Silver Is Set to Explode, Gold Has Surpassed the Euro - We’re Just Getting Started | Randy Smallwood

Summary

In this insightful conversation, Randy Smallwood, CEO of Wheaton Precious Metals, discusses the current state of the gold and precious metals market. He highlights the significant gap between gold production costs and the spot price, the long-term bullish outlook on gold due to U.S. dollar weakness, and the challenges mining projects face, especially with permitting and jurisdictional risks. The conversation touches on the role of streaming in financing mining projects, the importance of active management in the resource space, and the company's strategic focus on high-margin projects in silver and gold. Smallwood also addresses the need for government reform to streamline processes and support responsible resource development.

Takeaways

• 😀 Gold mining companies are seeing significant margins due to the gap between the cost curve and spot price of gold, making it a profitable time for the industry.
• 😀 The long-term bullish outlook for gold is driven by the weakening of the U.S. dollar and growing concerns over unsustainable U.S. debt levels.
• 😀 The U.S. debt, along with the loss of trust in its monetary system, is expected to push gold prices to new heights, with predictions of gold reaching $4,000 per ounce.
• 😀 The main challenge for mining projects is jurisdictional risk, where political instability and government intervention can disrupt operations. High-margin projects are key to mitigating such risks.
• 😀 Canada's mining industry faces permitting and regulatory delays, with many projects waiting for approval for years, which significantly impacts investor confidence and project timelines.
• 😀 Streamlining the permitting process and removing bureaucratic hurdles would improve the efficiency and success of mining projects in Canada, without the need for direct government investment.
• 😀 Streaming, as an alternative financing model, has proven to be more reliable and flexible than traditional public market investments, especially in the current cyclical market.
• 😀 Wheaton Precious Metals focuses on streaming precious metals from base metal and critical mineral projects, with an emphasis on shared value for both the company and operators.
• 😀 There is a positive outlook for silver, with potential growth driven by increasing investor interest in precious metals, especially in a favorable market environment.
• 😀 Wheaton's growth strategy involves focusing on quality projects rather than specific metals or jurisdictions, though the company slightly prefers silver when opportunities arise.
• 😀 Management changes within Wheaton, including promotions from within the company, reflect the successful growth trajectory and solid leadership team in place for future expansion.

Q & A

What is the current situation with the gap between the gold cost curve and the spot price?

The gap between the gold cost curve and the spot price is at an all-time high. This disparity indicates that gold mining companies should be making profits given the current prices. Smallwood highlights this as a unique situation in the gold market.

Why is Randy Smallwood bullish on gold in the long term?

Smallwood is bullish on gold because of the long-term weakness of the US dollar, driven by the unsustainable US debt and fiscal policies. He believes the fundamentals of the US dollar are weak, which positions gold as a strong alternative.

How does US government fiscal policy affect gold prices according to Smallwood?

Smallwood suggests that the US government's fiscal policies, including increasing debt and deficits, undermine trust in the US dollar. This contributes to his bullish view on gold, as he believes it is a safer investment during times of dollar instability.

How does jurisdictional risk play into Wheaton Precious Metals' strategy?

Jurisdictional risk is a concern for Wheaton, as governments worldwide are trying to capture more revenue from the mining sector. However, by focusing on high-margin projects, Wheaton can absorb some of these risks and continue to operate effectively even in uncertain regulatory environments.

What are Smallwood's thoughts on government involvement in mining projects?

Smallwood is not in favor of government investment in mining projects. He prefers that governments streamline permitting and regulatory processes to allow private capital to finance these projects and allow markets to drive the economics of mining.

What needs to change in Canada’s mining sector to encourage growth, according to Smallwood?

Smallwood advocates for a faster, more predictable permitting and regulatory process in Canada. He believes that governments should not be directly investing in mining projects, but rather provide a clear framework that supports market-driven projects and capital flow.

Why does Smallwood emphasize high-margin projects for Wheaton Precious Metals?

Smallwood emphasizes high-margin projects because these projects are better equipped to withstand external challenges, such as changes in government policies or economic downturns. High margins provide the flexibility to weather such risks and continue generating revenue.

What role does streaming play in the current mining investment landscape?

Streaming has become a key financing mechanism in the mining industry, especially in light of the disconnect between public market investments and mining projects. It provides structured capital, offering a competitive alternative to traditional equity and debt financing.

How does Wheaton Precious Metals approach its investments in copper and silver?

Wheaton Precious Metals primarily streams precious metals, with the bulk of its revenue coming from byproducts of copper mines. While Smallwood prefers silver over gold due to its potential growth, he notes that most silver comes from base metal projects like copper mines.

What is Smallwood's view on the future of silver in the precious metals market?

Smallwood is optimistic about silver, suggesting it is currently underpriced and likely to perform well, particularly as global economic conditions improve and as precious metals become more attractive to investors.