Ep. 49: Michael Gentile | Gold, Mining & De-Dollarization

Michael: Yeah, I would say the Russian invasion of Ukraine and when the U.S. froze the Russian FX reserves was like a seminal moment. I had my turbocharged bullish thesis based on debt and money printing we've talked about a lot so far. But when the U.S. seized the Russian FX reserves, that was a major gunshot for a lot of these countries that were already getting worried just doing the same math that I'm doing, going, okay, I have 70% of my FX reserves in U.S. dollar globally. And that U.S. dollar is becoming less and less valuable. That paper is becoming less and less valuable because I have to print a lot more just to float the interest on the debt. So maybe I should get out of that trade just as a good steward.

Tarek: Welcome to Yallstreet. Today, I speak with Michael Gentile, one of the best known strategic investors in the junior mining sector. He's the machine of the day, the machine that smashes. 100% legit.

Michael: So Chris, do you have a cup of coffee? I just want to be the best.

Tarek: Michael, want a cup of coffee? I'd love one. I got you this coffee mug. It says, of course I talk to myself. Sometimes I need expert advice. Thank you very much. You are widely considered one of the premier experts in the junior Canadian mining space. And I have a thousand questions to ask you about that. We're going to talk gold and silver. We're going to talk about the commodities. But can we start with just a little bit of your background? Where are you from? And how did your journey start?

Michael: Sure. Born and raised in Montreal, Canada. One of those rare kids that discovered his passion really early in life. So I discovered the stock market at 10 years old. I was in grade four in an extracurricular activity after class. I thought it was the coolest thing in the world. Back then we had newspapers. I used to follow all the stocks in the newspaper. I used to go to McDonald's with my dad. So I used to follow McDonald's in the paper. I used to have an IBM computer, so I followed IBM's quote in the paper.

Tarek: Why was that of interest to you at 10?

Michael: I don't know, it just captured my fascination. I just found it the most interesting. I loved sports as a kid and I loved the stock market. So I read the business pages in the sports section every day in the newspaper. That was my two lanes that I stayed in. And from the age of 10 years old, I knew exactly what I wanted to do.

Tarek: How old were you when you placed your first trade?

Michael: So we grew up very humbly. My parents were teachers, didn't have a lot of money growing up. So I made my first $5,000 sharpening hockey skates at a sports store. Being Canadian, of course, that's a very Canadian thing to do. So did you get tips to do that? No, it was six bucks a sharpen. I think I made like six bucks an hour, did like 100 sharpens a day. It was not a very glamorous, very sweaty, hard-working job. But yeah, I made my first $5,000 working as a summer student in the sports store. And the first stock I bought went from $5,000 to $50,000. I had 10 times my money on my first stock. In what time frame? It was the dot-com boom. So I bought a tech stock that actually made money. I didn't buy any of the dot-com stocks. I refuse to speculate on the garbage stocks that are out there, but it was a tech company doing GPS tracking for stolen cars.

Tarek: I'm sorry to keep interrupting you, but why did you pick that? How much research did you do?

Michael: It's a crazy story. So I was sharpening skates in the sports store, and my boss knew I was this passionate kid about the stock market. Some guy came in the store to buy a pair of skates for his kid. And he's like, hey, I think you run a public company, don't you? And he's like, yeah, I do. I run this small, micro-cap company. So I'm selling the kid a pair of skates. Meanwhile, the dad's pitching me his company. And I went home, and I knew enough about financial statements in the market back then. I started when I was 16 to download all the statements. And I saw it was actually a really profitable company that was growing really fast that was really undervalued. So I took my money that I made at the sports store, bought his stock, and because the tech market was so strong, it re-rated really quickly. So if it wasn't hooked already, that definitely hooked me on the stock market. Did you ever have another conversation with him after you exited? Actually, no. I should have followed back up with him. It was the seed that set the house on fire, so to speak.

Tarek: So at this point, were you trading online, or did you have a broker that you were calling?

Michael: It was 1997, I think, or 96. My dad knew nothing about the stock market, never bought a stock with my mom either. But my next-door neighbor was doing online investing, which was a new thing back then. It was a big, innovative thing, direct trading. And so he taught me how to open up my first account. He showed me how to do the bid and ask and all the trading. And so by the time I had my first job, I kind of just eased my way into it. And so I had my first account, and the rest is history. So now you're a teenager, and you have $50,000.

Tarek: Now, what comes next?

Michael: So I went through university, because my family had no connections, worked really hard to try to get away. It's not easy to break into the business, as you probably know. And I met my first boss at a networking reception in school, I think. I felt like the guy, the Rolex salesman in New York City. He's like, what do you like in the stock market? I'm like, let me tell you what I like. And I had all the stocks in my portfolio that I owned that I was actually investing in, even in university. And I guess he was just very impressed with the passion that I had. And he actually ran a small cap firm, which was always my passion, small, undiscovered, poorly followed companies. So we hit it off. He gave me a shot, an internship, and worked there through university a couple semesters while I was finishing my studies. And then I ended up working there for 18 years, the same firm.

Tarek: So just rewinding for a minute, that $50,000 that you had, did you reinvest that into the stock market and all these companies?

Michael: That was sort of the seed capital that kept compounding. I've done pretty well financially in my life, but I would say 98% of my net worth has been compounding in the stock market, and probably 2% has been salary and income. So a lot of advice I give to young people is get started early. Start compounding, start growing your capital. If you're going to compound returns over 20, 30, 40 years, it accumulates pretty quick.

Tarek: So as you were at this networking event and you're talking about these stocks, you had actually made quite a bit of money then at this point.

Michael: For a guy my age, I had a decent amount of capital. Through university, I was in a portfolio management program, so they gave eight students in university a million dollars of live money to run. Our client committee, our board of directors, were the pension plan directors, some of the biggest pension plans in Canada. So good training, a lot of pressure to pitch your stocks in front of very accomplished professionals. So yeah, just investing from the age of 16 on basically consumed me. School was an excuse, like it was a means to an end. I didn't do great in high school because I didn't want to do sciences and stuff they were pushing. I really wanted to get in the market. As soon as I got to university and started studying the business classes, I had to get the best grades possible to put myself in a position to have that job.

Tarek: And so you said 18 years you spent with that company. Yeah. So walk me through what that career trajectory was like. I'm interested to learn about some of the big wins and some of the big mistakes, things that you learned from it.

Michael: Sure, so yeah, it was a traditional institutional equities business, small mid-cap equities generalist. So I'm known as a mining guy now and I can tell you how I transitioned to that. But when I was in university in 96, 97, the dot-com boom was in full swing. I bought that one tech stock that I met in the sports store, but every other stock I bought was traditional, like railroads, oil and gas companies. Because back then the old economy stocks were interesting. If it wasn't a dot-com or a tech stock, nobody wanted to own it. It's almost similar today. If it wasn't AI, it was very interesting to the market. So there's deep, deep value in the undiscovered, unappreciated cash-flowing traditional businesses.

Tarek: So were you like a Buffett guy, or like a Benjamin Graham and value investor?

Michael: My first hero was Warren Buffett. So I read Warren Buffett, Peter Lynch. I call myself a kind of a Garpy, growth at a reasonable price investor. That was sort of my early training. So I got into oil and gas in the late 90s because I was on this student committee for a school running a million dollars and everybody wanted the tech sector. We had eight portfolio managers. We had our first meeting. They said, who wants to cover tech? Eight hands went up. My hand did not go up, so seven hands went up. Who wants to cover oil and gas? It was like crickets. Oil and gas was really out of favor. Oil was like $10 a barrel. People thought it was going to go to $5. It was completely uninteresting. I said, I don't care, I'll learn anything. If nobody wants it, I'll do it myself. So I took over the oil and gas sector and I quickly realized that the Chinese were hoovering up oil as fast as they possibly could. There was this huge demand for oil and the industry had been capital constrained for years, kind of like the mining market got into 20 years later. So no supply, big demand increase. Oil didn't go down. It went from $10 to $140 a barrel. So when I walked into my first job at Formula Growth, the firm I worked at, I had spent three, four years studying oil and gas. They had not bought an oil and gas stock since 1970, since the Iran oil embargo, the first one in the 1970s. So I walked into a firm, which is a traditional growth shop firm, growth equities and commodities was not a thing that they did. But the oil boom was picking up steam and they needed someone to follow the oil and gas sector. So I kind of walked into a great opportunity where I was the de facto expert on oil and gas in the firm when I was like 24 years old.

Tarek: And this was right around the 2000 timeframe? Yep. And so obviously everybody knows oil made that enormous run over the next seven, eight years up to what, $150 a barrel? Yep, $145, $150 a barrel. So the firm capitalized on all that growth.

Michael: Yep, we did terrifically well. And that was my first lesson on contrarian commodity investing. So I picked up a sector when everybody hated it and the outlook was negative. When I had a bullish view, that taught me a lot. And then I saw the power of a bullish commodity price environment coupled with good stock picking. If you could find good companies that were growing production and decreasing their costs into a rising commodity price environment, that's how you could do 20, 30, 40, 50, 60 times your money. So I had a lot of really big winners. Again, early on in my career, investing professionally for our institutional customers, but also the firm encouraged the young guys to actually invest in their own accounts, which a lot of firms don't do anymore, which I think is actually a shame, because you learn a lot more putting your own capital at risk. And so I invested in a lot of small capital oil and gas companies and caught a very, very big cycle, which hooked me even more into commodities. I started in 96, 97 at school studying oil and gas, was the oil and gas analyst for about 10 years there. When I saw the power of that cycle, I also saw the power of the downside as well. We can talk about that. That's what I was going to go to next. But I learned a lot from both that epic run and the epic collapse of wanting to allocate capital and the hallmarks of a cycle turning and how powerful a long-term cycle can be when you're investing equity capital behind it.

Tarek: Yeah, so I'm interested at the end of the cycle, oil makes this huge run higher. Everybody's investing in oil at that time. At what point did you exit? When did you start seeing this as the end of the run? Were you late? Did you lose a lot of money at the end? Walk me through that six to nine month period.

Michael: What I love about investing, Tarek, is that every time you lose money you become a better investor. I hope to do this until the day I die, but every year I get better. It's like a good wine, you vintage, you get smarter. So every time you lose money, every mistake that you make, if you're smart and you're a student of the game and you're a student of investing, you learn from your mistakes. So I would love to say that I rode the oil market from 10 to 145 and said, whoa, this is getting too frothy, I'm taking all my money off the table. It was actually the opposite. I rode it up and then rode it down hard and was late getting out and lost a lot of money. I think I'm a pretty good stock picker, but in a commodity downturn if you're the best stock picker in the world you're going to lose 70% versus the guy next to you who lost 95%. It doesn't make you feel any better. So understanding that cycles have their ebbs and flows and ups and downs, that was a valuable lesson. And obviously having that sensation of seeing your stocks drop 50, 70, 80% teaches you a lot.

Tarek: Yeah, can we talk about that? Walk me through the psychology that you felt at the time of going through that down cycle because a lot of people listening to this podcast do trade and they do lose money and when that happens the psychological effects can be pretty severe. The old adage, loss is loom larger than gains and it feels twice as bad to lose money than it does to make money. Can you talk me through what that experience was like for you emotionally?

Michael: I actually had the good fortune to meet Warren Buffett physically in the flesh. I taught a class at the university for 10 years at Concordia University in Montreal and then our class got invited to go meet Warren Buffett in Omaha. I just had his cherry coke, went to the steakhouse and he answered a question for three hours. One question really stuck with me that somebody asked, what does it take to be a good investor? He said, emotional intelligence. He said, I'll take somebody with 130 IQ that has very good control of his or her emotions and good emotional intelligence over someone that has 170, 180 IQ that can't control their emotions. So when your stocks are down 50%, when the market's yelling at you, you've got to sell, you've got to get out or the pressure of losses, like you mentioned, is piling onto you. One of my best attributes is the calm and I'm a pretty even-keeled guy and I don't get too attached to money and don't get too attached to numbers on a screen. I try to let the fundamentals dictate my decisions. Many investors make decisions based on price action. They're credibly excited when the stock is up and they're basically depressed or despondent when the stock is down. I try to look at what's changed, what are the fundamental changes. Back in the oil price, OPEC started increasing capacity and the oil price crashed. So the oil price went down justifiably. But sometimes if you had the recent pullback in the gold market, the gold price is down but the fundamentals are as good or as strong as ever. So sometimes you need to recognize a mistake and say the fundamentals have changed, I've got to sell. Sometimes the market's down, the market's completely wrong and you've got to be doubling or tripling your position. So having that even-keeled emotional intelligence, not letting the price action or the screen dictate your behavior is really, really important. That taught me a lot in 2014. Testing your conviction, testing your thesis. Do I really still believe what's happening? Am I letting the price affect me or am I letting the fundamentals affect me? That's something I look for in investors in my own firm too and understanding their makeup. It's not just about having to be the smartest guy in the room, it's also about how can you handle the pressure of the job day-to-day.

Tarek: Coming out of 2008, can you comment on what that timeline was like for you from say like 2009 coming out of the great financial crisis into this huge run-up in the precious metals market? Were you now getting actively involved in gold and silver at that time or did that come much later?

Michael: Yeah, so the contrarian lesson I learned in oil and gas in the late 90s when I really got back engaged, I was always looking for cycles, looking for depressed, looking for that same setup. So in 2015 I saw what I believed to be the exact setup I saw in the oil and gas market. Gold was $1,100 as you may recall at the time. There was a Wall Street Journal article saying it's a relic, it's a pet rock, it has no more purpose. I think Barrick was under extreme financial duress. Freeport Mack was under distress. Valet, these major mining companies were fire-selling assets because their balance sheets were upside down. They had so much leverage from the previous cycle. There was so much pessimism. I remember I went to the Bank of Montreal Mining Conference in 2015 and this is the biggest institutional mining show of the year for big institutional investors. I was told I was the only generalist investor that attended the show that year. So the only fund managers were there, ones that had to cover the sector by default. But generalists are guys that can go anywhere. They can go into tech, they can go into retail, they can go into healthcare or energy or materials. So I was the only person there. I remember I did like 60 meetings in three days. I was a crick and fire out of a hose. I was so excited by that pessimistic setup. Then the more I dug into gold and the backdrop for the macro thesis and the deficits increasing post the financial crisis, I'm like, wow, people hate this thing. The macro setup is phenomenal. I think gold's going to go up a lot, it's not going to go down. The companies were selling at fire-sell prices. That was really my all-in engagement moment. I usually do a pretty astute guy, spent two, three years studying the stock, studying the sector, knowing every name and buying stocks from my institutional customers from 2015 to 2018. The gold price slowly started creeping up, but it was still pretty pessimistic back then.

Tarek: You mentioned something that was really important, was the prior cycle highs. Gold had peaked in 2011 at $1,900 an ounce. I think the entire mining sector peaked a little bit later than that. What is fascinating today is that gold, as of today, is trading around $4,500 an ounce. The mining companies have not recovered the highs of 2011, 2012, 2013, when gold was at $1,900. I think that does speak to just how severe the pessimism was at the trough of the cycle. It still exists today. The echo effect of that persists. You mentioned that 2015 to 2018 timeline. There was also another major headwind, which was the propagation of cryptocurrency and Bitcoin. You started to see a lot of traditionally gold investors or silver investors now moving into the crypto space. Did you have a view on cryptocurrency? Or is it so just completely different than how you had ever approached investing before that you just sort of avoided the entire market?

Michael: I did. I did have a pretty vocal view. You can go back and check interviews that I did. I was pretty vocal about saying gold's been money for thousands of years. Cryptocurrencies, it's a new technology. I'm not a tech expert, so I'm a bit over my skis here. I didn't believe that. Everyone was saying gold was money. So Bitcoin was money, the new gold. My view was that people are buying because it's going up. That it was a wildly speculative instrument. That if you saw the trading pattern of Bitcoin the last three, four years before it's kind of mellowed out, the last couple years, it was a four-time leveraged ETF on the NASDAQ. NASDAQ's up two, Bitcoin's up eight. NASDAQ's down two, Bitcoin's down eight. The kind of people that own Bitcoin are not the kind of people that are hard money, wealth preservation. The role of gold, as you know well, has been for thousands of years. It's a crowd of people that are speculative in nature. They're tech investors in nature and they're looking for quick bucks, action, excitement. I said the second that Bitcoin stops having exceptional price performance or percentage performance year-over-year basis, people will lose interest. That's kind of what's happening right now. The other thing I said too is, look what the smart money's doing. We'll talk about whether they're smart or not, but central banks are not stockpiling Bitcoin, they're stockpiling gold. The guys that make the rules, that print the money, that run the monetary system, they're telling you with their wallets what they think money is and the opportunists out there are pushing. I may be wrong, but that was my view. I was very vocal about it. I said until proven otherwise, gold is money and Bitcoin's a wildly speculative investment. Guys like Michael Saylor and MicroStrategy and trading at two times nav, that reminded me so much of the dot-com boom. How can you have a stock that has a billion dollars worth of Bitcoin trading at two billion? That's not typical bottom-of-the-market type behavior. That's typical, very leveraged, extreme behavior. Whereas gold had zero interest, like you said, echo of 15, 20 years. But the smart money, the central banks, the BRICs, the emerging markets were stockpiling on a regular basis.

Tarek: What did you have to learn? Walk me through the learning curve of what it was like as you're now venturing into this space for the very first time. You had all this experience in oil and gas. Were there a lot of similarities to how you were judging these junior mining companies? Did you have to go on-site and talk to experts? What was that like for you to get comfortable with assessing who the winners and losers would be?

Michael: I would say that commodity investing has a lot of parallels. Big difference between oil and gas and mining would be that the cash flow realization is much quicker in oil and gas than in mining. Mining has a much longer cycle. If you're mining a junior mining company today, maybe you have cash flow in 8 to 10 years. Whereas the oil and gas company typically has production going in 1, 2 or 3 years. But in terms of the modeling, in terms of the cycles, in terms of the valuation, they trade off price nav or price cash flow or mine life or reserve life in oil and gas. There's a lot of similarities. It wasn't a hard transition. I dabbled in mining stocks in 2002, 2003 and 2008, 2009. But when I really went all in was 2015. So it wasn't a hard transition for me. It took some time to build up my network. My first mentor that hired me at my first job at Formula Growth, he always told me, you want to be the dumbest guy in the room. A lot of people in my business have very big egos and they have to be the smartest guy in the room. He was a very brilliant guy, super successful investor. He said, I want to be the dumbest guy in the room. I want to surround myself with people that can tell me more about the company, about the business, about the industry. So when I got into mining I tried to surround myself with the smartest people and create a really big network. So now when I do due diligence it's a lot of phone calls. It's two or three phone calls to get to the truth versus hundreds of hours of analysis or using AI. Because you usually know somebody who knows somebody who's been on the asset, who knows the red flags, who knows the issues, who knows the people. So I've always adopted that in terms of de-risking assets. I had that in oil and gas and it took me three, four, five years to build that up in mining to the point now where I feel very confident if I'm looking at an asset within two days I can get to the bottom of it pretty quick.

Tarek: At this stage were you getting actively involved in the business like you are today or were you more of a passive investor?

Michael: There's a key break point in my story which we haven't got to yet. So 2015 to 2018 I'm working institutionally, I'm running about a billion dollars, had a corner office running a big hedge fund very successfully with my partner Charles Hager. And then 2018 I was blessed with the news my wife was pregnant with twins. And that was great news, we were really happy, but the exciting news or scary news was I already had three kids under seven years old before that. So I had the concept of having five kids under eight years old looking me in the eyes, I was running a billion dollars, I was traveling all over the US, probably working 60, 70 hour weeks, already feeling stretched, trying to be a good dad and trying to be a good fund manager. And the twins was kind of like the checkmate move. I had to make a decision, am I going to fail at my marriage and my fatherhood or am I going to fail at my career? And I rightfully chose to fail at my career. So in 2018 I told you I loved the business since I was 10 years old. I took a really hard decision to walk away cold turkey from a job that I desired for basically 30 years of my life. And so I walked away from the partnership, walked away from running a fund, went home, helped my wife take care of the kids. Best decision I've ever made in my life, just absolutely fantastic decision from a human level.

Tarek: Did you know that right from the jump?

Michael: No, I told my wife, I said, honey I know this is the right decision, but I'm going to be a miserable bastard for a year or two. Because I knew how much I loved my job, I knew I had to give it up, but I thought I would be miserable leaving my job. And then I was just filled with the joy of watching my twin daughters grow up, picking up my kids at school. I never had a chance to do that kind of stuff when you're always working so hard. So that was beautiful. And then I'm sitting at home in 2018, I had gotten really bullish on gold in 2015. I had a bit more free time on my hands than I usually did. I had a bunch of capital since I was investing since I was 16 years old. I said, gold's going to go up a lot. I'm really convinced gold was $13.50. The macro thesis was just really starting to roll. I'm like, gold's going to go up a ton. If I'm right about gold going up a lot, how do I make the most money possible? I said, the maximum leverage you have to gold is in the micro-cap junior explorers, which I had never owned before. I had always owned the producing companies. Small mid-cap producers, senior producers, because my institutional customers want a cash flow, they want a balance sheet, they want a bit more blue chip exposure. I said, I've got to go down to the wild west of junior mining. That's where the action's going to be. Typically, we haven't seen it yet, but typically the maximum torque to a rising gold price is in the smallest companies. So I was at home in late 2018, 2019. I identified a great company that made a major discovery. They had had no money for five years, so it was like Little Lake shooting fish in a barrel. Because typically in junior mining, you're taking the risk of making a discovery. But in 2018, so many companies have been stalled for years without any capital that you could walk up to a store that made a discovery, a bonafide potential mine, really good discovery, trading at five cents on the dollar. So I wrote my first check, wrote a pretty big check, became a top five shareholder of this company, and I quickly realized that being a passive investor, which I had been my whole career. You buy the shares, you talk to management once a month, you do the conference calls, you see them at conferences, but you trust management to run the business. I quickly realized in junior mining, if I stayed passive, I would lose all my money. While they have great deposits, while they may have good infrastructure, most of them are run by geologists, and most of them don't know how to run a business. So most stories, even if they have a good deposit actually into being a mine, the shareholder outcome is subpar disappointing because they dilute themselves along the way, they raise money at the wrong times, they make the wrong strategic decisions, they raise money from the wrong types of shareholders. So when I looked under the hood, I said, wow, this is a great business that's on fire sale valuation, but you guys need a lot of help. So I became a strategic advisor, I became an advisor whether they wanted to or not. I became a very activist shareholder in a friendly way, helping those companies make good decisions. What I realized then was I was amplifying the power of my check because by making some small tweaks to their strategy and their financing and their corporate business practices, the value creation was enormous. So that one deal became two, became five, became 10. Today I'm the largest shareholder of 35 junior mining companies. I told my wife two or three years into it, I said, no honey, I thought I was going to be miserable, but I'm actually having more fun than ever doing this. I found a new passion, I found something I do even better than I did professional investing, and it fits a lot of my giftedness and my energy level that really loves being involved in building businesses and being entrepreneurial. That was the big break decision in my life, but God blessed me with a whole new path and a whole new career option that had been prepared for me for 30 years.

Tarek: You were rewarded for your decision and your commitment to your family. I believe so, yeah. 80% of all the metal held in ETFs are held overseas in foreign jurisdictions. We wanted to develop products where the metal is held on U.S. soil, specifically in Texas. These funds are U.S. vaulted, fully allocated gold and silver bars and less expensive than most of the existing gold and silver funds out there. Visit yallstreetetfs.com. There's a lot there that I want to get into. I guess the first is, you said this was around 2018, and obviously I know this industry really well. I know what the market environment was like in 2018, and to be bullish gold in 2018 was very contrarian. The big gold run was sort of kick-started around COVID, and this is pre-COVID. What was it at that time? You talked about a few things with central banks and so forth, but was there something that you were seeing that nobody else was seeing?

Michael: I love the coffee mug because it made me laugh. I think in 2018 and 2019, 2020, I spent a lot of time talking to myself because there weren't many people in my corner agreeing with me. I had people yelling at me about Bitcoin, about gold being worthless, about how these companies were garbage. You've watched me with a big short, obviously.

Tarek: Of course, yeah.

Michael: But the guy with the headphones, that was me, just talking to myself, convincing myself. What I saw was Barack Obama took office, $8 trillion of debt. When I started really getting vocal and advocating for the junior mining business in 2018, we had $30 trillion of debt. You see this runaway train of debt, of money printing. COVID hits, rates go to zero. I'm like, guys, if rates go to 4%, 5%, we're literally insolvent. There is no way other than monetizing. It was just this overwhelming preponderance of evidence that I felt that the only way out of this mega-debt bubble the US had created was devaluation and money printing. That was the overriding macro backdrop. Then we had the BRIC countries later on. Then we had Russia, had their assets. Every catalyst I got from 2018 onward only added turbo fuel to my thesis. Yet, as you said very well, the market was just more bound. It didn't care. The gold price was flat, the gold stocks were worse, but what it did give me, Tarik, was it gave me lots of time to deploy capital. I'm a contrarian, so I love bear markets. If you're a commodity investor and you're bullish, you should love bear markets and you should pray they last longer because it gives you more time to get more quality investments in your book before the inevitable rebound happens. It gave me a lot of time. Because you're in a bull market, you've got to move fast and the stocks are rallying quickly, so the opportunities are very, you seize them or they're gone. We're in a bear market, I had time, I could dictate terms, I could do my due diligence. I was the only check writer. Literally, it was one of the only guys. Eric Sprott, myself, a handful of people in Canada that were actually writing checks to juniors. I was getting incredible terms, pick of the litter, terrific assets, and the companies were very receptive to feedback because they were desperate for so long that they wanted to get themselves out of the terrible situation they were in. I was very happy the bear market took long, but it did a lot of talking to myself because I'm like, when is this actually going to show up in the gold price, when it's actually going to show up in the market? But I think my training, just being patient and that competition that I have gave me the fortitude to hang on and just keep pressing my bet.

Tarek: You had mentioned earlier in the conversation that we came out of this massive bubble and all of a sudden you had these mining companies who were insolvent. Because the money dried up, the exploration dried up, the number of new discoveries dried up. If you look back at the charts of those times, you see this massive decline in new discoveries that were happening in the gold sector. Meanwhile, you have this bullish thesis that gold, with everything that's going on globally and with the debasement of the currencies, et cetera, is going to be in this big bull market. It's sort of like this perfect storm. Did that play a role in how you were assessing the market at that time?

Michael: Absolutely, I mentioned how the movie reminded me of the oil and gas sector in the late 90s. China was driving demand and the oil and gas business had such low prices for so long that the investment in new capital and new production was dried up completely. So yes, I saw this fundamental, long-term, insatiable demand for gold. At the same time I saw, I mean Barrick and Newmont, I think in the, don't quote me, that's in 2014, 2015, were spending $10 million a year on exploration. The biggest mining companies in the world were spending a pittance on exploration. So how are you going to make new discoveries? I also knew in the mining business, unlike the oil and gas business, if you wake up tomorrow and say, hey, we need more gold, we need more copper, and you want to start from scratch today, you're talking about a five to 15 year process to bring on new production. So when the market goes like what's happening in the copper markets right now, hey, we need more copper. Well, sorry, you've put no money in the ground for 15 years. Call me in 2035, we'll have some copper for you. I need it now. Well, too bad, price is going to 10 bucks a pound. That's the kind of dynamic. So yeah, you're right, when you saw that macro driver coupled with supply, supply kills both markets and commodities. Either demand gets destroyed or supply comes and floods the market and crushes the market. I like gold because gold is such a deep and broad and large market that annual supply growth is 2% a year. Most of the gold's demand is above ground and held for investment purposes by central banks. So unlikely that supply can't go from 2% to 10% a year. So it's hard to kill the gold market by supply when you kill it by demand. So either price goes way too high where guys start to sell or central banks start selling it in the 90s or something fundamentally changes in the market. U.S. dollar suddenly gets stacked together. U.S. government wants to run austerity programs and cut their deficits and cut their budgets. I don't see that happening, but that's demand typically what kills a gold market. But yeah, that macro setup, that supply-demand setup was quite attractive to me.

Tarek: So you get actively involved in all of these companies and you mentioned as of today you're involved in around 35 companies, is that right? Walk me through your schedule. So how do you handle being involved in that many companies and multiple locations? What is that experience like for you and how do you support them?

Michael: Yeah, I'm on the phone a lot. I was doing a call on the way here to the studio. Generally I trust the companies to run the business day-to-day and I get involved in parts of the business where I can add the most value. So financing, marketing, communication, corporate strategy, M&A, capital markets. Matt adds a lot of value in this business because these businesses, as you probably know, they don't generate any cash. So if you're in a business that burns cash, your cost of capital is extremely important in how you market the story, how you get your cost of capital down, when you raise money, make sure the balance sheet is 30, doing M&A at the right times. In the downturn I told all my companies, stop drilling. Drilling is the most expensive thing you can do in the junior mining market. It costs millions of dollars a year to drill a project. When the market fell out 2019, after COVID-21-22, my marching orders to my companies was, cut your G&A by 75%, hunker down, cut your costs, and wait for the guys around you to go bankrupt. So we did a lot of really creative M&A deals because my companies didn't run out of cash. They cut their G&A and when the neighbors ran out of cash and were desperate to sell, we were picking up assets for pennies on the dollar, consolidating camps. Nobody wants to sell when you can do a bought deal financing for $20 million and money's easy. When the money dries up, the guys that have the good balance sheets and have the fortitude to endure a cycle took huge advantage of that. Those kind of decisions can really multiply your returns. But I'm not over their shoulder asking them, where are you drilling the next hole? I'm not a geologist, I'm not a mine engineer. I know what I know and I know what I don't know. And I trust the companies I work with. And out of the 35 companies, I'd say I'm really intimately involved in probably 10 to 15, because that's probably 80% of my portfolio. And the other 20, I'm just incubating the ideas, giving them some capital, get going. And then when they have that success, then I'll press in and give them a lot more of my time.

Tarek: Speaking of your portfolio, I read somewhere that you have about 90% of your total net worth is exposed currently to junior mining stocks. To just about any other investor in the world, the definition of insanity. So how do you get comfortable with that type of exposure and that type of concentration to what has historically been a very risky and volatile marketplace?

Michael: Sure, so first of all, for your viewers, I don't recommend that for anybody. I think the average person, that's 1 or 2% of their net worth in precious metals and gold right now. I think it has to be a lot higher. 90's too high, so let's start with that caveat. I'm very, very convicted on the cycle. I've always been a high conviction guy, concentrated guy. It's all my own money, so I'm not running other people's money. I would never put other people's money in 90%. It's all my own personal capital. I'm comfortable financially. I want to give the vast majority of money I make away to charity and to my foundation over time. I just view this as a generational opportunity to create a significant amount of wealth in a space that I know really, really well. If I'm writing checks today, my time horizon is 5 to 10 years. So I believe firmly that we're another 5, 10 years ahead of this bull market for precious metals. We have a long cycle ahead. As we get closer and closer to the end, I'll hopefully take lessons from my 2014, 2015, 2008 learning experiences in oil and gas where I overstayed my welcome. But right now I just see a very, very strong fundamental thesis. I've built up an incredible network, an incredible opportunity set. I'm a big fish in a very small pond. I have an opportunity to get in front of the best deals, the best management teams, the best assets and create substantial value in what I believe is a very long-term cycle.

Tarek: How important are relationships to you in the industry as it relates to this growth in the mining space and the people that you trust? Do you have experiences with deals gone south because of relationships? Because it's such a small market, it's such an incestuous market and with these tiny companies there aren't a lot of employees. Can you walk through that a little bit?

Michael: Terrific question. Early on in my foray into junior mining, I put too much value on the asset and not enough value on the management teams. What I learned as well is obviously like in any industry there's a lot of bad actors in any industry. In mining there's a bunch of bad actors too. I've built up that network, like I said, over many, many years. Now at the point I refuse to invest in a junior mining company if I don't have a close relationship with somebody who has a close relationship with the principal behind that company. Because I've gone to too many bad deals where I've been burned by the people or by the lack of integrity or lack of follow-through from the management team. I de-risk my investments through my network and like I said, usually on a deal, one or two phone calls I know somebody that knows the principal there and that will vouch for them. Good people attract good people. I think I've developed a network of really high integrity, high quality people that will tell me the straight truth on an asset or the people behind it, not trying to make a commission or a quick buck or an M&A fee. That's my trusted network that I've built up and I use them extensively to de-risk assets. I also know that I'm not a mine engineer, I'm not a geologist so I have expert mine builders and geologists. I've been doing this so long that I can smell a good opportunity and then I use those guys to keep me out of trouble. I'm like, you have a blind spot here, there's a red flag here, the mine's never going to get built because of this issue or that issue or the geology pinches out over here and it's not going to grow like you think. They've kept me out of a heck of a lot of trouble as well. I'll do five to seven deals a year, like max. I look at probably 500. It's the ones that I can tick all the boxes that have been fully de-risked. A lot of the deals I pass on, by the way, end up being really good stories, but I don't care about those. I'm trying to increase my batting average as much as I can, reduce as much risk as I can on the front end because it's a business that by nature will fail, that most junior mining companies will not become mines. I'm trying to increase my batting average, increase my odds by using my network extensively as possible and using the experience I have making mistakes in the past to avoid them in the future.

Tarek: If 2012-2013 was a time of incredible speculation in the space and 2015 it was completely dry, where do you see us today? How much appetite is there for exposure in the Canadian mining sector? Because you said that we're in the early stages of this major cyclical bull market and these bull markets last a long time and typically most of the money comes in at the end of the bull market. Are we at 20% interest, 10% interest or are you starting to see money pouring into the space? Are you seeing a little bit of momentum, I guess is the question.

Michael: Yeah, I would say if you look at the last top versus the low. If the last top was an 11 on 10, the low was like a 1 on 10. I'd honestly say we're still like a 3 or 4 on 10. You made a really good point earlier, you talked about the previous gold price, $1,900, $2,000 being the top. In my world, the junior mining resource stocks, non-cash flowing resources, like ounces in the ground, let's say. In the last top, the average ounce in the ground resource company, pre-production, non-production, sold between $50 and $150 an ounce. That was when gold was $1,900. You fast forward to today, gold is $4,500 an ounce as we speak today, and the average resource company in my portfolio trades between $30 and $150 in the ground. How does that make any sense? In the last top, 2011-12, the average margins for the best companies in the business might have been $500 an ounce. $1,900 gold price, they made $500 all in profit margins. Today, they're making $2,500 an ounce profit margins. So their profit margins are five times higher. They're $2,500 cash margins versus $500 cash margins. You can buy ounces in the ground at the exact same price today as you could in 2011-12. It doesn't make any sense. Forget that you care about metals at all, but you can buy a product in the ground for $100 an ounce that you can produce at $2,500 margins. You would think you could pay a heck of a lot more than $100 an ounce for that. That speaks to the lack of appetite and the lack of interest in the junior mining space. One of my theories, Bitcoin was a big suck on the sector for a while. The big one now is AI. Drawing parallels to my experience again, dot-com boom in 97, 98, 99, nobody cared about oil and gas. Nobody cared about commodities, nobody cared about railroads. AI is sucking all that energy out because you can buy a semiconductor stock that's up 100% in a day. You're getting that speculative price action that investors used to get from the mining sector. I think when that bubble, whatever you want to call it, eventually deflates, that a little bit of that money shifting into the gold sector will start to set this house on fire. What I love is the fact that the big mining companies can afford to pay, I've done the math, $500, $600, $700 an ounce in the ground and still have wildly accretive acquisitions. They're trading at $5,200 today. You asked the question, why is 90% of my portfolio still in the space? It's because I'm playing for that. I see that game happening very soon. The mining companies are making so much money, so much free cash flow, their balance sheets are clean, they're buying back stock, they're paying dividends. The capital is there for growth. We just don't have the investors yet that are recognizing that.

Tarek: Yeah, it is remarkable. We have these conversations internally all the time. I don't understand why money just is not pouring into the space. You talk about AI. There's been a lot of commentary on how important commodities are to the AI boom. We need the commodities for the data centers, copper, even silver, to support this growth. Have you found that AI has started to shine more of a light on the commodity space as a result of that?

Michael: It's a great question. I would say my bullishness and confidence that the valuations are going to lift in the gold sector is already being validated where you're seeing in the copper sector. What I mean by that is, we talked about the generalist investor who can invest in any kind of stock, any kind of sector commodity, and the specialist investor. Right now in the gold sector, it's 95% specialist, dedicated mining funds, guys like me that do this 24-7 that love it, and 5% generalist rotation, let's say, with the sector. In the copper sector, because the AI trade is so well understood and adopted by generalist fund managers, they've made that connection. They said, AI boom, electrification, massive power generation demand. If you have more power gen, what do you need? You need copper wires, you need to bring the electricity to these data centers and these AI boom happening from that. Therefore, the copper stocks, the copper producing names, the Freeport Mac brands, the Lundin Coppers, the Capstones, the Hubbays, they're all trading at massively higher valuations than the gold names. Because that money has gone to the copper sector. To give you an example, average copper producer at spot prices, say 650 copper, has about a 3-4% free cash flow yield. You take spot gold, it's 15-20% free cash flow yields. Same business, same mining industry, same challenges, same opportunities. One sector has a lot of generalist interest, the other one doesn't have it yet. That's coming soon to a theater near you. When people finally realize that the gold price is here to stay, they start adopting some of the macro views that you and I believe strongly in, when the generalists fully adopt that gold price of 4,000, actually the floor is not the ceiling, you'll see this massive migration in valuations. That hasn't happened in the gold sector, it's happening in the copper sector. That's just a natural market flow. They need to have more and more adoption. But the AI trade is so powerful, those generalists have said, I'm going to take the time to learn a bit about a copper stock. Now they've educated themselves on copper stocks, it's a little easier bridge to cross to get to the gold side of the fence after.

Tarek: One of the things that I've communicated to a lot of investors, and it just completely blows their mind, is that this century gold has outperformed the total return on the S&P 500. Gold is around 1,100%, S&P 500 total return about 650%. Just a massive difference, and the correlation between the two is zero. So why would you not want to have it in your portfolio? Precisely, and you mentioned the statistic actually earlier that gold penetration in the investable market today is about 1%. And it's remarkable to me that more asset allocators are not looking at gold as a hedge. Now Morgan Stanley came out and they said, look, we think you should be in 60-20-20, 60% equities, 20% bonds, 20% gold. But that is still sort of a fringe opinion at this point. And if you're saying, if you're correct, and we're still in the early stages of this commodity super cycle, this bull market, prices are going to go much, much higher. And I have some questions, I guess, as a follow-up to that and those statistics. Why do you think that a shiny rock is outperforming the total return over the S&P 500 over the last 25 years?

Michael: Very simple answer is you can't print more shiny rocks. But if you look at a lot of the prosperity boom or the boom in the stock market or just the wealth creation in the United States, I hate to say this, but it's an illusion. It's been massive money printing. If you took $8 trillion of debt when Barack Obama became president and we still had $8 trillion of debt today, what would the GDP look like in the US? What would the S&P 500 look like? It would be a heck of a lot lower. So a lot of this S&P 500 record highs, gold is telling you it's all bogus. That actually in gold terms, the S&P is actually down. So one of my favorite things to do in my Bloomberg is actually look at the S&P 500 in gold terms. It doesn't look as exciting as it does on just the pure value. My uncle, my godfather, worked in Argentina for many years. He's an engineer, worked on processing plants for lithium mines, different things. So he gets to Argentina first time there during their massive inflationary boom. He goes grocery shopping with the other project manager there. The guy puts like 14 bottles of wine in his cart. My uncle goes, oh my god, I'm working with an alcoholic. How much wine are you going to drink for dinner tonight? Because he's going shopping for a one-night dinner. He's like, no, you don't understand. I'm buying the wine tonight because if I come back to the store next week, it's going to be 35% more expensive. So some of you should pull up the Argentinian stock market during hyperinflation. It was making record highs every single day. It makes the AI stocks and semiconductor stocks look like underperformers. But in reality, that stock market's making new highs for the people who are getting poorer and poorer. It's the same thing happening with the S&P 500. It's making new highs, but in real terms, the stuff you actually want to buy, it's barely keeping up with inflation. You remove the massive money printing and the government stimulus in the economy. The US is pretty good because they actually create their productive economy, you have innovation. But where I'm from, from Canada or Europe, there's no productivity growth. I would say the vast majority of our stock market appreciation has all been money printing.

Tarek: You're seeing a lot of diminishing returns. For every incremental dollar that is borrowed, you're not getting that dollar plus in new productivity. That's what is being reflected. I talk to a lot of researchers who are trying to speculate on what the price of gold will be at some point in the future. It could be a six-month time horizon, it could be a five-year time horizon. They look at the fundamentals of gold and the demand and what they think central banks are going to do and what the jewelry market's going to do. I say, you're eliminating the most important data point, which is the denominator, the dollar. What's the price going to be in the dollar? Going back to 2018, I think that was a really interesting time as well. If I recall correctly, the dollar was strong. Gold had broken out in every single currency in the world except for the US dollar. You were actually seeing that growth, but you weren't seeing it domestically because of the currency that it was denominated in.

Michael: I remember showing my investors, my viewers charts on the yen and exactly right, all making record highs. The US dollar was impeding that. Now the US dollar has softened a little bit and you're starting to see the gold price take off. I always say, when you ask me what the gold price is going to do, I say, how much money do we have to print to float the boat? That's the answer. Remember, gold doesn't go up, right? Paper currencies go down. Gold's just a measurement of how much excess money printing we have to engineer to keep the country from going bankrupt. I think we're at a very precarious time right now with 10-year rates at 4.6 and a 30-year bond at 5.2, 5.25. We're getting eerily close to a place where the US government's insolvent. I've been very, very vocal. I've made the joke a bunch of times. Chairman Warsh may want to be hawkish, he may say he's hawkish. My five girls all want a pony, they're not going to get one. He wants to be hawkish, he's not going to be able to be hawkish because they can't afford the interest on the debt. I don't want to get too much in the weeds, but their intervention in the yen market was a big, big tell a couple of weeks ago. They're intervening buying Japanese yen to make sure the Japanese don't sell their yen, sell treasuries to buy yen. The whole system cannot afford 5% rates. Round numbers, $40 trillion debt in the US, 5% average interest rate is $2 trillion a year of interest expense. The US government took in 5.2 trillion in revenue last year. When 40% of your budget is going to cover the interest on your credit card, your family's bankrupt. That's the US government right now. How do they hike rates? I think they're going to have to do yield curve control, suppression of rates, or let inflation run really, really hot to float the boat, which is all extremely bullish for gold.

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Tarek: You mentioned earlier in the podcast about central bank buying, and we saw a massive uptick in central bank buying in 2022 when the US kicked Russia off the SWIFT system. We've talked a lot about domestic spending, but what do you think is actually happening globally with just the global monetary system? It seems like there's a lot of manufacturing, and you mentioned the intervention with the yen. There's obviously so much going on with the petrodollar right now and the geopolitical tension, etc. We grew up in a time period of globalism, and we are now devolving into jurisdictional tension. With tariffs and wars and the difficulty with money flows for a variety of different reasons, we're starting to see what seems to me to be a breakup of the global monetary system. Are you sensing that? Do you have an opinion on that? What are your views there, if any?

Michael: I would say the Russian invasion of Ukraine and when the US froze the Russian FX reserves was like a seminal moment. I had my turbocharged bullish thesis based on debt and money printing we've talked about a lot so far, but when the US seized the Russian FX reserves, that was a major gunshot for a lot of these countries that were already getting worried, just doing the same math that I'm doing, going, okay, I have 70% of my FX reserves in the US dollar globally, and that US dollar is becoming less and less valuable, and that paper is becoming less and less valuable because I have to print a lot more just to float the interest on the debt. Maybe I should get out of that trade just as a good steward or a good balance sheet management. When they froze the reserves, all the countries who've been at odds with the US, let's be honest, most countries over the last hundreds of years have had a tiff with the US at some point in time and said, well, if I've got 70% of my FX reserves in the US dollar, it's a bad trade just because that paper is worth less and less every single year that I own it. If I am on the wrong side of the fence of a geopolitical dispute at some point, you might freeze those dollars. I'm out of there. You saw a massive acceleration of de-dollarization at that point in time. You saw people selling treasuries, selling US dollars, and buying gold. Gold went from about 6% of FX reserves at that time to about 25% today, and that trend continues. China set a record central gold bank buying in June 20 tons.

Tarek: If I'm not mistaken, gold is the number one FX reserve in the world currently, isn't that correct?

Michael: It's pretty close. The US dollar is probably still fighting for it. I think everyone sees the macro view that we see that in order to repay that $40 trillion of debt, there's going to be paper that's worth less and less. They see a geopolitical risk of holding FX reserves that could be frozen on a whim, and so that's a very hard trade. The third point you brought up, which is a very good one, is this globalization, which is float US dollars, de-globalize, get the lowest production course. We've seen a lot of trade wars, a lot of friction geopolitically, so countries are going, I've got onshore. I've got to take care of my own business. I've got to make sure that if commodity chains are cut off for basically geopolitical conflict or tariffs or whatever that may be, I've got to make sure I can take care of my own. We're seeing a massive reshoring, which is also very debt intensive, very capital inefficient, which only adds that money printing debt stack that we're piling up globally. But those countries have no choice but to do it. That's also the re-appreciating their gold, they're making sure they have enough home cooking to take care of their country. These three theses are going to be hard to unwind. It's going to be hard to say, won't freeze your FX reserves again, or don't worry, the trade wars are a thing of the past. People have long memories, and therefore that's going to be an enduring, I think, tailwind for the gold price going forward. You see it when the gold price pulled back, you saw banks aggressively Q winning gold around $4,000 an ounce recently.

Tarek: You made a really compelling case for gold a little bit earlier. I'd love to touch on silver, PGMs, and dive a little bit more into copper.

Michael: Sure.

Tarek: What is your outlook for silver? I know you're bullish on all the commodities, but they all serve different purposes, so I'd love to get your take on each of them.

Michael: Silver, I have a bit of a different view. I know people talk a lot about solar demand, and just being out of demand, we have shortages of silver. I call silver poor man's gold. Silver to me is a thermometer, and you probably know this better than anyone, but silver is the number one retail interest participation in the precious metals market. Central banks stack gold because they can stack massive amounts of monetary value in a very small, confined space. You're never going to see China starting to hoard silver to balance their currency because they'd need 75 football fields full of silver warehouses to do that. There's not enough silver in the world to make sense to do that. What silver is to me is an amazing indicator of retail interest in precious metals. We've talked a lot about why investors are not there. They're still pretty apathetic towards the space. Central banks are clearly all in, and they're definitely allocating. You're seeing gold outperform silver. In this kind of gold price environment, you'd think silver would be doing even better, but the retail interest is not there. When you see silver take off, when this thesis starts to go more and more mainstream and podcasts like your own are really helping investors educate themselves to understand why it should go mainstream, you'll see silver outperform. Then silver is a terrific proxy for junior mining stocks because when the retail guys are buying silver, they say, well, how do I get some equities as well? That's how I view silver is really a thermometer, a temperature check. Given that I'm so bullish on gold, given that I think the retail market is going to come around, I do believe silver is going to outperform gold. But I spend less time in the weeds on the supply-demand forecast because most silver is above ground. It's really driven by investor demand, and that's going to be the real tipping point for silver. So I do see it coming. I do like silver equity names. Silver equities tend to be much more expensive than gold names on a fundamental basis. It's hard to find good value because they provide torque. So I'm pretty conservative in my silver allocations, but when I find a really good silver name at a good valuation, I'm extremely excited because I do think there's a lot of upside torque in the silver price going forward.

Tarek: Platinum has suffered from some of the same issues that the mining stocks have. Platinum was over $2,000 an ounce in 2012-2013 time frame, and it still has not recovered that price. What at one time was a price point that was 2x that of gold, and actually if you look at airline miles and things like that, platinum is always the higher tier than gold, and today it is one-third the price. Do you have an opinion on platinum and palladium and where you see those going?

Michael: Full transparency, not so much. I don't think platinum and palladium are really monetary metals. In the past they had some applications in the auto business and there was a bit of a sympathy trade. I wouldn't say no to a good platinum or palladium opportunity. In fact, I'm looking at one right now that I may invest in, but it really can be defined by the mine and using pretty conservative platinum and palladium prices. I think as the bull market evolves and gains more steam, it'll pull all the metals up. But my favorite three metals are gold, silver, and copper, probably in that order. I like broad, deep commodities. I always make the analogy that if all 35 of my companies, my portfolio, went to production today, which is impossible, they wouldn't move the gold, silver, or copper price markets. Some of these niche commodities like the rare earth, some of these titanium, other markets, one or two mines coming on can tip the supply-demand balance globally. So I really try to focus on broad, deep commodity markets where I have a 5-10 year positive view. It's possible platinum and palladium get pulled up along for the ride, but I don't have a high conviction thesis in either metal to say I'm going to over-allocate capital in those places.

Tarek: Copper, you mentioned $10 a pound. It's at $6.50, $6.60 right around now. What is the source of your conviction in the copper market?

Michael: I have a really good friend, one of the guys I use to de-risk my mine build projects. When I get to a project where they're talking about building a mine or really advancing the studies, he's built mines all over the world. He's a really prolific mine builder. He's not a market guy. I remember I had a dinner with him in Florida three, four years ago and he said, Michael, copper's going to $6, $7. I'm like, yeah, I know. The supply-demand's amazing. He's like, no, you don't understand. You mentioned the lack of exploration in the business. He brought up a whole new point I hadn't thought about before. He said, look, I'm like 60 years old. He's like, for every four of me, there's only one guy in the business that's a 35-year-old Florida that actually knows what they're doing and how to build mines. Not only did we lose exploration dollars, we also lost talent. Because all those kids that used to go into engineering school and mining school went into tech. Silicon Valley. We have very few, he calls them A-plus, mine-building teams able to build mines. His view was you have lower and lower copper grades, harder and harder projects to build globally, bigger and bigger capital budgets being built by less experienced teams. You're going to see massive cost overruns, you're going to see massive blowups, you're going to see massive issues. Copper projects are 10 to 20 times bigger than a gold project. A gold project you bring on for $300,000, $500,000, a couple hundred thousand ounces a year. Copper projects are typically in the multi-billion dollar range. They're in very remote, difficult locations because a lot of the low-hanging fruit in copper has been mined out. You're going to frontier jurisdictions, you're going deeper, you're going lower grade. His view was, even when you hit go and you said, copper is 650, we need more copper. We don't have the human horsepower to bring that on. So why I throw $10 out there, I'm not saying copper is going to 10, I don't use that as a headline in the interview, but what I would say is that we need price to rationalize the demand. If you believe that AI is going to keep powering forward, we're going to need more and more power generation, then price is going to have to slow down demand because we cannot match it with supply. Then eventually when copper does go to $9, $10 a pound, you'll see tons of capital coming into business, but even then it's going to take five to seven years to create that supply overhang that brings the price back down. So I'm quite bullish, barring a major recession or some type of geopolitical shock that we've seen many times in history that could disrupt the copper price in the short term. We just don't have the ability to bring the price down other than bringing the price down through higher prices, which is usually what happens in commodity cycles.

Tarek: A moment ago you mentioned jurisdiction. How important is jurisdiction when it comes to choosing the companies that you invest in?

Michael: I would say 80% of my portfolio would be in North America or tier one jurisdictions. Why is that? When your gold prices increase, you're seeing that a lot in West Africa and Latin America. Two things happen. Nationalization picks up. You wake up today, you own 100% of the mine. Six months later the government says, now we want to own 20% for free. Now we want to raise our royalties, we want to raise our taxation. Whereas in Canada, the US and Europe, you can't just wake up and say, taxes are 80% or I'm going to charge a 5%. There's rule of law, there's private ownership rules. It's hard to claw back ownership in a privately owned asset. Whereas in other jurisdictions you always have to face that risk of, I own it today but I might own less in the future due to the government unilaterally taking control of the assets. So 80% in Canada, tier one jurisdictions, North America, Europe, whatever. Then 20% outside. Why go outside? Because geology quite often is so compelling and I'm getting paid to take that risk. So the return plus the geology plus the grade, the scale, the size of the deposits are so compelling in certain jurisdictions that I'm not able to hold myself back from doing that.

Tarek: Let's dive into your book a little bit. 35 companies. Let's just say I have $100,000 and I want to put it in a very high risk investment that I'm willing to lose 100% of my money. As a friend, what would be the top five companies you would suggest I take a look at?

Michael: I'll try to answer that question, but I actually won't. I always tell people in the junior mining space, I adopted a venture capital based approach. In a VC fund, you have one Amazon, you have one Facebook, and you have 34 failures. But the Amazon or Facebook makes you so much money that it pays for your whole book. I have 35 companies, I have five daughters. I love all my company, I love all my kids, but I can't tell you which kid's going to be the most successful and I can't tell you which of my 35 companies is for sure going to make it. I'm very disciplined and very structured in how I allocate capital. The way I develop my process is when I find a new company, I do five to seven new deals a year. My process is if I like something enough to make a check, I'm going to put 1% of my total net worth or book capital into that initial investment. I want to own 5% to 20% of the company on my first check. On that first check, I'm looking for 20 to 50 times, two zero to five zero times my money off the first check. In my mind, I'm already allocating up to 5% of my book capital on five or more subsequent financing. If the company does what they say they're going to do, they're executing well, they're creating value despite the market environment, the noise, gold price up or down, I'll continue to fund them and increase my position if they're doing a good job. If they're doing a bad job and they haven't done what they say they're going to do, or I find out the management wasn't as honest or full of integrity as I thought they were, I starve that investment of future capital. The most I can lose on a mistake on round one is 1% of my capital. If I can find five to seven out of my 35 companies that go up 20 to 50 times and deploying 5% of my capital by that point in time, 5% times 20 is 100% return, five times 50 is a 250% return. You can see how a few winners can drive exceptional compound returns. But when I see an investor at a conference or on a podcast, they always say, yeah Michael, I know you always say that, but really what's your favorite one? I say, if you want to do this game, you've got to be disciplined, you've got to be patient and you've got to be structured in your approach. Even five for me would be too little a portfolio because just the round distribution of geology and luck and returns will, maybe you pick the five bad ones. Maybe you get the five good ones and you're the happiest guy in the world, but I can't say that. It's a very structured, disciplined, return-driven approach. If I find an opportunity that ticks all the boxes but doesn't have the upside, I won't write a check. I'm really structured on my entry points and how I allocate capital. I've been fortunate to have 20 baggers, 50 baggers, 70 baggers in my portfolio that obviously motivate you to come to work the next morning and find another one, but also that will amortize some of the losses that are inevitably going to happen in your book.

Tarek: On that note, are you setting a strategy with these companies for an exit or for an investment from a larger business? Because obviously at some point you just run out of capital. You have to start generating some cash so that you can go into some new businesses. How do you think about that?

Michael: A terrific question. Just to give your viewers a bit more, if they want to follow what I'm doing I have a free newsletter. It's called SaturdayMorningMining.com. It's not an investment advice, it's not an investment service, but I talk about all the companies that I own. If they have news that week, I write about a little summary of the news, press release of drilling results, whatever happened. I also talk about any macro thoughts I might have in interviews I do like this. If they want to get a feel for what I own, but again, buyer beware. Make sure you do your homework, make sure you have a diversified portfolio. I'll give your viewers over time all 35 companies, I'll write about them over a two to three month period in my newsletter so they can get understanding.

Tarek: I'm a subscriber and I highly recommend it. To anybody listening, you have to subscribe.

Michael: To your question about exits, really important. When I own 5 to 20% of the company, the deal I make with the company is, I'm coming in today, I'm not selling a share for 5 to 10 years. I'm thinking like an owner, like a venture capital fund, like a private equity fund. I'm not trying to trade news or a pop on the stock. The only way I profit or make money in junior mining business is if I buy it when it's a sub $50 million market cap company and it graduates itself to be an asset that a major mining company would like to acquire one day. It's a liquidity event for me, it's an exit. I've had multiple exits in the last eight years where a major mining company agrees with my thesis that this should be a mine. They have the capital to build it, they pay a price and I create a big liquidity windfall for my portfolio that I can recycle into new names. Or the rare ones that go all the way from micro cap stock, have the right management team, get adopted by the market, they can do $200, $300 million financing and they get to production themselves. At that point in time it's a big board listed stock, it's a billion dollar plus market cap, has lots of liquidity and I'm able to sell some shares. When I write my first check, I'm already saying if everything goes right, it has to be 20x. So I have to see the market cap today versus where it could be in the future has to be at least 20 times to account for dilution over time. That's what it could be worth if it's a mine one day and handicap that and try to get even more juice in that return to get there. I'm already thinking about how long it's going to take, what has to happen, how many finances we have to do, what are the steps along the way to create value. That's the approach that I bring to a lot of management teams that don't have that. They're mine builders, they're geologists, they just want to drill the next hole, they want to produce the next study. I'm like, guys, if we do that now, how much value is it going to create? How are we going to finance this to make sure that everybody wins in the end? Most investors are great at buying and terrible at selling because they get excited about buying but they don't have an exit plan. In my case, because I can't sell, I'm obsessed with the exit plan and thinking about how we're going to create an exit. Like a VC firm or a tech firm, they're always thinking about the exit. I don't have the luxury of 55 VC firms or 100 PE firms all trying to buy the same assets. There's less liquidity for me, but I'm fine with that and it creates a lot of opportunities to add to really good positions that are creating value every single year but the market's not recognizing yet.

Tarek: In addition to your newsletter, you have the Gentilly Mining Forum coming up in London. I read that you have the Gentilly Icebreaker in Vancouver. Talk about these. What are the purposes of these events and what was the genesis for these ideas?

Michael: I guess as my portfolio has grown and my reputation has grown in the business, I'm a big believer in synergies in all types of businesses. I guess people get to know that I do good work, that my companies have hallmarks and hopefully have quality associated with them. A lot of companies spend a lot of money on marketing and IR. What I've tried to do with my companies is say, why don't we co-brand an event together? Why don't we go to London and have my top 22 investments in my portfolio? So 80, 90% of my book is going to be in one room, one day. All the investors in Europe that want to see my entire portfolio and have face-to-face meetings with the CEO on October 19th in London, England can come for a day and see my entire portfolio. Otherwise these companies will go to London on their own, do a five-day roadshow, spend the same amount of money they'll spend doing a day with me and they'll see one-fifth of the investors. If you like one company, why don't you come and see five? Instead of having 20 investors for lunch, why don't you have 150? We're trying to give my companies that scale advantage and investors know if they spend a day or a few days with me in Europe, they're going to see a lot of quality names. They're not going to buy them all, but they're going to have a high-quality day with really good meetings. I'm trying to do more and more of that. Vancouver, same thing. During the V-Rick show in Vancouver, I had all 35 of my companies for the first time in one room. You can see my whole portfolio, a full day of one-on-one meetings. My companies find it terrific, investors find it terrific. I enjoy it, I get to interact with all my management teams in the same place. It's a lot of fun, a lot of value add. Hopefully it lowers the cost of capital for my companies and provides them with a whole new investor audience that they haven't had a chance to interact with yet.

Tarek: If someone's interested in doing the type of work that you're doing, or even somebody who's younger, 25, 30, how do you get access to deal flow? How do you get in the space? How do you get connected? Do you have any ideas or recommendations for that?

Michael: What I've always loved Small Caps Terek for, even from my first day on the job when I was 21 years old, is you want to talk to the CEO of Microsoft, you're never going to get them on the phone. You have the 17th Vice President of Investor Relations that'll give you a boilerplate summary of what the IR script is for that day. During your mining, even if you have 10 grand to invest, you pick up the phone. Even in my portfolio of companies, nine out of 10 will pick up the phone and talk to you. They have incredible access to talk to the key decision makers at a micro level, which is really important. When I invest capital, I want to talk to the CEO and the capital allocators. Who are the people making decisions with your money, stewarding your money well? There's so much available online now. You can see YouTube interviews, and company interviews, and download AI. You can see all the information you need, but the real value is interacting with management teams, seeing if they do what they say they're going to do, do they execute? But that level of access, I've always had that my whole career. I've always talked to the C-suite executives on any investment I've ever made in my career. I love the small cap space and the micro cap space, even for retail investors. Managers are incredibly available. If they're not available, you can show up at a conference, hear a good presentation, grab a coffee at the coffee table and get five, 10 minutes of the CEO's time. In general, they're very open and available to investors, which is a great way to learn.

Tarek: At the outset, you offered a really important piece of advice to young people to begin the process of investing and compounding to build wealth. What other pieces of advice would you offer, either personally or professionally, at this stage of your career looking back that you think are the one or two things that a young person really needs to think about and know?

Michael: Just general financial advice. I tell my kids this all the time. Make more money than you spend. Try to save a bit of money every single month. Put that away. Get compounding to work for you. In a hyperinflationary market where your dollar is being devalued every day, the only way to keep your head above value is to have your money compounding faster than the inflation rate. That's how you're going to better your livelihood, better your family's lifestyle and your family's future. That's one. Two is educating yourself on what's happening in monetary metals. It's not just a niche investment opportunity. I think it will really inform how you vote, how you look at politics, how you look at government spending. Understanding inflation, monetary debasement, the impact that governments make with their spending decisions on your family's finances and how it's impoverishing the lower middle class more than anybody by their decision making is really important. You learn about a great sector, you can make some money and you also get really more informed about how the world works and how money is flowing and how your politicians are maybe making some decisions that are less than desirable. The third thing I'd say is if you do start investing, like I said earlier, learn from your mistakes. I'm a student of the game. Every mistake that you make, don't let it discourage you, don't let it distract you from staying involved in the business. But write down, what did I learn from that mistake and how can I not make it again? I've made hundreds of mistakes in my career and hopefully over time I'll make less and less mistakes because I've learned from each and every one of them. I always say the files where I lost money are the ones I learned 10 times more about the market than the ones I made money. So don't be discouraged. If you lose a little money, call it your education, your PhD, your master's. That's part of the process of becoming a better investor.

Tarek: Michael, fantastic advice. I can't let you go without leaving you with some above-ground silver. This is a one-ounce Yallstreet silver round. Thank you so much. Michael Gentile, thank you so much. It was a fascinating and enlightening podcast. Thank you.