we're still down around 20 to 25% from those intraday peaks. Now, Michael, where does that leave the value proposition of gold today? Fundamentally speaking, how great of an opportunity is it to add to your gold and gold positions, and what is your outlook for the next couple of years? >> So, some much needed context.
01:20 I think I have a long-term view on gold. We've talked before, Stein, about my 5 to 10 year view. So, if you look, last October, gold was 4,000. So, we're actually up 10% or more over the last 12 months. So, sometimes people get caught up in the noise. We obviously had a big run to 5,500 for a couple of weeks when gold went hyperbolic for a period in January, February of this year.
01:41 But I think the long-term trend is firmly intact. I'm not just saying that with my mouth. I'm saying that with my wallet. In Q2 when the gold price pulled back from 5,000 plus to below 4,000, I had my biggest ever shopping spree. The most money ever allocated in a single quarter to junior mining companies.
02:00 I did two or three significant deals in that time frame. Big investments that I made. So, I took advantage of the pullback and the extreme negative sentiment in the sector to be very aggressive and I remain very aggressive. I've got a couple of deals I'm working on now, two or three as we speak.
02:19 So, I expect maybe Q3 or Q4 will be another record for me. So, I really remain very very constructive on the gold price. Again, that doesn't mean we're going to go up 30% next month. I don't think that way. I think in terms of long cycles and I think a lot of the noise that we're seeing is actually very very supportive for gold going forward.
02:36 And pullbacks, especially sharp pullbacks in a bull market, are very normal. I always ask myself when a gold price or a stock pulls back, check my thesis, check my basis. Has anything changed on my long-term macro view for a company level or the gold price or the commodity, whatever I'm looking at.
02:54 And my answer to those questions in the gold price anyway is absolutely not, which is why I've been aggressively buying. Sometimes price pulls back and it's for a reason. There's been a big structural change, a major shift that changes the tide from positive to negative. I do not see that in the gold price and the metals market.
03:09 So I remain very very aggressive in my allocations and the sector remains extremely attractively valued based on the pullback we've seen as well. >> Wow, that is very interesting. So even though you mentioned earlier if you take a long-term view gold is still up around 10% on a 12-month basis.
03:28 You're really taking this opportunity that you're seeing right now in the equities to allocate. So perhaps that's something we can quickly touch base on. What have you really been focusing on the last couple of months? >> Yeah, new deal flow. So either buying new investments, made a new investment recently in McFarlane Lake Mining.
03:45 One of the biggest checks I've written so far in my career, bought 20% of the company day one. We can get into more details there, but that's a classic setup that I look for, an asset that has scale, grade, terrific infrastructure, a project that I truly believe over time, it's going to take time, has potential to become a mine.
04:04 And with some of the recent news in Canada, we can also talk about as well, it's also a very favorable backdrop to be building gold mines in Canada right now. The winds are changing very quickly in my home country of Canada. I took advantage of the downturn to double my position in Big Ridge Gold from 9% to 20%.
04:20 That's another asset that I think is very misunderstood by the market and is a very buildable asset in this cycle with a short permitting timeline. Good grades, previous mines, infrastructure is all in place, with a lot of room to expand the deposit, and they've attracted recently two top-notch mine builders and permitters that have built the last two mines in Newfoundland to the team.
04:40 Always a good sign when the guys who have built the last mines come to your company. They obviously know what a producing mine looks like and they're eager to join the team at Big Ridge Gold. So that's been very busy. And also I continue to be very busy in terms of, I have a portfolio of 35 junior mining companies and so I believe I bring a lot of value on the financing, corporate strategy, direction for these junior mining companies.
05:07 But I'm also trying to get a lot of synergies in my portfolio. Instead of marketing one company at a time, market them as a whole, because a lot of my companies have very similar hallmarks and characteristics. Investors want to know what are the type of companies that Michael's investing in. So, I spent a lot more time working on that instead of my companies doing a 5-day road show in Europe on their own, meeting 10 investors every day, hosting conferences and forums.
05:32 So, I've been very busy recently working on my Gentile Mining Forum in Europe, October 19th to 23rd. Starting in London on October 19th, I'll have my top 22 to 24 investments in my portfolio on a dollar basis in the same room for a day. So, one-on-one meetings, group meetings, presentations.
05:52 So, investors who want to know what makes me tick, what I look for in a company, what better way than meeting my entire portfolio, 90% of my net worth, in a room in the same day. You'll see the hallmarks of an investment that I make, the quality of the companies I invest in. So very excited about that. And for the companies participating, instead of doing a road show and having a lunch for 20 people, there'll be 150 to 200 people at that lunch.
06:10 So they get a lot more exposure, a lot more value for their marketing and IR dollars and a lot more leverage on a trip across the pond to Europe to do that. So anybody interested in attending that conference can go to saturdaymorning.com. That's my free weekly newsletter and they can sign up there and they can get updates every week on what's happening, other events that I'm hosting in Vancouver, Quebec, other places where I'll be traveling to see my portfolio.
06:33 So, there's real good value in that for investors I find, to be able to see a bunch of quality companies in the same day. So, that's what I've been focusing some time on as well, to get leverage in the portfolio. >> Lots of threads to pull on there for sure. Michael, perhaps we can talk about your conviction in this gold bull market for just a bit longer.
06:52 What would you really say are the fundamental drivers that you are betting on when we're talking about a bull market for gold for the next 5 to 10 years? >> Sure. Very simply, your viewers can see what's happening in the global bond markets. UK 10-year, 30-year bond yields close to 6%, the US is at five, France records, Japan blowing out.
07:11 Really what the bond market is sending as a signal to global investors, and I've been saying this for eight or nine years almost non-stop, Stein, is that we've got too much debt in the system and in real time the bond markets are revolting and saying we're not going to buy your bonds because you're going to pay us back with massively devalued paper currency.
07:32 And so that's what's happening in real time. And we're seeing a shift out of the paper money markets, out of the paper bond markets, into hard assets like gold. Gold has reasserted itself as the collateral of choice. And so investors are saying, "Yeah, even though you're paying me a 5% yield on a 10-year or the 30-year bond, I know you're going to pay me back in money that's worth 50% less in 10 years.
07:52 So, I'm actually going to have a negative real return on that bond. So, I want to store my net worth or preserve my wealth in assets that can't be printed or just inflated away by the overspending of the US government." And we've spoken about this before, Stein, but it seems to be finally dawning on investors that with 40 trillion of debt and now live in real time 5% 10-year bond yields, that's $2 trillion a year of interest. The US took in 5.
08:18 2 trillion of revenue last year. 40% of the revenue of the US government will go to pay off the interest on their credit card. That is completely unsustainable. Healthcare is a trillion. Defense is a trillion. Social Security is a trillion. You're spending twice Social Security and twice healthcare on your interest.
08:33 That is an insolvent situation. And so, you saw the Fed hike rates this week. We can unpack that a little bit as well. That was well priced in. I think that's Chairman Warsh trying to show that he's paying lip service to fighting inflation. But the reality is he and his other G7 governments are backed into a corner.
08:51 They do not have the luxury to allow rates to go higher. And at the same time, Stein, out of the other side of their mouth, they're intervening in the Japanese currency markets in an attempt to backdoor suppress yields. Secretary Bessent is going to buy 2 billion of 30-year bonds. He's going to buy 4 billion. Now he's going to buy 6 billion.
09:08 And despite all that, yields are still moving higher. [Sponsor] Today's episode of Palisades Gold Radio is proudly brought to you by our parent company, Palisades Goldcorp, Canada's leading junior resource investment vehicle trading on the TSX Venture Exchange under ticker symbol PALI, with equity and warrant positions in over 200 companies, ownership of mineral projects and royalties and a significant stake in New Found Gold.
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09:52 ca and join us in our mission to level the playing field for investors. Now back to the show. [End sponsor] So the bond market is saying you need a bigger bazooka, you need a bigger intervention to cap these rates. If you agree with my math, we can't afford these rates. So something's got to give.
10:11 And that's I think the pinch point that we're going to get to at some point in this gold market, where there is a major intervention in the bond market by the Fed to cap rates, or they say I'll let inflation run at 5% instead of 2%. More likely they're going to try to intervene in the bond market because that'll optically look better than letting inflation run hot.
10:31 But they're going to have to suppress rates, because the fair market buyer of bonds is asking for more yield, the government can't afford it, and if you suppress rates further or cap, intervene with QE, whatever you want to call it, that is turbo fuel for gold. And so until someone proves to me that we can balance the budget and return to a normal level of money printing and circulation in the economy, that's your permanent bullish backdrop for gold. It's going to get too excited like it did in February,
10:59 it's going to get too negative like it did a month or two ago, but the trend in my opinion is up and to the right, and just measure by how much money printing or how much more money you're creating in circulation every single year. That's just going to be the backdrop for increasing gold prices. Remember, gold's not going up.
11:15 Paper money in circulation is going up. Gold is just a measurement of that, and that's why gold prices will be, in my view, higher in 5 years than they are today and why I'm positioning my portfolio for that. >> Is it only the dollar going down and thereby gold going up, or is there also a rerating that we have been seeing for gold in recent times? I mean central banks have been stepping up their gold purchases massively and through that perhaps rerating the real value of gold, and is there an opportunity we could see investors that
11:44 maybe used to buy bonds now want to purchase gold, kind of driving the same mechanic? >> Absolutely. I think if you look at, when Barack Obama was president they had $8 trillion of debt in the US. I think by the time Trump took office for his first term there might have been 30 or 32 trillion.
12:01 Don't quote me on it, but that's a 4x increase in the debt. I'm just using debt as a proxy for money printing in circulation. It's not a perfect one, but it gives you a good idea of how much money has been created or printed out of thin air to float the US economy. But you look at the gold price, in 2011 it was 2000, and when Trump took office the first time, it was below 2,000.
12:24 So you quadrupled the debt, but gold did nothing. So everybody goes, "Oh, gold's had a huge move." But really what happened was gold was suppressed for 10 years. The money in circulation was going like this and the gold price was doing this. And so what happened when the Chinese and the BRICS countries started rotating out of the US dollar and buying physical gold, pricing of gold moved away from a paper speculative market where derivatives were 10, 20, 30, 100 times the actual physical market, and then physical demand through central banks and rotation out
12:54 of the US dollar made the market a more honest market where physical buying now sets the price or tries to set the price. There's still some manipulation in the system, but it sets the price. And so what we saw, gold from 2,000 to 4,000, really was just a catch-up trade to reflect all the money that's been printed the last 10 or 15 years since Barack Obama was president.
13:13 The debt was 8 trillion. I think there's still a bit more catch-up to do. There's some great charts about the amount of physical gold held in the US versus their debt load, it's at record lows, like 3% or something. But over time, that's the correlation that I follow.
13:30 More money printing, more paper money creation, more debt deficits is just going to have a positive tailwind for gold. So, it was a big catch-up trade. I think going forward it's going to have a much tighter correlation between paper money creation and physical gold, but I don't think it's been as huge a rally. It was very very suppressed for 10, 15 years.
13:48 And what broke it out of that suppression was the central banks. And you saw, Stein, in Q2 and Q3 the Chinese, the last three quarters have had record physical gold purchases. So the gold price pulled back from 5,500 to 4,000 and the physical buyers stepped in and cleaned it all up. And so we've got this new floor demand of, every time the price pulls back, the central banks that want to rotate out of the dollar use the opportunity to buy.
14:13 Where in the past it would be speculators would short the gold price and just lean on it and create negative sentiment in this vicious cycle. We've got a much more honest and normally functioning gold market now. And until we solve that problem of debt creation, the deficits, you've got the permanent bid and support for the gold price behind you.
14:31 >> What is the order of magnitude that we're talking about? I mean, if you look at the M2 money supply, for example, when you go back a few decades, the compounded annual growth rate is somewhere in the 7, 8, 9% range, depending on when you're looking at it. Have we now entered a new accelerating phase or should we continue to expect this in a type of linear fashion? >> Yeah, I think you're on the right track there.
14:53 I think the money supply is the right proxy for gold, versus the fake inflation number, CPI 2%, is not an accurate reflection of the devaluation of money. Things you actually want to buy, food, lodging, those are way up more than 2% a year. And so yeah, the money supply creation is a good proxy for the tailwind for gold, obviously with overshooting, undershooting, and times where you underperform and catch up. Your question on acceleration: any time we've seen a massive paper money devaluation, the more debt you strap on
15:25 and the higher the deficits are, 40% of our revenues now, it's only going to go higher over time unless you rein in spending. Neither party in the US and no government I see across the pond anywhere has any desire to do that right now. So as your percentage of debt to GDP and interest to revenue starts to rise, the money supply creation naturally has to accelerate to compensate for that. It's like a hockey stick higher. So you're right.
15:53 Over time, unless we have massive structural changes to control our spending and reduce deficits and get our debt under control, the money supply needed to keep up with the deficits and the structural issues you have in the economy will need to accelerate. So, I do expect it to go from 7 to 8 to 10 to 12 over time. And at one point, you lose total control, right? That's when you have a hyperinflationary environment like we saw in Germany after World War I or some of the third world countries we've seen like Zimbabwe or
16:19 even Argentina that had just massive devaluations where it's going 30, 50, 100% a month. Forget about 10, 12% a year. We're not there yet in the US, but we are on a very perilous path which, left unchecked in some way, will lead to that. And the US is the reserve currency still of the world, of choice. It'll be the last one to fall. But you see Japan, look at Japan's currency, right? Look what the yen has done the last 30 years.
16:50 It's devastating, on a relative basis to the US dollar. But all these currencies are depreciating very very rapidly relative to gold, which can't be printed. Japan's just the first one. But you're going to see that start to spill over against the gold price, because currency is a relative game, right? It's the best house on a bad block, whereas gold's in a different neighborhood.
17:10 It's not even on the block. So you have a different valuation marker to look at, and that's what's going to happen in real time unless we see major changes, which I just don't see the political will for. [Sponsor] With gold trading at new all-time highs, gold producers are printing money, and this means that for the first time in years money is beginning to flow into exploration.
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17:56 Made in America's properties are nestled amongst several of Nevada's largest gold mines and resources, making it highly prospective for a potential discovery. To find out more, visit palisades.ca and join us on our mission to make Nevada's next multi-million ounce gold discovery. Now, back to the show. [End sponsor] >> Wow. I think that's a very interesting point that you brought up just there as well.
18:17 This is not just a US dollar story. Everyone kind of seems to be in the same boat. Something I was surprised to learn is that even China's government debt is anywhere in the 85 to 100% range depending on how you calculate it. So even they, as being the net producer of the world, might be facing a similar problem over the next few years.
18:35 >> Yeah, I feel bad saying this, but I think it's very true. Much of the growth the last 20 to 30, 40 years in our country, or much of the growth even since we got off the gold standard in the 70s, has been an illusion. It's really been driven by deficits and money printing, right? But on a standard of living basis, or just on a quality of life basis, people are getting poorer and poorer in real time. And so that is the problem when you print money at will and you decouple yourself from a hard
19:06 money economy. You have the illusion of GDP growth. You have the illusion of wealth creation, but in reality, you're getting poorer, and you have less emphasis on productivity and actual unit wealth creation or improving your standard of living, and you go back to just absolute numbers. And so, it's funny, when I was in the markets starting off my career in the late 90s, Exxon Mobil was the biggest company in the world.
19:32 I think it was like a 200 billion or $250 billion market cap. Today, that makes you a micro cap or midsize company. We're talking about trillion dollars. Nvidia 3 trillion, SpaceX 2 trillion, right? That $3 trillion is not all productivity growth. The value of the dollar has declined so much. And what 3 trillion could buy you today is probably what 300 billion could buy you 30 years ago, and so there's an illusion of all this wealth that we're creating, but in reality, a lot of it's driven by debt, deficits,
20:00 and money printing. And gold is the truth barometer of that. So, I often like to look at the S&P 500 in gold terms. More investors should do that. Look at the value of your house in gold terms. Look at your salary in gold terms. It'll give you a much more honest and realistic barometer of: are you increasing your wealth? Or are you just being lifted by a rising wave of paper devaluation? And the more investors do that, I think we'll have more sound decision-making and more
20:34 realistic opinions of what's actually going on in the economy and society. >> Yeah, that really feeds well into gold as an investment, but also the gold mining complex, where of course you spend a lot of your time, specifically in the juniors. We oftentimes hear this concept that gold miners are a leverage play on the underlying, namely gold.
20:57 But that only seems to be truly correct if you have the right environment. Do you think we have the right environment right now, fundamentally speaking, for the gold mining complex to truly lever gold? >> I do, and I've bet 90% of my net worth on that thesis. When I started this 8, 9 years ago, Stein, investing a lot of my capital in junior resource-stage companies, I asked myself the question: if gold goes up a lot, and I've been right about that, where do you have the most leverage? It's in the junior resource companies. That is
21:28 traditionally where you see it. And so why is that the case? Well, if you look at the last bull market, gold went from $800 to about $2,000 an ounce at the last peak. Most gold mining companies in 2011, 2012 were getting $2,000 gold for a cup of coffee. I'm using round numbers because it didn't stay there for long.
21:47 And their all-in cost, all-in kitchen sink included, might have been about $1,500 an ounce. So they had $500 margins. So, if you have $500 margins on your production and you want to fuel the next wave of production, because if you don't buy another gold mine when you're a producing company, when your current mine exhausts itself and runs out, you're out of business.
22:08 So, you've got to fill the pipeline in behind the producing mines with future production to allow your business to perpetuate itself. So, if you have $500 margins, what could you pay for a junior mining company? Well, maybe you pay $50 an ounce for those ounces in the ground. Maybe you pay $100 an ounce.
22:26 You pay 10 to 20% of the spot price. Layer on a couple hundred an ounce of capital cost to build the mine, the plant, the mill, the trucks, all the work you have to do to get the mine in the ground, and it leaves you with a couple hundred of margin. So that's how you get to a $50 to $100 an ounce. Very rough math, I could build you a spreadsheet if you want, but that's what a justifiable price could be and give you a decent IRR for an acquiring company.
22:49 You fast forward to today, it's hard to believe, Stein, but most of, I own 35 junior mining companies as the largest shareholder, I'd say the vast majority of my companies in my portfolio are trading between $30 US per ounce and maybe $100 per ounce on the high end. But the gold price today, again round numbers, $4,400, let's say, it's not quite there today, but $4,500 an ounce.
23:12 All-in costs for mining companies on average, let's say 2,000 to 2,500. Let's just say 2,500 just to be really conservative. That's $2,000 per ounce margin. So, how can it be today that when you're making $2,000 per ounce all-in margins versus 500, you're still paying the same $50 to $100 an ounce in-the-ground acquisition price? Logic would dictate that you could pay, again, 10 to 20% of the gold price, would be $200 to $400 US per ounce.
23:41 That's how you get leverage, because if you buy ounces in the ground today at 30 and you sell them at 200 or $400 an ounce in the ground, you've made five to 10 times your money just on the price appreciation of the gold value per ounce in the ground. And you get double leverage in a junior. I try to find companies that not only are starting with a million or two million ounces today, but through exploration can find another two, three, four, five million, that are sitting with five or 10 million ounces when it comes time to sell
24:09 the company. So, say you do $30 an ounce times 2 million ounces, that's a $60 million valuation. If you sell 10 million ounces in 5 years at $200 an ounce, that's a $2 billion valuation. That's 60 to 2 billion, even with dilution it's a hell of a proposition for investors. And I think that's the next stage of the cycle that I'm playing for.
24:33 I've done very well investing in juniors, mainly through stock selection and picking good companies. I've not yet had the benefit of a rising tide lifts all boats. And that's the really fun part, where you get rich whether you're smart or not. But if you're smart and you have a rising tide, that's how you really create generational wealth.
24:51 That's the second part of the trade that I've yet to enjoy that I'm looking forward to. And a final point I'll say is this is not just hypothetical, Stein. We've seen two deals this year that clearly demonstrate that senior mining companies understand that they can pay a lot more than $100 an ounce for deals. So, we had Rupert Resources get acquired by Agnico Eagle, the largest mining company in the world, for $500 or more US per ounce in the ground.
25:17 And we had G Mining buy G2 Goldfields for like $600 US per ounce in the ground. And both of those companies were applauded for those deals. Good, smart, strategic M&A in their backyard, synergies, all the works. So, I've got a group of companies trading between 30 and 100. The big mining companies just paid 600 and nobody fired them.
25:35 So, that's a lot of room between $50 and $600. I'm not saying all my companies get $600 an ounce. Those are special situations, but it shows you there's a lot of room to pay more and still have terrific IRRs. So, sorry for the long answer, but it's a really important question that you asked, for investors to understand what we're playing for and what the upside can be in a bull market.
25:53 It's been so long since we've had a real bull market in juniors that people forget the leverage. It hasn't happened. The gold price has gone up. People like to just resign themselves to, okay, whatever, I'll get $1,500 an ounce in the ground. But no, you can afford to pay a lot more.
26:10 And the recent news in Canada and other governments that are getting very serious about stimulating capital investment and construction of mines and infrastructure is going to, in my view, add fuel to the fire. >> Now, Michael, I absolutely love this analogy, this framework that you just shared, and I would love to dive a bit deeper into that actually, because of course not all ounces in the ground, like you outlined earlier already, are created equally.
26:36 So the yardstick is kind of flawed in that sense, not necessarily saying that you can't use it, but how do you actually pick the companies that could generate those outsized returns? I understand grade is going to be a component, but what else are the factors you are really thinking about to get the maximum torque on that ounce-in-the-ground figure? >> Yeah, it's a good point.
26:54 I've got a bit of a tongue-in-cheek throwaway line that I use, but I think it's very important. Junior mining companies are either worth zero dollars per ounce, the way I look at things, or a heck of a lot more than they're trading today. So all that math that I did for you with the values in the ground today versus the values in the future only holds true in my business, which, I'm an owner of companies and I only sell when the company is transacted on, either sold or builds the mine, only holds true if you find an asset, like you properly said,
27:19 Stein, that becomes a mine. So Agnico Eagle is not going to pay $500 an ounce for some promotional company that's got nothing in the ground that never can hold together, either from grade or scale or infrastructure, that will never be a mine one day. They think like I do. Those ounces are worthless to them.
27:35 So the first thing I do, Stein, is I think like a major mining company would, like an Agnico or a Newmont or Alamos or pick your mining company. I look at assets and go, okay, is this an asset that a major mining company, whose business is building mines, not promoting micro cap stocks in Vancouver, but their business is building mines,
27:59 is this an asset they would find desirable to build? And does it have superior infrastructure, grade, scale? Really that adds up to superior economics, desirable enough to put that in the top 10% of projects globally, and put that in the top 10% of projects that major mining companies would want to spend their time on and acquire, because Agnico, Alamos, Centerra, whoever, Barrick, Newmont, they can only build one or two mines at a time. They can't build 20.
28:25 And so there's 2,000 junior mining companies in the world. Most of those mines are never going to get built. So, you really got to focus on quality at the front end and look at any red flags that could prevent those major mining companies from wanting to build the mine, or if you want to do it on your own, prevent you from doing it on your own. I have a long list and we could do a whole interview just based on that.
28:44 But from a high level, that's what it is. I spend a lot of time at the front end doing due diligence and de-risking these assets, going, is this an asset that really could be a mine? If the answer comes back no in any one of those categories, I'm not interested. I don't care how cheap the stock is and what kind of promotion cycle or news flow cycle they have coming.
29:04 If I conclude for whatever reason this is going to be tough to be a mine one day, I'm not interested. And so that's how I look at it, almost like a private equity owner that can't sell. If we're in a rising tide lifts all boats, a lot of investors are going to make a lot of money picking the wrong stocks or picking stocks that never become mines. That's fine.
29:20 You can come along for the ride and the market will not differentiate very well in the short to medium term as to this is a mine, this is never going to be a mine. They're all going to lift. But when I own five, 20, 30% of a company, I don't have the luxury to make a mistake.
29:34 I do make a lot of mistakes and I will make mistakes, but if I make a mistake, it's fatal. I can't get out. So, I've got to put a lot more emphasis on the front end as to picking quality assets. And remember, the math is probably less than 1% of the projects on the junior stock exchanges in Australia and Canada will become mines.
29:52 So, I'm trying to get up from 1% to like 20 to 30%. So, you will see failures in my portfolio. You will see mistakes. I'm going to go from a very very low batting average to a moderately good one, because when you get them right, you make 30, 40, 50 times your money. And that's what I'm playing for.
30:07 And if you get the leverage in the cycle, it could be even more. That is the prize. So, focus on managing and trying to find more of those winners. >> And of course, well understood, you can get a significant rerating on the ounces in the ground, but there's also, of course, the opportunity in junior mining to increase the amount of ounces in the ground that you have.
30:27 How often do you tend to bet on those opportunities where there's significant geological upside yet to be tested? >> Yeah, I love those stories, Stein. So, my favorite stories are, and I've been very fortunate the last nine years because the market has been so slow to react to the positive, especially in the junior space which I operate in,
30:44 I really still get to walk up to stories today where they've got a resource. I can do a really pretty good analysis of the potential for that existing resource, with the infrastructure and the quality that it has, to become a mine one day. So I'm starting off life with: there's enough here that I think it can go into production.
31:04 But my favorite stories are: there's enough here to go into production now, obviously over time you de-risk it, multiple years, but there's a lot of exploration upside that can take this base case, this is a good project, to make it a terrific project. And so that's what really gets me excited. A couple examples, like Radisson Mining, which has got a $60 million investment from Agnico Eagle to buy 10% of the company. That's one.
31:26 When I first invested, it had 4,000 ounces [sic, as transcribed — likely 400,000] of really high grade. I said, "Not enough to be a mine yet, but lots of exploration upside." Then they got to a million ounces. I'm like, "Wow, this is getting really interesting." Then they got to 2 million ounces. I'm like, "This is a mine," right? And then Agnico's investment kind of is validating that.
31:41 But Radisson's got an exploration target of 4 million plus ounces, eight rigs drilling, currently hitting almost every single hole. That's a project that's already a really exciting, profitable future mine in my view, that every single day you come to work, they're adding ounces. So those are terrific.
31:57 Another one is Galleon Gold. It's going underground right now. They're putting a bulk sample underground, accessing 1.6 million ounces. I think, because the infrastructure is already in place, it's already an economic mine, but they put out results the last couple of months that are indicating that that 1.
32:14 6 million is vastly understated. That could grow to multiple million ounces of potential. And so the best stories keep getting better, and while you're de-risking the project, while you're doing the studies and metallurgy and permitting and First Nation engagement, you're adding value every single day. Those good stories become great, become incredible.
32:34 If you buy a story that's got limited exploration upside, then it's, this is a good story, and it's possible some other story gets better and takes your place in the pecking order of assets that want to get built this cycle. So I love those stories where you have both. What I don't do, Stein, is a lot of greenfield, where I'm walking up fingers crossed hoping to make a discovery, because not only do you have to make a discovery, but then you've got to find enough to become a mine.
33:00 And so I have a few of those in my portfolio, like five or six, always at a low market cap, low entry cost, in an area that I feel has the geological potential to be a mine, but know that the failure rate there is going to be a lot higher. That's just the name of the game. But true generational discovery can create a lot of wealth.
33:18 It's just an area that's a little harder for me to analyze and de-risk because you just don't know. You have less information. >> How important is scale to you? Of course, if you find a big deposit, oftentimes it surprises you on the positive side, but sometimes if you find something small that's high grade, putting it into production yourself as the management team might actually be feasible for a relatively low cost.
33:40 Could you be enticed by those types of opportunities as well? >> In my experience, I've not done well. I know Australia has a lot more of that mentality, that kind of bootstrap mentality, put 5,000 ounces a year, 10,000 ounces a year into production. It's typically hard for a few reasons. One, the people running those smaller companies typically don't have the experience of putting things into production, and they underestimate the dangers and the risks, not knowing what they don't know.
34:05 So there's a lot of blowups, and they're undercapitalized and they make bad decisions along the way. My model is really: find assets that mid-tier to large mining companies would want to acquire. Very rare are the stories that can go from a junior explorer to a producer. I've got a couple. NorthIsle Copper and Gold has really managed that transition terrifically well from a micro cap stock to now a $1.
34:32 5 billion market cap company, one of the premier development assets in Canada. But they've brought on two Mining Hall of Famers on their board. They brought in a chief operating officer that's got 40 years experience. They understood that the same management team and board that gave you success from a $50 million explore co to a couple hundred million explore co won't get you to producing status.
34:53 But where are the companies that have that foresight and that understanding and ability to attract the people? K92 Mining is another one in my portfolio that went from a micro cap $10 million stock to a multi-billion dollar producer. But again, they brought in people at the right time to de-risk that asset.
35:09 Most of the time, Stein, nine times out of 10, it's explore co, resource, PEA, economic studies, de-risking of the permitting, boom, big mining company comes in to buy you. So, if you focus on smaller producers, those big companies have no interest in acquiring a 10,000-ounce-a-year producer. So, now you're in business for the long term.
35:27 So, would I do that? I would do that if I had a rockstar team with me. But again, the rockstar team's like, well, I can build this mine for 10,000 ounces or I can build that one for 200,000 ounces. Why don't I build a bigger mine? I'm going to spend just as much time, just as many headaches.
35:41 Why don't I have 20 times the cash flow and return versus a small one? So, less exciting for me as a public company and as an investment. I just don't find them as attractive unless you're using that as a bootstrap to get into something bigger. But again, even though there's so much risk in it, I rarely do it. >> Yeah, more torque to find in other places perhaps.
36:01 I would also love to dive into your methodology a bit deeper regarding the dollar prices for gold and silver and copper. You take into account, of course, the goal of mining is to make a margin. You have an all-in sustaining cost and you want to sell it at a higher price than that. But of course, if you calculate at too low of a gold price, you're leaving dollar amounts on the table.
36:22 It could be quite significant. So, how are you thinking about gold prices as you calculate a resource and you calculate the economics of a mine? >> Great question. First thing I would say is that in general I only want to write a check in a junior resource company if I feel that the price of that commodity, say gold, silver, copper that you mentioned, will be higher 5, 10 years from now.
36:47 So that's a lot of the discussion at the beginning, that my macro views are hopefully well informed, because if I get that wrong, you're going to lose money. Like in a bear market, when oil fell from 140 to like 30, almost to zero during the pandemic, every single oil stock lost you 80, 90%. When gold fell in 2012 from 2000 down to the low $1,100 level, every gold stock lost you money.
37:09 So forget about stock selection and all the process that I do. I'm just going to lose less money than you, but we're all going to lose a lot of money. So, first of all, if you're going to buy a stock, make sure you get your commodity right. That's the first one. Second one, the danger in a rising price environment is that you lose your discipline.
37:27 What I mean by that is there's some projects that would never make money at $1,500 gold, would never make money at $2,000 gold, probably not even make money at $4,000 gold. But if gold goes to $8,000, they could make money. And some guys know that. They're like, I'm going to buy this thing for like $2 an ounce in the ground because it's not economic at $4,000 an ounce, but gold's going to $8,000 an ounce, so I want to get some leverage.
37:52 Yes, that trade can work really well. In reality, Stein, those assets rarely get built, because the asset that can make money at $1,000 gold is just that much more valuable at $8,000 gold. And the big major mining companies all compete on cost and margins. That gives them a competitive advantage. So despite gold going up, I'm still focusing on assets that can be profitable at $2,000 or $2,500 gold, not assets that need $4,000 gold.
38:21 Even though I think gold is going higher, I sleep well at night. And I also know major mining companies will want to buy the assets that are kind of like that tier one, top 10%, lowest-cost-curve assets, because those assets make you money in any cycle. And again, come back to my other point earlier.
38:37 If you can only build one or two mines at a time as a major mining company, you're going to want to build the large low-cost operation versus the smaller high-cost operation or the large torquey operation, unless you're willing to bet your company on $10,000 gold prices. Most companies should not and are not willing to do that.
38:55 And so, again, I'm thinking like a miner. Give me low cost. Give me great returns at lower gold prices. And give me head-spinning returns at higher gold prices. Those are the assets that are going to end up getting built and acquired, and the winners in this cycle.
39:10 But again, those other torquey stocks could wildly outperform my portfolio because they give you even more leverage, but they'll be a point-in-time return, not an exit or an acquired mine in a cycle, in my opinion. >> You also made a very interesting point there, that you've got to get your commodity right. So that leads me to polymetallics.
39:33 Polymetallic deposits, how are you thinking about those? On the one hand, you could argue it's a de-risking as you're betting on multiple commodities at the same time, and your all-in sustaining costs can be perhaps lower on the gold side. On the other hand, if you're wrong about three out of the four commodities, that might be a huge drag on your portfolio.
39:50 >> Great question. So, I'm writing about this this weekend in my newsletter. It'll come out on the weekend. But I look at NSR value per rock, net smelter return value per rock. So polymetallic deposits are really interesting in the sense that you have different revenue streams and potentially higher grade if you have all the metals contributing.
40:10 One thing on polymetallic deposits you have to look at is the metallurgy. So if you have four or five metals coming out of the ground, what percent of each metal can you get? What does the flow sheet look like? What does the concentrate look like? But Group Eleven Resources is a company that I own.
40:25 It has zinc, lead, copper, silver, germanium and antimony. It's a treasure box full of really rich minerals, and all those grades are actually above standalone grades. So the zinc is above a normal zinc deposit. The copper is pretty competitive. Silver is competitive with silver deposits. So when you add it all up, the NSR value per ton of that deposit is extremely high.
40:47 In some cases $1,000 or even $1,500 per ton net smelter rock. So that is really really interesting in the sense, I'll give you an example: one gram gold today is worth about $200 per ton. So if you've got $1,500 per ton rock, that's 5 to 8 grams per ton equivalent gold, over wide widths. So again, I'm thinking like a miner.
41:08 I'm looking at what's the value of the rock I'm taking out of the ground after metallurgical recovery. So I start with grade. What's my net recovery after metallurgical testing and recoveries, net coming out of the mill, out of the door, into the concentrate? What is that worth per ton to mine? What are my mining costs? That's your margin.
41:25 And what's the capital I need to build the mine? And the higher the cash margins, the more volume you have and the lower the capital, the more likely that project's going to get built. So to some degree, I'm almost agnostic about the metal mix. I'm more interested in the net return, or the net value per ton, revenue over the costs, funding the capital to go in.
41:47 That's why I look for infrastructure-rich projects with low capital, easy places to build, and look for the highest grade and most volume possible, because that combination is what makes a mine scream at you and say build me now. The returns are so good. The payback's less than a year, a year and a half, higher IRR with lots of future upside potential.
42:03 Those are projects that get built, not projects where you're hoping for leverage or a massive move in the commodity price to bring you into the money. Those are less likely to be exciting. >> I would also love to quickly touch base on portfolio management, of course. How do you ensure you're not watering the weeds and cutting the flowers, and how do you think about reallocating capital after you've just had a big win, which might happen if this bull market continues for a bit longer? >> Yeah, it's happened multiple times,
42:32 fortunately for me. I've had multiple takeouts. I had another one this year, Arizona Sonoran, that I owned since it was a private company, got taken out. So those are happy days for me, where I've got an exit and I can redeploy capital. There's a few things that I do. First thing would be on my initial check I limit it to about 1% of my net worth.
42:50 So I try to control my risk on the way in, and for that 1% of my net portfolio value I'm trying to own 5 to 30% of the company. So I try to get a big position early on, typically in a sub-$50 million market cap company that I think has potential to be a mine, meaning a billion dollars or more market cap one day. So that's my entry point.
43:11 I then in my mind pre-allocate checks. So, I'm going to give you 1% of my portfolio now. I know you're going to need financing over the next several years. So, I'm willing to go up to 5% of my book capital over the next 2 to 5 years in subsequent financings. And if this is a big one, if they're executing well, if the story is on track, if I still believe with high conviction that the asset's moving towards a mineable deposit in the future. If the geology goes wrong, the management goes wrong, the strategy goes
43:42 wrong, even maybe the commodity thesis goes wrong, then I starve that company of future capital. So the most I could lose is 1%, or maybe 2% if I write a second check and change my mind. So that's what I call pulling the weeds out of my portfolio. The flowers, the ones that are doing really well, I keep allocating more capital to.
44:02 So I get more of my capital invested in that company, and the stock is increasing in value if things are going well, typically. So that 5% could become 10, 15, 20% of my portfolio. And because I own so much and I don't trade my book, the temptation to pull my flowers and take profits is not there, right? And so I hold my stocks,
44:22 giving more money to my winners, investing in the good assets, hanging on to my position for longer than most investors. And that's how I've been fortunate to have so many 20, 30, 40 baggers in my portfolio. Most investors can't hang on for the ride. The desire to take profits is too much, and they want to sell their winners and buy the stock that's down 70%, just because it's down.
44:42 They don't realize it's down because it's never going to be a mine, or it's been a disaster, or it's a failed asset. So that systematic process has helped me, and I know if I don't get those 20, 30, 40, 50 baggers my process won't work, because I will make mistakes on the front end. The natural death rate of juniors is high because, again, 1% of assets or less will become mines.
45:05 So you can't think you have 35 stocks in your portfolio and have 35 mines. I'd be delusional if I had that belief. >> Yeah. I know you need to run to another meeting after this. I'll try to keep the next question short. I would love for you to talk about the psychology for a second of adding to your winners, because oftentimes when they're winning and executing well they will be at a significantly higher price, yet the relative risk-reward might still be better.
45:29 >> Great point. My first mentor, John Dobson, who is not a commodity investor but a growth stock investor, taught me this lesson very clearly one day. So I had bought a stock, it was an oil and gas stock. It had gone from $4 to $8. So, I was pretty young, in my early 20s, and I was really excited.
45:47 And he said, "Why are you so happy?" I said, "Well, John, I bought the stock. It's doubled in value. I'm going to sell." He's like, "Well, why are you selling it?" I said, "Well, because it went up." He's like, "Well, what's your fair value of the company?" I said, "Well, they just doubled their production.
45:58 They're trading at like one or two times EBITDA." He's like, "Where's the group trading at?" "Well, four or five times." He's like, "Well, what do you think it's worth?" "I think it's probably worth $50." He's like, "Well, why are you selling it at eight? You should be buying more.
46:10 " I'm like, "What do you mean?" Because good stories, like I said earlier, get better and better and better. So I didn't sell it, I bought more and it went to 50. And the lesson was: what's your target price? Well, if I'm buying a company today at a $50 million valuation, I believe it has potential to be a $2 billion market cap one day on a full realization of its potential.
46:32 And it goes from a 50 million market cap to a 250 million market cap, say 15 cents to 50 cents, but the fair value is $3-4 per share. Why would I sell? I actually should buy more. Right? But if you don't have a plan on the way in, you don't know what you're buying, you don't know what it could be worth one day when it grows up in a good scenario, then you're going to be dominated by the market movements.
46:53 You're going to be reacting to either positive pricing or negative pricing and your emotions are going to take over. So I'm a pretty rational, kind of sober, hopefully well-thought-out individual. So I don't let my emotions take over. I say, "What is the value of the company?" If the stock was $7 today, I should sell it all because my fair value is four.
47:10 We're not in that kind of market, though. We're not in a market where things get overvalued. We're actually in a market where things just languish for long periods of time. And so, it's very easy to hang on in that kind of environment for me. Very easy to add more. And because these companies constantly need money, the financing windows give you opportunities to reassess and say, I can put more money in, like I did recently in Big Ridge Gold.
47:34 I doubled my position on an existing investment, because in my view that was the highest ROI I could see in my portfolio versus a different, new investment, because the price of the stock had pulled back and there was a bunch of catalysts ahead and the company needed some money. So terrific. So you're always thinking about a new check: what's the return on that new investment?
47:51 Maybe you don't have the money to write a new check, but holding on to your stock is like writing a check, right? You're buying it every day. You wake up today, whatever's in your portfolio, you're buying it today. Realistically, you're buying it every day. So, by not selling, you're holding it.
48:06 That means you're deciding to buy it. You can sell something to buy something else if you like it better. It's got to compete for a place in your portfolio, the same way that a European football player or a hockey player would compete for a spot on the roster. That's how I think about my portfolio. And that's how investors should think, not about the price of the stock and how it makes you feel, but what is the best return on capital today from your dollars available to you on a Friday morning or a Monday morning.
48:30 >> Absolutely, love the framework. Now, Michael, I would love for you to talk about your European road show as well as your newsletter. >> Yeah, so I'll be in Europe October 19th to 23rd. I'll be bringing my top 24 investments to Europe for a one-day conference in London, England.
48:46 So, you can see my entire portfolio in one day. All the CEOs of the companies will be there, group meetings, one-on-ones, a chance to interact with me. I'm giving a breakfast keynote and a lunch keynote. So, that's a terrific way to interact with 90% of my net worth in one room. And then 4 days after, I'm going to Paris, Frankfurt, Zurich, and Munich with six of my portfolio companies.
49:04 A little bit more intimate setting, say 50 to 100 investors per city. We'll have a group lunch where each company will have 10 minutes to present themselves to investors, and we'll have one-on-one meetings in the morning and afternoon. So, if you're based in Europe or you want to take a nice holiday and fly to Europe, I would love to have you at the conference.
49:19 And you can find out information at saturdaymorning.com. That's the website where you can sign up for my free newsletter. Every Saturday morning it comes out and I put links for any interviews like this that I've done, any conferences that I'm hosting, and any news in my portfolio that week. It's not investment advice, but it's a great summary of what's happening in the mining markets. Completely free.
49:38 I encourage you to sign up, saturdaymorning.com. >> We'll certainly put the links in the description. Michael Gentile, thank you very much for your time and especially your insights today. This was incredible. Thank you. >> Always a pleasure to be with you. [Disclaimer] This podcast is for general information purposes only and does not constitute investment advice, an offer or solicitation to buy or sell any securities.
50:01 The views expressed are those of the host and guest and do not necessarily reflect the views of the company or their affiliates. Guests on the show are not compensated for their appearance. Certain discussions may include forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially.
50:20 Listeners should do their own research, consult a licensed financial advisor, and not base any investment decisions solely on the information discussed. For a full disclaimer, please visit our website. And for full disclosure and risk factors of any companies referenced, please see full available disclosure and risk factors on SEDAR+ at www.sedarplus.ca.