Transcription
Mining Network's coverage of the Rick Rule Symposium is brought to you by Copper Giant. It's July 7th.
[music]
And we're at day one of the Rick Rule Symposium, and we are with the real Rick Rule. We were here yesterday. There was like a two-hour set reception yesterday. Buzzing in here. Couldn't believe it.
Yeah. I mean, for one thing, the conference is almost 30 years old now. Uh, so there's a lot of folks here who are, you know, repeat attendees. Uh, and it's become a community. They know each other. They vacation together. They hang out together. They know the company as well. It's just nice the way a community comes together. And I was gratified by the first day response. Um, but, you know, you work 30 years to be an overnight success.
Yeah, it's true. It's like many mining companies, I guess. Um, look, there's a lot of topics I want to talk to you about. One one of them being management teams. We've spoken about this as a topic in the past quite a bit. There's quite a few. I believe every company in the room here you have invested in in in some capacity.
Close. There are some booths that have four or five companies in them that are part of a group.
Okay. I have to own one of the companies. There are some that have been smart enough to sell me one and then crowd the rest under the same banner. [laughter]
Yeah. No. Smart. Um, I look, I'm just wondering early on, it's like we said, we've always spoken about that some people think commodity prices are the most important thing in in mining. You've always said that management picking the right people is really up there.
Certainly with the juniors.
Yeah.
Uh, people make a mistake that the juniors are asset-centric businesses. They're not. They're knowledge businesses.
Investing in exploration is the same as investing in technology. It's answering a series of unanswered questions. So the science is more important than the molecule.
I think you always reference PTO's law, which is a really good example as to how this actually works. But in terms of that 20% and then further down into that 4% that you you often reference, who who are the 4% perhaps even in this room or maybe not in this room that that you've always think, "Okay, they've got a new vehicle. I'm going to back them. That that's the company. They're the guy." Let's get smaller than 4%. Let's run the 4% through the same performance dispersal curve. Let's get the 1%.
Yeah.
The 1% have names. The Lines, the Freedellands, the Quartermains, the Rossbies. By the way, they're all represented here. There are groups of people who have built institutions, organizations that have been serially successful over 30 years. You look at Rossbi as an example. I've been involved in 14 Ross Bey companies in 35 years. 12 of 14 have been 10 baggers or better. So you want management teams, not just the Chief Ego, not just Ross Bey, but through the organization who have been serially successful and who have been serially successful at the task at hand. Somebody who has been a success at gold mining may or may not be a success in oil and gas exploration. So you want the success to be applicable at the task at hand. That's your first job.
Who's your because I I often find with mining, it's very rare to find an individual that both gets the geology and the finance because with junior mining, it's just as much about your ability to raise capital and push on as it is actually understanding the rock sometimes, especially in tough markets. Right. Is there someone that stands out to you on the geology side that you think, "Okay, this guy thinks there's anomaly here that's worth looking at. I'm going to follow this guy." Because that's really the risky part, isn't it? The the the
There's a lot. Uh, I mean, the hybrid or or compound guys, the Ross Bees, the Bob Quarter, you see them do both are rare.
Yeah. I know both of them by now late in my life, uh, as businessmen. I've negotiated against them. I've negotiated with them. I've financed them. All these kind of things. I'm continually impressed when I attend a presentation with them and a geologist is is speaking. I'm continually impressed as to how good these guys are at geology, how good they are technically underneath that corporate veneer. Uh, what you find is a hell of a rockhound in every circumstance. I remember, rest in peace, uh, early on my career doing business with Adolf Fund, thinking this guy's a spectacular businessman. He's a spectacular investor. And then you'd be watching a presentation on oil and gas exploration. You go, "Oh, wait a minute. Before that, this guy was an offthecharts geologist."
Yeah.
Um, what about on the finance side? Is there anyone that's done any deals in the past that you think, "Okay, this is different. This is this is someone who's changing the game here."
I don't know about changing the game. Uh, I look to the other the other side, somebody who sticks to their knitting.
Here at the conference. Jonathan Dindee. Jonathan Goodman.
Goodman. Who who learned at the hands of his father, Ned Goodman, who was an early mentor of mine. Jonathan Goodman has figured out that his role is to assemble a financial and technical team to merchant bank to back other companies. The job that they did with Reunion, uh, taking Reunion from a 250,000 ounce resource explorer in the middle of the Gian jungle, uh, to a 10 million ounce deposit which they sold. Uh, the Reunion guys get a lot of credit, but it was Dundee behind the scenes providing the backing, providing the support in down market, saying to these guys, "Don't let this market get down. We'll support you, and if we can't support you, we'll find somebody who can." That sort of spark is what I'm always looking for. Somebody who I know and love and trust, who I can invest alongside, who will who will provide the backbone for these companies. Those are the financiers I look to.
We're um we're chatting to Jonathan, I think, tomorrow on the channel. What if you had one question to ask him? What what would you what would you say?
I would ask Jonathan, now that he's been an investor for 35 years and helped build companies, uh, what it is that most investors get wrong.
Yeah.
And how they can support, how how they can do a better job of identifying companies to support and maintaining that support through five often challenging years. Too many people in our business are looking at three-month solutions, and there aren't three-month solutions. Building a company, enjoying a 10-fold return is more often than not on a five or six-year job.
Throwing that question back at you, what would you say?
Uh, most investors don't work hard enough.
Uh, most investors prefer to feel as opposed to think.
Uh, which is why most investors fail. Your opinion about something is irrelevant if it's not an informed opinion. I've graded almost a hundred thousand portfolios at Rural Investment Media and I've learned a lot grading portfolios. The common investor mistakes include laziness. Money is made on the delta price and value. And if you don't spend enough time to identify what something is worth, its price is meaningless. It has no meaning. Uh, the second is patience. If taking, uh, if enjoying a 10bagger takes five years and you allocate three months, you're going to fail. Uh, and the third is tenacity. In most of the 10 baggggers I've enjoyed in my career, I've been exposed to a 50% price decline in the stock while I owned the stock. It takes a strong opinion of value to hold a stock and buy more during a 50% price decline. But those are the three things: work, patience, tenacity.
Interesting. And just going back over your career as well, like obviously you've had, like you were saying, you've had some multiple 10 baggers within the industry, right? What are there any that stand out to you? What was your first one? What was because usually the first one is one that gets everyone addicted to this space. It's
No, not not the first one. The most important one. Let's do the most important one.
Okay.
The most important one was Paladin.
Paladin.
Important for many reasons. Uh, I was a contrarian, and you make the most money in a hated sector.
Yep. Uranium was truly a hated sector. It had been a bare market for 20 years. When people thought of it, they thought of Hiroshima and Nagasaki and Three-Mile Island. It wasn't that they were bored of it, they hated it.
Which is why I liked it. I knew it was cheap.
I identified a guy, John Borchoff, at a little tiny conference, then Little Tiny, in Western Australia called Diggers and Dealers.
He had a 1.8 million Australian market capitalization. You know,
Uh, 2,000 shares would buy you a cup of tea, right?
Yeah. Yeah.
Uh, and I remember going up to John and I said, "John, in all fairness, with your market capitalization, you have no money in the bank. The company's running on vespers. How can you explore?" And he said to me, "I don't have to explore." I was like, "Oh, this is going to be a long day." You know, I said, "Okay, I'll buy it. Why don't you have to explore?"
Yeah.
Said, "Well, I was uh exploration manager for a West German uranium company, and they had a billion dollar database, a database that cost them a billion dollars to assemble, and they gave it to me as my severance pay when they laid me off. So, I don't have to explore. I just have to I just have to stake stuff I already discovered." I said, "That's the best answer I ever heard." So, we did a $2 million financing for John when he had a million8 market cap.
Oh, you got 50% of the company. Wow.
And we had a warrant, so we actually got two-thirds of the company. Now, we did that at 10 cents and I felt really good about this.
And initially the market went up. Uh, I've learned later because Australians like fresh blood. They looked at me as a new victim. So the stock went from 10 cents to 11 cents to 12 cents to 13 cents to 12 cents to 10 cents to 8 cents to 7 cents went all the way down to a penny. Now, if you own a stock at a dime and selling for a penny, you don't have a hold. You have a buy or you have a sell. So, I had to revisit all my premise, which investors need to do whether they're up or down. And I decided I'm right. The market's rock. They're bored. And if I'm willing to support this company, it's going to be a success. That decision, and I didn't get into a penny, sadly, but I got someone at a penny and a half.
Uh, that decision exposed me to a move in the stock from one half cents to $10. $10.
In seven years. To have a live 12.5 cent warrant, which is what my warrant was, in a market that's $3 bid, is as much fun as an old man can have with his clothes on. I mean, there's just nothing like it. So, that was instructive for many reasons. I entered the stock well. I entered the stock when the sector was in hate.
I backed an absolute zealot. John Borchoff would chew through concrete to meet his goals. When I was challenged, when my premise was challenged by the market, I had the courage of my convictions and then I had the good sense to sell because when it went to $10 after that, it went all the way back down to 60.
And I didn't retrace.
Yeah.
The the power of optionality as well, right, with the warrant is is just incredible.
Yeah. I I I remember watching years ago, you did an amazing uh speech on private placements, um, which I I think it's on YouTube. People should go and find it. It's at a conference somewhere. Um, that for me was a game changer. It was I think you you must have done this about 10 years ago, this speech, and it was when I was first starting to invest in money myself and start getting into private placements. It changes the whole in when you start thinking about how sophisticated investors start investing versus just buying on the market. It changes the game. That's like a a clear story of having some optionality down the line for for the faces.
Now understand that that only works in bare markets.
Yeah. In bull markets like this, when you want to invest, everybody else wants to invest, too. And you can't get good financing terms. Right now, I'm doing almost no fther places in this because people aren't giving me warrants.
Why would I sign up to get restricted stock when I could get free stock in the market if I don't get a warrant?
Uh, I believe in the old. Well, you're not American, so you might not understand the reference, but I uh, I believe in the Nancy Reagan defense, which is to just say no.
Yeah.
Um, other than other than Paladin, I I guess that's a really unique story in a way because you you found a guy with clearly a lot of experience, a lot of intellectual data that that he could then deploy and and you're backing the person again, a management almost story. Is there anyone at this conference other than Quartermain and and some of the guys that you've said where you're thinking a similar very low market cap but actually a lot of potential to to go on and maybe you have to hold for five years but you're willing to do it.
Uh, I would say there's a class of companies here, uh, the prospect generators, the people who use their intellectual acumen and other people's money to explore. Uh, exploration is a very rough game. It's been very good to me. And you need to invest in exploration in a way that gives you an edge, and and those are very few. The probability of success in exploration, as defined in my first year geology course 50 years ago,
Uh, is that one in 3,000 anomalies becomes a mine.
Which means you have a one in 3,000 chance of success. You can cut those odds substantially by backing the right scientists. You can you can cut them all the way to sort of one in 50.
The way you make money in this is you get multiple lottery tickets that are paid for by somebody else's money. In other words, rather than having a whole lottery ticket, you get 30% of a lottery ticket, but somebody else bought you the ticket. That's the prospect generator. So for somebody who wants to be on the ragged edge of exploration, for somebody who wants to occasionally enjoy a hundred bagger rather than a 10bagger, the only arithmetically predictable way to do that is in the prospect generators. Hence, I own them all.
Do you own all of them?
Yes.
Really?
Yes.
Wow. I mean, there can't be that many left, can there? Where is there like 10?
That's pretty easy. No, there's 17.
There's 17.
Well, Matt Guyger will tell you there's 50.
Right?
Uh, because he's more generous in his definition of prospect terrorists. By the way, if you don't know Matt Guyer, you need to interview him. He's a genius.
Matt Guyger. Um, yeah. He's a US basis and he's got a fund. Yeah. Yeah. Yeah. Yeah. I know of him. Um, interesting. One of the other things that this this love-hate scenario, we've spoken about this loads, and I I loved I remember when I first joined the industry around 10 years ago, you you were banging that uranium drum, and and lo and behold, I'm sure Paladin as well, one of the examples, but um, you you then I think you've went on and you've spoken about nickel more recently. We've had lots of chats about nickel. We've had lots of chats about uranium. Um, there are a few commodities still that are lagging behind. We spoke about lithium. I think last time we spoke, you said lithium is not ready yet. Maybe down the line, potentially. What about some of the ones that are really hate, like lead, zinc, things like that. I'm not sure zinc is hated. Lead is certainly hated.
Uh, the difficulty is it's tough, it's tough to find a lead play. Mostly when people have a lead deposit or a lead zinc silver deposit, there's silver byproducts and they call it a silver, they call it a silver project. These silver projects are often lead projects in drag.
Uh, and I would argue that the only commodity in the world that is still hated, the only major commodity.
Uh, is probably lead.
Yeah, I'd agree.
Um, the easy money is made when stuff is hated. There's no easy money left in the sector. There's sure money ahead of us. There are certain sectors that in the next 10 years, under almost any scenario in the world, save a global synchronized global depression, we'll do well.
But the easy money has all been made. I wonder as well, I was chatting to a colleague of mine, uh, yesterday, um, and we were talking about the copper price, and it's it's fascinating how you have a global event like like the Iran war, where in theory energy supplies decreased, the global GDP in theory should be reducing as well, as as a direct result, but copper prices holding above that sort of $6 mark or around that $6 mark. Was that was that a surprise to you that we didn't see a bit more?
Huge surprise. Yeah, a lot of stuff, a lot of stuff right now is negative for copper, and copper's holding in. Among other things, interest rates rise. Uh, people who hold copper inventories, particularly Chinese, are paying much higher holding costs.
The temptation when there's no momentum is to cut the interest rate bleed and sell the copper. Similarly, the very high oil prices acted as a tax on the economy, and all taxes are bad. Uh, when liquidity leaves the sector, it's tough on the economy. Copper is economically sensitive.
Uh, treatment and refining charges are at all-time lows. Uh, everything that you look at at copper in the near term is bullish. Yeah.
Everything that you look at in copper in the long, pardon me, everything is bearish in the near term. Everything is bullish in the long term.
But prices are set in the near term in anticipation of the long term. The strength in copper, I think, has everything to do with the fact that two decades of underinvestment in copper.
Are coming home to roost.
Copper is entering what many analysts believe to be the start of a super cycle. JP Morgan is forecasting a refined copper deficit of 330,000 tons in 2026, growing to around 2 million tons by 2030. Major mining companies are now circling the largest underdeveloped projects, of which there are only around five billion ton plus copper deposits in single asset company hands. One of which is Copper Giant's Makoa copper molybdenum project in Colombia. This video sponsor, Makoa, hosts an inferred resource of 1.12 billion tons at 0.51% copper equivalent. Right now, they have three drills turning, end of PA underway. As we often talk about on this channel, mining is just as much about people as it is about the rocks. And Copper Giant is led by a team behind two of the six largest copper mines built in the past 10 years. Their largest backer and shareholder is Frank Gustra, with in-country expertise having co-founded Colombia's largest gold producer, Aris Mining. With what we know already, you can do a back-of-the-envelope valuation, and that's pretty exciting, you know, in the back of my mind, waiting for that to happen because it will be a rerating, and it's going to be significant. So, we have to just do it right. It's all about execution in this game. You can have the best assets, but you got to you have to execute.
Intelligently, and I know he's done it a couple times before. I trust him.
If you want to do your own due diligence, you can find out more at coppergiant.co.
Yeah, and I think we also spoke about last time, maybe it was in Zurich, I can't remember. Well, maybe at Mines and Money, we were talking about, obviously, we did have quite a lot of spy shops last year as well, didn't we? Kakuda, Escandida,
Uh, uh, Grasberg with the mudslide. There, there was quite a few. I think Cadel had some stuff going wrong as well. Um, are you anticipating that there's a little bit of that at play as well, where I think I think we did lose about what, 5% of copper supply? Obviously, um, Copper Panama as well is is still not back online yet. There's a lot, there's a lot in terms of the big, big copper is one of those metals where a lot of it comes from a few mines.
Yes.
And we've seen a lot of disruption.
Right. I have to believe that the all-time low treatment charges.
Have to do with a shortage of concentrate.
And I think in the next year, we probably make up for that, you know, to get those mines back online. What we don't make up for is 20 years of underinvestment in new mines. At Metals Week in London, I think you were there the end of last year, uh, there was an astonishing paper presented by Wood Mackenzie saying that the 10 largest copper producers in the world have to invest, uh, $250 billion constant US dollars, $2.25 to maintain current production. But current production is a deficit to current demand, and demand is increasing at between 1.5 and 4% compounded annually, depending on who you read.
Uh, and when I say constant dollars, that's important because the same study suggested that inflation in the inputs in construction and operation are increasing at 8 to 10% compounded, which means that $250 billion today becomes $375 billion five years from now. The mining industry, inconveniently, doesn't have that much money.
Yeah. What I also find as well, and I'd be I'd be really interest, we've got Copper Giant behind us, um, as as the sponsor of who thankfully have allowed us to be here, um, as well as yourself, obviously.
Um, but one one of the things with copper companies is a lot of these single asset companies is that they've usually got quite large capex, and it's it's usually quite tough for a single asset company to raise a billion, two billion, however much it might be to to build these big mines, right? And that's as well as permanent, but that's that's one of the big, I guess, shortfalls of of the amount of, like you were saying, there's not enough capital in this space. How can a company like Copper Giant, for example, get that mine into production and and return value to shareholders? Cuz this is well, in the case of Copper Giant.
More likely than not, if their exploration thesis is true, which by the way, I happen to believe it is.
Yeah.
Uh, and if they solve over time the sociological challenges of Puto, which I hope they will.
Uh, because they have Frank Gustra behind them.
There is a chance that they could raise the money to build it.
Yeah.
I think it's highly unlikely that they do. I think that they use the threat of Frank Gustra to say to an acquirer, if you don't pay us a fair price, we're going to build it ourselves. But the truth is that as a consequence of two decades of underinvestment in in copper, not this year, not next year, but beginning by 2028, the Wall Street frame of reference to the big copper mining companies is how are you going to maintain production and how are you going to grow? Given that those companies have systematically underinvested for two decades, the only way that they can establish a pipeline is to buy it. Copper Giant's job is to derisk the deposit and make the buy decision easier to say the legal challenges, the permitting challenges that you would have to spend five years solving, we've solved. Proving that we have a billion ton deposit is not something that you have to spend $40 million a year on because we've done it.
Done it.
Here's the feasibility study. Uh, costing what the cement is going to be, what the power is going to be. All of that baseline work is done. The species work, the flora, the fauna, it's done. Drisk, drisk, drisk, drisk, sell.
Yeah. No, I think that's a great plan. Um, what what do you also Ian Harris, as I think was you involved in Miridor?
I was.
I was involved in Coriente going.
Oh, he was.
Way going back before Ian could spell Coriente.
Well, he he was one of the main guys driving that project over the last.
Did a fantastic job. He did a fantastic job.
Was that a big win for you?
A great win for me. I mean, mercifully, I've known David Lol, rest in peace now, for a very long time. Uh, following David Co, uh, pardon me, David Lol around the North American Cordillera,
From Arizona all the way down to southern Chile was the most fun you could have. Uh, when David had a sense that he had a copper field,
Uh, it was always a good sense. You know, the same guy that really was responsible for Coriente was responsible for Escandida.
Yeah. Yeah. You know, I partially responsible for San Manuel. The guy was unbelievably good.
Uh, he couldn't have done what Ian did. He did not have the temperament to push something through the Ecuadorian political circumstance. He didn't have the temperament to hang out with the locals for three or four years.
Uh, and Ian, well, Ian didn't have 50 years experience in the Cordillera to make that discovery either.
Oh, sure.
So, they, you know, they each had their role to play in that success.
I'm going to change topic a little bit. Um, just because obviously 80% of all listed mining companies are in the gold space. So, I I really want to just I think it would be quite nice just to get your view on this. Obviously, Walsh came in, uh, more well recently, it's very bullish on being able to actually cut rates, you know, that reduce the balance sheet of the Fed, making all the right noises in a way, um, that that you would want to hear from from from an incoming Fed chair. It sounds as though, and and I don't know if you saw one of Trump's true socials the other day where he said that things are a bit hostile in the Fed towards Walsh. Um, uh, it sounds like he's gone in there and and perhaps the rest of the board aren't quite on the same page, and and things are looking a little bit more hawkish. What What's your read on it?
I never listen to what they say. Worsh now an accomplished politician. And to become a successful politician, you have to become a polished liar. You can tell these guys are lying when their lips are moving.
Yeah.
And his lips are moving a lot. Uh, if you ignore what he says and you look at the arithmetic as to what he has to do, the path is clear. He may be able to be hawkish for six months, and most people think in three months timeframes. Looking longer, the math mitigates against him. There is no doubt in the last three years that the political force has begun to lose control of the long interest rate. They drive the short-term rate down, which they can control, but the long-term rate has begun to move away from them. It's moved away from them because of debt and deficits. Uh, there's nothing that Worsh can do. I think Worsh's instinct is right. I think Worsh would like to let interest rates rise. Worsh would like to reduce the size of the Fed balance sheet. He knows what a central banker should do to defend the integrity of the US dollar, but US politics won't allow it.
It's we've been speaking about this for a while now because it it seems like the writings on the wall that you will see a bit more money printing and more inflation. It's if if you do lose the sort of long-term bond yields and and you do focus just on the short term, you start printing too much on the short term, you are you are you are at risk, aren't you? If you do then need to increase interest rates and you've got all this short-term debt, you're I mean, the US economy is a bit shaky as it is. I mean, that's not going to help.
It's odd. Uh, uh, I I think the US dollar is the worst currency in the world with the sole exception of all of the others.
Yeah, I agree. Uh, when I look at our problems in isolation, I think, oh my god. And then when I look at our problems relative to the problems of other countries, I say, "Oh, safe havens are scarce." I I mean, let's look at this. On balance sheet and off-balance sheet liabilities in the US government now exceed $160 trillion. Now, that's gross. Net, it's only 157 or $154 trillion. Put that in perspective. The IRS's estimate of the aggregate private net worth of Americans is $175 trillion. There's a $15 trillion gap between what we have and what we owe. Now, people will say, "Yeah, but what about the collateral? I'm a bondholder. You think I can go to President Trump and say, 'You owe me yusede.'" I mean, it's not going to happen, right? So, it's important that you look at it like that. And that $15 trillion gap is getting smaller by $2.5 trillion a year on balance sheet debt and $2 trillion a year off balance sheet debt. Which suggests to me that three or four years from now, what we owe is going to exceed what we have. Now, how do you deal with that? I I haven't heard Mr. Worsh or Mr. Trump address that.
Yeah, I guess I guess you look at Japan. It's it I they've owed a lot more than they than they have for a while, haven't they?
Uh, except private savings. Uh, the number of what they have relative to what they were worth was sustainable as long as they could hoodwink their citizenry. If you look at the opportunity set that confronts young Japanese today, which is to say nil, you are looking at the future that confronts young Americans if we don't deal with our problems now.
What what do you think about because the the I guess the the new narrative coming from the tech bros and the AI revolution that we're talking about is well well you don't need to worry because we've got autonomous robots that are coming out in two years time. They're going to be doing your laundry. They're going to be doing your gardening soon. They'll be doing everything.
Um, that that's the narrative that Elon Musk is talking about right now. Is I certainly believe that the future will allow economic growth that's less capital intensive.
Uh, I'm not great at technology. I'm 73 years of age. There's some aspects of science like geology I'm reasonably good at.
But the breadth of technology, uh, let's be charitable and say I'm a ludite. But in certain sectors of what I do, as an example, credit analysis, uh, I can literally now do on Claude in two minutes.
What took me four weeks.
As an intern.
We will be able to accomplish more with less. But we will have an increasing wealth divide in the world.
Between people who can implement technology and people who can't. Right now, I live in a small community in northwestern Washington where there's a genuine labor shortage. Uh, entry-level workers at McDonald's make $20 an hour, almost three times the minimum wage. And these people, many of them are functionally illiterate. Uh, McDonald's has icons on the cash register for people who can't read.
Is that right?
These people make $20 an hour, and $20 an hour is not a living wage in my community. These people, wonderful people, wonderful people, don't have the education to generate the utility that will allow them to be paid a living wage. If those people get raised to $30 an hour, you will have voice recognition software.
Uh, at McDonald's. You will order, the software will recognize it, an automated machine will kick it out, and there won't be any humans in the process.
Well, that's that's the idea, isn't it? But but essentially a lot of a lot of labor.
Right.
Will be made redundant.
That works for me.
But it doesn't work for the citizen who becomes redundant.
Now, what the politicians say is that's great. So, what we'll do, Rick, because you're so productive, is we'll steal, we'll steal 60 or 70% of your wealth and we'll redistribute it as we choose, particularly to those morons who vote for us.
Um, you you can understand you're explaining the Labour Party in the UK.
You can understand my hostility to that.
Yeah.
Yeah. No, I I can um I I I guess that's the big, a lot of fund managers have been talking about this, uh, recently is is that I I saw an article recently, I think from The Economist, saying, um, this is sort of the last chance people may have to to acquire assets in terms of physical land and, um, and sort of hard assets in that sense because of what's coming, it because of this redundancy in jobs that we're going to see. We already have the highest unemployment for for youths in the UK. We do. I don't know if it's the same in the US. Is is this sort of, uh, I I don't maybe we're getting a bit bit too far into the future and it's all a bit speculative, but it seems like the current model of where we are at the moment, it's could could it be, could it be the last sort of run of the sort of epic?
No. No. No. I mean,
Humans are prone to fashion. And I suspect that there will be lots of cataclysmic mistakes in the future where people become uniformly pessimistic and sell whatever they have, and those are always buying opportunities.
Yeah.
Uh, people are perpetually stupid in that regard, and so we'll have panics in the future, and those, you know, those panics in financial markets are called sales in physical markets.
That's good. Um, last question. The Economist just, I don't know if you saw it, they wrote a wrote a big headline recently saying we was wrong. Did you see that on on oil? So they they were forecasting that the trade of horses, the closure was going to bring around $200 oil. They were calling everyone who was short in oil and sort of the less bullish traders, they were calling them all idiots. It was it was a big deal. And then I think about two days ago, they came out and had to write a big apology piece because they now don't believe the oil price is going towards 150 to 200, right? Um, you I just wonder where you're sitting on the oil space now because we it's something we spoke about in March. You looked at this crisis and and you said it it potentially will create a selling opportunity down the line in oil. Has that happened? Have you sold your oil? Are you still in oil stocks? Where'd you sit?
I'm still in oil stocks.
You are.
Uh, I I'm not a geopolitical forecaster, so I didn't know how the war would end.
Yeah.
I was nervous because that conflict seems like an existential conflict to both Iran and Israel.
Yeah.
Why the United States was involved, I will still never understand. But that's a different topic.
Yeah. Yeah.
Um, we dodged a bullet. We meaning humankind. Well, we dodged several bullets. It didn't go nuclear, which is a very good thing.
Yep. Oil was priced in anticipation of a physical shortage. There was enough oil in terms of floating inventory, cargo, and in terms of strategic reserves in some countries that oil was never rationed by price. It was it was priced in anticipation of a shortage. We never experienced a shortage, but I suspect we missed it by a week or two.
Yeah.
Very, very, very close. That's a portend of something in the future. We've seen what can happen to the oil price in anticipation of a shortage. We've seen the oil can clear from $55 to $115 in anticipation of a shortage. Beginning 2029, 2030, we're going to have a real shortage. Not war-inspired, but re rather a shortage that occurs as a consequence of deferred sustaining capital investment. You and I have talked before in prior interviews, which I urge your listeners to replay, about the fact that we are underinvesting in sustaining capital in the oil business to the tune of a billion US dollars a day.
A day.
A day. Now, that's gotten worse.
Nobody in the last four months was investing in sustaining capital in the Gulf. First of all, they had other uses for the money, like killing each other. And secondly, if he built something, the other side would blow it up. In addition to deferring more sustaining capital, we have to repair all the stuff that did get blown up. The Iranians have to repair Kar Island. They don't have the money and they don't have the knowhow. Uh, in the UAE and in uh Saudi and in Kuwait, all those facilities that were damaged in Qatar, they need to be rebuilt, and we're still underinvesting a billion dollars a day. That impacts our ability to produce in the outy years. That'll be a shortage. That isn't an induced shortage. That'll be a structural shortage. We've already seen an oil market. What happens when there's a shortage?
And obviously, even just compounding onto that, obviously, Ukrainian drone technology has got so good recently. They've been attacking a lot of Russian oil fields. There's a lot of displaced supply here. So, I I guess how do you see this moving forward? Because under the scenario that theou does take and and there is an agreement. Well, obviously a lot of analysts like you like you've been saying as well, is there hasn't been an underinvestment and there is damage that's going to have a two, three, four, five-year lag on effect to get back up and running just to the way it was, let alone what we need.
Is that is that the main thesis as to why you're still in oil stocks and
I'm not selling those stocks. I believe that the circumstic underinvestment. Yeah.
I've made most of the money that I've made in my career by buying commodities that were priced below the total cost of production.
I suspect that the total cost of production of a barrel of oil worldwide now, including importantly cost of capital and taxation, is in excess of $60 US. At $55 a barrel, what it means is the industry makes the stuff for 60, sells it for 55, loses five bucks a barrel, and does it 102 million times a day. Uh, what that means is that in the longer term, the industry must either lose its co must either make its cost of capital, or your car won't start. That's the only thing that happens.
So I don't feel good about oil in 2026 or 2027, maybe 2028. I feel real good about oil 2029 and 2030. Uh, it's important that if you follow this thesis, the popular companies on Wall Street, uh, the popular companies in the city are companies that are maintaining high distribution to shareholders, which is a different way of saying that the companies that are cap cannibalizing themselves are popular. The companies that you have to buy typically have lower dividend yields because they're reinvesting sustaining capital at a great rate. So, it's important that if you follow this thesis, that you think in the five-year time frame rather than the five-week time frame.
No, agreed. Um, Rick, we're taking up a lot of your time. I really do appreciate it. Um, just just just as I go, well done on getting Battlebank up and running.
Thank you.
Great to see. Um, I think they have a stand here, so I'm going to go have a chat with them and see.
Please do.
What's going on. Um, please do.
But no, Rick, really appreciate it. Thank you.
Coming to a country near yours. Yours, in fact.
Is it coming to the UK?
Yeah, it took us about two years to get Everbank licensed in the UK.
Okay.
We needed to get licensed in our home market first, obviously.
But we will be coming to the UK. We will be coming to the EU. And of course, we're happy to service now, uh, the million some odd British subjects who live in the United States.
Yeah, well, I'm sure that number will continue to go up as well. Rick, thank you.
Thank you.