July 11, 2025 • 41 mins
Mining is often an afterthought for many investors. But according to this week’s guests on Merryn Talks Money, it shouldn’t be—especially given its critical role in the global economy and the energy transition (or should we say energy addition?). Nicky Shiels, head of metals strategy at MKS PAMP, and Evy Hambro, head of thematic and sector investing at BlackRock, join host Merryn Somerset Webb to discuss why investors need to pay closer attention to the melt-up in metals.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Welcome to Meren Dorg's Money, the podcast in which people
who know the markets explain the markets.
Speaker 3 (00:22):
I'm Maren Sumset Web.
Speaker 2 (00:24):
This week we are spending the episode focused on one
particular market, commodities. It's been a while since we discussed
the sector, so we have invited on two experts to
join us in a conversation about everything metal and mining.
We talk about the commodities themselves, the minds they come from,
and the relationship between those minds and the equities that
represent them. We talk about copper, we talk about gold,
(00:45):
we talk about platinum, and we talk about silver. So
in our studio we have Nicky Shield's head of Metal
Strategy at mks PAMP, a group that specializes in precious metals,
and in our London studio we have Heavy Hamburg, who
is one of the world's most influenced mining invested Evy
is co manager of the black Rock World Mining Trust
and global head of Thematic and Sector Investing at black Rock,
(01:08):
as well as being head of the Natural Resources Equity team.
Nick and every Welcome to Merrin Talks Money. So Everie,
why don't I start with you and just tell me
what it is that you think of when you talk
about commodities. What are we talking about here? How is
this sector different to the rest of the market.
Speaker 4 (01:24):
You could go anywhere with that question.
Speaker 3 (01:26):
I know I wanted.
Speaker 2 (01:27):
I wanted to have fun by asking at the very
beginning of bitcoins a commodity, but I'd have heard that.
Speaker 3 (01:31):
Leave that's the end.
Speaker 4 (01:32):
It's fascinating if you think about commodities and the fact
that we all use them every day, and some of
them are more visible to us than others. So if
you go to the petrol station then you fill up
your car, you know what the price of fuel is
and how that changes. If you go shopping at the supermarket,
(01:52):
you know what the cost of agricultural commodities are because
you can see how the price changes. But most of
the commodities that we take for granted, you know, the
metals and so on, have very very low levels of
visibility in terms of how we consume them. And I
think that society as a whole is rather complacent about
their supply and the invisibility of the price changes. And
(02:16):
I guess the fact that they're always there and we
take them for granted means that we don't pay that
much attention to them, and I think that's reflected in
how people value the companies that produce them, and so
to us, theres very very long term investors in this space.
It's quite disheartening to see how lower percentage of the
(02:38):
kind of global market cap commodity producers represent relative to
how essential they are both in everyday lives but also
in sustaining living standards. And it's only when you know,
things go into kind of I don't know, panic mode
around shortages, or you hit the front page of the
media and so on, that people's interest levels rise and
(03:01):
multiples expand or greed over where overtakes, you know, fear
in terms of people wanting the exposure that the sector
becomes front of mind for most financial investors, and you know,
we're certainly seeing some early signs of that in the
government space. But to me, I find it very confusing
that something that is so essential to everybody's daily life
(03:24):
has such a low level of interest and low multiple
that the companies tend to trade on in the market
relative to the businesses that actually consume them. I mean,
you can't build a data center without commodities, Yet there
the data center companies trade on infinite multiples.
Speaker 3 (03:41):
Yeah, that is interesting.
Speaker 2 (03:42):
We had we had a few months ago, we had
ed Conway on talking about his book Material World and
talking about this difference between the ethereal world and the
material world, and the extent to which we've sort of
forgotten that the material world is the foundation of everything,
and without without the minds and without the really fealthy,
grubby bit at the bottom of everything, we could all
the other things that we like to talk about.
Speaker 1 (04:02):
It.
Speaker 2 (04:02):
It's just interesting how that's happened over the last couple
of decades, that the foundation, the foundations of everything have
been forgotten on the pyramid of need has been rather upturned.
Speaker 4 (04:11):
Yeah, I think you're right. I mean, it's a great
book that I loved it, and I listened to it
on one of the players audible. It is amazing if
you think about how society has moved on through time,
where basic industries were such a core part of everything,
and now services are the kind of the most core
part of everything. And it's just you know, usk how
much value dis services really add?
Speaker 2 (04:31):
Oh controversial or can I add anything without without the exactly?
Speaker 4 (04:37):
That's what I mean.
Speaker 2 (04:37):
Yeah, And I suppose the other interesting part of that
that will come onto later as well is energy, And
there's a whole justop oil excepter plava where everyone forgets
that in fact, oil is part of absolutely everything they
touch and everything they feel around them, everything they see.
Speaker 3 (04:50):
Is that something to do with fossil fuels.
Speaker 2 (04:52):
But nonetheless, we've moved so far away from the understanding
of the materials sector. There's a genuine belief out there
that the world could continue.
Speaker 4 (05:00):
Yeah, I mean that's my foundations. I find a bad complacency.
Speaker 2 (05:04):
You're beginning to see some kind of change. I mean,
I think ed Ed's book was a bit of a
turning point for starters. But also looking at the papers
this morning, one of the headlines on the front of
the FT Sorry competitor Alert was Chinese mining acquisitions globally
at their highest level since twenty thirteen.
Speaker 3 (05:18):
So somebody's getting it.
Speaker 2 (05:19):
The Chinese are up there looking at everything, buying everything,
beginning to monopolize as much as they can.
Speaker 3 (05:24):
So let me just ask you, then, when you.
Speaker 2 (05:25):
Look at the sector today, what are the parts that
you find most interesting? Where is it going to happen
that we'll see these supply demand shocks that are going
to wake people up to the importance of this area. Yeah.
Speaker 4 (05:37):
I hope we don't have shocks for the wrong reason,
because that would be pretty bad for the environment or
for safety and life and stuff.
Speaker 3 (05:44):
Slow surprises, let me go slow surprises. Yeah.
Speaker 4 (05:47):
I think it's hard to argue against the fact that
the world's going to need more as life goes on.
That's pretty much a given. That's definitely been the history
and it's likely to continue to be the future. I
think the shape of what more is is what's interesting.
So when we think about the transition, I suppose you
away from fossil fuels, that is a transition from fossil
(06:09):
fuels to hard metals to industrial commodities, and the intensity
of use of those commodities rises, you know, almost vertically,
the more you move away from fossil fuels. Up to
some long.
Speaker 2 (06:22):
Data can I Evie, do you mind if I just
interrupt you briefly, because we always talk about the transition,
and when we do, I think it's time we start
making it clear that we're not really talking about a transition.
Speaker 3 (06:32):
We're talking about an addition.
Speaker 4 (06:34):
Correct, It's just the change of shape, And I think
that's it. Yeah.
Speaker 3 (06:37):
Absolutely, We've never had an energy transition in history.
Speaker 2 (06:40):
We've only ever had an addition that we don't use
less cold than we did, we don't use less wood
than we did, none of those things. We just use
another type of energy on top. And that's what's happening.
Speaker 4 (06:50):
I mean, we can't have the future that is being
advertised to us so extensively without a net addition because
everything that is being advertised, that data sent A and
AI just use vast amounts of power and we can't
solve that with fossil fuels alone. It's got to be
other things. So the transition is the shape of those
energy molecules in terms of where they come from, and
(07:11):
through time, I'm sure we probably will get to a
point where the shift away from fossil fuel starts to
become dramatic, but that's probably quite long dated. But in
that transition period, as that part is evolving and becoming
a bigger component of supply, more and more metals are
going to be going to be needed. And I think
that's pretty obvious. So I think the demand side is
very hard to argue with. I think the supply side
(07:34):
is equally challenging, you know, we're seeing very very long
dated timeframes, so the addition of new supply of industrial commodities,
it's becoming harder and harder to develop these things for
whether it's the environmental permitting or the regulations attached to it,
the complexity where these all bodies are located. They're not
kind of shining out of the ground and easy to identify.
(07:55):
You've got to go deep underground or top of mountains,
access to water and power and people, and it is
just becoming more and more complex. So the thing that
we see that's coming back to your question that's so
fascinating is how the industry finances the growth that is
needed and are the incentives or the returns there today
(08:15):
at today's commodity prices to justify those investments. And when
you look across the kind of spectrum, it's hard to
see the returns for a number of the key commodities
to justify that investment. So the imbalance, the kind of
shock that you talk about, is probably going to come
from a long dated period of under investment into supply
because the returns aren't there. That coincides almost tectonically, you know,
(08:39):
with that sudden, you know, appearance of demand that everybody identifies,
and you then see a price response to reflect that imbalance,
and that then triggers probably a long dated period of
investment into new supply growth. In that interim period, you've
got governments running around, you know, saying that they're worried
about security of supply, trying to incentivize investment. You've got
(09:01):
the US trying to unblock some of the red tape
around investment of domestic resources, which might help. We don't know.
It's a very very early days in that regard, but
I still think that the challenges are very much going
to be kind of dominating the headlines, and at some
point there's going to be pressure and that hopefully will
lead to improve returns for the companies that make the
(09:22):
commodities today.
Speaker 2 (09:24):
Yeah, I mean, the demand side will makes sense. And
I think everyone can see this. Everyone can see rising
demand from the energy transition edition, whatever we're going to
call it now, from everyone, from this rising concern about security,
from the idea that we should massively increase our spending
on defense, increase our spending on reindustrialization, et cetera, et cetera.
(09:45):
But when it comes to the supply side, in the
old days, we always used to saying that the alter
to high prices is high prices, or the solution to
high prices is high prices are shoot.
Speaker 3 (09:53):
I mean, because then you get.
Speaker 2 (09:54):
This massive burst of supply, but increasingly it becomes harder
and harder to incre supply for all the reasons that
you mentioned, but also for environmental reasons, getting permissioned to
open new sites, getting permissions to explore, etc.
Speaker 3 (10:07):
So is it the case that.
Speaker 2 (10:08):
As this dynamic you've been talking about unfold, the cycle
is very significantly longer than it might have been in
the past. So, for example, all the big companies will
now say that it's very significant did you just go
out and buy someone else's sites than it is to
try and find another one, explore, get permissions and get
going with production.
Speaker 4 (10:25):
Yeah, I'd definitely agree with that latter point. The valuations
on existing production today are much lower than the cost
of building stuff. I mean, that's a sweeping commet but
there are there's a lot of data to support that.
And it's not just the cost, it's the time and
complexity as you mentioned about building new stuff. So you
might have a project that's ready to go, but it
(10:47):
still takes many many years to construct. There's still a
lot of risk around how much it's truly going to cost.
Anyone who's built a house knows that it tends to
cost more than you think at the start, And it's
the same with building your mind, except the numbers that
just have many more zeros. When you think about that,
if you're buying an asset today that's in production, you've
got many many years of cash flow from that asset
before the stuff you might be building from scratch actually
(11:08):
starts producing cash if it starts on time and at
the right cost and ramps up to full production successfully.
We've got a few examples recently where some of the
world's biggest new copper mines have ended up costing fifty
to one hundred percent more than originally planned and are
still not at full capacity two or three years after
having supposedly started, Whereas if you'd gone and bought somebody
(11:30):
else's asset and paid full price for it, you would
have had three or four years worth of cashlow to
help reduce that cost by the time you know, the
new one might have might have started. So I think
the kind of on a risk reward basis, the assets
in the market are trading a lot cheaper for less
risk than building some things from scratch, which obviously is
one of the opportunities in the market that we see.
Speaker 2 (11:52):
Okay, Nick, and we've talked a lot around qualities in general,
about the different metals. I know you've specialized particularly in
precious metals, but in the world of metals overall, the
any that you look at and you find particularly interesting.
We're not going to go straight to gold, by the way.
Speaker 1 (12:06):
No, you talked about these not to build on this,
and it's sort of punnintended there.
Speaker 3 (12:10):
But you talk about the slow surprises, and.
Speaker 1 (12:13):
When you look at commodities sort of uros pla manus demand,
you kind of fudge for macro equals price, and gold
is it's less of a commodity out of all of them.
But from my seat, basically what we're seeing is is
platinum is really turning into a PGMs, turning into sort
of that slow surprise we touch on again, it's your
structural urrors of under investments in the sack. So a
(12:34):
couple of months ago, fifty percent of the fifty percent
of your supply was underwater, and so you get then
you sort of have this sort of you know, really
low pricing regime a sort of painful period, and you
then get a catalyst, which happens to actually be the
ball price, because Chinese jewelry demand is basically down like
(12:54):
thirty forty percent given high ball pricing, and so you
got your Chinese judas really looking at re stocking and
going into platform versus gold. So that is the catalyst
that has you know, seen almost forty percent three pricing
in the last few weeks, which is pretty unprecedented.
Speaker 3 (13:10):
So yes, eyes.
Speaker 1 (13:11):
Are definitely on the PGM sector because again, I think
that response when we talk about the supplier response and
how quick that is, because when the mind does turn,
it can swim pretty quickly. And in metals it's it's
either scrap or it's primary. And if you just there's
just no mind to bold, right there is it's just
not there, and scrap for especially for PGMs, that's sitting
in order cats and people are just hanging on to
(13:33):
cars for longer because of high inflation because abound certain
ty becaeuce of tariffs and that that material just isn't
coming back. So we're not really seeing that the supplier
responsors you generally see across the metal space industrials and
precious when you get a large price free rating.
Speaker 5 (13:48):
Okay, well I'll tell you what I gave in and
let's talk about gold. You're I mean it's empting heavy.
You're your portfolio is what the thirty percent or in gold?
Speaker 3 (13:59):
Gold? Like please at the moment?
Speaker 2 (14:00):
Right, And Nikki, I know you're something of a gold bull, right, Nika,
why don't need talk us through the case.
Speaker 1 (14:05):
I think gold sort of speaks for itself in terms
of its three ratings through two thousand and it's it
is putting commodities back on the map in the broader sense.
It hasn't burnt itself out like every other commodity price
boom or bus. So you've got investors coming back and saying, right, right,
is this time really different?
Speaker 3 (14:23):
And why?
Speaker 1 (14:24):
And you've had a bunch of structural forces come together. Deglobalization,
de dollarization, which didn't start now it's this started Brexit,
like this started Brexit Trump one point zero, accelerated with COVID,
accelerated with Ukraine war, the weaponization of dollars, and then
just sort of ongoing geo political tensions.
Speaker 3 (14:43):
And I think you now have a world where.
Speaker 1 (14:46):
Yeah, there is it's it's each protectionism is up and
again a course for those strategic stockpiling of and central
banks that have been that key game changer, that a
key demand game changer for whether it's a sub two
thousand dollars acid or or now three thousand dollars plus
ASCID and the way they're accumulating just too as a
(15:07):
dollar hedge, but also fits currency hedge and inflation hedge,
energy political hedge is kind of unprecedented, and we don't
see that falling away anytime soon.
Speaker 2 (15:16):
You don't see it falling away anytime seeing the Chinese government,
Chinese center back, for example, has been buying and buying
and buying, and you see that continuing.
Speaker 1 (15:23):
Mostly Yeah, so it's mostly emerging markets, central banks, a
lot of Africa and a lot of Asian obviously China.
The interesting thing is, you know, World God Council do
a great it's sort of great analysis and data on
central bank buying, but it's it's official and a lot
of it's unofficial. And in a Trump era, who you know,
Trump has actively come out he had comments overnight related
(15:43):
to the sort of the brick summits. But if you're
actively seeing d dollarizing, which in the purest form is
accumulating gold.
Speaker 3 (15:50):
The threats of tariffs sort.
Speaker 1 (15:52):
Of increases, So I think you're going to see a
lot more It's it's going to become a lot more
paid back to what we started off. From the conversation,
I think central bank buying. You're going to have a
lot of unofficial or just estimated central bank buying and
won't go through the official channels.
Speaker 3 (16:07):
Okay, interesting, and is that what you see as well?
Speaker 4 (16:10):
I think I'm more bullish than that. You know, I
agree with a lot of the comments I made, but
I just think the scale is so much greater. You know,
you look at the size of government balance sheets today,
and I think that the education, a painful education that
many people have been through about the loss of purchasing
power over many, many years. Every year, you know, your
(16:33):
paper currency buys you less than it did in the
year before, and you know, cumulatively, it's very very expensive
for paper assets. And I think the scale of government
balance sheets now that need to be continually refinanced. People
have learned a very very expensive lesson. We did the
study of a year ago or so. I think the
(16:55):
iPhone is now sixteen years old. You know, when it
was launched, it was five hundred bucks iPhone. Now it's
fifteen hundred bucks for an iPhone. You know, if you
use gold to buy your iPhone, you need thirty four
percent less gold today to buy today's iPhone than you
did when it was first launched. That is the protection
of purchasing power. Real assets have held value much better
(17:17):
than paper currencies over time, and we all know that.
And I think that people's people have started to become educated.
Central banks have certainly become educated on this. And so
my career is too long now, but you know, I
when I started in the nineteen nineties, you know, everybody
had an allocation to gold in an investment portfolio. In
the early two thousands, that allocation was zero. Even the
(17:38):
Swiss wealth managers had zero allocation to gold. Now it's
getting back to two three percent some cases. More central
banks have you know, stopped selling gold in the early
two thousands, you know, having had whatever it was, four
decades of net selling, you know, and they've been buying continuously,
and they're buying at twice the average rate, or nearly
three times the average rate over the last three to
(18:00):
the last kind of seven or eight before that. So
we're at a kind of a pivoting moment in this
where gold has really re established itself as a financial asset.
Speaker 1 (18:11):
You make a really good point on a sort of
the allocation to gold and sort of relative size I
think of the gold market relative to other industries. I
think is underappreciated. So yeah, it's just that idea that
the gold space relative to the questioning of US treasuries,
questioning of other assets is just it can't hold the
amount of allocations if we simply just doubled investor allocations,
(18:34):
or if Central anxious had to double their allocations to
the sector.
Speaker 2 (18:38):
So what percentage of an ordinary person's portfolio should being gold? Micky,
do you think we'll go can't?
Speaker 1 (18:44):
I mean the numbers thrown around is about one to
five percent. I look at a very crude measure of
just sort of known investor holdings, which is just simply
ETF and your net COT numbers, and that's less than
one percent as a percentage of equity.
Speaker 2 (18:59):
Hohold.
Speaker 1 (19:00):
But I do think specialists are somewhat involved. This is
what makes me extremely polished. This isn't a gold rally
that's firing on all cylinders. Retail's pretty sluggish, both in
Europe and in the US. You've got central banks, you've
got general investors, but I think it hasn't got.
Speaker 3 (19:15):
To that Fomo their phoonmo level weight.
Speaker 1 (19:18):
The new your taxicab is talking to me about hying gold,
so really has been a sort of cold hearted like
sort of allocation, very measured allocation to gold.
Speaker 4 (19:26):
I'd go more than that, So I thought you mightn't
anywhere there enough. It's Oh. I think there's two components
to that answer. The first one is that there are
different ways to get exposure to gold, and to me,
the optimum way is to have a mixture of exposure
to physical and to gold producers. And so you set
(19:48):
yourself a target where you want that exposure to be,
and you might go with five percent, you might go
with ten. I normally have anywhere between fifteen to twenty
percent in my own personal portfolio, and you know, you
manage the risk of those two positions. So if gold
outperforms gold equity producers, then you know, you take a
few profits in the physical gold and put it into
the gold producers and you just manage that exposure in time.
(20:11):
But you manage it as a number. So you know,
if you get too high because something is that performance.
So the gold shares are up three times the goal
price this year, you know, you obviously be taking some
profits and some of the gold producers and putting it
back into physical if you think if they think they've
gone too far. You mentioned our exposure to goal equities
in the portfolio today. We went from an underweight position
in gold producers at the beginning of twenty twenty four
(20:34):
to a substantial overweight position in the gold producers, not
because we had a different view on goal price. We've
been bullished throughout that period. We just felt that given
the move in the price, the companies were set to
earn an extraordinary amount of cash flow and profits, and
therefore we couldn't argue with that, and even the worst
companies couldn't destroy the profitability that they were now getting.
(20:56):
And so therefore we adjusted the position because there was
value in the producers over the gold price view. And
we're maintaining that we've got a very very healthy level
of gold equity producer today because we think this quarter's
earnings second quarter of twenty twenty five should be the
evidence point. A little bit like the homework being marked
by the master. You know, we will see whether the
companies have been able to hold on to the price
(21:18):
moves and convert that into cash, and the results over
the next few months are going to be a real,
real test for these companies. And then the second element
of that test is what they do with the money.
Do they waste it, which is off too often a
track record of management teams, or do they give it
back to shareholders with higher dividends. A lot of them
are embarking on share buybacks. Most of them have paid
down their debts, so there's a lot more choice about
(21:40):
what they can do because they're not restricted with debt
covenants and so on. So we actually think we're on
the cusp of quite a material changing goal producer valuations
if they can deliver. And when you look at the
valuations relative to the past, they're trading way below their
own historic levels, so there is a lot of room
for them to move despite the year to date returns
(22:01):
that they've been able to mark up. And then coming
back to that question about the allocation, gold is also
a risk tool but also an insurance policy. Take Nicky's
number of five percent, the other ninety five percent goes
really really well. It takes some profits out of that
and add back to the gold to keep it at
that five percent number, and you will be absolutely thrilled
when the ninety five percent has that unexpected fall that
(22:23):
that five percent over delivers view and acts like an
insurance policy. And I think that's how you measure it.
You don't chase gold because that is the big mistake.
If you're chasing it because you think it's going to
go perpetually higher, you're probably going to be disappointed and
probably buying at the wrong point. But if you're managing
it as part of an asset allocation in your overall portfolio,
that is the sensible and smartest way to do it.
Speaker 3 (22:43):
Yeah.
Speaker 2 (22:44):
Can I ask you what the top gold holdings in
your portfolio are with what of your favorite miners producers?
Speaker 4 (22:50):
Well, we move those around so we don't necessarily have
a particular favorite name. What we do is we try
and build that kind of basket of exposure. So because
not every company can offer to us what we want,
so some of them we own for cash flow productions,
some of them we own for expiration potential, so they're
going to discover more Others for growth in production, others
for stability. You know, you've got to build your house
(23:11):
on strong foundations and so on. So it's getting that
mixture right. It's like baking a cake. If you're only
interested in the flower, the cake's not going to taste
very nice. But if you want to mix it with
the right ingredients, then you're going to end up with
a good outcome. So we think that kind of blended
approach works well. It also softens the risk. So if
you have all of your exposure in one particular name,
then you can tend to be disappointed by that nicky.
Speaker 1 (23:32):
What about silver, silver, it's miss along the lines with platinum.
I think, like I said, Goalput has put precious metals
back on the map as a sort of general debasement trade,
and I think silver and platinum, or obviously coming into
that fors are kind of the second iteration of that
general debasement trade. We had it a thirty two thirty
(23:52):
five dollar range. It's now moved up. It's still relatively cheap.
If you're talking about gold consistently hitting all time highs.
The dual part, right, you've got industrial demand which is
so super super strong, A lot of it is PV
but again as electronics it plays a part in the
transition economy, and then as well it's got that investment side.
So to me, silver, if you think we are right
(24:16):
now sort of at a macro inflection point where we're
going to get sort of a series of trade deals,
the FED is going to join the G ten rate
cutting party. The US dollar has appreciated a ton, but
it's still in his early endings of a sort of
structural decline.
Speaker 3 (24:30):
Then your high beta.
Speaker 1 (24:32):
More industrial precious metals such as platinum and silver definitely
have more upside than gold. So in terms of you know,
it's just we're not really in that full on fear
mode where where havens are being overbought, and I think
I think there's there's a rotation out of sort of
your pure havens into some of these alternatives.
Speaker 2 (24:50):
Ever's nodding away like either completely agrees or has something
to appen.
Speaker 4 (24:54):
I think the I find silver fascinating. I started my
job and take some photographs, take the camera film to
the chemists and get it developed. And that was silver.
Silver was foury odd percent of demand with photography. And
when was the last time you took a film to
the chemist to get it developed, so if you can
find one that would do it. So you know, silver
has that amazing ability to kind of reinvent itself with
regards to demand, and today it's attached to that really
(25:17):
really fast growing part of the market, which is solar cells,
and it's the biggest part of consumption. So as that
grows and the world uses more, it's great great for silver.
Silver also has this other characteristic where there aren't very
many pure silver mines, so it tends to be a
byproduct of production of other commodities. So you have a
copper mine that might produce some gold and silver at
(25:38):
the same time, and so the kind of cost of
production element doesn't apply as kind of neatly in relation
to other commodities, or price falls below the cost of
production production shuts. Same with copper and other things. Silver
doesn't necessarily have that same extent because of that byproduct nature,
and so the kind of supply side support on price
from a kind of cost curve isn't really there to
(25:59):
the same degree. So we actually are very positive on silver.
We think the silver equities have been left behind and
we think there is room for a more material move
in the price of silver. We're actually surprised that it
hasn't broken out. It's had a couple of attempts recently
in that kind of mid thirties range, as NICKI mentioned,
but we haven't seen that kind of big bump move yet,
(26:21):
so we're kind of anticipating that. So in our Golden
General Fund, we've actually got an active weight to silver today.
That's pretty big because of that positive view.
Speaker 2 (26:30):
God, I'm glad you that I've been holding that Golden
General Fund for decades.
Speaker 4 (26:33):
It's at an all time high now, mare, and so
you should be pretty happy with the.
Speaker 3 (26:37):
I know, yeah, there were there was some not so happy.
Speaker 4 (26:41):
I totally agree that we've been through a bit of
a roller coaster across all the commodity space, and the
Golden General Fund has been one of those. But I'm
very pleased to see twenty two quid or whatever the
unit price is today.
Speaker 3 (26:53):
Yeah, me too, Me too, Nikka.
Speaker 2 (26:54):
Outside precious metals, are there any any metals.
Speaker 3 (26:57):
That you're particularly interested in?
Speaker 2 (26:58):
I mean, obviously the big one there as copper, and
I'll come back to you every on this a big
part of your portfolio.
Speaker 1 (27:03):
But is that interesting to you, NIGGI, Yes, I mean
it's it's definitely interesting sort of fits. That's that similar
framework with platinum and with silver in terms of if
you're looking for a reflation trade. Again, these are metals
that are generally constrained. You have a strategic stockpiling globally
occurring in critical metals and so yes, I think do
you like corperate, constructive and positive to it, but yeah,
(27:27):
probably add that in industrial metals, we like some of
the opgms with thurniums is really a big part. Again,
there's no listed commodity that's very niche. It's basically I
call it the in video of the PGM sector, but
it's a big part of sort of data centers and
again the South African mining complex. I mean, they can't
mind these metals in isolation. It's mined as a basket
(27:50):
similar to what we're if it was referring to in
in silver as in their byproducts.
Speaker 3 (27:54):
So yeah, generally constructive. Yeah, it's interesting.
Speaker 2 (27:58):
I mean going back to going back to that, I mean,
we read so much about the rare earth metals, which
as we all now know, on't exactly rare but only
minded particular places. How does it reacha out of us
to get exposure to the.
Speaker 3 (28:10):
Rare earth metal story.
Speaker 4 (28:11):
There are a handful of listed companies around the world
that you can get exposure to. The quality of the
assets is very variable. The challenge with the rerror space is,
you know, there are lots of different elements to the
supply chain, so it's not necessarily the mine. It's downstream
from that. It's the processing and conversion of that of
those products into usable items, and it's that element that
(28:32):
China controls. So China controls that intermediary step between the
raw production and then conversion into something that's usable, and
then the sale of those into other formats, whether it
goes into magnets or other applications. And that's the kind
of huge strategic win that China's had over the years.
They've realized that if they can dominate the control of
(28:52):
the supply of that, they don't need to own the
minds as such. They just need to own that intermediary
step and that gives them that long term power base.
So you've got to think about where is the margin made.
Is the margin made in digging the stuff out of
the ground, or is the margin made in converting into
something that's usable, And that's where you need to think
about your exposure. So we do have exposure to rare
US across our portfolios. Some of them are in the
(29:17):
mining companies. We have two pure play exposures, both listed
in Australia, where the one is exclusively a rare US
producer and the other one is building out a rare
US facility both downstream processing and the mining of the product,
and that will come into production in the next kind
of year and a half. So those two companies are
kind of ways of playing it. We haven't gone into
(29:39):
the kind of more exotic ways of doing it because
it's just a bit of a challenge that some of
those companies, but that's how we're doing it.
Speaker 2 (29:47):
But you should see an awful lot more of the
mining and the processing of all these commodities coming back
into Western countries, right and that would make sense if
everyone is concerned about energy security. In particular, we're going
have to mine and process on our own land, which
is a grubby thing to do, and we don't like
doing these things because they're all dirty, and we prefer
to outsource all the dirty work to China in particular,
(30:09):
but we're going to have to bring it back on Shore.
Speaker 4 (30:11):
Yeah, there's definitely that, and I agree with what you've said.
The challenge is the price. You know, at the moment,
the prices of these things are not high enough to
justify the investment to build that onshoring of capacity. I mean,
nowhere near high enough. If you look at the share
prices of some of the rare producers, they have not
been good performers at all. In fact, they've been completely
the opposite, and that's because China doesn't want that supply built.
(30:34):
They like the fact that they control the industry, and
so the last thing they want is to lose that
kind of ad plus percent market share position. So it
will require some incredibly low cost capital or huge grants
and subsidies or whatever from Western world countries to be
able to build that, plus you know, some changes around
the regulation I suppose in terms of the processing capacity,
(30:54):
because it isn't the cleanest of industries, it will take
some change and that change will take a lot of time.
So I think the supply side response is relatively inelastic
in the near term.
Speaker 3 (31:05):
Yeah, although I suppose it is possible.
Speaker 2 (31:07):
And we've talked a lot on the part of the
last couple of months about the mooted rise in defense
spending and if you're going to be spending five percent
of your GDP on defense, body you're actually talking about
And the answer, of course, is that you're not really
going to spend five percent of your GDP on tanks.
You're going to spend it on exactly that, providing locust
capital or very large grants to securing your supply of
the metals and minerals that you need for energy security
(31:29):
as well as physical security.
Speaker 4 (31:31):
Yeah, that's definitely going to form a large part of that.
As you say, you're not going to be necessarily building
the tanks, you're going to be building the drones. And
you know the drones will not use that much steel,
but they will use a hell of a lot of
magnets and chips and so on, and then you've obviously
got the explosives and everything else that goes with it.
So the shape of spend is going to be different
to the past in defense.
Speaker 2 (31:51):
Do you hold any renewables equities or is that outside you're.
Speaker 4 (31:54):
In there that we've got a large renewables listed equity
business on the team, and that's actually going through a
bit of a renaissance right now. I think everything that
was talked about in the context of sustainability, you know,
has been through a bit of a downturn over the
last few years, and you know, it's kind of reached
that kind of low point where things are starting to change. Obviously,
(32:16):
the shift and the backwards and forwards in the US
with regards to regulation there looks as though it's reaching
a point where it's going to be less bad and
the equities are starting to kind of reflect that. So
our exposure there is really starting to improve. And I
think when you look at the valuation of those businesses,
they've been so heavily penalized now for the last three
or four years, it's kind of hard to see them
(32:37):
go any lower. So I think that's actually a very
good opportunity in that space.
Speaker 3 (32:41):
Hard to Stephen goingilwer is not the same as being
able Stephen going out.
Speaker 4 (32:44):
No, No, I think I think they've gone so low
that the next move is up. And I think it
goes back to that question we were talking about earlier
on all the other topic around the energy transition. The
only way to fill the energy needs in the near term,
you know, in terms of extra molecules, is by adding
renewable capacity, and so the growth that's going to come
through from the deployment of money into building out the
(33:07):
renewables is going to be the solution. I mean, try
and get a gas turbine and how long you know
it takes to get hold of that. It's super super hard.
Reactivating the nuclear which we are very optimistic on, you know,
for the outlook for the uranium is definitely coming, but boy,
it's going to take a long time. And so unless
you're going to build a whole bunch.
Speaker 3 (33:24):
Of it, does it have to take a long time.
Speaker 2 (33:25):
I mean, we have talked about this quite a lot
on the pot about that about uranium, and I've loved
for Nicky's opinion on uranium.
Speaker 3 (33:31):
In a minute.
Speaker 2 (33:32):
And with that, you know, we talk about the energy
mix endlessly.
Speaker 3 (33:36):
We must have this mix of different sources, et cetera.
But do we really really need.
Speaker 2 (33:41):
An energy mix if we actually went full on with nuclear,
if we really focused on SMRs, if we put out
new nuclear blands at the same speeders as South Koreans,
for example, which is very significantly cheaper than the way
we do it in the UK, and you can get
them up in five years. If we did that, we
could solve all our problems in it relatively short amount
of times. It's not that it's not possible, it's just
(34:03):
that we won't do it.
Speaker 4 (34:04):
I agree with you, and you mentioned the UK, and
obviously the disaster of Hinkley Point in terms of its
costs brings us immediately to mind. But you also said
five years. You know you can build a hell of
a lot of data centers in five years, you know,
much quicker than you can build the nuclear Even at
the SMRs.
Speaker 2 (34:18):
It takes you five years to put up a great
wind farm, takes you five years to get planning permission
for a solar farm. Values is nothing in the world
of the UK's planning permission. If you decided to solve
your problem, you could solve your problem very fast. Like
everything in the UK, the problems are easily solvable by
policy changes. I'm so, I'm way off into politics now.
(34:39):
All of our problems are solvable with fast, sensible, data
driven policy change, which is not matter anyway, but they'll
be that isn't me.
Speaker 3 (34:48):
You must have exposure to uranium in their portfolio.
Speaker 4 (34:51):
We do have exposures to uranium in the portfolio, and
the uranium side is really interesting. You know, if you
talk about a commodity that's had zero investment in for
an incredibly long time, some of the world's biggest minds
were kind of put on care and maintenance because the
demand was just so bad, and they're now being reactivated
because the demand is coming through. The restocking cycle is very,
very long dated. And what's interesting is, I think it
(35:13):
was two years ago now that we attended a conference
here in the UK for the uranium companies and it
was the kind of a little bit like the kind
of mating season where the uranium companies meet the utilities
and they work out what their needs are and so on.
What was fascinating is meeting with the uranium producers who
were now having requests for supply coming from technology companies.
(35:35):
Because the technology companies had worked out that one of
the challenges was power and if they needed to solve
the power, they needed to solve it with long dated,
low carbon, reliable base load power and nuclear as the solution.
So they were actually pitching direct to the uranium producers
for access to units of supply to be able to
meet their future needs. And then two weeks later we
(35:55):
saw the announcements about the reactivation of capacity in the US,
and so this is absolutely moving forward and it wouldn't
surprise me that we see more growth coming out there,
but again it's going to take time.
Speaker 3 (36:06):
So we should all hold chemic coal.
Speaker 4 (36:08):
We do have that in the portfolio. Absolutely.
Speaker 2 (36:11):
We let me ask you about the future. So we're
going to have a lot of mining companies out there.
We talked about gold companies in particular. There's going to
be a lot of cash piling into them. So we're
going to see a lot of companies in this sector,
massive bounce of cash on their balance sheet.
Speaker 3 (36:25):
What do you think they're going to do with it?
Speaker 4 (36:27):
What I think is going to happen is different to
what I would like to happen. And I think what
I would like to happen is that the company's are disciplined,
they give returns to their shareholders who've invested in their businesses,
and they manage those cash flows sensibly and an investment
in the right way. That's what I hope will happen.
What I think will happen is that the companies will
repeat what they've done in the past. Not every company,
(36:49):
but I think we are seeing today a rise in
capital expenditure across the industry with questionable returns, and I
am worried that this is a trend that might come
back to levels that we saw in previous cycles. Why
I'm worried about that is because a lot of money
was destroyed when the companies were generating great margins because
(37:11):
of poor thinking and capital allocation. And I really hope
we don't see a repeat of that. It's a message
we're trying to get through to the companies as frequently
as possible. Absolutely, there are companies out there that will
not do that, and they will be disciplined and they
will be great businesses. And we're really happy shareholders in
those companies. And if the companies can be disciplined and
(37:31):
return the money, then the shareholders will do very very well.
The host nations will do very well, the employees will
do well, good taxes will be paid, and the shares
should re rate. The risk is that they don't and
the opposite happens and.
Speaker 3 (37:44):
We don't get those dividends we've been looking forward to.
Speaker 4 (37:46):
Yeah, and the gold companies a great I mean, my
old boss was a wonderful man called Julian Bearing, and
he was absolutely table thumpingly strong on this topic. He
was the the great creator of this, of investing in
this in the gold space, and he would always hold
companies to ransom with regards to dividends, and because they
(38:06):
are a fair way of sharing the spoils that the
companies make. And they're a great discipline too. If you
don't do a dividend because you badly invested the money
you're making, then you owe your shareholders and apology. And
so a discipline around dividends is like handcuffs on management.
If you know the dividend is sacrosanct, then you've got
to pay it. Then that reduces the amount of free
(38:27):
money that you have to reinvest, which means you can
therefore only make smaller mistakes if you're going to make mistakes.
And so dividends are absolutely essential component of returns. And
if you look at the industry as a whole through time,
the mining industry greater than fifty percent of the returns
that the industry generates a dividends. And if you're not
paying the right amount, then you're really going to going
(38:48):
to let yourself down.
Speaker 2 (38:48):
Okay, we'll keep an eye on that. Let me just
ask you one last question both of you. Nikki, do
you see bitcoin as a competitor to precious metals?
Speaker 1 (38:57):
We look it into you look at liquidity in the
system like global but it is consistently reaching all time high.
There is there is a space. This is a space
where both can survive. They basically complement each other, Bitcoin
and goal. They should be the same hip in terms
of what they kind of stand for anti fear to
sort of a verte against the system. But one is
(39:17):
extremely volatile, the other one is a bit of a
more safe haven. So I think in a portfolio there's
enough space for both of them, depending on yours profile,
depending on what you're looking at.
Speaker 3 (39:27):
So I don't.
Speaker 1 (39:27):
I don't really see it as a competitor in a
world where there's a consistent search for US dollar hedges
and it's just there's there's a of reliable US dollar
hedges out there.
Speaker 3 (39:39):
Yeah, okay, thank you. And I think would you put
it in I mean, you know, is it a commodity?
I mean you mind it right?
Speaker 4 (39:44):
Yeah, I wouldn't. I would say a minor would argue
with that. I think it's a word rather than an action.
Crypto as a whole is sold on the same basis
as gold and bitcoin in particular, and as a result
of that, there are characteristics that you could see in
a similar light. I think gold is the original. Gold
will be around for thousands of years, as it has
(40:06):
already been around for thousands of years. I think it's
re earning its place in people's portfolios with the moves
that it's had. I look forward to the day where
you are able to pull out your debit card and
spend gold. I think that's a really, really exciting time.
I know there are some companies that are doing that already,
but it isn't mainstream in the same way that you
(40:28):
pull out your your card and you can swipe on
your phone to spend euros or dollars or pounds or whatever.
Why can't you swipe to spend gold.
Speaker 2 (40:35):
I have the answer for you that I have the
answer for you to that question, and the answer is
capital gains liability.
Speaker 4 (40:41):
Hell not, but not if your gold exposure is held
via coins, because there's no CGT on gold coins.
Speaker 2 (40:48):
Fair enough, fair enough, Seeing've got coins backing up your card.
Speaker 3 (40:51):
This is too complicated. We're going to leave it here.
We're going to leave it.
Speaker 2 (40:54):
Yeah, Evy, Nikki, thank you so much for joining us today.
Speaker 3 (40:58):
Hugely appreciate it. Thanks for listening to this week's Marin
Talks Money.
Speaker 2 (41:12):
If you like us show, rate, review, and subscribe wherever
you listen to podcasts, and keep sending your questions or
commiments to Merin Money at Bloomberg dot net. You can
also follow me in John on Twitter or x I'm
at Marinus w and John is John Underscore Steppe. This
episode was hosted by me Maren Sumset Web. It was
produced by Someasadi, Moses Ander and Tala Amarari. Sound designed
(41:34):
by Blake Maples, Bestial Thacts, Sineky Shields and to Ev
Hambroke
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Welcome to Meren Dorg's Money, the podcast in which people
who know the markets explain the markets.
Speaker 3 (00:22):
I'm Maren Sumset Web.
Speaker 2 (00:24):
This week we are spending the episode focused on one
particular market, commodities. It's been a while since we discussed
the sector, so we have invited on two experts to
join us in a conversation about everything metal and mining.
We talk about the commodities themselves, the minds they come from,
and the relationship between those minds and the equities that
represent them. We talk about copper, we talk about gold,
(00:45):
we talk about platinum, and we talk about silver. So
in our studio we have Nicky Shield's head of Metal
Strategy at mks PAMP, a group that specializes in precious metals,
and in our London studio we have Heavy Hamburg, who
is one of the world's most influenced mining invested Evy
is co manager of the black Rock World Mining Trust
and global head of Thematic and Sector Investing at black Rock,
(01:08):
as well as being head of the Natural Resources Equity team.
Nick and every Welcome to Merrin Talks Money. So Everie,
why don't I start with you and just tell me
what it is that you think of when you talk
about commodities. What are we talking about here? How is
this sector different to the rest of the market.
Speaker 4 (01:24):
You could go anywhere with that question.
Speaker 3 (01:26):
I know I wanted.
Speaker 2 (01:27):
I wanted to have fun by asking at the very
beginning of bitcoins a commodity, but I'd have heard that.
Speaker 3 (01:31):
Leave that's the end.
Speaker 4 (01:32):
It's fascinating if you think about commodities and the fact
that we all use them every day, and some of
them are more visible to us than others. So if
you go to the petrol station then you fill up
your car, you know what the price of fuel is
and how that changes. If you go shopping at the supermarket,
(01:52):
you know what the cost of agricultural commodities are because
you can see how the price changes. But most of
the commodities that we take for granted, you know, the
metals and so on, have very very low levels of
visibility in terms of how we consume them. And I
think that society as a whole is rather complacent about
their supply and the invisibility of the price changes. And
(02:16):
I guess the fact that they're always there and we
take them for granted means that we don't pay that
much attention to them, and I think that's reflected in
how people value the companies that produce them, and so
to us, theres very very long term investors in this space.
It's quite disheartening to see how lower percentage of the
(02:38):
kind of global market cap commodity producers represent relative to
how essential they are both in everyday lives but also
in sustaining living standards. And it's only when you know,
things go into kind of I don't know, panic mode
around shortages, or you hit the front page of the
media and so on, that people's interest levels rise and
(03:01):
multiples expand or greed over where overtakes, you know, fear
in terms of people wanting the exposure that the sector
becomes front of mind for most financial investors, and you know,
we're certainly seeing some early signs of that in the
government space. But to me, I find it very confusing
that something that is so essential to everybody's daily life
(03:24):
has such a low level of interest and low multiple
that the companies tend to trade on in the market
relative to the businesses that actually consume them. I mean,
you can't build a data center without commodities, Yet there
the data center companies trade on infinite multiples.
Speaker 3 (03:41):
Yeah, that is interesting.
Speaker 2 (03:42):
We had we had a few months ago, we had
ed Conway on talking about his book Material World and
talking about this difference between the ethereal world and the
material world, and the extent to which we've sort of
forgotten that the material world is the foundation of everything,
and without without the minds and without the really fealthy,
grubby bit at the bottom of everything, we could all
the other things that we like to talk about.
Speaker 1 (04:02):
It.
Speaker 2 (04:02):
It's just interesting how that's happened over the last couple
of decades, that the foundation, the foundations of everything have
been forgotten on the pyramid of need has been rather upturned.
Speaker 4 (04:11):
Yeah, I think you're right. I mean, it's a great
book that I loved it, and I listened to it
on one of the players audible. It is amazing if
you think about how society has moved on through time,
where basic industries were such a core part of everything,
and now services are the kind of the most core
part of everything. And it's just you know, usk how
much value dis services really add?
Speaker 2 (04:31):
Oh controversial or can I add anything without without the exactly?
Speaker 4 (04:37):
That's what I mean.
Speaker 2 (04:37):
Yeah, And I suppose the other interesting part of that
that will come onto later as well is energy, And
there's a whole justop oil excepter plava where everyone forgets
that in fact, oil is part of absolutely everything they
touch and everything they feel around them, everything they see.
Speaker 3 (04:50):
Is that something to do with fossil fuels.
Speaker 2 (04:52):
But nonetheless, we've moved so far away from the understanding
of the materials sector. There's a genuine belief out there
that the world could continue.
Speaker 4 (05:00):
Yeah, I mean that's my foundations. I find a bad complacency.
Speaker 2 (05:04):
You're beginning to see some kind of change. I mean,
I think ed Ed's book was a bit of a
turning point for starters. But also looking at the papers
this morning, one of the headlines on the front of
the FT Sorry competitor Alert was Chinese mining acquisitions globally
at their highest level since twenty thirteen.
Speaker 3 (05:18):
So somebody's getting it.
Speaker 2 (05:19):
The Chinese are up there looking at everything, buying everything,
beginning to monopolize as much as they can.
Speaker 3 (05:24):
So let me just ask you, then, when you.
Speaker 2 (05:25):
Look at the sector today, what are the parts that
you find most interesting? Where is it going to happen
that we'll see these supply demand shocks that are going
to wake people up to the importance of this area. Yeah.
Speaker 4 (05:37):
I hope we don't have shocks for the wrong reason,
because that would be pretty bad for the environment or
for safety and life and stuff.
Speaker 3 (05:44):
Slow surprises, let me go slow surprises. Yeah.
Speaker 4 (05:47):
I think it's hard to argue against the fact that
the world's going to need more as life goes on.
That's pretty much a given. That's definitely been the history
and it's likely to continue to be the future. I
think the shape of what more is is what's interesting.
So when we think about the transition, I suppose you
away from fossil fuels, that is a transition from fossil
(06:09):
fuels to hard metals to industrial commodities, and the intensity
of use of those commodities rises, you know, almost vertically,
the more you move away from fossil fuels. Up to
some long.
Speaker 2 (06:22):
Data can I Evie, do you mind if I just
interrupt you briefly, because we always talk about the transition,
and when we do, I think it's time we start
making it clear that we're not really talking about a transition.
Speaker 3 (06:32):
We're talking about an addition.
Speaker 4 (06:34):
Correct, It's just the change of shape, And I think
that's it. Yeah.
Speaker 3 (06:37):
Absolutely, We've never had an energy transition in history.
Speaker 2 (06:40):
We've only ever had an addition that we don't use
less cold than we did, we don't use less wood
than we did, none of those things. We just use
another type of energy on top. And that's what's happening.
Speaker 4 (06:50):
I mean, we can't have the future that is being
advertised to us so extensively without a net addition because
everything that is being advertised, that data sent A and
AI just use vast amounts of power and we can't
solve that with fossil fuels alone. It's got to be
other things. So the transition is the shape of those
energy molecules in terms of where they come from, and
(07:11):
through time, I'm sure we probably will get to a
point where the shift away from fossil fuel starts to
become dramatic, but that's probably quite long dated. But in
that transition period, as that part is evolving and becoming
a bigger component of supply, more and more metals are
going to be going to be needed. And I think
that's pretty obvious. So I think the demand side is
very hard to argue with. I think the supply side
(07:34):
is equally challenging, you know, we're seeing very very long
dated timeframes, so the addition of new supply of industrial commodities,
it's becoming harder and harder to develop these things for
whether it's the environmental permitting or the regulations attached to it,
the complexity where these all bodies are located. They're not
kind of shining out of the ground and easy to identify.
(07:55):
You've got to go deep underground or top of mountains,
access to water and power and people, and it is
just becoming more and more complex. So the thing that
we see that's coming back to your question that's so
fascinating is how the industry finances the growth that is
needed and are the incentives or the returns there today
(08:15):
at today's commodity prices to justify those investments. And when
you look across the kind of spectrum, it's hard to
see the returns for a number of the key commodities
to justify that investment. So the imbalance, the kind of
shock that you talk about, is probably going to come
from a long dated period of under investment into supply
because the returns aren't there. That coincides almost tectonically, you know,
(08:39):
with that sudden, you know, appearance of demand that everybody identifies,
and you then see a price response to reflect that imbalance,
and that then triggers probably a long dated period of
investment into new supply growth. In that interim period, you've
got governments running around, you know, saying that they're worried
about security of supply, trying to incentivize investment. You've got
(09:01):
the US trying to unblock some of the red tape
around investment of domestic resources, which might help. We don't know.
It's a very very early days in that regard, but
I still think that the challenges are very much going
to be kind of dominating the headlines, and at some
point there's going to be pressure and that hopefully will
lead to improve returns for the companies that make the
(09:22):
commodities today.
Speaker 2 (09:24):
Yeah, I mean, the demand side will makes sense. And
I think everyone can see this. Everyone can see rising
demand from the energy transition edition, whatever we're going to
call it now, from everyone, from this rising concern about security,
from the idea that we should massively increase our spending
on defense, increase our spending on reindustrialization, et cetera, et cetera.
(09:45):
But when it comes to the supply side, in the
old days, we always used to saying that the alter
to high prices is high prices, or the solution to
high prices is high prices are shoot.
Speaker 3 (09:53):
I mean, because then you get.
Speaker 2 (09:54):
This massive burst of supply, but increasingly it becomes harder
and harder to incre supply for all the reasons that
you mentioned, but also for environmental reasons, getting permissioned to
open new sites, getting permissions to explore, etc.
Speaker 3 (10:07):
So is it the case that.
Speaker 2 (10:08):
As this dynamic you've been talking about unfold, the cycle
is very significantly longer than it might have been in
the past. So, for example, all the big companies will
now say that it's very significant did you just go
out and buy someone else's sites than it is to
try and find another one, explore, get permissions and get
going with production.
Speaker 4 (10:25):
Yeah, I'd definitely agree with that latter point. The valuations
on existing production today are much lower than the cost
of building stuff. I mean, that's a sweeping commet but
there are there's a lot of data to support that.
And it's not just the cost, it's the time and
complexity as you mentioned about building new stuff. So you
might have a project that's ready to go, but it
(10:47):
still takes many many years to construct. There's still a
lot of risk around how much it's truly going to cost.
Anyone who's built a house knows that it tends to
cost more than you think at the start, And it's
the same with building your mind, except the numbers that
just have many more zeros. When you think about that,
if you're buying an asset today that's in production, you've
got many many years of cash flow from that asset
before the stuff you might be building from scratch actually
(11:08):
starts producing cash if it starts on time and at
the right cost and ramps up to full production successfully.
We've got a few examples recently where some of the
world's biggest new copper mines have ended up costing fifty
to one hundred percent more than originally planned and are
still not at full capacity two or three years after
having supposedly started, Whereas if you'd gone and bought somebody
(11:30):
else's asset and paid full price for it, you would
have had three or four years worth of cashlow to
help reduce that cost by the time you know, the
new one might have might have started. So I think
the kind of on a risk reward basis, the assets
in the market are trading a lot cheaper for less
risk than building some things from scratch, which obviously is
one of the opportunities in the market that we see.
Speaker 2 (11:52):
Okay, Nick, and we've talked a lot around qualities in general,
about the different metals. I know you've specialized particularly in
precious metals, but in the world of metals overall, the
any that you look at and you find particularly interesting.
We're not going to go straight to gold, by the way.
Speaker 1 (12:06):
No, you talked about these not to build on this,
and it's sort of punnintended there.
Speaker 3 (12:10):
But you talk about the slow surprises, and.
Speaker 1 (12:13):
When you look at commodities sort of uros pla manus demand,
you kind of fudge for macro equals price, and gold
is it's less of a commodity out of all of them.
But from my seat, basically what we're seeing is is
platinum is really turning into a PGMs, turning into sort
of that slow surprise we touch on again, it's your
structural urrors of under investments in the sack. So a
(12:34):
couple of months ago, fifty percent of the fifty percent
of your supply was underwater, and so you get then
you sort of have this sort of you know, really
low pricing regime a sort of painful period, and you
then get a catalyst, which happens to actually be the
ball price, because Chinese jewelry demand is basically down like
(12:54):
thirty forty percent given high ball pricing, and so you
got your Chinese judas really looking at re stocking and
going into platform versus gold. So that is the catalyst
that has you know, seen almost forty percent three pricing
in the last few weeks, which is pretty unprecedented.
Speaker 3 (13:10):
So yes, eyes.
Speaker 1 (13:11):
Are definitely on the PGM sector because again, I think
that response when we talk about the supplier response and
how quick that is, because when the mind does turn,
it can swim pretty quickly. And in metals it's it's
either scrap or it's primary. And if you just there's
just no mind to bold, right there is it's just
not there, and scrap for especially for PGMs, that's sitting
in order cats and people are just hanging on to
(13:33):
cars for longer because of high inflation because abound certain
ty becaeuce of tariffs and that that material just isn't
coming back. So we're not really seeing that the supplier
responsors you generally see across the metal space industrials and
precious when you get a large price free rating.
Speaker 5 (13:48):
Okay, well I'll tell you what I gave in and
let's talk about gold. You're I mean it's empting heavy.
You're your portfolio is what the thirty percent or in gold?
Speaker 3 (13:59):
Gold? Like please at the moment?
Speaker 2 (14:00):
Right, And Nikki, I know you're something of a gold bull, right, Nika,
why don't need talk us through the case.
Speaker 1 (14:05):
I think gold sort of speaks for itself in terms
of its three ratings through two thousand and it's it
is putting commodities back on the map in the broader sense.
It hasn't burnt itself out like every other commodity price
boom or bus. So you've got investors coming back and saying, right, right,
is this time really different?
Speaker 3 (14:23):
And why?
Speaker 1 (14:24):
And you've had a bunch of structural forces come together. Deglobalization,
de dollarization, which didn't start now it's this started Brexit,
like this started Brexit Trump one point zero, accelerated with COVID,
accelerated with Ukraine war, the weaponization of dollars, and then
just sort of ongoing geo political tensions.
Speaker 3 (14:43):
And I think you now have a world where.
Speaker 1 (14:46):
Yeah, there is it's it's each protectionism is up and
again a course for those strategic stockpiling of and central
banks that have been that key game changer, that a
key demand game changer for whether it's a sub two
thousand dollars acid or or now three thousand dollars plus
ASCID and the way they're accumulating just too as a
(15:07):
dollar hedge, but also fits currency hedge and inflation hedge,
energy political hedge is kind of unprecedented, and we don't
see that falling away anytime soon.
Speaker 2 (15:16):
You don't see it falling away anytime seeing the Chinese government,
Chinese center back, for example, has been buying and buying
and buying, and you see that continuing.
Speaker 1 (15:23):
Mostly Yeah, so it's mostly emerging markets, central banks, a
lot of Africa and a lot of Asian obviously China.
The interesting thing is, you know, World God Council do
a great it's sort of great analysis and data on
central bank buying, but it's it's official and a lot
of it's unofficial. And in a Trump era, who you know,
Trump has actively come out he had comments overnight related
(15:43):
to the sort of the brick summits. But if you're
actively seeing d dollarizing, which in the purest form is
accumulating gold.
Speaker 3 (15:50):
The threats of tariffs sort.
Speaker 1 (15:52):
Of increases, So I think you're going to see a
lot more It's it's going to become a lot more
paid back to what we started off. From the conversation,
I think central bank buying. You're going to have a
lot of unofficial or just estimated central bank buying and
won't go through the official channels.
Speaker 3 (16:07):
Okay, interesting, and is that what you see as well?
Speaker 4 (16:10):
I think I'm more bullish than that. You know, I
agree with a lot of the comments I made, but
I just think the scale is so much greater. You know,
you look at the size of government balance sheets today,
and I think that the education, a painful education that
many people have been through about the loss of purchasing
power over many, many years. Every year, you know, your
(16:33):
paper currency buys you less than it did in the
year before, and you know, cumulatively, it's very very expensive
for paper assets. And I think the scale of government
balance sheets now that need to be continually refinanced. People
have learned a very very expensive lesson. We did the
study of a year ago or so. I think the
(16:55):
iPhone is now sixteen years old. You know, when it
was launched, it was five hundred bucks iPhone. Now it's
fifteen hundred bucks for an iPhone. You know, if you
use gold to buy your iPhone, you need thirty four
percent less gold today to buy today's iPhone than you
did when it was first launched. That is the protection
of purchasing power. Real assets have held value much better
(17:17):
than paper currencies over time, and we all know that.
And I think that people's people have started to become educated.
Central banks have certainly become educated on this. And so
my career is too long now, but you know, I
when I started in the nineteen nineties, you know, everybody
had an allocation to gold in an investment portfolio. In
the early two thousands, that allocation was zero. Even the
(17:38):
Swiss wealth managers had zero allocation to gold. Now it's
getting back to two three percent some cases. More central
banks have you know, stopped selling gold in the early
two thousands, you know, having had whatever it was, four
decades of net selling, you know, and they've been buying continuously,
and they're buying at twice the average rate, or nearly
three times the average rate over the last three to
(18:00):
the last kind of seven or eight before that. So
we're at a kind of a pivoting moment in this
where gold has really re established itself as a financial asset.
Speaker 1 (18:11):
You make a really good point on a sort of
the allocation to gold and sort of relative size I
think of the gold market relative to other industries. I
think is underappreciated. So yeah, it's just that idea that
the gold space relative to the questioning of US treasuries,
questioning of other assets is just it can't hold the
amount of allocations if we simply just doubled investor allocations,
(18:34):
or if Central anxious had to double their allocations to
the sector.
Speaker 2 (18:38):
So what percentage of an ordinary person's portfolio should being gold? Micky,
do you think we'll go can't?
Speaker 1 (18:44):
I mean the numbers thrown around is about one to
five percent. I look at a very crude measure of
just sort of known investor holdings, which is just simply
ETF and your net COT numbers, and that's less than
one percent as a percentage of equity.
Speaker 2 (18:59):
Hohold.
Speaker 1 (19:00):
But I do think specialists are somewhat involved. This is
what makes me extremely polished. This isn't a gold rally
that's firing on all cylinders. Retail's pretty sluggish, both in
Europe and in the US. You've got central banks, you've
got general investors, but I think it hasn't got.
Speaker 3 (19:15):
To that Fomo their phoonmo level weight.
Speaker 1 (19:18):
The new your taxicab is talking to me about hying gold,
so really has been a sort of cold hearted like
sort of allocation, very measured allocation to gold.
Speaker 4 (19:26):
I'd go more than that, So I thought you mightn't
anywhere there enough. It's Oh. I think there's two components
to that answer. The first one is that there are
different ways to get exposure to gold, and to me,
the optimum way is to have a mixture of exposure
to physical and to gold producers. And so you set
(19:48):
yourself a target where you want that exposure to be,
and you might go with five percent, you might go
with ten. I normally have anywhere between fifteen to twenty
percent in my own personal portfolio, and you know, you
manage the risk of those two positions. So if gold
outperforms gold equity producers, then you know, you take a
few profits in the physical gold and put it into
the gold producers and you just manage that exposure in time.
(20:11):
But you manage it as a number. So you know,
if you get too high because something is that performance.
So the gold shares are up three times the goal
price this year, you know, you obviously be taking some
profits and some of the gold producers and putting it
back into physical if you think if they think they've
gone too far. You mentioned our exposure to goal equities
in the portfolio today. We went from an underweight position
in gold producers at the beginning of twenty twenty four
(20:34):
to a substantial overweight position in the gold producers, not
because we had a different view on goal price. We've
been bullished throughout that period. We just felt that given
the move in the price, the companies were set to
earn an extraordinary amount of cash flow and profits, and
therefore we couldn't argue with that, and even the worst
companies couldn't destroy the profitability that they were now getting.
(20:56):
And so therefore we adjusted the position because there was
value in the producers over the gold price view. And
we're maintaining that we've got a very very healthy level
of gold equity producer today because we think this quarter's
earnings second quarter of twenty twenty five should be the
evidence point. A little bit like the homework being marked
by the master. You know, we will see whether the
companies have been able to hold on to the price
(21:18):
moves and convert that into cash, and the results over
the next few months are going to be a real,
real test for these companies. And then the second element
of that test is what they do with the money.
Do they waste it, which is off too often a
track record of management teams, or do they give it
back to shareholders with higher dividends. A lot of them
are embarking on share buybacks. Most of them have paid
down their debts, so there's a lot more choice about
(21:40):
what they can do because they're not restricted with debt
covenants and so on. So we actually think we're on
the cusp of quite a material changing goal producer valuations
if they can deliver. And when you look at the
valuations relative to the past, they're trading way below their
own historic levels, so there is a lot of room
for them to move despite the year to date returns
(22:01):
that they've been able to mark up. And then coming
back to that question about the allocation, gold is also
a risk tool but also an insurance policy. Take Nicky's
number of five percent, the other ninety five percent goes
really really well. It takes some profits out of that
and add back to the gold to keep it at
that five percent number, and you will be absolutely thrilled
when the ninety five percent has that unexpected fall that
(22:23):
that five percent over delivers view and acts like an
insurance policy. And I think that's how you measure it.
You don't chase gold because that is the big mistake.
If you're chasing it because you think it's going to
go perpetually higher, you're probably going to be disappointed and
probably buying at the wrong point. But if you're managing
it as part of an asset allocation in your overall portfolio,
that is the sensible and smartest way to do it.
Speaker 3 (22:43):
Yeah.
Speaker 2 (22:44):
Can I ask you what the top gold holdings in
your portfolio are with what of your favorite miners producers?
Speaker 4 (22:50):
Well, we move those around so we don't necessarily have
a particular favorite name. What we do is we try
and build that kind of basket of exposure. So because
not every company can offer to us what we want,
so some of them we own for cash flow productions,
some of them we own for expiration potential, so they're
going to discover more Others for growth in production, others
for stability. You know, you've got to build your house
(23:11):
on strong foundations and so on. So it's getting that
mixture right. It's like baking a cake. If you're only
interested in the flower, the cake's not going to taste
very nice. But if you want to mix it with
the right ingredients, then you're going to end up with
a good outcome. So we think that kind of blended
approach works well. It also softens the risk. So if
you have all of your exposure in one particular name,
then you can tend to be disappointed by that nicky.
Speaker 1 (23:32):
What about silver, silver, it's miss along the lines with platinum.
I think, like I said, Goalput has put precious metals
back on the map as a sort of general debasement trade,
and I think silver and platinum, or obviously coming into
that fors are kind of the second iteration of that
general debasement trade. We had it a thirty two thirty
(23:52):
five dollar range. It's now moved up. It's still relatively cheap.
If you're talking about gold consistently hitting all time highs.
The dual part, right, you've got industrial demand which is
so super super strong, A lot of it is PV
but again as electronics it plays a part in the
transition economy, and then as well it's got that investment side.
So to me, silver, if you think we are right
(24:16):
now sort of at a macro inflection point where we're
going to get sort of a series of trade deals,
the FED is going to join the G ten rate
cutting party. The US dollar has appreciated a ton, but
it's still in his early endings of a sort of
structural decline.
Speaker 3 (24:30):
Then your high beta.
Speaker 1 (24:32):
More industrial precious metals such as platinum and silver definitely
have more upside than gold. So in terms of you know,
it's just we're not really in that full on fear
mode where where havens are being overbought, and I think
I think there's there's a rotation out of sort of
your pure havens into some of these alternatives.
Speaker 2 (24:50):
Ever's nodding away like either completely agrees or has something
to appen.
Speaker 4 (24:54):
I think the I find silver fascinating. I started my
job and take some photographs, take the camera film to
the chemists and get it developed. And that was silver.
Silver was foury odd percent of demand with photography. And
when was the last time you took a film to
the chemist to get it developed, so if you can
find one that would do it. So you know, silver
has that amazing ability to kind of reinvent itself with
regards to demand, and today it's attached to that really
(25:17):
really fast growing part of the market, which is solar cells,
and it's the biggest part of consumption. So as that
grows and the world uses more, it's great great for silver.
Silver also has this other characteristic where there aren't very
many pure silver mines, so it tends to be a
byproduct of production of other commodities. So you have a
copper mine that might produce some gold and silver at
(25:38):
the same time, and so the kind of cost of
production element doesn't apply as kind of neatly in relation
to other commodities, or price falls below the cost of
production production shuts. Same with copper and other things. Silver
doesn't necessarily have that same extent because of that byproduct nature,
and so the kind of supply side support on price
from a kind of cost curve isn't really there to
(25:59):
the same degree. So we actually are very positive on silver.
We think the silver equities have been left behind and
we think there is room for a more material move
in the price of silver. We're actually surprised that it
hasn't broken out. It's had a couple of attempts recently
in that kind of mid thirties range, as NICKI mentioned,
but we haven't seen that kind of big bump move yet,
(26:21):
so we're kind of anticipating that. So in our Golden
General Fund, we've actually got an active weight to silver today.
That's pretty big because of that positive view.
Speaker 2 (26:30):
God, I'm glad you that I've been holding that Golden
General Fund for decades.
Speaker 4 (26:33):
It's at an all time high now, mare, and so
you should be pretty happy with the.
Speaker 3 (26:37):
I know, yeah, there were there was some not so happy.
Speaker 4 (26:41):
I totally agree that we've been through a bit of
a roller coaster across all the commodity space, and the
Golden General Fund has been one of those. But I'm
very pleased to see twenty two quid or whatever the
unit price is today.
Speaker 3 (26:53):
Yeah, me too, Me too, Nikka.
Speaker 2 (26:54):
Outside precious metals, are there any any metals.
Speaker 3 (26:57):
That you're particularly interested in?
Speaker 2 (26:58):
I mean, obviously the big one there as copper, and
I'll come back to you every on this a big
part of your portfolio.
Speaker 1 (27:03):
But is that interesting to you, NIGGI, Yes, I mean
it's it's definitely interesting sort of fits. That's that similar
framework with platinum and with silver in terms of if
you're looking for a reflation trade. Again, these are metals
that are generally constrained. You have a strategic stockpiling globally
occurring in critical metals and so yes, I think do
you like corperate, constructive and positive to it, but yeah,
(27:27):
probably add that in industrial metals, we like some of
the opgms with thurniums is really a big part. Again,
there's no listed commodity that's very niche. It's basically I
call it the in video of the PGM sector, but
it's a big part of sort of data centers and
again the South African mining complex. I mean, they can't
mind these metals in isolation. It's mined as a basket
(27:50):
similar to what we're if it was referring to in
in silver as in their byproducts.
Speaker 3 (27:54):
So yeah, generally constructive. Yeah, it's interesting.
Speaker 2 (27:58):
I mean going back to going back to that, I mean,
we read so much about the rare earth metals, which
as we all now know, on't exactly rare but only
minded particular places. How does it reacha out of us
to get exposure to the.
Speaker 3 (28:10):
Rare earth metal story.
Speaker 4 (28:11):
There are a handful of listed companies around the world
that you can get exposure to. The quality of the
assets is very variable. The challenge with the rerror space is,
you know, there are lots of different elements to the
supply chain, so it's not necessarily the mine. It's downstream
from that. It's the processing and conversion of that of
those products into usable items, and it's that element that
(28:32):
China controls. So China controls that intermediary step between the
raw production and then conversion into something that's usable, and
then the sale of those into other formats, whether it
goes into magnets or other applications. And that's the kind
of huge strategic win that China's had over the years.
They've realized that if they can dominate the control of
(28:52):
the supply of that, they don't need to own the
minds as such. They just need to own that intermediary
step and that gives them that long term power base.
So you've got to think about where is the margin made.
Is the margin made in digging the stuff out of
the ground, or is the margin made in converting into
something that's usable, And that's where you need to think
about your exposure. So we do have exposure to rare
US across our portfolios. Some of them are in the
(29:17):
mining companies. We have two pure play exposures, both listed
in Australia, where the one is exclusively a rare US
producer and the other one is building out a rare
US facility both downstream processing and the mining of the product,
and that will come into production in the next kind
of year and a half. So those two companies are
kind of ways of playing it. We haven't gone into
(29:39):
the kind of more exotic ways of doing it because
it's just a bit of a challenge that some of
those companies, but that's how we're doing it.
Speaker 2 (29:47):
But you should see an awful lot more of the
mining and the processing of all these commodities coming back
into Western countries, right and that would make sense if
everyone is concerned about energy security. In particular, we're going
have to mine and process on our own land, which
is a grubby thing to do, and we don't like
doing these things because they're all dirty, and we prefer
to outsource all the dirty work to China in particular,
(30:09):
but we're going to have to bring it back on Shore.
Speaker 4 (30:11):
Yeah, there's definitely that, and I agree with what you've said.
The challenge is the price. You know, at the moment,
the prices of these things are not high enough to
justify the investment to build that onshoring of capacity. I mean,
nowhere near high enough. If you look at the share
prices of some of the rare producers, they have not
been good performers at all. In fact, they've been completely
the opposite, and that's because China doesn't want that supply built.
(30:34):
They like the fact that they control the industry, and
so the last thing they want is to lose that
kind of ad plus percent market share position. So it
will require some incredibly low cost capital or huge grants
and subsidies or whatever from Western world countries to be
able to build that, plus you know, some changes around
the regulation I suppose in terms of the processing capacity,
(30:54):
because it isn't the cleanest of industries, it will take
some change and that change will take a lot of time.
So I think the supply side response is relatively inelastic
in the near term.
Speaker 3 (31:05):
Yeah, although I suppose it is possible.
Speaker 2 (31:07):
And we've talked a lot on the part of the
last couple of months about the mooted rise in defense
spending and if you're going to be spending five percent
of your GDP on defense, body you're actually talking about
And the answer, of course, is that you're not really
going to spend five percent of your GDP on tanks.
You're going to spend it on exactly that, providing locust
capital or very large grants to securing your supply of
the metals and minerals that you need for energy security
(31:29):
as well as physical security.
Speaker 4 (31:31):
Yeah, that's definitely going to form a large part of that.
As you say, you're not going to be necessarily building
the tanks, you're going to be building the drones. And
you know the drones will not use that much steel,
but they will use a hell of a lot of
magnets and chips and so on, and then you've obviously
got the explosives and everything else that goes with it.
So the shape of spend is going to be different
to the past in defense.
Speaker 2 (31:51):
Do you hold any renewables equities or is that outside you're.
Speaker 4 (31:54):
In there that we've got a large renewables listed equity
business on the team, and that's actually going through a
bit of a renaissance right now. I think everything that
was talked about in the context of sustainability, you know,
has been through a bit of a downturn over the
last few years, and you know, it's kind of reached
that kind of low point where things are starting to change. Obviously,
(32:16):
the shift and the backwards and forwards in the US
with regards to regulation there looks as though it's reaching
a point where it's going to be less bad and
the equities are starting to kind of reflect that. So
our exposure there is really starting to improve. And I
think when you look at the valuation of those businesses,
they've been so heavily penalized now for the last three
or four years, it's kind of hard to see them
(32:37):
go any lower. So I think that's actually a very
good opportunity in that space.
Speaker 3 (32:41):
Hard to Stephen goingilwer is not the same as being
able Stephen going out.
Speaker 4 (32:44):
No, No, I think I think they've gone so low
that the next move is up. And I think it
goes back to that question we were talking about earlier
on all the other topic around the energy transition. The
only way to fill the energy needs in the near term,
you know, in terms of extra molecules, is by adding
renewable capacity, and so the growth that's going to come
through from the deployment of money into building out the
(33:07):
renewables is going to be the solution. I mean, try
and get a gas turbine and how long you know
it takes to get hold of that. It's super super hard.
Reactivating the nuclear which we are very optimistic on, you know,
for the outlook for the uranium is definitely coming, but boy,
it's going to take a long time. And so unless
you're going to build a whole bunch.
Speaker 3 (33:24):
Of it, does it have to take a long time.
Speaker 2 (33:25):
I mean, we have talked about this quite a lot
on the pot about that about uranium, and I've loved
for Nicky's opinion on uranium.
Speaker 3 (33:31):
In a minute.
Speaker 2 (33:32):
And with that, you know, we talk about the energy
mix endlessly.
Speaker 3 (33:36):
We must have this mix of different sources, et cetera.
But do we really really need.
Speaker 2 (33:41):
An energy mix if we actually went full on with nuclear,
if we really focused on SMRs, if we put out
new nuclear blands at the same speeders as South Koreans,
for example, which is very significantly cheaper than the way
we do it in the UK, and you can get
them up in five years. If we did that, we
could solve all our problems in it relatively short amount
of times. It's not that it's not possible, it's just
(34:03):
that we won't do it.
Speaker 4 (34:04):
I agree with you, and you mentioned the UK, and
obviously the disaster of Hinkley Point in terms of its
costs brings us immediately to mind. But you also said
five years. You know you can build a hell of
a lot of data centers in five years, you know,
much quicker than you can build the nuclear Even at
the SMRs.
Speaker 2 (34:18):
It takes you five years to put up a great
wind farm, takes you five years to get planning permission
for a solar farm. Values is nothing in the world
of the UK's planning permission. If you decided to solve
your problem, you could solve your problem very fast. Like
everything in the UK, the problems are easily solvable by
policy changes. I'm so, I'm way off into politics now.
(34:39):
All of our problems are solvable with fast, sensible, data
driven policy change, which is not matter anyway, but they'll
be that isn't me.
Speaker 3 (34:48):
You must have exposure to uranium in their portfolio.
Speaker 4 (34:51):
We do have exposures to uranium in the portfolio, and
the uranium side is really interesting. You know, if you
talk about a commodity that's had zero investment in for
an incredibly long time, some of the world's biggest minds
were kind of put on care and maintenance because the
demand was just so bad, and they're now being reactivated
because the demand is coming through. The restocking cycle is very,
very long dated. And what's interesting is, I think it
(35:13):
was two years ago now that we attended a conference
here in the UK for the uranium companies and it
was the kind of a little bit like the kind
of mating season where the uranium companies meet the utilities
and they work out what their needs are and so on.
What was fascinating is meeting with the uranium producers who
were now having requests for supply coming from technology companies.
(35:35):
Because the technology companies had worked out that one of
the challenges was power and if they needed to solve
the power, they needed to solve it with long dated,
low carbon, reliable base load power and nuclear as the solution.
So they were actually pitching direct to the uranium producers
for access to units of supply to be able to
meet their future needs. And then two weeks later we
(35:55):
saw the announcements about the reactivation of capacity in the US,
and so this is absolutely moving forward and it wouldn't
surprise me that we see more growth coming out there,
but again it's going to take time.
Speaker 3 (36:06):
So we should all hold chemic coal.
Speaker 4 (36:08):
We do have that in the portfolio. Absolutely.
Speaker 2 (36:11):
We let me ask you about the future. So we're
going to have a lot of mining companies out there.
We talked about gold companies in particular. There's going to
be a lot of cash piling into them. So we're
going to see a lot of companies in this sector,
massive bounce of cash on their balance sheet.
Speaker 3 (36:25):
What do you think they're going to do with it?
Speaker 4 (36:27):
What I think is going to happen is different to
what I would like to happen. And I think what
I would like to happen is that the company's are disciplined,
they give returns to their shareholders who've invested in their businesses,
and they manage those cash flows sensibly and an investment
in the right way. That's what I hope will happen.
What I think will happen is that the companies will
repeat what they've done in the past. Not every company,
(36:49):
but I think we are seeing today a rise in
capital expenditure across the industry with questionable returns, and I
am worried that this is a trend that might come
back to levels that we saw in previous cycles. Why
I'm worried about that is because a lot of money
was destroyed when the companies were generating great margins because
(37:11):
of poor thinking and capital allocation. And I really hope
we don't see a repeat of that. It's a message
we're trying to get through to the companies as frequently
as possible. Absolutely, there are companies out there that will
not do that, and they will be disciplined and they
will be great businesses. And we're really happy shareholders in
those companies. And if the companies can be disciplined and
(37:31):
return the money, then the shareholders will do very very well.
The host nations will do very well, the employees will
do well, good taxes will be paid, and the shares
should re rate. The risk is that they don't and
the opposite happens and.
Speaker 3 (37:44):
We don't get those dividends we've been looking forward to.
Speaker 4 (37:46):
Yeah, and the gold companies a great I mean, my
old boss was a wonderful man called Julian Bearing, and
he was absolutely table thumpingly strong on this topic. He
was the the great creator of this, of investing in
this in the gold space, and he would always hold
companies to ransom with regards to dividends, and because they
(38:06):
are a fair way of sharing the spoils that the
companies make. And they're a great discipline too. If you
don't do a dividend because you badly invested the money
you're making, then you owe your shareholders and apology. And
so a discipline around dividends is like handcuffs on management.
If you know the dividend is sacrosanct, then you've got
to pay it. Then that reduces the amount of free
(38:27):
money that you have to reinvest, which means you can
therefore only make smaller mistakes if you're going to make mistakes.
And so dividends are absolutely essential component of returns. And
if you look at the industry as a whole through time,
the mining industry greater than fifty percent of the returns
that the industry generates a dividends. And if you're not
paying the right amount, then you're really going to going
(38:48):
to let yourself down.
Speaker 2 (38:48):
Okay, we'll keep an eye on that. Let me just
ask you one last question both of you. Nikki, do
you see bitcoin as a competitor to precious metals?
Speaker 1 (38:57):
We look it into you look at liquidity in the
system like global but it is consistently reaching all time high.
There is there is a space. This is a space
where both can survive. They basically complement each other, Bitcoin
and goal. They should be the same hip in terms
of what they kind of stand for anti fear to
sort of a verte against the system. But one is
(39:17):
extremely volatile, the other one is a bit of a
more safe haven. So I think in a portfolio there's
enough space for both of them, depending on yours profile,
depending on what you're looking at.
Speaker 3 (39:27):
So I don't.
Speaker 1 (39:27):
I don't really see it as a competitor in a
world where there's a consistent search for US dollar hedges
and it's just there's there's a of reliable US dollar
hedges out there.
Speaker 3 (39:39):
Yeah, okay, thank you. And I think would you put
it in I mean, you know, is it a commodity?
I mean you mind it right?
Speaker 4 (39:44):
Yeah, I wouldn't. I would say a minor would argue
with that. I think it's a word rather than an action.
Crypto as a whole is sold on the same basis
as gold and bitcoin in particular, and as a result
of that, there are characteristics that you could see in
a similar light. I think gold is the original. Gold
will be around for thousands of years, as it has
(40:06):
already been around for thousands of years. I think it's
re earning its place in people's portfolios with the moves
that it's had. I look forward to the day where
you are able to pull out your debit card and
spend gold. I think that's a really, really exciting time.
I know there are some companies that are doing that already,
but it isn't mainstream in the same way that you
(40:28):
pull out your your card and you can swipe on
your phone to spend euros or dollars or pounds or whatever.
Why can't you swipe to spend gold.
Speaker 2 (40:35):
I have the answer for you that I have the
answer for you to that question, and the answer is
capital gains liability.
Speaker 4 (40:41):
Hell not, but not if your gold exposure is held
via coins, because there's no CGT on gold coins.
Speaker 2 (40:48):
Fair enough, fair enough, Seeing've got coins backing up your card.
Speaker 3 (40:51):
This is too complicated. We're going to leave it here.
We're going to leave it.
Speaker 2 (40:54):
Yeah, Evy, Nikki, thank you so much for joining us today.
Speaker 3 (40:58):
Hugely appreciate it. Thanks for listening to this week's Marin
Talks Money.
Speaker 2 (41:12):
If you like us show, rate, review, and subscribe wherever
you listen to podcasts, and keep sending your questions or
commiments to Merin Money at Bloomberg dot net. You can
also follow me in John on Twitter or x I'm
at Marinus w and John is John Underscore Steppe. This
episode was hosted by me Maren Sumset Web. It was
produced by Someasadi, Moses Ander and Tala Amarari. Sound designed
(41:34):
by Blake Maples, Bestial Thacts, Sineky Shields and to Ev
Hambroke
Host
Merryn Somerset Webb
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