Transcription
The S&P is lying. The bond market is lying. They're not telling the truth. When the S&P is at an all-time high, that's not telling the truth. It's lying. It's lying. Is that what's telling the truth is gold and silver. They're the truth tellers. And that's the they're telling you something bad's coming.
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Greetings and welcome to our Wealthy On show. My name is Trey Reich and we're here today with Don Durret, proprietor of the Goldstockdata.com subscription website, which uh purports to analyze pros and cons of investing in major, mid-tier, and junior mining companies, which is a pretty uh broad uh spectrum for your focus. Don, thanks for joining us today.
>> Yeah, thanks for having me on, Trey. First time.
>> Mhm. Perfect. So, jumping right into things, I've watched a few of your recent interviews to get up to speed um on where your head is at and how you approach gold markets. Uh, but for Wealthy On viewers, could you just give us a teeny bit of an introduction about Gold Stock Data? Um, how do you make money and how do you aim to make money for your clients?
So when I started, I was a newbie and I didn't know anything and um, I tried to find a book on the subject and there wasn't anything, literally um, I was shut out. I mean, I had to learn it all on my own. Um, and so from 2004, and the only thing that I wanted to invest in was gold and silver junior mining stocks. I had no interest in the stock market at that point in 2004. Um, it was my belief that the US government um, and US economy was basically heading down a path um, of no return, kind of a fait accompli situation where we were going to live on debt and we were going to generate our standard of living and everything basically based on debt. And I thought that was a kind of a non-starter. It was just all they were do, all we were doing is creating a bubble. Um, and sure enough, right after that, we created the housing bubble, then we had the GFC, and it's, it's kind of been on a downhill road ever since um, since 2004.
So I created my um, oh, so from 2004 to 2010 um, I was learning on my own and then I wrote a book um, because there wasn't any um, how to invest in gold and silver with a focus on mining stocks. So the second half of the book is understanding mining stocks and it's, and it's a very thorough book. So it's, it's really good at helping you to understand how to analyze mining stocks, how to understand the risk. And then uh, after I wrote the book, um, I created my website because there wasn't any websites out there. So the book was to help people. It wasn't for really for me to make money. It was to help people to give them some information. And then when I created my website, it was kind of the same mentality. How to help people get information. is what's called Gold Stock Data. Um, and it's, it's D. Now it's up to 850 gold and silver mining stocks and it's, and it's an ideal tool for identifying, let's, for instance, let's say you want to invest in in a mid-tier mine. My database will show you all the gold, silver mid-tiers there that there are in the world um, um, and it, you can just go down the list and then you can do your own analysis um, and I give, I rate the stocks, so I give you kind of a head start um. So it's, so both the book and the tool are very useful tools for investors. I'm not a stock picking service like a lot of newsletter writers. My newsletters do not write up individual companies. I don't have any uh, don't do any advertising on my website. So the first five pages of my newsletter is always macro. Um, I give lists. I create, there's about 10 lists in my, in my newsletter. But the lists are, they're just leads. Says, "Okay, here you go." So, I wrote it for investors. You're an investor in mining stocks. Here you go. Here's a tool. Use it. So, that's, that's kind of background. Thanks for letting me explain it.
>> Excellent. And so, how do you divide your time roughly between analysis of spot gold, spot silver, bullion fundamentals, and individual equities? Is it tilted one way or the other?
>> Yeah, it's 80% macro, 20% analysis on stocks.
>> Interesting.
>> It to start off, gold and silver mining stock is not investing. This is speculating and you're really speculating on one thing, which is the price of gold and silver, because that is the driver of the value of these stocks. It's a very unique situation. Gold and silver mining companies do not have competitors. They do not, they do not have customers. It's, it's a bizarre business. Newmont and Barrack do not compete against each other. They, they go out and they, you know, maybe they'll bid on on a property. You know, they might compete there, but by and large, they don't really compete against each other. They compete against themselves. The, the, they're, they basically f, when they get the gold out of the ground, there's, there's a willing buyer. They don't have to compete. There's no customers. They're just buyers. And you can sell your gold, you can sell your silver. Um, it's an unusual business and macro, it's so important because you're not investing in a normal business. This is, you're not investing in a normal business. What you're really doing, you're speculating on the price of silver and gold and then who, which company is more well-positioned to achieve that. So 80% of my time is in, and since 2004, is spent analyzing the backdrop of gold and silver because that's the only way you make money. And you have to be a believer, a strong believer that gold and silver prices are going higher. I don't invest for the next 12 months. I could care less about the next 12 months. That's not how you invest in gold and silver mining stocks. You're speculating over the long term, 12, 24, 36 months because you're chasing alpha. You're not trying to get a 25, 50% return, believe it or not, which you could get in the next 12 months. You're speculating on big alpha. You're speculating on baggers. I don't look at anything under a a four bagger. I go four bagger and above. And the only four baggers that I look at are stocks that I think have growth. So I'm, and I, in my book, I wrote that I'm ex, this is back in 2010 when I wrote my book, I said in the in the opening chapter, I'm after five baggers. That's, that's what I'm here to do. I'm, I want my portfolio to have at least a 500% return. It's totally, it's total speculation. And who, who, who invests like this? Now, you have, if you believe the gold and silver prices are going higher, a lot higher, then you can basically speculate on that outcome and then you can analyze the stocks and it takes a while to understand because it's such a unique business on how to analyze these stocks. For instance, juniors, um, explorers, mid-tier, uh, developers and producers, each category is completely different. They have, in many respects, they have nothing in common. They're like three different separate businesses, and you have to understand each, each one. It takes time. I think it takes about two years to kind of understand it. But it's, it's a lot of fun if, if you, if you believe, if you believe in gold and silver prices going higher, then you can, you basically, you g, it's like gambling. It's not really investing. It's like gambling, but you have an edge. And I teach people in my book how to have an edge. Believe it or not, there's a way to have an edge, which is fascinating to me that you can actually do that. And it's like Wall Street's completely asleep. Like, for instance, Newmont, when Newmont was at $30, you had an unbelievable edge that you were going to make a lot of money. My target for Newmont's about $350 and they're currently at 90, but they were at 30. So Newmont was a tenbagger in February of '24. A tenbagger. And and and Wall Street was asleep at the wheel and they didn't see this edge that that existed, which kind of blew my mind.
Well, that was a hell of an answer. You've uh stepped into two or three things that I hope to get into uh subsequently, but we're just going to jump right in. So I tell people this is my view and I've been uh investing in the gold miners for 25 years. I sort of started in 2001 and you know, I know almost all of the the large ones, etcetera, and down the market cap. But what you just said, um, I've always told investors, individual investors who are building a gold portfolio, that it is important to have representation in each part of the food chain of mine development, which you just mentioned. So you want a couple of explorers, you know, your Seabridges, your Northern Dynasties, whatever. And then you want your junior producers and you want your mid-tiers, your one mine, and you want a couple of seniors. Do you agree with that approach for an individual investor who doesn't have your experience?
>> Um, so in my book, I use a, I recommend a pyramid approach, which is similar to what you're saying. So the, the base of the, you want to start at the base of the pyramid. Pyramid is wider. So you want to have more allocation at the base. So you start at the base and you want to derisk your portfolio, diversify your portfolio. So I recommend physical, starting with physical and then create, use physical as a base and then use uh ETFs and mutual funds. So I have six ETFs and three mutual funds and physical. So a very strong base. And so because you're going to get a lot of volatility, I believe that a base is really useful. Now, I was doing this over years and years and years. Now, we're in a bull market. In a bull market, you can become a little more aggressive. And then as you go up the pyramid above the ETFs and and the mutual funds, then you do majors. And then above the majors, you do mid-tiers. And that should be that should be the foundation of your portfolio. And I want to, I believe you're going to make 80% of your profit in producers. Um, because producers can have unbelievable alpha because they can grow in three different ways, whereas developers and explorers can only grow one way. And so explorer, developer, a producer can just be, just build a really big company and make tons and tons of money, which I've seen happen. And so I believe I'm going to get 80% of my returns in producers, so I want to, I want to be overweight producers. So I want to own as many. But the key here is entry price. You make your money when you buy the stock, not when you sell. So you got to have a good entry price. So, I've been doing this for a long time. So, I don't buy majors unless they're cheap. But, if I can find a cheap major, I'm going to buy it. Cheap majors and then undervalued mid-tier producers. I want to buy as, I want to get as many as I can get my hands on. And that's going to give me a really, really solid foundation. Then build on top of that with the high alpha stocks. So, your high alpha stocks. Now, I, I didn't mention small producers. So, I said majors and mid-tier producers. Small producers. That's in your alpha, that's in your high-risk alpha. And I tend to go, I don't like small gold producers. They're going to be rare. I'm not going to invest in very many small gold producers. And the reason why is because they're not going to generate enough free cash flow to grow the business. You're just going to get a lot more bang for your buck reward on the mid-tiers. So, I tend to avoid small gold producers and small gold projects. Silver on the other hand, I like small silver projects. I like small silver producers.
>> It's because they're all small. Just kidding.
>> Yeah, that's true. Most of them are small. But the thing is, they're rare. Like there's, there's only like 15 silver producers. Um, there's just very, very few of them. But here's the kicker for small silver producers. If you can produce 1 million ounces of silver, 1 million. So all you need is 15 million ounces of silver in the ground and you can do 1 million for 10 years plus. If you produce 1 million ounces of silver and silver prices are $100, which is my target or higher, and your all-in cost is $50, which is conservative, you're probably going to be under $50 as a break-even. You're going to have $50 per ounce in free cash flow. Times 1 million is $50 million in free cash flow. If you get a 10 multiple, you get a $500 million market cap. So for every 1 million ounces of production, you get $500 million. And the kicker here is you become very valuable because you're rare. The s, anybody that's producing silver out there is not very many. You're going to get eyeballs on you. So I like small silver, but I don't like the small gold. And then now we go up the the food chain. The next one is the developers. I absolutely love developers. I have about 25% in developers. And the reason why I I like developers is because they become producers. They turn into producers. Plus, you can get really big alpha. And so, I want to own as many producers I can get. And a developer can turn into a mid-tier producer. And that's for me is where you can really make, get some good alpha. Now, the problem with developers is so many things can go wrong. So, I don't do high allocations on very few developers. In other words, for me, a high allocation is 1%. It's hard for a company to get 1% of my money. And very rare for developers to get 1%. Uh, they can get 0.5, 75, but they're not going to get one. Uh, and the reason why is because they tend to break your heart.
>> This is the Lundin curve, correct? The
>> Lundin. It is and it isn't. The, the Lundin curve, you, and when you, when you have a discovery, you go up the mountain and then when you go into development, you go down the mountain. So yeah, it, it definitely is. There is part of the Lundin curve, but the Lundin curve also says that if that mine gets built, it's going to go straight back up the mountain. So it's not so much the Lundin curve that breaks your heart. What, what breaks your heart is so many things can go wrong before they make money. The first thing they can go wrong is they can dilute, over-dilute you. And that's usually what happens. They dilute you. That's the Lissan curve on the de, they dilute you when they're building, developing it, and then they dilute you again when they build a mine and they do a bad financing. So dilution usually is kind of the worst one. The next one that usually bites you is they sell before they get your first pour. That one, that one bites you. And then another one that can bite you is they run into permit issues you didn't expect. And then another one, um, is the ramp-up. They'll ramp up and they won't hit their targets or they'll have cost overruns. But put it this way, development stocks, they will break your heart. I, I have another way to sort of approach this and I'm not putting you on your heels. I'm just trying to expose, expose Wealthy On viewers to what you do and how to they can employ that in improving, improving their own portfolio. So um, my question to you, you mentioned four baggers and up. So take Agnico Eagle, which is clearly the premier gold producer on the planet and very richly valued. Is there a place for that in your mind in an individual portfolio even if it's not something you focus on?
>> Ye, absolutely. Um, a lot of that is derisking and you want to own quality.