Transcription
That we know how long it takes to go from exploration to production and how long it takes to to act, you know, to bring in new supply to this the curve of these metals. And that is what, you know, sure, it's important that they're at least acknowledging the problem and starting to apply some changes in the regulatory environment, but also, uh, in how to support some of these companies, which would only help. But from a supply standpoint, things will unlikely change anywhere close to the next five to seven to ten years. So you can kind of be pretty, uh, consolidated in terms of a view that the next five to ten years will still be in a very supply-constrained place.
Welcome back to Metals and Miners. I'm your host, Gary Bone. Things are really heating up in the world of hard assets, geopolitics, and the precious metals. And there is so much to dissect and to discuss. And so today, who better to do that with than Tavi Costa, co-founder and CEO of Azura Capital? Tavi, it's an honor to have you back on Metals and Miners. Welcome to the show.
>> Gary. Thanks for having me. Looking forward to this.
>> Yeah. So, Tavi, look, you're one of the best macro thinkers out there. You're a great student of history. You're a value-oriented investor in the natural or, uh, resource space. You see the chessboard early, and that has helped you to position really, really well and capitalize from where you see the puck going to, rather than where it is currently. Right now, the puck is moving at dizzying speeds, and the risk for those watching right now is that they're going to make the wrong move because of how fast things are going. What do you hope for those tuning into this conversation today that they're going to walk away with after listening to this discussion?
Well, well, thanks for having me. Thanks for the, the very nice and kind comments. I, I think that, look, the way I approach this is, I, I know I'm not a trader. I know I'm not trying to understand the markets from a daily perspective. I'm trying to get the signals that I think help me to deploy capital over the five to ten years horizon. And I really mean that because I think there's, once you take that approach, uh, you can identify large dislocations in the markets that are presented to you because of volatility. And I think that the, the biggest thing that is happening now is the question that everyone is asking, and it, it's natural to think that way, is the fact that we've seen a very positive move in mining, a very positive move in in metal prices, and a lot of people are questioning if this is the end of it. Um, and I have a very different view on this. I think I think there's a list of things that you want to pay attention to when it comes to identifying the peak of the cycle. And I think we're far from that right now. And I believe that we're entering a regime that metal prices are unlikely to be low. They're likely to be higher for longer, elevated. Um, let's use silver as an example. Wouldn't shock me if $50 is the bottom from, from, from now on. Um, and maybe even, maybe even higher, maybe $70. Who knows? But my point is, the genie is out of the bottle when it comes to an industrial company or an electronic component company that knows the value of silver into what they're building. And I highly doubt that that will, that demand will go away in a case of prices going lower. We know supply is not changing. And so it gives you a sense of a floor in terms of valuations of a lot of things, and it gives you also a path to consider what to do with the portfolio in that sense as well.
>> Yeah. And wow, great answer, and it's a great lead-in for where I wanted to take this entire conversation. So, okay. So, Tavi, let's start here. There's so much risk in the world today, both internationally and domestically here in the United States. Geopolitical risks, currency risks, debt risks, natural resource risk, institutional risk. The Fed under criminal, uh, investigation right now. So, there's institutional risk being added. Risk is literally rising everywhere you look. The US stock market is at all-time highs, both in nominal dollars and in global allocations to it. With the risks intensifying and the world geopolitically bifurcating and the markets so concentrated in just a few companies and valuations so high, are you anticipating capital flows to move away from the US stock market here in 2026?
Uh, I don't know if I should, uh, frame this as 2026. I, I should frame this as as five to ten years, as I, as I think about the world. That, yes, certainly, that's the lens I'm using. I, I think that that's the right, uh, way to think about things because, um, I would highly doubt, I don't want to be in the position of of taking that level of risk, that concentration will go from 80 to 85 rather than 80 to 50. And I think there's a symmetry to believe that there's going to be a major rotation out of US equities into other parts of the world and also into other asset classes. You look at the silver to S&P 500 ratio, the gold to S&P 500 ratio, the copper to S&P 500 ratio. All these things are pointing to a direction of major rotation to hard assets. But I also think that all the things that the risks that you're mentioning, the institutional risk, um, even what we're doing in terms of acquiring companies, companies becoming state-owned companies in the US, um, all these, the currency risk, right? We're talking about a dollar that is actually, from a dollar DXY index, one of the most expensive levels, uh, that we've seen in history relative to the imbalances that we have. And so when you're putting all together, this is always a chess game. I believe that the dollar is unlikely to stay at these levels. That's almost like a core view of mine. I think the DS DXY index, to be very specific, is in the process of, um, not only topping but also starting to accelerate to the downside, uh, in the near future. As we see that occurring, I think we unleash a lot of trends. One of them would be emerging markets, and that is what I think that it will be one of the most important, uh, bullish trends that we will see in the near future is the rotation aspect, but also, uh, the inflows that we will see specifically in areas that have not received the inflows yet. So, so that's one thing. Um, I also think that you look at the valuations of these companies in Latin America specifically and others, and I'm talking about traditional companies, the banks, uh, retail companies, and so forth. They are all, you know, highly, highly depressed, um, in some cases, single-digit PE ratios, and others, you know, when you find an opportunity of single PE ratios with potential growth that could come from that rotation I was referring to, it, it turns into an exponential, you know, in my view, potential opportunity where, uh, you have growth with suppressed, uh, multiples. That is the recipe for a very large move. And so I think there's going to be some of that occurring. We're seeing some pockets of that happening in different markets, and I think that will continue to occur over time. So, yeah, that's, that's one way to view this. Um, and plus the dollar situation that I mentioned.
>> Yeah. Yeah. Okay. So in 2000 and 2008, we saw some very significant rotations taking place, but different second-order effects on the metals and the miners. Um, in 2008, we saw the metals and the miners go down with the rotation. The initial rotation. The market was plummeting, the general market was plummeting, and so did the metals. Although the metals rebounded fairly quickly, but the miners took a little bit longer. In 2000, the metals and the miners, as the NASDAQ was rotating, we saw both of those actually just going higher. They didn't get dragged down into any vortex as there is some kind of rotation. In fact, I think we're already starting to see it in the first two weeks of the year. I had just seen, um, some data showing the MAG 7 all negative this year. Um, as this rotation, you know, really begins to unfold in earnest, are you expecting the second-order effects on the metals and the miners to be more like 2000 or to be more like 2008?
>> I'm expecting to be a 2000 on steroids. And the reason for it is because if you looked at the factors that caused each of those situations back in 2008 and prior to the global financial crisis, it's important to note that the rest of the world was expensive relative to the US equities. It was precisely the complete different environment we're in today. Not a 80% US equities and 20% rest of the world. It was almost the opposite. The dollar was also at a very significant bottom or nearing a bottom at that period as well. In terms of the ten-year rolling change of the dollar itself, we were in the process of a bottoming there. In early 2000s, it's quite the opposite. We were at a peak similar to today. Also, back in the early 2000s, we had the concentration in US markets was, uh, very stretched relative to the rest of the world. So, and then the last thing you should be extremely aware of, I think I'm sure you are, but other people should also be aware is the capital spending cycle of the mining or the resource in, uh, sector was also at a major bottom back in the early 2000s relative to the 2008 or so, where we did see that actually being, you know, it was very stretched in 2011, even more stretched. Um, and the way you think about these things is the capital spending is a leading indicator for production, right? You're spending more money. You usually see some of that fall into exploration budgets. You see more discoveries. You see more projects coming online. Eventually, you see production growing. We're seeing for the first time in a long time, metal prices rising, eventually, eventually will cause companies to say, "All right, well, this is very profitable. We should spend more money in projects," and eventually it drives production. The problem is that is different than the early 2000s. Why I think this is on steroids is that different that time, we're not seeing any new discoveries. There are no new discoveries. In fact, after this surge in metal prices, we're still seeing the budgets of exploration falling. I think it's in a four-year low right now. Four-year low in the midst of, I don't know, all-time high metal prices. You're kidding me. I mean, this is crazy. What would take for an exploration company to be able to, or a, a major company to start actually spending money on exploration? And I explain a few reasons behind that. Um, one,
>> We're, we're gonna get deeper into the capex issue. So, hold on, hold on to that in your back pocket for now.
>> Okay? Until we get there. We are going to get there. I promise.
>> All right. As we all know, Tavi, gold and silver up huge in 2025.
>> When fourth quarter earnings are reported for the miners, investors are going to be shocked by the amount of profit that the miners have generated. It's not risk to the downside, it's risk to the upside. All of the risk surprise is up to is to the upside. The analysts have used much lower metal prices in their analyses on where they expected the miners to be revenue-wise. The fourth quarter gold price was up 20% over third quarter 2025. The average silver price was up 40% quarter over quarter. We could talk about, you know, the first quarter of this year, the last month has been unbelievable for silver, but silver's price is up 40%. Are you expecting a rotation into these precious metals miners to really begin in earnest outside of those who have been encapsulated in the space, as they're generating so much cash and profit, and investors start to get a little bit leery about the risk being locked into those big concentrated names in big tech?
Look, I don't know if the rotation question was implied within the industry or with capital out of the industry, but I certainly believe that it's not a rotation within the industry if it's new money that will be deployed into place.
>> Exactly.
>> And I think that that, it makes sense, and I, I think that, uh, you can characterize the gold space and the silver space in a different environment today. The gold industry, or I should say, a lot of times they overlap because a company may have gold and silver production, but you look at the gold, the senior companies specifically, um, they were really lagging gold not too long ago. Barrick specifically, the, the very large names that everybody knows and usually deploy capital into, particular institutions, uh, once the mining cycle begins, and those companies were lagging. A lot of people trying to explain this as if this was a fundamental change in the way markets were approaching the situation and that mining companies wouldn't really be a leverage on gold prices. Well, that was proven wrong, and the seniors did quite well. We've seen an explosion in prices of companies like Barrick, which are mismanaged, if you think about it. But they're also an option for leverage when it comes to gold prices. Eventually, these companies accepted the flows, and you saw a very large change in prices. Now, in the silver space, and, and I, and I think you're right. I think that was a perception that people were not really believing these companies would make money. As soon as the, the news came out that reports are coming in strong, uh, they started to, uh, adjust accordingly. The silver space is in that phase, is where everyone is a little skeptical and don't know exactly to where things are going to go here. They kind of want to see the reports and see that the things are going well before really start deploying capital here.
>> Can I, can I, I want you to keep on that topic, but I wanted to bring something to your attention specifically to where you're going with this. And that is, you know, the breakout in gold in '24 was led by central banks. Central banks don't buy mining companies, they buy the metal. And there was quite a lag there until investors got comfortable with the profits that they were making, that they started pouring in. Well, you know, we know, we know very, very well that the United States added silver to the critical minerals list that they're now stockpiling. We know China responded. They're not exporting anything out of the country without a license. They're stockpiling both for good reason. This smells like governments buying silver, buying the metal, not buying the miners. Very similar parallel to what we saw with with gold literally in '24.
>> Yes, I agree. Um, and I think that you have to think about the, the behavior, the usual behavior of those buyers is not in a trading environment. These guys are buying for the long term. They're buying for either critical situations or national situations or also because they want to stabilize their monetary system. I would say, however, that there is a change in the dynamic more recently where governments are starting to realize that maybe it's cheaper to buy gold in the ground than buy gold in the fiscal market. And I think that that is starting to happen. China is doing that. China has been, uh, funneling money into their silver miners or gold miners to acquire, uh, in transactions in other parts of the world that are, uh, that have control over production of critical metals. And I suspect the problem of that is that they've been inflating the private market in a large way because we approach the valuation of these companies. When we compete with China, and I've personally competed with, with other companies like that, what you find is that these competitions are usually driven by securing metal valuation. Okay. And that is a very different valuation proposition that is derived by a discounted free cash flow measurement to figure out what something is valued for. When you're just looking to secure metal for the future, who knows what the price of the mining company could be. And that is what's happening in the world today of mining when it comes to the changes of transactions we're seeing. I suspect that the Western societies are going to wake up to this as well. And this is why we're seeing the Trump administration beginning to get involved in some of these deals. You're seeing their engagement in South America politics and all these sorts of things. And that's not too different from the involvement of China in the African politics not too long ago, right? So starting to understand that eventually,
>> We're going to see the Western societies and us begin to pay securing metal valuations rather than discounted cash flows. Who knows what the valuation the miners would be, and that is to me one of the biggest bull cases for this industry that I've ever seen.
>> What a great lead-in here. So Tavi, yes, a few days ago, the White House released a proclamation directly from President Trump. In it, it says that the Secretary of Commerce, after a formal section 232 investigation, has found that imports of processed critical minerals and their derivative products threaten to impair the national security of the United States. And President Trump concurred, and then he decided to take it a step further. In it, in this proclamation, he goes on to mobilize significant portions of the American governmental apparatus to address this extremely serious concern. What's the big takeaway here?
Well, you know, a few months ago, actually, I did a calculation by metal of how much the US imports of those metals relative to local production. And looking back from the '70s to today, the changes are drastic. I mean, we, we went from, you know, relying on imports by 10%, 15% to 70% or so. And that clearly became a focus of the Trump administration. I think that that's the problem of all this is that we know how long it takes to go from exploration to production and how long it takes to to act, you know, to bring in new supply to this the curve of these metals. And that is what, you know, sure, it's important that they're at least acknowledging the problem and starting to apply some changes in the regulatory environment, but also, uh, in how to support some of these companies, which would only help. But from a supply standpoint, things will unlikely change anywhere close to the next five to seven to ten years. So you can kind of be pretty, uh, consolidated in terms of a view that the next five to ten years will still be in a very supply-constrained place. I am very concerned that some metals are still very dislocated relative to where I think the demand will be five to ten years from now. Like copper, for instance, is very interesting how there is enough copper in the world now. Certainly. And, and anybody who says that we're in a shortage of copper, I think is an incorrect view. However, big, however, is that we don't have enough copper above ground. Okay. Well, that's a big difference of what I'm saying. Then we do have a shortage of above-ground copper. And so, major shortage that worries me tremendously. I, it wouldn't shock me to see, like, where, where do metal prices go? Everybody's taking a nominal approach to this and looking at metal prices nominally and saying, "Oh, you know, it's too high. Look at the price." That's the same approach people would take on the S&P 500 not too long ago and say, "Well, in 2015, the S&P 500 is too high." It's a nominal calculation. You have to be looking at things from a fundamental standpoint, first and foremost. And the fundamental story,
>> To your point for copper, I believe there was a, a fairly large mine that was, uh, taken offline here, uh, recently, and another fairly large mine that pushed back, um, production estimates by several years.
>> Yes. And on top of it all, we all know there's no projects coming online that will substantially change here. And on top of it all, because we got to think about ten years. No, we know it takes ten years, fifteen years to go to production. Okay, then let's think of the pipeline. How many discoveries are we seeing? Oh, single digits. Do you know that in gold alone, the second, we saw two consecutive years of zero major discoveries of gold? Zero. And do you know how many times we've seen that in history? Never. So, this is scary. I mean, I, you know, and then I hear, well, AI is going to find all these discoveries, and we're not, we're going to be in a great world. That's not what we're seeing. That's
>> But even if it does, to your point,
>> 10 to 20 years, right? All right. So you're really, you're really painting, you're really painting the case that you made at the beginning, that you see this being 2000, but on steroids. Okay. So let's add one more piece to the pie here. America's huge move through this proclamation forces China's hand because they require the same critical mineral inputs to power their manufacturing prowess and their growing AI, robotics, and military capabilities that powers the United States. This will, when as they, you know, start to make even more aggressive moves, it's going to force America to become even more aggressive. But it's basically going to be a tit-for-tat game in this global scramble for critical minerals that we're now seeing shortages of above ground. As you say, every other industrialized nation on Earth, though, is looking at this and saying, "I've got to get my own supply chains in order, or they're going to be left behind," as these two economic superpowers are literally scouring the earth, making deals, and gobbling up any available supply. The price of these minerals is not going to be set by tariff. It's going to be set literally by a global bidding war of powerful nations. They're, and as you said earlier, they're going to spend any amount of money because they need it. It's existential. So my question is, isn't this really existential to every industrialized country on Earth to gobble up as many critical minerals as they possibly can?
>> Yeah. Look, you make an incredible case. And I, I think that also, like the, the, the national security aspect, it was already a huge aspect of the whole case for for metals, the de-globalization, the fact that you want to secure, uh, minerals and so forth. That was already a big case. And then on top of it all, you have this huge arms race, a real threat from an AI standpoint, where countries are looking at each other and companies are looking at each other and saying, "We don't want to lose this." And the only way to not lose this is to scale and to allow data centers to be built and to allow the whole, uh, electrical infrastructure of countries to be rebuilt. And look, we're nowhere close to that. And, and I think, you know, when I'm looking at that, you go back to the rotation idea. We're, we're not seeing a rotation from a valuation standpoint, but we're certainly seeing a rotation of capital that is coming out of AI companies, either from free cash flow or from a, or, or increase of debts in their balance sheet, coming into other sectors, materials, energy, infrastructure. And I think we're just at the beginning of that. And so, yeah, I, you know, the other aspect too, is, is there are some parts of the world like, for instance, South America. If you looked at most of the projects that will come from copper in the next five to ten years in the pipeline, where are they going to come from? South America. And you start looking at most of these minerals that are, you know, deposits that have been found, they still will take a long time to be, you know, in, in production. You're now seeing Chile is starting to change the regulatory environment to allow these mines to be built quicker. I think South America is playing a very strategic role here in order to accommodate some of the needs of places like the US. So, I, I'm seeing this as well as, as a major opportunity here as part of this whole situation. Um, but I'm concerned that the capital won't stop flowing from AI into the space. And look, these companies, you start doing analysis on them globally, they don't have a lot of debt, okay? Like these companies have, some of them, in aggregate, just in the US alone, they produce, generate about half a trillion dollars in free cash, not cash flow, free cash flow a year, okay? Like, if you think they are not going to shrink that cash flow, free cash flow, because they're going to spend more, I think you're out of your mind. And also they're, they're the new Fed. They're the new Fed. And on top of it, if you think they're not going to go from a net cash in their balance sheet to a 40 to 5%, a 40 to 50% um, debt, okay, leverage, you're out of your mind, too. But that's in ten years from now. And that capital will keep flowing in. Keep flowing in. So that is completely out of the, the whole stuff that you just said, which is about the de-globalization aspect. That's on top of it as well. This is very reminiscent to me of the mid-1930s, where Homestake Mining returned a $56 dividend in like 1935 or 1936. And those very, very few people who were invested in Homestake Mining back then, who were out of jobs, probably had no money in the bank because the bank, you know, closed, and all the other stuff that was happening, they re, you know, they might have had 10,000 shares and were handed a half a million dollar check in dividend payments during the heart of the Great Depression. It sounds to me like with what's coming for the mining companies, for those who are invested now and has a a decent, you know, share structure amount, they're going to be, uh, receiving quite the dividend as this free cash flow just continues to explode.
>> Look, I, I'm, I'm with you. I think that there's a few things that you, as a mining company and as an investor, should be also considering as part of this, in terms of, uh, you know, I'm always thinking about what's my risk as well, right? Like, it's focus, focus, focus on opportunities, but also what am I doing wrong here? And that, that's exactly what drove me to energy, is because I don't think we've ever seen these margins before. Like, if you look at most mining companies, the labor cost and other things are not keeping up with the metal prices. Metal prices are way far beyond rising, uh, more than than the cost structure of these companies. Now, you look at the gold to oil ratio, silver to oil ratio. Some places, highest in history, some places, highest since 1980s, '70s, whatever. I mean, we don't see these ratios that stay that at those levels for too long. Okay? So, if anybody thinks this is sustainable from that standpoint, you should be careful. That doesn't mean the margins are going to go away tomorrow. But it also means you should consider energy here as well. It also means that your new money that you're making, the new money you're looking to deploy, should also be considered in energy space as well, as a way of hedging your own portfolio risk of potentially seeing margins getting squeezed by a rise of energy cost. And so, I think that that's another way of smartly or intelligently trying to think about the world and how to be a smart money in this world where a lot of people are just looking at prices on a daily basis.
>> So when we, when we get into the capex portion here, which is coming up soon, I do have a question for you regarding oil. So, um, we're going to go a little bit deeper on it. So I'm glad that you did bring it up now. But Tavi, let's address real quick the unique case of silver. No other metal sits so perfectly at the intersection of industrial necessity and monetary history. Right? It's the most electrically conductive element. It makes it, it makes it irreplaceable in a dizzying array of electronics. We can go through them all, but ultimately for military applications, space, etc. I mean, you can't, you can't have those things without silver. The industrial demand, it's already relentless. It's pushing the market into this structural deficit. But layered on top of that is silver's 5,000-year history as a store of value and a medium of exchange. And in an era of escalating geopolitical conflict and unprecedented currency debasement, the monetary demand seems to now be a coiled spring. Do you see the proclamation that I was just talking with you about from President Trump regarding these critical minerals, that focus on securing the industrial supply chain, do you see that as inevitably colliding with silver's role as a safe haven asset, literally creating this feedback loop of scarcity and price discovery that is something we can't even comprehend, despite prices, you know, being around $90 now?
>> Yeah. I mean, it, it's, it's scary. The silver market is so tiny relative to money supply. It's so tiny relative to global markets, and at the same time, we know it's got, you know, centuries of history when it comes to being money, and people have recently neglected that. And I think that part of the way it's so embedded in the industrial and electronic side of of the world is also because silver prices are so low recently, and people have rediscovered how critical, uh, silver could be for those purposes in terms of efficiency. Yeah, you can potentially replace silver in some cases, but you cannot replace the efficiency of the metal, certainly. And so that inherently creates a bottom for the market, just like the gold market. I mean, you take gold to $1,000 an ounce, it will become very largely industrially driven as well, in terms of demand. And the reason why it doesn't go there, it's not because it's not an industrial metal. It's because it's just so efficient and so, uh, uh, useful as a metal that it become a current, it becomes a currency, and it's not abundant. And so it's the same thing with silver, mostly. I think we'll continue to see this monetary aspect of it, um, grow substantially. I think that central banks will start buying silver if they're not buying already. The same type of buying that we're seeing in the gold place, in the gold world. I think it looks like the silver space. Every dip is being bought, and I know we're talking today on the day that we're seeing a dip, and it's, it's just outstanding how this market continues to be bought in those days. And so, I, I don't think how this is, is likely to change. I'm very involved in the discoveries and, and the world of looking for opportunities on that side. And I can tell you, there's no major discoveries that will change the landscape of supply of silver anytime soon. Not only that, majority of the silver mines that are in the world today are losing their quality when it comes to grades in a very substantial way. And, yeah, I, I honestly, I think, I think this, this could take a dimension that I don't think none of us. Our biggest risk as investors is to be so disciplined. Personally, I, I really think that's the case here. Uh, we, as investors in the gold space and precious metals, really, really appreciate discipline. Really appreciate and hate the fact that the, the government has taken a different path in that sense, and I think that could play against us here. It can play against us in a big way as investors. And so, let it ride, is my, is my, is my, uh, my way of, I can't tell people how to manage money, but that's the way I'm thinking about this. I'm being very cautious about being too cautious. How about that?
>> Okay. Yeah. Yeah. And I, I'm hearing you loud and clear. Let's stay with silver for one moment here. As governments and and corporations, we haven't even touched on the corporation side. You know, big tech, the data centers, Tesla, I mean, all the the batteries that are coming out. All of these corporations need silver. All of them. Governments need silver. So the, we have governments and corporations with massive pockets, massive needs, prioritizing these strategic needs for silver. They're hoarding every available ounce for military, technological, industrial purposes. Let's war game this out. They're going to systematically over time lock retail investors out of the physical market. The tighter that the physical supplies become. In other words, the metal, as Mike Maloney has been saying for quite some time, it's going to become un-optanium. Um, the real question is, where is that desperate capital for silver going to go? It wants to get into silver so badly. It's going to be unable to source it. The retail, the retail guy. Where do you anticipate this desperate capital that's wanting to get into silver? Where do you expect it to go to?
>> It's in two words. It's called silver miners. I mean, that's the only way to go. It's, it's the only way to find potential supply of that. And, and I, yeah, I, this is why I think the biggest, uh, opportunity in my view today is in silver miners. Believe it or not, despite the fact that we've seen such a large increase in silver prices, is precisely the reason why the focus should be in silver miners. People are looking at this and saying, "The industry is broken. Look at the SIL to silver ratio, and it's all-time lows while silver is at $90 a barrel, $9 an ounce. What's wrong with the world?" It's not wrong. It's an opportunity in my view. That's what it is. I mean, I remember looking at the gold to silver ratio. Gold going banana here recently, and that ratio is at 90, and people are telling me, "This time is different." I mean, come on. There's 300 years of history that you can look at. I posted that chart multiple times and saying, "How many times in history have we seen the gold to silver ratio stay at 90 for two to three years?" It doesn't stay there. And so,
>> They were brainwashed into believing it's just an industrial metal, and you know this and that it's changed.
>> Look, I view, I love when I find a world or an asset or an opportunity in the market where, look, there's always a situation when people make fun of, "This time is different" all the time. And there are situations that this time could be different. Okay, maybe this time is different. I don't know. I, but when, here's, as an investor, the way I approach that, "This time is different" idea. Okay, you, you look at the price of an asset. If the price of an asset, everybody's overwhelmingly thinking that this time will be different, that's when you want to do the opposite, right? Because history tells you otherwise all day long. And everyone is saying, "No, history is wrong." That's when you, you, you go heavy. And that's what's going on with the silver miners to silver ratio in my view. Um, we, we, we don't see this going on for too long. And then some people will focus the wrong way. They're going to say, "So, you're saying silver will peak?" No, THAT'S NOT WHAT I'M SAYING AT ALL. I'M saying that we're going to see a major catch-up with the silver miners. So, you can't help some people, you know, it's just they, they will invest in a way that I just cannot relate. And so,
>> But, but instead of focusing on those, um, you know, the, the voices, the negative voices here to the thesis, the thesis really is, look, it's silver's in short supply. It's highly needed. It's a monetary metal. It's six year, it's now going on its sixth year of a supply deficit. Demand's increasing. Governments are now stockpiling. Bottom line is, is that eventually we're going to get to a point where governments and corporations are going to control it all, locking out the retail investor who's going to want to desperately own a piece. And there is only one alternative for them to turn to. Look, I remember when we were acquiring the fourth largest silver mine in the world for $18 an ounce silver prices, and everybody was telling us we're out of our minds. And I wanted to have a piece of the controlling the supply of silver, because that would, that to me just sounded like, I don't know, sounded like the perfect thing to do. And I love operating under against the consensus. That's, that to me, when I find something that I believe so strongly and everybody's telling me you're wrong, I just live for that. I love it. And I feel like we're going through that right now. For investors that have, uh, deployed capital in this industry and made some money recently, that are saying, "We've seen too much." I, I tell people, usually do a checklist of things you saw in prior peaks. Now, what did we see in prior peaks? We saw production growth. We saw capex all-time highs. We saw M&A of to an absurdity, of not just majors buying majors. We saw majors acquiring smaller companies like there's no tomorrow. We're not seeing that today. The juniors are dead relative to the seniors. I mean, just look at those ratios. And the seniors are dead relative to gold, right? I mean, they're still some of the lowest levels in history, still. And so, we're just at the beginning, in my view. If you look at the mining industry relative to the global, uh, market today, we're about, call it, 1% of the whole global equity market. You know, we've seen times where we saw double digits of that number in the past. Can we see, you know, a 5% of, of glo? Yes, we could,
>> Considering what's needed out there? Absolutely.
>> And so that's, that's the, the upside for us. Uh, yeah.
>> All right. So Tavi, let's move into this, uh, capex discussion that we were that I was alluding to earlier. Um, we'll start back at the proclamation from President Trump. It actually does more than ignite a price war. It almost, in my opinion, it guarantees a mining boom of unprecedented scale. The document really is a cry for help. It's a desperate admission that the West has allowed its industrial base to atrophy in the ways that we've been talking about for the last several years, and that the only way to solve this problem, the only way to ensure a secure supply of these minerals for not 18 months, but for the next 20 years, is to build new mines and to build lots of them. And they're woefully behind the curve. So clearly, I think we could be in agreement. You're anticipating a huge mining boom and capex cycle. That's what I'm anticipating. Can you confirm that? And what are the second-order effects that you're expecting from this type of new mining boom and capex cycle that's going to kick off?
>> Um, well, it's going to kick off a lot of things. Uh, but I, I, let me try to focus specifically on the question. Um, I'm concerned how we're tackling the issue because of this sense of urgency. I think that the fact that the government is getting involved in these purchases, a lot of investors are seeing this as positive and seeing this as a great thing. And while I think the acknowledgement of policymakers to the issues is a great, uh, aspect, I'm very afraid about the ownership of that. I mean, nothing that we're seeing here is new. Uh, we've seen this in emerging markets multiple times in history in terms of state-owned companies, and you have to think about through the lenses of, okay, what if there's an administration change in four years from, and three years from now, what would that look like under, you know, let's see MP Materials under Joe Biden or Kamala Harris's situation again, or a dummy, all right, how about that, you know, how would that look like in that, in that in those lenses, you know, so, I, I'm a little afraid of those situations of how we're driving this. Now, I do think there's a, uh, one part of your question that is important is how financial companies will play a role here. They're going to be bridging that capital in a large way from the AI companies and their own balance sheets as well. You know, the large, uh, and regional banks are probably going to be bridging that world and bringing the capital back into these companies in a large way. You're seeing JP Morgan and other companies come up with, uh, multi-trillion dollar funds to invest in the critical metal space through the Trump administration and so forth. Not just JP Morgan, but other banks. I think that's going to be a huge thing as well that is happening already. Um, and the other aspect of this is, is, you know, we're going to see a revolution of this industry from a labor standpoint. I mean, we haven't seen people really enter the industry in a very long time. And there's nothing like a better marketing for an industry than making money. And I do think that we're going to see a lot of money here, and eventually this is going to drive the demand for labor as well. Now, a lot of people have left the mining industry to go to other sectors of the economy, and I think that we're going to see a comeback of that. You know, if I had a kid today going into college, I would say, "Yeah, geology sounds like something you should be maybe studying today." Um, you know, we're going to need that in the next five to ten years. And so, um, clearly this is a, you know, it's different when you're talking about that, you know, three, five years ago, when there was no money in the industry, nobody could pay you any salaries, but this is going to change. And so I do think there's going to be a lot of, a lot of, uh, uh, significant shifts in that front. And I think that the technology aspect as well would be, uh, given the, the issues that we have in hand, uh, technology is going to have to solve a lot of those issues as well. We're seeing a lot of changes in the industry, uh, from a, a lot of technological advancements that we haven't seen. I mean, the industry itself has been stalled in terms of advancements. I mean, when was the last time we saw anything that really changed the industry like geophysics, right, in the '90s or something like that, that really helps companies to find something and, you know, and, and be able to, uh, effectively improve their productions and operations and discoveries and so forth? Like, we haven't seen anything like that in a very long time. And that's a reflection of the industry that has been neglected for so long. And so I suspect that that all that's going to change. And so, you know, this is what, you know, this is a revolutionary period of this industry. This, this is a legacy industry that's been here for centuries and is about to face one of the most important challenges that we've seen in its history. And very few investors know how to navigate this. Wall Street is absolutely clueless about this industry. Well, I really mean it, like clueless. I mean, they are, they can't, you cannot put two sentences together about this industry. And I, I, I don't know.
>> That's gonna change.
>> It's gonna have to change. Um, and so there's a lot of gaps to be filled. And so whoever is smart here is going to fill those gaps on the finance side. You're going to fill the gap on, because you are a geologist who's an expert in the industry and will take advantage of that, um, or you're going to be an investor in things. You're going to be a technologist who's going to change their focus from all this crap back to what we need, you know, and so all these things are going to be very, very important in my view. I, I, I gave you a few ideas to think.
>> Yeah. Yeah. Yeah. So, okay. So, the mining boom is needed, and it's coming. I mean, in order for governments around the world to, you know, have their shopping list of of things completed, um, you know, from military, space, AI, data center, everything that's needed, um, and, and, and really that they view as existential because of the war between the United States and China on these fronts, really, to me, it doesn't seem like they're going to let anything get in the way of this mining boom and historic capex cycle. There are some things that are, you know, concerning, but I think those things are going to solve themselves because this is needed. It has to happen. So with that in mind, with that is the framework that it has to happen. Can it actually mature into the mining boom and capex cycle that it needs to become to deliver the ultimate supply that you were talking about earlier? If oil prices go too high, and do you expect them to pull every lever possible to attempt to contain oil prices in some range in order for this mining boom and capex cycle to actually flourish?
and deliver what they ultimately need? Man, I'm not. I don't know if you can suppress commodity prices like that. I I don't believe you can do that. I think the suppression of commodity prices is an artificial uh behavior that is just unsustainable and ultimately it definitely reflects the supply and demand imbalances that we see worldwide. And I think oil and gas are both extremely cheap relative to the world we're seeing right now. And I think, you know, mining is in an awareness phase right now where people are starting to be aware like they're like you characterize as the boom coming. I would say that that started already and it's it's sort of, you know, people know about the mining industry now. They're talking about it at least. They're, you know, I'm not saying it's it's a bubble or anything like that, but they're they're definitely aware. It's it's it's the way I would characterize it's awareness phase.
Now the mining, the the energy space is more in a smart money phase where nobody's really talking about. Smart money is just quietly accumulating. They don't know when it's going to bottom. It could bottom tomorrow. It could bottom a month from now. It could bottom a year from now. But it just looks so cheap that we might as well deploy some capital there. And that's that's the way things are playing out in my view on those two in those two industries.
>> Okay. So, can oil ultimately, can can the price of oil ultimately um negatively impact the the maturation of the mining boom and capex cycle?
>> Um, and is that the number one worry? Is that the number one worry?
>> Uh, there is another worry, but I think that's one big one for sure. Uh, look, what worries me as well, I'm not going to lie, is the price change. Look, I I don't know. I've done a lot of things right personally from an investment standpoint, and yes, I do feel wealthier, but sometimes I don't. Sometimes I'm just looking at myself and thinking, wow, like it just seems like I'm keeping up with things in terms of inflation. Like, think about it. Is it normal to see silver prices to be moving that way? And no, it's not. And I grew up in an emerging market and I don't think, you know, I don't think people are putting together here what's been happening. Yeah, sure, it's a debasement of currencies and now every bank in the world is talking about it and therefore why everybody on Twitter and X are just talking about it too. But what they're not putting together is that the debasement is a code word for inflation and maybe even hyperinflation the way we're seeing things. And look, I'm not a doom and gloom person. I don't think the world that way. I assess probabilities into things. I just don't think the hyperinflation thesis is as low of a probability as a lot of people think. And I don't know, maybe labor costs could be changing here, right?
>> Mining.
>> So oil is a concern that it could interrupt it. Um, inflation is a concern that could interrupt it. In 2008 uh 78 the market, you know, uh bottom, you know, falling out, the bottom fell out of the market in '08.
>> and that interrupted that cycle. Are you worried?
>> Yeah, yeah, yeah. Are you worried for? I'm talking about the natural resources. Are you worried about
>> the natural resource cycle that we're now in the beginning stages of it? Are you worried that the market uh would implode at some point and that would also halt any progress?
>> Well, is that lower on your? Is that lower on your list?
>> No, it's lower on my list in terms of the the the I think that there's two scenarios for governments and and the economy here to be very to really simplify what what's been happening globally. One is a major deflationary shock, which is what we saw in '08. The other one is inflate your way out. And I give a 80% chance for inflating our way out as being the place to focus on as an investor, which means that what you're referring to could happen, right? Like what we saw in 2023 with some banks failing and so forth. But what do we see after that?
>> Capital infusion. Yeah. So, you know, maybe short-lived. Sure, it's possible. But I think it's more likely to see inflation here running hotter than expected than deflation. So I'm not a deflationist in this environment at all.
>> Okay.
>> But I I would say that be careful with mining too because mining will go through its cycles. In the 70s, we didn't see the peak of the cycle, but we did see mining companies go down 70% and you know in the middle of that decade. So I don't I think it's going to be
>> that coincided with the that coincided with the recession of 73 to 75. Yeah. With with rates going to a place that we couldn't afford that today.
>> But we look like we're going in the opposite direction. We're they're projecting five to six% growth next year or this year. They're, you know, we're going to see rates coming down because of the new Fed chair, etc.
>> How much can I ask a question Gary? How much you think and I'm not putting you on the spot like this is a real question just for to see your perception on how much you think rate cuts are projected to fall in two years from now?
>> Yeah. As far as the I haven't looked at the dot plot, but I don't think it's that many. I think it's three, four.
>> Two. Yeah.
>> That's what the market. Not even the dot plot. That's That would be even crazier if the dots in it. That's the market telling you that you're only going to see two 25 basis point cuts in.
>> That's not what Trump wants, though.
>> I I agree. I think that's mispriced. I think that that's at least double that or at least triple that, right?
>> Especially with, you know, you got nine you got a $9 trillion wave of maturing bonds that needs to be rolled over. They're not doing that at 3 4%. They need to do that at much lower, right?
>> Or or or what if we see a recession? I mean, I don't know. What if we see a downturn here that causes them or unemployment rates are 8 9%. What if AI is having an impact on unemployment and some people, right? I don't know. I just think that that's just so asymmetrically wrong what they're doing there. So,
>> all right. So, we're in a new paradigm. like we are in a new paradigm. It is clear. I don't know that everybody sees that. I I I think the vast majority don't see that yet, but I think we definitely acknowledge we're in a new paradigm. A new paradigm. The world hasn't seen this in generations. That begs the question, Tavi. If it's a new paradigm, then new investment strategies need to be deployed to both benefit from it and at the same time not to get run over and bludgeoned by it, right? So, what recommendations and maybe strategies do you have for those listening for this new paradigm that we're in?
>> Yes. I look, I think that what I'm getting now is like messages and people talk to me. It's like, man, you you know, you nailed this metals and mining cycle. What's next? I'm like, nothing. That's that's it. That's what's next right there. You're in it. And, you know, you're just thinking that this is the peak of it, and it's not. It's the beginning of it. And look, I think mining should be the core of a portfolio. It is of mine and I can't speak for other people. There's risks involved and so forth, but I do think that that there is a potential that this is the beginning of a trend at the end of one. I think mining looks more attractive than metals themselves. Maybe with the exception of copper. Um, I think nickel, some other things that that zinc that look attractive on the metal side too. Um, but I would say that giving some emphasis to Latin America, emerging markets, rest of the world. There's so many ways to skin the cat here. There's some people that are going to be very focused in Indonesia. I don't know. And and I think they're going to nail it, right? So I Where is my focus? I mean, I was born and raised in Brazil. I I feel like I understand Latin America better than the average person. uh and that's where my focus has been in that in that bucket of my portfolio.
Okay. Then energy is another one. Energy is certainly a way to look at it and I would say think about the through the lenses that I said before. Think of a massive column here of capital that is coming, massive 40 trillion, who knows how much it is coming from AI okay for the next decade and that's coming from free cash flow being reduced, that's coming from debt being increased uh and so forth. Governments and then on the other side, you think about this, you know, sort of funneling into areas of the economy that will benefit from that energy, materials. Materials is mining, cement companies, blah blah blah blah blah. Infrastructure, another very important bucket. Some people will kill it and utility companies. Some people will kill it on engineering companies. Find your niche. Right. So that's that's one way I'm thinking about. That's one rotation to consider. The second rotation is what you mentioned in the beginning of the call, the interview, which was 80% of US stocks. Do you really think that's going to be the case 5 10 years from now? I don't think so. We've seen this throughout history many times. That concentration doesn't last. You know, the dollar needs to probably weaken. You know that the the Fed needs to lower rates substantially even relative to what's priced in in the market as we just mentioned. So, okay. So, what are two things that kill emerging markets? Well, strong dollar and rising rates in the US. Can we see this 5 10 years from now? We could. Do I believe that that we're going to see it? No, I don't believe it. I I really don't think I'll put an 8020 chance on that again. And so that see that seems to be a clear way, a clear path, a green light for for for one to invest in emerging markets. So, you know, find your path. So, you know, I found my path in mining and other, you know, Latin American other things. There's plenty ways to do this and so find yours, you know, but I think there's plenty opportunities out there.
>> Great advice. All right. Well, this has been an incredible discussion. I just want to welcome everyone who's tuning in to this interview with Tavi Costa, co-founder, CEO of Isuria Capital. Before we wrap up, I just want to direct everyone who's interested in the metals and mining sector. Dive into our Substack at metalsandminers.substack.com. Join the quickly growing community. You're going to receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio. And that's the name of the report you'll receive. Now, I'm positive you've been enjoying this great conversation that I've been having with Tavi. Please let them know. Hit the like and subscribe button and leave a comment below the video. All right, Tavi, let's just finish off with this. Would you share a key takeaway that you want the viewers to keep in mind as we wrap up the discussion and then just share with everyone where they can learn all about your work and how they can connect with you?
A key takeaway I think from everybody is maybe uh the way I try to approach this is very focused on the fundamental story rather than the nominal price of things. I think that that's something maybe a principle of mine that I think other people have that it's not my own, you know, my own way to do things. But I I I I do think it's an important aspect to an environment where we are where things seem to be so disconnected and prices could reach levels that none of us know where it could be. And every time you see things going up a lot, you have to tie it back to fundamentals. Have the fundamental story changed? Have we seen new supply? Have we seen structural new demand? What's happening there? And understanding that is critical to understand the timing horizon of all these investments we're making. So this is why I believe the mining industry hasn't seen anything yet and yeah this is why I'm so excited about everything that I just mentioned. So anyways thanks for having me Gary. This was a great conversation.
>> Yeah. Would you let everyone know how they can connect with you, find you?
>> Yes. You can find me in two ways or or three ways. uh at Tavio Costa and X or former Twitter uh Tavi Costa or Tavio Costa on LinkedIn if you prefer that. You can message me there too or taviazurac.com is also my new email address. So thanks for having me.
>> Yeah, wonderful. This has been a great conversation. I'll have all of the information up on the screen. It'll also be in the description area as a link so everybody can click through to get over to you. Thanks again for coming on to Metals and Miners. This was fantastic. You've been so generous with your time, analysis, and ideas. I always love spending the time with you, and I look forward to having you back on sometime soon. And everybody else, thanks for watching. Just want to direct everyone who's interested in the metals and mining sector, dive into our Substack at Miners.substack.com. Join the quickly growing community. You're going to receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio. And that's the name of the report you'll receive. I know.