The World Faces Severe Deficit Of Critical Minerals, What's Next For Commodities Prices?

well this is the root I think that the important most important topic we face today in terms of electrification and Greening of the economy and decarbonization is where's that input material going to come from so politicians love to talk about meeting these climate goals love to talk about electrification but when it comes down to it without copper without other metals as well but without copper none of this can happen and the shortage of copper has a has a a huge potential to derail these climate goals the Commodities complex has seen an extraordinary bull rally this year in 2024 with copper and gold reaching new highs what's next for both these Metals as well as the underlying equities associated with these Metals we'll talk about uh this with Brian Sark he is the CEO of great Pacific and a co-founder of K92 we'll talk about those projects as well welcome to the show Brian David thanks for having me on let's talk about copper and gold first starting with gold so as you know $2,300 $2,400 a lot of people in the industry telling me that this is a great price for the miners well have the miners been moving in accordance to your expectations uh what they should be doing at these current price levels for gold Brian you know I think it's a really interesting time here you've had underlying commodity prices move very bullishly over the last several months over the last 12 months but you haven't seen the equities move proportional to that we've started to see the senior Golds trade well the mid tiers are starting to inch higher but we haven't seen movement yet in the smaller cap names and that's quite typical in these bullish environments the SC seniors who are just generating a lot of cash flow at today's prices move first the mid tier next and then later uh in the bullish environment you see the Juniors move and we started to see a little bit of activity a little bit more liquidity in the Juniors but for large part they haven't moved a whole lot off of their bottoms and I think that's where the real opportunity is that's where the big parabolic moves usually come in bullish commodity environments how long does it usually take for the uh junior companies to respond to a price search for example let's say gold spiking to $2,400 this year how long would that take before the junior start to ramp up drilling or uh ramp up their fundraising efforts you know basically just a pick up an activity you know I think we're right at that juncture and the reason I say that is you've had a year now of very strong commodity price all of the majors have seen improvements in their balance sheet most are a wash with cash and now you're starting to see a little bit of m&a activity out there and that's one of the things that usually prompts some action in the Juniors also there has been financing available for the last couple of years for good quality Junior Explorers so you've seen a lot of money go into the ground into drilling over the last several months in addition to the larger companies being a wash with cash we're going to start to see some discoveries it's a numbers game the more drills that are turning out there around the globe the more discoveries get made so it it's really a Confluence of events here that I think is shaping up really well for the smaller cap names in the space yeah I've heard the um the narrative that m&a could pick up because these larger companies have cash but uh Brian put yourself in the shoes of an executive of a Barra or newon why would you want to acquire a company at record high valuations right now well it's interesting with K92 which you mentioned earlier we actually purchased that asset from baric gold uh we paid $2 million cash and the promise of some future payments and that company ended up trading uh to date around around $2 billion and I I think the best days are ahead of it we bought that when nobody wanted gold assets baric disposed of the asset we picked it up as a junior we're focused on exploration focused on that particular project and it's really paid off handsomely for early shareholders so if I'm in the shoes of a Barrack or Newmont I know that the best explorationists in general the companies that are f focused on exploration are the smaller cap names so rather than conducting a whole bunch of In-House exploration Etc it's easier to pick off some of these Juniors that have already Dr risked projects in jurisdictions that the majors want to be in we've just recently you know I've been in Papa Guinea for 10 years new mon just entered Papa guini in the last 12 months via their acquisition of new crest new month the world's largest gold miner is making a huge bet on PNG that's a bet we made several years ago no I understand that but uh would you as a let's suppose you were a senior would you wait for the gold price to Trail down a little bit correct before uh making Acquisitions or are you are they generally timey agnostic here you know I think for the right projects they timing agnostic but I've very much throughout my career had the mentality of an Explorer and our view is no matter what the price of Gold's doing advaned good projects you know the market will come we can't worry about what the price of Gold's going to do tomorrow we just have to advance good projects when we acquired in Papu Guinea as an example the canu asset that ultimately was the foundation of A2 billion doll company nobody wanted gold assets people didn't want to hear about gold projects nobody wanted these assets that's why with $2 million cash up front we were able to acquire just an amazing land package nobody else wanted it so as a junior I think we have to be price agnostic we have to just move forward uh build these projects out as fast as possible as efficiently as possible as prudently as possible and the market eventually comes to us at some point but it's very tough to predict you know when that time comes I do think right now with all of the majors out there a wash in cash you'll start to see some more m&a uh Brian why do you think gold spiked the way it did this year you know I I'm a big believer in gold and have been for a long time I think that what we're seeing out there in general in simplified terms is just a growing distrust of paper currency of Fiat currencies and I think you've seen it around the world almost every Central Bank in the world has been accumulating gold over the past 12 months I think that you have central banks uh nervous about exposure to the US dollar they want to drisk that somewhat but you also see the general retail public uh not just in North America but around the world start starting to pay attention to Gold starting to understand that gold is a hedge against uncertainty U it's a store of value gold is money and we're seeing gold shine in these very uncertain economic geopolitical social times Gold's doing what it does best it's protecting wealth and storing wealth uh in times of uncertainty and those same drivers the uh distr of the fiat currency system that I guess were in place early in the year is that still in place today June we're speaking middle of June absolutely I think you continue to see central banks around the world accumulate gold and that's month after month after month and we all talk about China we talk about India we talk about big purchasers like that but central banks from countries all sorts of different size all sorts of locals are accumulating gold I think we also see Main Street consumers starting to understand that they may be better off having a portion of their wealth in gold which is real money versus paper and anecdotally there's no better example of that that than Costco selling out of gold every month uh limiting the amount of gold that retail consumers can purchase and I think that's just a a a fact of life right now that whether you're on main street or within a central bank you've got growing distress growing unease about fiat currency well certainly there's been a lot of interest in the metal as you said uh especially from the East China's gold demand was up 68% year to dat this is Chinese retail investors according to the world gold Council data uh Brian what is it going to take for these mainstream investors to move into the gold equities do you think do you think the price of gold needs to be even higher still we're at a certain price before we have a rush of mainstream interest into the GDX index for example or even the gdxj no I think everybody should consider or should have a portion of their wealth in gold in physical gold that makes sense but from an investment or speculation perspective in Gold B markets historically we see gold equities outperform the price of bullion itself gold equities outperform gold in bullish environments we haven't seen that yet and there can be a few different triggers as to what sets off a hot market for gold equities it's not necessarily correlated directly with a rising gold price I don't believe we need 2500 or $800 gold to set off a bit of a frenzy in equities in the junior space what we normally see is a couple of things one when the majors start to make a lot of money they build up cash they know that the best place to get bang for their buck in terms of putting more ounces on their book is through acquisition so you see m&a pick up at the same time exploration success disc y really sets off uh bull markets for the juniors for the Explorers with all of the money out there right now around the world uh that is going into the ground I think globally we're going to likely have some major discoveries over the next 12 24 months a discovery two discoveries three discoveries that can really generate wealth can fuel that speculative frenzy so I think think the setup is very good okay uh the common criticism to today's environment is that well if the gold equi is Haven outperformed gold on a year- to-day basis yet uh what's the point because I want that leverage why I put myself in the risk of management and operational risk when I when I can just own the underlying metal I want that leverage it hasn't come yet so what's the point in investing in the gold mining sector now how would you counter that criticism sure I like I say I think everybody should own physical gold physical silver that's a store of wealth in terms of creation of wealth there's no better spot to be in a bull market for gold itself than the gold equities historically we've seen gold equities outperforms gold itself in really bullish environments we haven't yet seen it in this bullish environment for gold bullion but I think one of the most dangerous phrases in speculation is this time is different and I don't think this time is different I think like we've seen in multiple Cycles over the years gold equities will create more wealth than gold itself in a gold bull environment so I think as a store of wealth you've got to own gold you've got to own silver physically in terms of creation of wealth you want to own the equas okay copper is the next metal we'll talk about it hit a record high of $5 and uh 11 cents a pound before what Roy is called a ferocious short squeeze uh in the Futures Market brought it back down so uh what happened there what is the narrative that once again propelled copper to new highs you know I think there are a few things going on over the longer term you've got a push for electrification decar carbonization you've got continuing industrialization around the world and all of this drives copper demand and copper demand is growing at the same time you've had very difficult conditions in terms of equity markets to fund copper explorers over the past several years so you've had a relative lack over the last decade of money going into the ground so discoveries new copper discoveries have lagged the growing demand and I think that it we are really in a Tinder Box here where it won't take much to ignite the copper Market because of that imbalance the supply demand imbalance that's coming maybe the market got a little bit ahead of itself there was a little bit of a short squeeze I'm not a Trader but we're going to see fluctuation like that over time but over the midterm longer term I think it's really clear that this electrification decarbonization the consistent industrialization of the planet is going to lead through to more and more copper demand Supply is not catching up with that so over the long term we should see copper prices higher okay well as a Trader or investor one might be I guess optimistic about this Prospect of a shortage but this presents or brought a challenge to Society at large what does the industry need to do to fill this Supply Gap in the future you know I think the more money that goes into the ground in terms of exploration the better I think certain countries are ahead of the curve in terms of Permitting uh new mines New Opportunities other countries uh are are behind the curve and and we'll need to make regulatory environments more efficient more streamlined more fair for exploration development production entities you know we work and we've worked for the past decade like I mentioned in in Papa New Guinea and this is a jurisdiction that not many people know about but it's a great jurisdiction in terms of mining it it's known as the land of giants for good reason some of the world's biggest copper gold projects uh deposits have been found in puppa guine but but it's an it's also a place that values mining investment and therefore it's a place that's attracting a lot of exploration Capital right now there are other jurisdictions I I wouldn't touch with the 10- foot pole because no matter what you find it's going to take a decade plus to ever permit a mine no matter how good it is and and what people have to realize there's no electrification there's no Greening of the economy there's no decarbonization without copper so if you're an environmentalist you ought to be very supportive of of copper mining well that's the point here that that's the key point you just brought I'll come back to your approaches in just a bit but what is the government going to do about this I'm reading this article from mining.com and it's reported by the international copper study group that the copper Market is facing yet another year of deficits 2020 um three well last year was 114,000 tons 2022 was 431,000 tons we're entering an age of uh coer deficit that this article says is so large it could derail our climate goals these climate goals by the way are set by the government so their own goals aren't met because there's a huge shortage what are they going to do about this problem well this is the root I think that the important most important topic we faced today in terms of electrification and Greening of the economy and decarbonization is where's that input material going to come from so politicians love to talk about meeting these climate goals love to talk about electrification but when it comes down to it without copper without other metals as well but without copper none of this can happen and the shortage of copper has a has a a huge potential to derail these climate goals yet the same politicians that are the loudest about climate goals and electrification and decarbonization the same politicians that are the loudest about those lofty aspirations are often anti- mining which is which is crazy and and we see that in the Western World I I'll tell you I think that we're missing the the boat here in North America I think North America uh is going to come to a point where we wake up one day and realize we rely on countries all over the globe for the input materials we need to meet our own climate goals so North America is not a place I I do a lot of exploration work uh there are certain parts of North America that are wonderful of course other parts that are horrible in terms of exploration climate but it's a big question and I think what we need to do the politicians the governments the bureaucrats need to start having honest discussions about this either you want this climate uh these climate goals to be met or you don't if you do want them to be met you have to support accelerated copper production and development so you're saying some of these um restrictive environmental um policies if you want to call them that are putting you off exploration in in North America absolutely there are jurisdictions in North America I just wouldn't explore within there are some great jurisdictions around the world there are poor jurisdictions around the world and Mining is what's needed to build a Greener economy mining is the Cornerstone of electrification and decarbonization and I think in North America with four or fiveyear election Cycles we are prone to have lofty aspirations but not put in place what's needed in terms of mining policy development policy to support those goals it's more political ideological than practical I think that at the top of every project it's key to focus on health safety environment Community social but done properly mining is a not only a great creator of employment and jobs but it's the Cornerstone of a Greener economy this is from the government of Canada's websit so I'm just going to pull this up first of all copper is considered a critical metal in in Canada along with aluminum and a host of other metals uh there is a tax credit here supporting critical mineral exploration in Canada this paragraph says to enable the exploration of critical Metals a new 30% critical mineral exploration tax credit is being introduced that would be available to investors under certain flow through shares agreements to support spe uh specified exploration expenditures incurred in Canada the tax credit is a applicable to specific critical Metals uh including nickel lithium Cobalt graphite copper Rare Earth elements vadium and uranium among others can you are you familiar with this is this going to help I am and you know I'm I'm sure it will help it will Foster some exploration but like Ronald Reagan said the the most dangerous words or sentence in the human language is I'm from the government and I'm here to help and I think that this is a little bit of that and I think that if Government got out of the way and stopped putting up roadblocks to sensible responsible exploration and development we'd be better off the fact is government at all levels in Canada puts up roadblocks to responsible exploration development and Mining there are jurisdictions that are better than others I do think that these flow through credits Etc and support of critical Metals exploration of course that helps that will fuel some activity but I think that the first order of business at at any level of government in North America should be how do we streamline existing processes make them more efficient before we start thinking about tax credits well the Biden Administration has loaned money to lithium uh producers and deposits in the US on us soil so I wonder why the industry you know industry leaders like yourself in Canada aren't petitioning the government to just provide subsidies or loans to copper and other critical Metals uh deposits I mean at the end of the day in my business for example I would rather be exploring in Pap guini I'd rather be developing projects in Papa New Guinea so I'm not overly active on the on the Canadian scene as a Canadian citizen of course we're over taxed we're over regulated do we get value for our tax dollars know can we streamline processes to make our economy better absolutely uh but in general I'm very focused elsewhere outside of Canada let's talk about Papa New Guinea then uh how long is a permiting time there uh compared to let's say a developed economy or country sure Papa New Guinea is it's a great place to work and the permitting process is very thorough so when you have an expert exporation license application in that exploration license application is reviewed by some excellent technical people they're not politicians they're technical people geologists Engineers community members they review the exploration license application and they review it on its merits is this responsible uh environmentally sensitive uh exploration is the plan uh in line with what the community wants what are the community benefits over time how does this impact negatively or positively the environment they make recommendations based on the work plan that's been submitted you may need to alter that plan and then ultimately it gets recommended for approval once you have that license in hand you can go out and work you don't need multiple permits to drill you don't need to be going back to government every second week to get an additional permit once you have that license in hand you can go to work and it's very efficient the number one thing in P Guinea as it should be is community consultation the community has to be on side with what you're doing and what we found in Papa New Guinea is that it's a mining country they understand the wealth that can be created through mining the jobs the benefit in terms of environment health safety community so if you're doing things properly you end up getting some great Community Support so the Papa New Guinea regulatory environment is a very good one what we've seen in Papa guine we were very early movers to this new era of PNG exploration we were there you know several years ago with K92 and I'm there obviously now with Great Pacific gold but we've seen over the past 24 months a new rush in Papa New Guinea newa the world's largest gold mining company just entered Papa New Guinea as I mentioned over the last 12 months they've entered Papa New Guinea in a big way a multi-billion dollar uh bet on Papa New Guinea via their acquisition of new Crest so now you have the world's number one gold miner new there you've got the world's number two gold miner Barra there you've got K92 which I was a part of showing that you can go from Discovery through to development in a systematic and efficient way so puy is fast becoming in my opinion one of the world's hot destinations for mineral exploration uh what are the um how would you evaluate the cost of drilling and exploration they're relative to a North American jurisdiction uh depending on where you are it's quite good uh pgh's very mountainous Place uh you've got certain projects that have Road access two of our three projects our key projects have Road access the other is helicopter assist in some of the more mountainous areas you have helicopter assist programs so costs are a little bit higher but when you have Road access costs are in line with where they would be in North America I mean Papa New Guinea is next door to Australia Australia obviously is just a hot bed of exploration P New Guinea has had a great resource sector for decades so you've got experienced geologists Engineers drill contractors you've got great Papa ninian geologists around so this is a mining country and as such the costs are in line with with other mining countries around the world why have you decided on poing guini in the first place I mean presumably you could have picked any um developing area to work in uh I know that West Africa has has Rich deposits in gold and copper South America as well as you know is a copper capital of the world you know have you looked into other jurisdictions before making a decision yeah absolutely so in 2014 we had an opportunity that came up 2015 we ultimately transacted on that opportunity and the opportunity was a project in Papa New Guinea U that baric gold owned it was a project that had never made money it was a mine that had never worked and it was on care and maintenance nobody wanted to buy gold assets at that time the market was horrible and baric wanted to sell this asset so we evaluated it on its technical merits we loved it we thought there was huge exploration upside that was being missed we went in and with $2 million cash up front and the promise of some future payments we acquired this asset well that asset today has 1,600 employees it's traded as high as a $2 billion market cap it's a big contributor to the P guine economy and by 2027 uh it's slated to be producing approximately 500,000 ounces of gold annually at some of the lowest costs in the industry it's a a real special project that's been a big success and I think the best days are ahead of it with that uh in the the rear view mirror for me personally um I'm no longer on the board I I was the co-founder of the company former president I was president from inception through to cash flow positive operations and commercial production I started to look for other opportunities in Papa New Guinea and we've acquired in Great Pacific gold close to 3,000 square kilometers in papao Guinea we actually have ground that's contiguous with K92 where we've just put out some some spectacular early stage soil results getting ready for drilling we've got some other ground to the southeast of K92 where we'll likely start drilling over the next couple of weeks and then we have a a big400 square kilometer land position in Papa New Guinea on one of the islands uh in East New Britain province which is a spectacular Place uh that was a form of producing mine it's Advanced stage exploration and we'll be going to work there so Papa New Guinea for me was a natural post our success with K92 mining which continues to be a real growth story K92 just put out some spectacular news this week drill results and the the best days are ahead of K92 but for me personally pu Guinea was a real natural based on that success and and that where Great Pacific is focused the one risk that some Emerging Markets jurisdictions face is nationalization as you know so I was reading that BHP was operating in Papa New Guinea's Western province in the early 2000s and what happened was they wanted to exit from that project because they were you know they were environmental concerns and say the government wanted them to stay uh long story short uh they reached an agreement whereby um the government of pinug guine uh owns 37% of the uh of of of the shares of that particular project and um it was the other 63 were sold off so uh how would you address the concern that um investors may have that nationalization needs to be addressed yeah p mcghin is one of the the rare Emerging Markets where nothing's ever been nationalized and I think that's why Papa New Guinea in addition to the great geology is attracting so much new investment that's why Newmont decided to go there this year make a big bet on pppa nimi Barracks oper in there you know at K92 we went from a discovery through to development into production you know over the span of a couple of years and uh we've found it to be a great place to operate there's never been a nationalization uh I think that Papa Guinea is becoming one of the world's top destinations for exploration for for good reason um I'd be a lot more worried about certain jurisdictions in North America than I would in in Pua for sure all right well thank you very much Brian for educating us uh we'll put the links to your uh company in the description down below so make sure to uh follow uh Brian as company's work there I appreciate it thank you we'll speak we'll speak again soon great thanks David and thank you for watching don't forget to like And subscribe

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Id: og1-kPRC6cE

Length: 33min 28sec (2008 seconds)

Published: Mon Jun 17 2024