A Masterclass in Natural Resource Investing

foreign [Music] yes in a perfect world it'd be great if we were all green energy and there was no carbon emissions but there's got to be a transition it's going to take many years to get there we're probably not going to meet the goals but bitching about it and saying no isn't the solution either transparency is of utmost importance to us we want to make it clear from the outset that today's guest Marion katusa is the co-chair of the board of directors of carbon royalty Corps he's also one of the largest individual shareholders of carbon streaming core Marion arranged financing for and is a shareholder of uranium royalty Corps he's a shareholder of uranium energy Corps he's a large shareholder of ocisco development Corp and his wife sits on the oscisco development board of directors this week we are joined Ben Mack by Marion katusa of katusa research one of the largest independent financiers in the resource sector and one of the largest independent researchers in the resource sector as well he has been in the business for 20 years and has written two best-selling books which is two more than me actually you've written two books more than me not just it's not just a question of best-selling um Marion it's a pleasure to meet you how are you good it's a pleasure to be here usually I ask someone what they have their eye on other than their core thesis um because you know there's a lot going on in the world right now and sometimes you might be looking at something other than your core business because you think it's just generally fascinating or compelling or disastrous um what are you looking at right what's keeping you awake at night or keeping you glued to your screams um so a couple of years ago I wrote a book my second one called the rise of America and there's in the resource world and that's all I am right like I'm a resource guy and there's this belief that all that matters is China and everyone's kind of thrown in the towel that America's a show and it's a place that is just backwards and it's best days are behind it and after traveling the world for over 20 years for work you know I've been there and done it like if anyone's been there done it I can truly say for Middle East to Africa across South America and at the end of the day when I look at my track record the biggest scores are rarely going to be in Ecuador or Argentina or the DRC or somewhere you know that sounds cool to read and sell newsletters where you know you're you're going on Horseback in the middle of a jungle with no infrastructure no rule of law because all those things are going to come haunt you later on when you actually find something and you have to build it and my thesis is very very very simple Harry it's go to the biggest projects in the world so scale where you have a rule of law most importantly if you're going to develop a resource project it is a hell of a lot easier to develop something that has already been a major mine and if you have greatest King Metallurgy is Queen and OPM other people's money so for example you go to a like the biggest producing gold mine in America's history was homestake in South Dakota so when the world shut down in 2020 in May a group of us myself a couple of mining geologists a couple of Engineers we booked a private plane we were the first team in Canada to get an exemption to fly out of the country when all the planes were down we had to go private and we went and struck a deal on this project because the thesis was very simple here's a very high grade major producer produced over 40 million ounces of gold and it was just sitting there with all this infrastructure and it's never seen modern technology for over 20 years technology and minings significantly advanced in the last 20 years so if you can go after something like that why the hell do you want to take the risk of going somewhere where you need Securities and I call it AK-47 Nations it's cool if you're 26 and you want to do a selfie and you know impress your friends it's not cool for your portfolio you know that's that's a pretty compelling argument and it's true I've never I've not really made a lot of money in places where the rule of lore is um uh actually I say that I kind of have um the best scores I've ever made were in Russia actually and nobody's ever said that the rule of law in Russia was was sacrosanct or Paramount I think incredible side of the uh it depends on what side of the LIE well you gotta you gotta you're it's best if you and the judge are at school together let's put it like that and um um but you know still the right time in the right place stuff can work um even in in places like Russia uh but I do take your point um you do need scale um to really get a good score um and who who would want to put down a huge block of cash in a jurisdiction which might just take it away with a blink of an eye I I definitely can see that so I guess the question is what is the next big trade what are you looking at as the best way of of of accumulating hitting the ball out of the park in the next 10 years if your time frame is 10 years I think too thick like look five years ago I was on the show Raul's an old buddy of mine you know drinking in Napa and I was slamming the table on uranium and people would laugh well today look both of my books had a chapter about uranium and nuclear energy and where it's going that's played out now right like everything that's happened there and and it's going to do well but it's not cheap anymore so you have to look at cheap with big upside de-risking and there's no doubt about it gold is cheap today now not the metal gold gold is I don't know Seventeen hundred and twenty five dollars U.S an ounce I'm not saying the metal is cheap I'm seeing the producers and why are they cheap I have no interest in taking exploration risk I'm not a explorationist my wife is a geologist I'm around many close friends in geology but I want to get the upside for free I don't want to pay for upside and today in the gold market you could buy producing mid-tiers for literally like we did in uranium five years ago for 30 cents on the dollar and you get all that exploration upside for free but why is it cheap well because the miners capex you know inflation has gone way out of the way that'll take care of itself number two Gold's out of favor right nobody really cares about investing gold number three what's really interesting and a lot of people don't understand is so many of these mining companies are listed in Canada and the big index funds in the U.S can't buy them and they're not listed on what I call the big league exchanges of the New York Stock Exchange or the NASDAQ so you look at some of these companies and most of the gold remember there's the old saying God created gold but the devil took it and spread it around they're in shitholes that you and I have literally no interest in investing significant amounts of money because you know it's going to be stolen and I get into things called negative swap lines and all that in my book about that and I don't want to take those risks and most of the exploration and development of gold resources and most resources over the last 20 years have been in the merging markets go to where the gold is but yet you have some of the highest grade largest endowments of gold in America with infrastructure with power you know people will laugh about this in in Utah people forget that one of the largest copper mines in the world Bingham Canyon is in Utah well just 40 kilometers south of that is something called tintic owned by a company that just listed on the New York Stock Exchange called The Cisco development I'm a huge shareholder I'm also down like 50 on my money that's another thing people are going to have to be aware in the resource sector it's super volatile so it's not like I'm talking my book uh I I say what I invested in but this thing is the highest grade operating gold mine in the world and here's the crazy part of it it's been operating on and off for over 120 years and this is going to sound crazy and it may come across but I'm saying this with the greatest intention and respect as a Canadian I've been to sight a few times I was one of the first guys Underground when they found this T2 structure which is the highest grade uh operating gold in the world most of the employees are these you know I'll call them the corn fed tough Mormons and there's this amazing culture on site they have the lowest ltis when you go to a job site is it clean uh what are the ltis and there's a correlation to well-run low LTI low low time incidences so you know the guys help me out here what's an LTI I'm an innocent Bond Trader never never yes so lost time incidences so you know how many hours did guys lose because they got hurt and there's a correlation between the highest operating profitable gold mines and the lowest ltis and when you go to site is it organized is it clean is it safe safe and organized also requires very profitable I've been to so many Minds that are just sloppy and it's an accident waiting to happen and and then you see geesh it's low cash flow low margins so these are the little things you see the spirit at the site it's incredible uh the technology modern technology coming in this mine has been producing for over 100 years but its main priority was to provide flux which is basically a quartz material to blend with Bingham Canyon which is one of the largest copper producers just 40 miles north so the smelters can separate the copper and the gold and all the other items the old timers got paid to produce absolute clean flux it's some of the highest cleanest flux in the world right there in tintic and then this green stuff right beside it eight feet away the old timers missed the highest grade operating Gold Mine by eight feet because they didn't get paid to produce green stuff they got produced to produce white stuff so you look at these Technologies now same thing with homestake in South Dakota that company's called Dakota gold run by Bob quarterman New York Stock Exchange listed company so for me it's got to be listed on a big league exchange it's got to have scale I don't want one or two million ounces it's got to have tens of millions of ounces potential great it has to be in the highest quartile of grade because grade is King and I want simple Metallurgy so can I separate the gold from The Rock Metallurgy is queen and I love OPM other people's money if you look at for example what a Cisco development has in Utah there's over 500 million dollars of existing infrastructure works that the company doesn't have to pay for because it's been built over the last many decades that's 500 million dollars that this management team doesn't have to build that you'd have to do on a new discovery in Ecuador and by the way there's no discoveries in Ecuador or South America or Africa at this plus one ounce grade at the mine so that's kind of the gold side and then I'll throw the most controversial commodity that I've ever been involved with I think if you're young and you want to take a real interest is carbon credits I think it's the the place to be I think it's going to outperform kryptos and that's a bold statement for Raul's crowd I I yeah I think it's it's dangerous to say that things will outperform crypto for for Pharrell's crowd you're just going to get yourself in a in a bad place um I'm doing a tongue-in-cheek to kind of get it going you're a brave man I never offend crypto guys because they they're so passionate I uh what can I say I have Slavic Heritage we're not scared of much what can I say I have Jewish Heritage and I I avoid trouble so um so I'm very interested in the carbon credit stuff I'm long of carbon credits myself today was a painful day um I'm not sure there's all sorts of good reasons why carbon should have gone down today oil prices went down for example it tends to be well correlated with Energy prices um there's talk about de-linking European electricity prices from gas prices and and and I think also the Polish uh uh prime minister or president I mean prime minister but somebody gave a speech where they talked about a phrase on carbon um should we worry about this if you're into the carbon trade I I don't and I'll explain why the the Polish government has been saying that same argument for 15 years because look what their sources of energy are so you got that situation um I personally don't feel that investing in the European market is a place that I have an advantage in so I don't do that that's a compliant bureaucratic uh thing that's going to shift with the political wins uh what I'm focusing on is the U.S market again and it's not what the governments are saying look what the boards are mandating by corporations and the board members the executives they're not going to get their bonuses unless they meet the criteria of what they said they were going to do and these pledges that they've had because of the investors and if you SEC is going to be mandating and think about this you look at all the big accounting firms how are they going to grow their revenue well you audit your financials obviously you have to you know have audited financials and like I said earlier to you Harry you know 22 money to and Beyond is the digitalization of pollution you're going to have audited environmental liabilities what is your footprint and you're going to have to report that and you're not going to get into these big funds that like the Pension funds for example the largest Fund in Canada is called the CPP the Canadian pension plan it's now on the front page it has to meet the criteria you saw with Sweden and Norway are doing now it's interesting Texas and Florida are fighting BlackRock on their ESG standpoint but this is going to evolve and the corporations for example who is the world's largest investor in nature-based Solutions shell an oil company it's not Greenpeace it's not in all these ngos that are you know grandstanding and all that it's an oil company so you can sit there and take a piss on the oil companies but we do need to have a transition and it takes everybody's participation and there and and this is how small the market is think about this shell is the largest investor in the voluntary nature-based Solutions globally and it's only a hundred million dollars that's less than what they'll drill in the Gulf of Mexico that's nothing for a major company so this is a very early stage it's going to evolve but just be very careful where you're investing things like ndcs the naturally determined commitments you know where are you investing what type of credits are you investing don't get caught up in there's 68 different type of credits there's different vintages of credits it's like a wine auction so go to places where you can get updated info like www.carboncredits.com that's where I go in the morning to look at all the different prices it's there for free and you get all these reports for free you there's a lot of data out there but there's a lot of noise too so just like in all Investments look for the right management teams that have skin in the game what price are if you're in at you know you're paying ten dollars in the management and are a dollar are you aligned most like most likely not but if you can get in as close as the price is the management and they have a pattern of success and they're going after big projects and they know what they're doing because they've done it before that's where you want to invest you know I'm with you I like the idea of the carbon credit trade I see the logic of it it's compelling to me but one of the things that my European friends are doing is teaching me that there's political pressure um and all sorts of dangers associated with this and it's not very few trades are without any kind of risk I'm starting to see the political risks associated with associated with this so for example you just pointed out that you've got to expect Poland which has massive incentives to fight against carbon pricing to to do its best to drop tape bombs on this and there are two good reasons for that one of which is the whole thing is bad for coal mining and coal mining is part of it is in Poland's interests but the other side of it is if you're a Polish coal mining concern you'd like to buy your carbon credits as cheaply as possible so every time the a Polish politician take bombs at Market you get a chance to buy some cheap carbon credits um given I'm had a look earlier today one of my colleagues at mi2 dug up for me that uh for coal emission her coal Now 60 of the price of coal is now that carbon credit me personally I think that's a wonderful thing it's a great idea we can take some of that well hold on Harry so you you have to look at how that's calculated and that that that's actually where my background is so when someone makes a comment like that is is that thermal core is that lignite call is that met call Net calls used for steel Poland had no problems taking the EU money to modernize and decarbonize their facilities but now that they have to deliver what they said they're going to do now they're going to piss and scream well hey you know uh that that's kind of a catch-22 number two it comes down to your electricity price you can't price it off of your ton of your coal because you can manipulate your costs you when you do your carbon and first of all what you're referring to is the EU ETS it makes up less than even at current prices which is touching all-time highs it's making less than 12 percent max on the electricity Generation price so it's nowhere near the input now the price of coal for the input on the smell on the on the actual utility the coal power plant the price of coal is about 65 of the electricity cost price okay and what you're referring to is EU ETS I'm saying that that's one large Market but if you want to play a much bigger growing Market where the Glen cores of the world which is you know the third largest commodity Trader in the world uh vital all of the big commodity houses all the banks are setting up desks BlackRock uh just invested over 400 million into my friends uh Joe and Will's company called expansive which is the largest digital Trader they're kind of like the The Ice of carbon credits the voluntary Market is where I would focus on so I don't who gives a what Poland's doing it's Poland I've been to Poland many times go build something in Poland they got great copper projects good friend of mine Ross Speedy's been stuck for 15 years with a copper project in Poland trying to deal with the permits there's a reason why the Balkans in Eastern Europe is Eastern Europe I come from that Heritage a large investor in that part of the world it's still backwards so if you're going to be focusing on the etus you've got to focus on the bureaucracy what I'm saying is totally different the voluntary Market and focus on the U.S companies I'm talking about the biggest companies in the world that have already stated this is our corporate plan we have to do this so uh first of all uh we are both have some Eastern European Heritage um I I know I've spent some time there too I don't find them particularly backward uh I do think that people go build a project if I really want to build a project there so I'm not I'm not disputing what you're saying there are political complexities everywhere right um and I maybe those complexities are more difficult difficult to deal with if you're coming in from outside to Eastern Europe I don't think it's a friendliest investment environment in the world because everything's improving people know people it's hard to get stuff done you've got to know the right people to get stuff done in many cases I think in some respects it's the same in the UK just to a different degree perhaps um but the principle I'm making the principle the problem I'm highlighting will be true everywhere which is uh there's winners and losers in this and some of the losers May well be extremely loud in in complaining about what's happening I I take your point that maybe that the better environment to do this is North America uh because you know usually when rules get written they don't get Unwritten quickly I say that but that you know things are different in Texas sometimes um uh I I'm with you I can see where the wind is blowing we have to do something about this this is a relatively easy thing to do but it is a transfer don't expect the losers to keep their mouth shut they're going to complain oh yeah and even environmentalists like you look at Greenpeace they're anti-offsets all all offsets well yes in a perfect world it'd be great if we were all green energy and there was no carbon emissions but there's got to be a transition it's going to take many years to get there we're probably not going to meet the goals but bitching about it and saying no isn't the solution either it's going to take all companies not just you know the tech companies which are doing a great job you look what Google's doing and apple and feet like Apple's a big investor in nature-based projects too you see what they're trying to do but the oil companies we have to incorporate the resource companies and the steel producers are trying to switch to Electric Arc furnaces but here's the reality you know it's expensive so until like for example you look at nuclear power I've for years been saying this is not a uranium Miner isn't necessarily A minor it's part of the decarbonization and the green side hated nuclear power now the EU has stated in January 1st 2023 nuclear uranium meet the criteria for for green energy that means the big ETFs and the funds can buy those sectors whereas up to January 1st 2023 they were not allowed so things change which is a highly political decision and upset a lot of people me personally I'm in favor of nuclear and the technology has moved on I think there are ways of implementing it which result in much lower risks and to some degree needs must when the devil drives we have a serious problem and if we want base load electricity we need to find a solution to that problem and uranium and nuclear presents a solution to the base load problem that we currently have it's part of the it's part of the solution the the real solution is a diversified energy Matrix right that's where China is going look 18 of China's uh power comes from Hydro well with the record droughts the risk here what a lot of people don't realize I mean you have a reservoir and it drops now you have integrity risks to that Reservoir you know China's got a whole slew of issues and now they're fast tracking the permits of all of these coal power plants because they have no choice what are they going to do and you know pre-fukushima I think it's something like 442 nuclear reactors you know than than Japan shut down all I think they had about 54s 52 somewhere around there I can't remember the number shut them all down well they have to bring them back what are they going to do it's it's part of the solution and you know today seven percent of uh Japan's power comes from nuclear they've openly emitted by 2030 to meet their 2050 goal they got to Triple that right and they're bringing seven more reactors on so they're gonna have to build more reactors there's 50 there's over 50 reactors being built globally so I agree with you the new generation we're in the Gen 4 nuclear reactors and then you got the Gen 5 like you know Bill Gates is the big shareholder of Terra X they're building the small modular reactors that don't produce waste remember gen 1 2 and 3s do produce waste and that is an issue that it needs to be dealt with but like everything once these reactors are built you know way more okay this is a very controversial topic because people argue about wow you know how many people died from the cancer of you know Chernobyl but from the direct emissions way more people have died at coal power plants than nuclear power plants I don't know how to calculate how many people died of cancer from Chernobyl I don't know but you know there's all sorts of risks to everything the key point is is things will leave it's an argument a lot of the asthma we see in the world around us is caused by diesel emissions from Cars um yeah so The Apocalypse of China so exactly you know so I wanted to pull you back to the question of carbon credits um before we moved on to the uranium question and and because what I don't know what the actionable trade is I've got uh European ETS European carbon futures um ouch today uh but what trade would you recommend for anyone listening to this podcast I'm just going to say what I've done personally and what I've published over the last two years about this is I did a deep deep study on the gold producers and uh the two Best Bets in the gold sector would have been just a purchase two companies Franco Nevada and Silver Wheaton they are the two world's largest precious metal gold and streaming precious metal company so it's like a royalty and streaming model and I took that thesis and say well you know there's GLD which is like an ETF you could buy carbon krbn which is kind of an ETF easy for American investors to buy I don't really focus on the European stuff I think there's easier ways to make money as a North American right so what I my thesis was get into the royalty and streaming company again scale diversity of credits diversify your political and I don't want to be in any nation that is you know if you're not a G20 because what's going to happen here is with cop 27 coming up article 6 remember 196 countries agreed to the Paris Accord in 2015. if you're producing credits in a country whatever country call it India and India you've been producing these credits India just came out and said uh-uh you can't sell those credits internationally until we meet our domestic NDC so you have to study what was that NDC level commitment is it low meaning easy to achieve so your credits can cover that and then you can sell three quarters at the international price because your credits will trade lower if it's a smaller economy for example like the DRC or something where you know it's not really a big economy and I'm not picking on DRC specifically I'm just saying you got to be careful what was that country's NDC Indonesia is another country great projects in Indonesia like rimbaraya which is probably the world's number one red plus project but they halted it all so you got to understand what is Indonesia's NDC for the first five years is pretty low so those credits you know you're still going to get closer to the international market because most of the credits will be sold out of the country but if the NDC is high you may be stuck in this domestic lower price kind of like North American Gas ACO which is the Alberta Edmonton price of gas in Canada trades at like 25 percent of Henry Hub why because there's no infrastructure to get it out and that's why it trades at such a low price that's kind of what you're going to look at in certain regions for carbon credits you got to be aware of what type of credit and there's many different types my favorite are blue carbon credits because they store the carbon they sequester that carbon for thousands of years under the water whereas a red plus could be a couple hundred years but if there's a forest fire or illegal logging that that gets released so it could be you know 50 years or 200 years so be careful which type of credits I'm not the biggest fan of corsia credits which are you know uh Elon musk's credits that's really where you know a big cash Savior for Tesla were the credits right so those are the energy switch credits the fuel switch credits and they're trading that way they're they're kind of the low end of the pricing blue carbon credits are higher end you get you know biocharged trading at the higher side and and I just think things like I'm staying away from science projects like direct air capture it's still going to be like 200 per ton to do it efficiently and the capex of building some of these CC Us's are 100 million for a small project that has about a six seven year payback I like my payback tax less than three years so those are the type of different factors about cash is King I want scale I want to de-risk my political exposure risk and I want diversity in the credits so if I want you to Fire and forget solution what would you recommend a fire and forget solution I wanted something where I I look into it I say this is my bet and I put that on for the next 10 years what's my carbon credit trade so what I've done is I only own two stocks in the carbon trade that's it just two my largest position is carbon royalty Corp and on that board is you know that's the Superstar board and then another one is carbon streaming Corp open disclosure I own 13 of the company and that's listed uh on the Canadian exchange and it's attempting to list on the NASDAQ I believe they've got about 80 million U.S in cash no debt and they've invested about 75 million into projects so those are the two bets that I'm betting on and to me my goal is to be the largest investor in what I believe will be the two big winners in the carbon royalty and streaming sector so the obvious question I ask myself all the time is what don't I know what what what what could I get wrong in this where do you think if this goes wrong how will it happen as a bet I mean there's in an infinite number of things that can go wrong uh for example uh let's say the SEC decides that there's a new rule that they don't really they switch their mind on carbon credits I don't see that the way it's going but let's just say they just say screw it you know we don't need it anymore the we're in such a bad recession let's just keep the jobs going and the companies but that's not really the case I think a big risk is the Integrity of the credits are so based right now on third party verifiers so think of it this way when I produce gold or Copper at my Minds I produce a concentrate and I send it to the smelter in the carbon world it's a little bit different I can follow a framework I do everything I say I'm going to do then I apply to a third party verifier and people like Vera or gold standard have had significant delays and issues with Manpower and covid because you got to go to the sites and it's been incredible and then governments a big issue that I see happening and that I'm protecting my investment from is wait a second you know according to the uh UNF Triple C protocol which is pretty close to Vera's countries are going to say well we want a piece of this commodity just like they want mineral attacks they want to tax the commodity but we're waiting for this third party verifier like Vera and they're delaying this income and I want that money now and why the hell are we waiting for them when we can just do it internally so you're going to see a lot of changes in evolution in the Frameworks where someone like Avera could probably become replaced or minimized in the market I got nothing against Vera but they're in the market many people are unhappy with them because of the delays also changing Frameworks so let's just say Harry you invest in a buddy of yours and he used to work at the UN and he's going to get this reforestation project and they invest all this money and then they realize that oops we're going to change the framework like the Baseline uh or the leakage issues and your economics change now too so you really have to know what you're doing and it's kind of like mining because you think you have this much gold and then when you get underground you go uh oh it's not continuous so you've got to do the prep work like why we do Drilling in in mining and bulk samples to see the continuity is there a thrust fault or a dike that just ends the deposit there's going to be changes like that in the framework and the verifiers and we're still in like the first inning of this this sector like I would put it as if we were in the tech game we're in you know 2002 you know so it's very early days so that makes it quite difficult to to put a lot of money into this if you think it's going to be like this may well be the future but there are so many risks and they are so hard to fully Define is how big a bet can you take in the space space oh the big funds are putting billions towards it uh Brookfield which is what I think some of the smartest money in Canada they just raised the 15 billion dollar fund over subscribe Mark Carney used to be the bank uh chief of Canada and also the bank of England he's now become the chair of that um you know River uh Carlisle Group Riverstone BlackRock they are all putting in hundreds and hundreds and they're bidding against each other so I would disagree with that some of these projects are billion dollar projects um you're looking at you know depends what type of project and where you know if you're doing a cook stove project you can do you know 30 million uh tons over seven years of prevention credits for 14 million dollars that's not a big project but with that you can do double cook stoves you can do water filters there's a lot of things you can do egg plus projects so as you're building these projects you can you know build environmental you know mini uh modular homes and also bring in new uh farming techniques you know for citric plants in the area do an off take with Coca-Cola you know fob and and there's many ways to make it bigger and bigger it really comes down to the project a blue carbon project you know is much more expensive than you know a red plus project or a seagrass project so remember there's 68 different types of credits so there's no um it's the opposite right now there's this is as an investor it's a field day because there's so many projects that are economic at current credit prices that are starving for cash that's not the issues where you deploy the cash it's selecting the risks to the projects well that's the thing I mean for example my impression of Mr Connie who is an incredibly sharp man um I've only met him briefly because you know I spent some time as a hedge fund manager and he spent some time at Goldman's um but he's obviously a very sharp operator but he didn't strike me as a kind of man that would deploy his own Capital At Risk um it's too smart for that so and just because same with say BlackRock or even Brookfield they can find profitable opportunities for them selling us this story doesn't necessarily mean these projects are going to make money for their investors just because big and big investment companies set these up I the thing about Carney is I noticed his interest in global warming and sustainability questions even while he was at the bank of England he was making speeches in this space and prepping the ground for going into this area well before he left even the Boe um he's a smart guy and he's a kind of guy who can see the direction the wind is blowing in so if he's picked this space he's probably right this is where we are all going one way or the other but you pointed out that it's hard to pick winners because of all of the risks and so I'm thinking if I you know as a retail investor and you don't get much more retail than me um how do I evaluate what's a good trade and what's a bad trade and what's going to be a space filled with prep Pros I would start with people like look I'm one of the largest financiers and investors in the gold sector and I own five gold stocks and I put to hundreds and hundreds and hundreds of projects so that's just what it takes to be successful in any sector same with uranium I have two uranium stocks um you know so you can just common sense you can get rid of 90 of the assets so I would it's not easy but nothing is you you're not going to get fit by just buying a gym membership you actually got to go to the gym sadly I'm living sadly I'm living proof of that so but what you got to do is like find the guys that you can connect go to the conferences spend a little bit of time it's easier now than ever because you got YouTube and you can have a 20-minute Zoom interview with someone that five years ago nobody did that now it's no problem you know the CEO of carbon streaming Justin Cochran's a really nice guy contact the office and get to know them or you can contact you know even if you want to play it really simple and you just say you know what I don't want to invest in companies and they might have a high burn rate I just don't like anyone and you want to buy an ETF you can contact the guys at krbn they're all there they're nice people I've done it just pick up the phone and talk now granted you know I have a little bit of a reputation in clout so they may call me back earlier so what call them three times email them five times so nothing is easy but you know I would disagree with saying you know you can invest with Brookfield through their asset management and participate on their upside so remember yes they're taking investors but remember it's their money too you look at what they're doing and you know why not participate with someone like Brookfield they're very smart they have connections that I don't have and I would never bet against the guys at uh Brookfield but same thing I just picked up the phone and called them and they call me back so it's in an area of ESG and I know a lot of people think that that just means energy star Germans ESG is here to stay regardless of the form whether you know Texas fights BlackRock and Florida joins the fight the companies have committed to this and and I'm not saying put 100 of your money in but you should put some of your money towards this and I think you know specifically the young audience that follows you in the crypto world I think all of the above need to be explored and this is a very very early sector that the the Frameworks and the governments and the exchanges and the ETFs Harry you're a bond Guy what's the largest growth bond market in the last 10 years the green energy sector the green energy bonds they are the largest growth by a huge margin and that's not going to stop so that's how like for example does it make sense that Home Depot was a top 10 position in the green ETF that makes no sense at all Home Depot most of the stuff's made in China you know they have but there was nothing else because they met the minimum crime material of the ESG things are going to improve and get harder and harder and offsets were part of it they have to they will they have to improve because they're all full right now I mean the truth we currently have this hybrid system where it's some form of capitalism but not the capitalism I grew up with uh and I'm not arguing that capitalism is inherently good or a very efficient system but what you don't want is a capitalism mixed through Central planning where your central planning planners work in ESG funds and apply their own preferred ESG metrics which determine how much Capital something gets you know the best example of why this is potentially disastrous in terms of asset allocation is BTU like if you look at Peabody Coal this stuff was about to go bust to was it two years ago two a half years ago the debt is looking at that Bond at 40 cents in the dollar thinking to myself you know how bad can it be surely I get a West Virginia Town thrown in with every Bond or something it's got to be something to this I didn't buy it because I'm an idiot it was a great trade and the stock has absolutely flown there's not enough coal in the world now even though coal is disastrous from the point of view of global warming because we don't have enough energy because we can't use rust and hydrocarbon and so forth and so on well we when you talk about coal things are there's no doubt it it's an inverted marker right now but does it make sense that thermal core traded at a premium to metcore no but that's what happened um and all I'm saying is what the world is now coming to accept you know what you're calling ESG or stakeholder capitalism is nothing new to the mining world you know you go build a mine we had to go get the governments we had the you know the Sierra clubs of the world come up you had the indigenous Community you had the environmentalist groups and we had to be able to incorporate all of that and that's for us it's nothing new this is now becoming a New Concept and that's the new Norm this is the new reality whether you like it or not is irrelevant um so I just think that it's you could you know a very dear friend of mine and a long-term partner is a guy named Doug Casey and he goes wow Marin it's all I go well you also thought the internet was but you know you you love the internet today and you only got a cell phone two years ago so you can about it or you could be ahead of like as Canadians say go to where the puck is going to go that's I think that's exactly right I I personally think ESG is currently implemented is a disaster but it doesn't matter it's going to be implemented regardless and it will probably improve and it will probably do something approximating to what it's meant to do somewhere down the line there's not an awful lot of Point me standing on the sideways saying you're doing it all wrong Lads it doesn't it doesn't have anything doesn't help and even doesn't make me a dollar so we move on um you said you have two uranium stocks would you care to share which ones you have so again I love of the royalty and streaming model it's the only one in the uranium sector we started it at my house it's listed on the NASDAQ it's called uranium royalty Corp and it's a big company it's you know done incredibly well we got royalties on the biggest mines in in North America and then the other one's the largest U.S um built you know it's got almost 300 million in cash well north of a billion market cap called uranium energy Corp and what is funny about all this is in 2013 uh the CEO is my best friend and I convinced them to say do not do what everybody is doing everybody in the uranium Market said oh we're going to prove to all the bankers and the investors that we can make money at forty dollars a pound so we're gonna do a deal with the utility and I said that's this like I'm one of the few guys who had the benefit of visiting every single uranium mine in North America and I said that's the stupidest thing in the world it takes you 10 years to permit this thing specifically what I coined this phrase called wiser warm ISR and situ recovery so it's in Texas and Wyoming hence why it's wisr and I said your best production comes from your first production platforms and you're giving all that away and at 40 bucks you're not going to have any free cash flow so Amir in in all of his brilliance fought the market and you know I was able to get the former Secretary of Energy a great guy named Spencer Abraham who was under Bush the chairman of the company and they're now America's largest they are the world's largest holder of uranium permitted in the ground bigger than chemical you know outside of Kazakhstan you know cuts out of prom um and you know everyone talks about Hillary Clinton and you know how they sold the uranium to Russia it was uranium energy Corp that bought it back off the Russians at you know 10 cents on the dollar and that's built produced in America so look I'm a fan of you got to be a contrarian but you got to buy things cheap and when I was talking about it going to build what they had you know when I was banging the drums on UEC it would cost you 10 years and hundreds and hundreds of millions of dollars you could buy it for 20 cents on the dollar it was a no-brainer so that's what I'm saying with the gold sector and I think the biggest upside wild card and the most hated sector you gotta understand I come from the mining world I've been mocked I've been harassed I've been uh when I talk about carbon credits people are like oh clearly he's smoking crackers laughs well I like my you know that's my uh sin but you know I've never had the negative pushback like I have on carbon credits and my spidey sense that means I'm probably on to something very big yeah you're on the right track you're oh because somebody somewhere hates it and they don't even know why correct because it goes against their belief well you don't get paid for your beliefs absolutely totally agree am I right in thinking so you're long of you you you quadruple you is that the one or the no no no no no no no you so there's uranium royalty Corp you Roy u-r-o-y that's on the NASDAQ and UEC on the New York Stock Exchange I do not own uh quadruple you that's a totally different company there we go thank you it shows it shows what little I know very interesting um and what is your longer term prognosis now for you so you you think uranium's done what it's going to do or we've oh it's gonna it's gonna perform but perform pretty so I just published I just yeah I just published a chart so if you look at the it's nowhere near anywhere near its historical highs both nominal uh or inflation adjusted and uranium is very volatile but it's gone through its washout remember post Fukushima you had a Germany you had Japan you had all these countries say but you know Middle East China they went full bore but you had all this Supply Plus you had the nuclear warheads being down Blended and like I talked about in my book the FX Advantage so Kazakhstan when I first got into the business in 2001 [Music] I did a site visit Kazakhstan didn't even produce a million pounds of uranium they took American innovation technology North American money investors brought all these companies to Kazakhstan and they were like wow look at these great you know uranium sand sword hosted deposits and they said this is going to be incredible it was still called the ISL back then in Kazakhstan it's in situate leaching anyways they went from one million pounds to almost 60 million 64 million pounds which is about 40 percent of the global primary uranium production within 15 years like no commodity has ever gone like that parabolic that's the equivalent of Russia and OPEC combined in the oil markets that's Kazakhstan but nursultan is a genius he was able to control and stay in power since what the early 80s from the Soviet days but he used the FX Advantage so as uranium prices was 60 bucks a pound then Fukushima took it to 40 then it went all the way down to 17. remember they're producing in tenge the local currency in in Kazakhstan and as their currency went lower as long as it went lower than the price of uranium was going lower they were still fine because they're selling in US dollars and that was now that's all all that excess Supply is being absorbed because companies like the the Sprott uranium trust and uranium royalty Corp they've gone in and bought this excess Supply and now the utilities who've had a field day for 10 years they've basically bent these producers over the barrel are now going oh crap what's really interesting Harry is you know there's all these sanctions and bite and talk tough and Putin except uranium uranium is not included in the sanction list yeah you know I I looked at the situation and to me it looks very bullish for Uranium um we need base load power this is a source of it we have new technologies which allow us to build smaller less risky energy but that takes time to remember your nuclear is the most feared thing it'll still take 10 years to permit even a small modular reactor absolutely but at the same time we also have a geopolitically terrifying world one in which so we were as you pointed out just now uh dismantling old warheads and melting them down for alternative uses we want to hear a funny story that I talked about in the book If America wanted to down blend their Warheads they don't have the infrastructure in place it'd be probably 10 billion dollars in 10 years of bureaucratic permitting they'd have to say about those nukes fantastic isn't that hilarious yeah well anyway but uh it didn't so when you see these out of whack nonsensical things that's like a good thing going maybe I want to investigate this more there might be an opportunity here and it was it was an incredible opportunity but I can't help but think uh China is going to be building a whole bunch of warheads uh the Russians will probably be upgrading Warheads the US has announced that it will be building its Warheads there's all sorts of uses for Uranium um and they all all look to be expanding admittedly at different rates um I can see a bullish case just don't get caught up in the thorium angle for years people are like Marin you got to get into thorium and I go why because with a nuclear reactor what do you end up with plutonium with thorium even though thorium it's kind of like the beta VHS vhs1 but beta was better thorium is technically better but you don't get the nuclear bomb as a byproduct yeah I remember reading somewhere as I was researching around the subject that the reason the United States built those nuclear power stations even though there were disposal problems and other was because of the the byproduct we wanted the byproduct more than we wanted the electricity and that's why we had to build what you might describe as less secure less safe less cheap uh Power facilities to create the plutonium for that was used for other purposes and uraniums everywhere people forget that uranium is everywhere it's in Texas it's in Wyoming the Athabasca Basin and Saskatchewan in Canada you got some of the highest grade stuff there's no shortage of uranium and my thesis is why do I want to go to Namibia where I'm going to have to compete with the Chinese soes that play on different rules than you I can't play or compete against the Russians or the Chinese in Africa and all I got to do is you know go into the Texas or Wyoming and you got built permitted facilities trading at 30 cents on the dollar with a rule in law and you just gotta wait it was the easiest is trade you know absolutely most of all because the United States like the Russians like the Chinese need to secure their supplies what's the best way of securing a supply of uranium if you're the United States using your own uranium that's the best way of knowing it's secure the second best is Canada right well what's wild about that was in I guess it was 1978 America was the largest producer of uranium still today America is the largest consumer of uranium it consumes about 25 percent of the world's uranium but America was the largest producer and It produced about 40 million pounds uh in 2020 It produced less than a hundred thousand pounds so one in every 10 homes in America is powered by nukes uh nukes that are powered by Soviet invested infrastructure one in five homes in America roughly just under one in five is powered by nuclear energy but one in ten comes from the former Soviet Union the Cold War enemy sources even the American Military is at the risk of depending on Kazakhstan fuel they try to say or we buy it from Canada but what does camaco do they're more of a traitor than a producer they just put it in a new Barrel made in Canada and ship it down right I I'm getting the impression that's happening in diesel as well uh that Russian oil is going to India the Indians are refining it into Diesel and then sending it back to the United States and Europe and that's that's why oil prices are not even higher um and I think there's a underlying lesson here the underlying lesson is that Russia may have been a small economy in GDP terms but it was heavily integrated into the global economy before and that when we started this war we didn't really factor in how heavily integrated some of these some of these markets are with Russia and that's why we're seeing blowback in certain effects so it's a working hypothesis that it may not be correct but I I suspect that you know where these problems won't go away while this war is going on Baron we couldn't even dig into really a quarter of some of the stuff we should have talked about in this because you know a trade to trade you need to know where you cut you need to know where you're going to be wrong um if people want to to look up your thoughts on these in more detail where should they look just go to my website katusaresearch.com and I publish a free weekly letter and it's also on YouTube and uh I just published what I think is interesting because you live once and I only want to do I only work with people I like I only do things I want to do and that I believe in so the best part of you know getting to this point in my career is I kind of don't give a I'm gonna do what I want to do so you're going to get the raw uncut style that's why I don't work at a bank or at a big fund I just probably wouldn't survive to lunch I I Think You'd Survive longer than you think because results matter a lot too and you've done very really well but it's been a great pleasure speaking to you I'm hoping we can do it again because this is an education I look forward to it stay well all right that's a wrap on my next big trade be sure to subscribe wherever you get your podcasts and as always head over to realvision.com for financial Insight you won't find anywhere else [Applause]

Channel: Real Vision

Views: 10,312

Keywords: Finance, Markets, Economy, Stock Market, Investing, Trading, Financial Literacy, Recession, Interview, Conversation, Strategy, Insight, Analysis, Thesis, Short Seller, Real Vision, Equities, Raoul Pal, Inflation, Stagflation, Monetary Policy, Money, Federal Reserve, Fed, harry melandri, next big trade, next big trade podcast, marin katusa, natural resource investing, masterclass investing, fortune investor, 2 billion trade, colder war, nyt bestseller, uranium, carbon, gold companies, $UEC, $UROY

Id: jliiO1JONbg

Length: 56min 32sec (3392 seconds)

Published: Wed Oct 05 2022