In this high-conviction, high-energy interview, SCP Resource Finance CEO David Wargo joins Trey Reik to lay out why the next big macro move is into commodities, driven by a weakening dollar, a race for critical minerals, and an urgent shift away from China-dominated supply chains.
Key Topics:
- What the recent U.S.–China trade deal really means for rare earths
- Why gold, silver, copper, nickel, and rare earths are all set to surge
- How the U.S. dollar’s decline will fuel a real asset bull market
- How Ukraine’s reconstruction will supercharge base metals demand
- Whether the U.S. will take control and liberate its mining sector, just like Big Oil
Would you like to hear more about SCP and its rare earth mineral projects? Get their white paper here: https://wealthion.com/rare-earth-metals/
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David Wargo 0:00
Buy gold, buy silver, buy rares, buy copper, buy nickel, buy everything that we work in trade because it’s all valued in the US dollar. It’s all going up based on currencies and demand. This is going to be a big party.
Trey Reik 0:21
Greetings and welcome to our wealthion show. My name is Trey Reich of Bristol Gold Group, and we’re checking in today with Dave Wargo, CEO and head of investment banking at SCP, resource finance, independent merchant bank with offices in Toronto and London. Dave, thanks for being available to chat with us today. No problem. Trey, no problem. The the primary reason we asked you to join us is to get your impressions first, as they may be on the surprising talks in the US or surprising progress in the US, China trade talks this past weekend in Switzerland. So I guess the first thing and what the impacts may be on the rare earth market. So my first question is, what did you make of the talks themselves? Do you detect some sincerity on both sides?
David Wargo 1:18
Yeah, I do. I mean, they’re both staring down the, you know, the the end of a gun, basically, like they’re both so dependent on one another that, you know, kind of calmer heads have to prevail, and they have to be pragmatic about things. And what I said in my previous podcast to be the trade. I said Trey was, I think that the next generation IP will stay at home, and then the basic manufacturing that’s basically already set up, like sunset industries like auto parts, you know, toys. I mean, I really don’t think those jobs are those, those types of jobs are going to come back. So I think there is sincerity, but I think there’s been so much damage done in the relationship. And I think the American kind of thinking is they want to be independent in certain industry groups, right? So I think the negotiations are good in the sense it settles down the markets. It gives them 90 days to actually get to a solution, whether they get to one or not, that’s a different story. But I do think this is a great start both, both, both countries need one another, and the world needs them to be cooperating, because they’re the two biggest dogs in the in the sandbox, right? And if they’re not getting along, it doesn’t matter what Canada does, it doesn’t matter what Mexico does, and to you know, a lesser extent, it doesn’t matter what Europe’s doing, although, you know, the best, biggest beneficiary of all this stuff is Europe so far, right? So they’re, they’re doing well, so, yeah, I think there’s sincerity. I do think that the this is going to be a business relationship. It’s not going to be a friendly relationship. It’s only if you look at what Trump’s done with his administration. It’s, they’re all China hawks, and his mandate is to bring as much back home as possible. So hopefully they do it in a very polite way. That’s all we can hope for, right?
Trey Reik 3:09
I hope you’re enjoying my conversation with Dave Wargo, but for those who are interested in learning more about the rare earth space, I wanted to mention that wealthion and SCP have produced a white paper on rare earth metals, which can be received by clicking on the link in the description below right I noticed, in the wake of the talks, I think yesterday or the day before, there were reports that China has lifted export restrictions or granted export permits to four rare earth magnet manufacturers so far, just for clients of all places in Vietnam and Europe, with specific mention of Volkswagen. So what do you make of that? Is there some particular reason they would choose those two countries, and does that we have more coming? What do you think? Well, I mean,
David Wargo 4:05
Vietnam, they’ll probably put downstream technology in their country, right? Small guests, because Vietnam has ionic clay deposits, right? And then when you’re saying you’re going to supply Volkswagen, you’re basically saying you’re supplying the the German state, because Volkswagen is Latin for the German state, and so I think that’s a bit of leverage, right? It’s like, Hey, you guys don’t want to play fair in the sandbox. We’ll give it all to the Europeans, and it gives the Chinese more leverage in the negotiations, right? Right? So it’s a brilliant move, interesting, yeah, well, you see that this is going to be the most, yeah, you’re going to, it’s going to be the most fascinating negotiation, set of negotiations the world has seen in a very long time, right? It is, I’m, you know, I find it fascinating. It’s an inflection point, like, it truly is an inflection point in. And the way the world’s going to go forward, right? So, yeah, it’ll be fascinating to watch these negotiations and the game theory and all that that goes behind it, and let’s just hope it works out for the past,
Trey Reik 5:12
right? Do you think the rare earth stance that China is taking, what is their ultimate aim? Is it just negotiating leverage? Or do you think there’s something more sinister? It’s
David Wargo 5:22
leverage in the negotiations. They’re the only ones that make it basically in industrial amounts. So it’s just leverage in negotiations, because these magnets are so important to the military complex, and it’s so important to, you know, the whole new, new, you know, economy that’s evolving with the robotics and and whatnot. So these, these magnets right now, have a tremendous amount of leverage. It’s kind of like the leverage the US has with AI and what they did with Nvidia, going into Saudi Arabia, like everybody wants that technology, the Americans have actually contained it for the most part, and that gives them leverage and going into different countries. So the the Chinese are doing the same thing with the rarest. I think that’s a good comparable, in my opinion. So just leverage,
Trey Reik 6:10
all right. And after Trump’s trip to Saudi Arabia, I saw an announcement that us, producer NP materials, signed a MoU with Saudi Arabia, as I’m not exactly sure how to pronounce this, they’re flat Madden to jointly develop a rarer supply chain in Saudi Arabia, including mining, separation, refining, magnets. So it I know, I know that you and I have talked in the past about Ukraine, and I know your view is there’s not a lot of rare earth metals in Ukraine. How would we know? And are there? And you know what? What? How is Saudi Arabia endowed with this stuff? I
David Wargo 6:53
I’ve, I have not heard of the Saudis having a rare deposit. But that doesn’t mean they don’t have one, because it’s kind of a very secretive state, in a way. They do have good, hard rock deposits there, but I could do a bit of work to find out if they have a if they have a rare earth deposit itself. If they do then what they’re trying to do makes sense. You know, to a degree, Molly Corp, I really don’t know what the skill set is outside of producing a rare earth concentrate. I’m sure there are people in the company that can take things further downstream, but they haven’t done it yet. So it’s a nice press release, right? It’s, yeah, it’s good. It’s like, it’s like, you know, it’s, it’s just building this bridge with the Saudis were just fascinating, that there’s always been a strong relationship, obviously, because of the oil. But there, you know, it’s, I guess it’s just the way to bring the two countries together. And you know, it’s also a message, maybe to the Chinese too, like, we’ve got the biggest oil producer in the world, and we’re going to do rares with them too. And, you know, they can turn off the faucet, maybe, if you go against them, type of thing, I don’t know. I mean, just throwing stuff out there. So I think it’s more of a press release. And what, what it what it’s what it entails, is probably about 10 years of development, maybe 15 years. So by that time, there probably isn’t development, because this space, the game, and this space is over in 24 months, in my opinion, in fact, the outside so, and by development, you mean mind development, yeah, mind development. And if they want to go downstream, like, you know, there’s a whole skill set, you know, counter current, solvent extraction, to produce a separate rare earth is, you know, it’s, it’s not like putting, you know, Lego together. It’s, there’s a lot of there’s a lot of IP and there’s a lot of human capital skill set that’s required, right? And, you know, and you, all you do is pump oil and gas your whole life. You don’t have the skill set. So this is another thing that the West, and now it’s the Middle East. It’s all human capital constrained, right? So it’ll take time.
Trey Reik 9:01
No, but let, let, not to beat it into the ground. You’ve never, in the past been aware that Saudi Arabia has particular mineral resources of any type, right?
David Wargo 9:11
No, they’ve got, well, obviously oil and gas. They have very good copper and gold in the in the basin, right? You know, it’s a big basin, so the other edges of the basin, you’ve got these beautiful copper gold who went in there? I think it was Equinox went in there that back in like 2011 they bought a, I forget the name of the mine, but it was a good mine. And then they did a great job purchasing it. And then Barrick ended up buying Equinox. And I do believe that mine. I don’t follow Barrick, so it could be wrong. I don’t I haven’t followed that mine itself either, but I’m pretty sure it’s in production, and it’s a, it’s a very good mine. So they have good hard rock assets, I just don’t know about rare earths. And if they have one, it’s not going to be Ionic, that’s for sure. So because of no water there, there’s lots of heat. But so i. It would be a conventional hard rock bassinet or monazite. And that’s not way. That’s not the way the world’s going. And there’s more than enough of that type of material coming out of Australia, coming out of Brazil, will come out of Brazil, and a lot of it will come out of mountain pass too, right? So I think it’s more pomp and circumstance than I know. Yeah, I think.
Trey Reik 10:26
And speaking of pomp and circumstance, back in late April, President Trump signed an executive order under the auspices of the deep seabed hard minerals act of 1980 to promote mining of poly metallic nodules of crystal minerals and metals such as cobalt, nickel and manganese, yeah, and the Edo applies to the continental shelf as well as international waters. China promptly objected and vociferously, uh, stated their opinions. Is this just another PR thing from Trump, or is the stuff out there? And can it be mind profit?
David Wargo 11:08
You know, there’s probably more deposits under the ocean floor than we know, right? More more under the ocean than there is above surface. But let’s face it, I mean, cobalt, just go to the Congo. They’re swimming in it called, call it land core. They probably have about 20 bonded warehouses full of this stuff. But they don’t tell anybody about cobalt side. I mean, it’s critical. I don’t know. You’re not going to mind the sea floor for cobalt, the MN, manganese nodules he was talking about, there’s more than enough of that stuff up on the surface nickel. We’re swimming in it. The Indonesians own that market now in three years. Incredible. So it’s more, it’s more, it’s more. I think it’s just more. The American state basically saying we’re very serious about hard rock mining, and we’ll even go to the ocean floor. But you can tell Donald he he’s time. He doesn’t have to do that right away. You know, there’s a lot above ground. There’s a lot of good copper in Arizona. There’s lots of great gold in California. Let’s just take the over burden of all the permitting. And you know, the permitting has to be fixed. That’s where the focus should be, not mining the sea floor. And you think about it, in China, they’ll build a mine in a week. I’m being facetious, but on a relative basis, to the west, they’ll have theirs depleted by the time we push go on ours if we’re to do equal mines, right? Because they just get to work. We follow rules for the most part. Those rules have to be streamlined because they it encumbers the process. And you can even argue at times, the mining space is not even an asset class, because as the commodity rolls, as you’re building your mine, there’s no capital for it, right? So I think
Trey Reik 12:58
there’s an Arizona copper deposit that’s been resolution permitting for 20 years, right? Or 25 years, that’s
David Wargo 13:06
going to, I think, I think the Donald’s going to, he’ll, I think that’s, I think they’re fast tracking that one that that is a that is truly a world class deposits, and it’s in a red state. Tell us about it. Well, I don’t know a lot about it. All. I what I have read about it. I read, you know, about all the encumbrances. It’s an RT Z mine. I think now, don’t quote me on this. I think it would supply 25% of the total demand of the US. Wow. Don’t quote me on that, but I think that’s what it is. And that puts a serious that’s a serious lever now, right? And that’ll impact the international copper price and the way I look at the way the Americans will approach this space, and I’m actually excited for it, because that means that Canada can develop it. But if you look at oil and gas as your proxy, what did the Americans do? The Americans went around the world with the best IP technology, the best reservoir engineers, the best everything, the oil, gas space, and they just pumped it. They didn’t care who bought it. They didn’t care where it went. They looked at the oil market as it’s just a giant pool. Pull it in, put it put the oil into the pool. Everybody puts their straw like, you know, the Russians will put it in the the Chinese, the Americans, and you get the oil price down, right? That’s why OPEC came in, because they were just flooding the market. And I think that’s what’s going to happen on the hard rock space. Because as I said before, the genies out of the bottle, all this stuff in the West that we are going to go away from the east is going to have to be developed, and you’re going to have to develop probably more. And this is where the argument is going to come between what the government wants and what the mining company wants, because the mining companies want to have the most margin per unit, right, and the governments are going to want the least amount of margin at the government level, sorry, at the company level, so that the consumer and the car companies have the cheapest inputs to their value added products. And the consumer, you know. Will benefit from that. So there is going to be a philosophical argument between a mining company in the state. And one thing that worries me about that is the state will always win. And if you look at around the world all the major super oil giant deposits, and you know, oxy and Chevron and Exxon, that’s all Latin for the US government. I’m sorry, right? So you look around the world, oh, where was it going? Every major oil deposit was basically nationalized, right? And if it wasn’t nationalized, it was controlled by the big five in the US. And I think that is a trend that will probably get going in the Hard Rock space, because, you know, SCP resource finance is not going to hold the US government over a barrel like I’ve got the rare earths. You can’t have them unless they give them to me. So I think you’re going to see a tremendous amount of development, a tremendous amount of capital on the ground, and you’re going to see minerals coming out from all over the place now, because it’s replacing oil. And you look at oil, oil is below 60 bucks. It’s going below 50. And I may even make a bet with somebody that’s going below 40, really. Oh, there’s we’re swimming in the stuff. They broke OPEC like Angola left, funny enough, six weeks after they did the libido corridor to take all those minerals out of the Congo the American government gave them that they could have probably gone around if they wanted his most efficient way. But, you know, six weeks later, Angola leaves OPEC. Plus, so, I mean, that’s a horse trade that that wasn’t a coincidence. So OPEC is the disintegrating I think, because, you know, the big guys can ratchet back supply, the smaller guys can’t, right? And the smaller guys, the the marginal player, will actually erode the leverage along with the battery. And so, you know, the the leverage will come into the Hard Rock space after that, right? The hasty,
Trey Reik 16:58
have you done any work on Northern dynasty, the
David Wargo 17:01
one up in Alaska, yeah, yeah. Well, I mean, it’s this, it’s the story that always comes up. I It’s a beautiful deposit, the pebble deposit. It’s beautiful. It’s, you know, as Donald would say, it’s beautiful, it’s, it’s world class, it’s beautiful. It is beautiful, but it, but it’s also in the most beautiful part of the world, right? Like, I’ve never been up there, but everything you hear about it, it’s just, you know, God’s country, and then, you know, Alaska will never get over the Exxon Valdez, right? So the impression that not left on that state and the country and the continent as a whole, that that just puts up the barriers to entry. And I, you know what, there’s a lot of minerals outside of pebble that we can take first. And you know, when we’re the last people on Earth, and we need that incremental pound of copper, and we’ve taken it from everywhere else, let’s go develop that one. Like they’re not going to hear that. But, you know, I like development, but I also like, you know, environmental part.
Trey Reik 18:01
Par name we got DOM loan too, right? Isn’t that a big one?
David Wargo 18:05
So they’re all big? Yeah, I don’t know it’s Yeah. I don’t really pay attention to that into the market, so I can’t really comment on it. But like, the big projects will get developed now, and the one thing that might get pebble going is there’s a lot of investment in from the west, going up into the Arctic region, into Alaska, into Northwest Territories. And it’s all about the Russians and the Chinese coming over the top. So they want to develop this up there. So maybe that, that catalyst gets pebble going. And if they’re going to build pebble, you would have to do it in a way that would be the, the safest possible way, because you don’t want anything to ice, just a, apparently, just a spectacular you know, it’s heaven on earth. So, yeah, gotta be careful.
Trey Reik 18:51
I’ve actually stood there, and I’ll tell you, you wouldn’t confuse it with the Florida intercoastal waterway. I mean, it’s, there’s so much metal in the ground. Nothing grows. I mean, there’s no trees. There’s nothing above six inches. It’s, it’s basic load of cotton,
David Wargo 19:08
yeah, yeah, there’s some gold. There’s, there’s a lot of goodies in there. No, they’re always been talking about this, like, my whole career in the capital markets. And it, it predates me, right? It’s like, these deposits, you know, they bump along, and then all of a sudden they become something like kabanga in Tanzania, we floated on the New York Stock Exchange, I think, three years ago. But, you know, that was with Glencore and Barak and, you know, like it’s been with, you know, I think it was like 2030 years. I’m not sure exactly the the time frame, but, you know, 20 to 30 years before they actually got their first dollar of capital right, which is when the shame of that is, you know, the Indonesians come online and they swamp the market with lottery nickel, and it’s just like, here we go.
Trey Reik 19:49
So anyway, well, thanks for your time. I would ask you, in closing in the last month, is there anything that’s caught your eye in the mining space that you think we should. Be focused on.
David Wargo 20:00
Well, you know, I’m biased. I think, you know, I think that, I think the Ukraine war will get settled out before. So I think that’ll, that’ll hit gold a bit. I do like gold long term. I think silver is probably the metal that outperforms gold because it’s got an industrial element to it. And if we settle down the Ukraine and the trade war, you know, it’s not going to get settled quickly, but if it just settles down, then, you know, silver is an industrial metal as well as the poor man’s store of value. So I like silver, probably right now, better than gold. And I love the rare space because, you know, I can’t say it enough, even with a trade agreement between the two countries, America is going to go the West and America. Well, America leads the West, so America and the West will go full steam ahead to become self sufficient. They will never, you know, be at the mercy of another state, right? And right now, with 30 years of offshoring, there’s a lot of vulnerabilities within the supply chain, and I think those vulnerabilities will get lined out over the next decade. I think it’s going to take that long and they’ll be self sufficient. Then we’ll see really what happens, right? Because that’s when the real fun starts.
Trey Reik 21:22
And a part of your Ukraine thesis is rebuilding the country and demand for base metals as well, right? Oh,
David Wargo 21:30
100 there’s a trillion dollars of capital plus going into that country. And so a trillion dollars, that’s a lot of lot of CapEx. There’s a lot of fees running around there. So there’s just going to be this party going be this party going into the Ukraine. And I think you know what the what the US is doing. They’re, they’re, they’re, they’re, they’re, they’re slowly bringing down their dollar. It’s been pretty fast, but they’re going to slow that down a bit, but it’s going to continue to depreciate against other currencies. You saw how the Chinese, the Chinese were really good. They they lowered their lending rates, and they lowered their interbank rate, right? So they’re sewing their RMB too. So it now it’s a race to the bottom. When I worked in China, the RMB was 8.28 to one US dollar. That was in 2005 the economy’s gone up five times since then, five times, and the renminbi is approaching 8.28 to the US dollar. It doesn’t make some sense, right? So it’s a currency war. The Americans, I think, are going to let their currency kind of go a bit lower, and they want to stimulate exports. And I’ve read some read some articles about how they think the reserve currency has what’s cost them their industrial base, which is true, because their currency is so high, nobody can afford their goods, so it goes offshore. So if that’s the thinking, then take that to the bank. Okay, and it buy gold, buy silver, buy rares, buy copper, buy nickel, buy everything that we work in Trey, because it’s all valued in the US dollar. It’s all going up based on currencies and demand. This is going to be a big party. When it gets going, it’s going to just go and it’s going to make that last cycle of 2005 to outside of that four five month window of Oh, eight, which, you know, that was the scary moment. The whole system was done outside of that four to five months you had from 2005 to the end of to mid 2011 and the market went from like zero to 100 like it was just everything just went and I think we’re going to get that moment again, but it’s going to be on steroids. It’s going to make oh five to 2011 look like nothing, because, because you’re getting the big nation states involved now, right, right, and all, that’s where the capital is. And when you’re, when you’re transitioning to a whole new economy, then you know, it’s, you’re, you’re going to be pulling so much raw material into it. It’s just, it’s the perfect storm. It really is, like it’s the best industry to be in. And, you know, I know it’s the best industry to be in. Trent, you
Trey Reik 24:10
say industry? You mean mining, generally, mining generally, yeah,
David Wargo 24:14
yeah. And it’s, and it’s, and I’ll tell you this, you know, I watched CNBC. I think it’s a great show, because it gives you the breath of the American retail investor. And I also think that they actually are a mouthpiece for for things. And they, they, they plant seeds into the market and give you an idea where things might go. So I was watching this morning over a coffee, and there’s this, you know, one of the reporters, she’s underground. She’s got the hat on with the light. And I’m like, Oh my God, she’s at the COP mine in Utah, and I’m like, CNBC is airing this prime time. So you know what it’s like in America? You know, like when you guys get on to something and you don’t, you don’t just put one into it, you put 100 into it, right, right? And so once you wake up to this trade, you know, the multi. Multiples in the space, with the Americans, like, fully focused, like they would have been on the oil and gas space, which I think is going to happen. The multiples of these companies are just going to go through the roof, because we’re starting at nothing, right? And there’s not any of them, No, there isn’t, right, but there’s going to be a ton of capital going in the space. There’ll be a lot of discoveries that actually have already been made that come into the, come into the, you know, come into fruition. So the amount of capital that’s going to flow in the space is just going to make every other industry look like nothing, right? It will be, because the tech space, it’s habits run the mag seven, whatever you want to call it, you know, it was those 10 companies, what they had, the market cap, the size of us, GDP, almost like. And they don’t like monopolies in America. I’m sorry, that’s a monopoly. So they’re out. And the mining industries and the Hard Rock industries and the the actual the blue collar industries are coming back, and it’s great man, because it’s it. That’s the heartbeat of the any economy, that’s a hard beat of any culture is having a robust middle class, right? And this is what we’re going to bring back. So I’m all for it, and it’s going to be fun. And I think that this, this go around is, I don’t know, you know, strap on the boots, my friend, because it’s, it’s going to be party time. I’ll tell you that we
Trey Reik 26:19
can start thinking about retirement? Well, yeah,
David Wargo 26:22
I don’t know about that. I think we’ll all be carried out in a box. You know, where this is in our blood tray.
Trey Reik 26:26
I still had facial ticks from 2011 12. That was a rugged time. Yeah. Anyway, that’s a good note to end on, Dave. Thank you, man. Anytime.
