As economic risks escalate, central banks are making a big bet on gold—and so are savvy investors. Chris Mancini, mining analyst and associate portfolio manager at Gabelli Funds, a $30 billion asset manager, joins James Connor to discuss the forces driving this trend, from inflation and currency concerns to the potential for hyperinflation, making gold a critical safe-haven asset. Learn why investors are following central banks’ lead into gold—and likely moving into silver. Chris also dives into opportunities and challenges in the gold mining equity space, offering insights for those looking to broaden their investment strategy.
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Chris Mancini 0:00
If the US has a hyperinflation, you know, which is a which is just a distinct possibility, it will have to tie its currency to a hard asset. And it’s not going to tie it to the euro or the yen or anything. It’s far too big. What it’ll do is it’ll tie it to gold, because the US owns gold in Fort Knox, the biggest owner of physical gold in the world and so and all these other countries are thinking the same thing. So gold is the the monetary asset. That’s the real play at the end of the day.
James Connor 0:32
Hi and welcome to wealthion. I’m James Connor. The financial markets are becoming more chaotic, and if you need help understanding these crazy markets, consider having a discussion with a wealthion endorsed financial advisor. You can find out more information@wealthion.com slash free. Once again, That’s wealthion.com/free now on to the show. Chris, thank you very much for joining us today. How are things in New York?
Chris Mancini 1:01
Jimmy, things are, first of all, pleasure to be here. Thanks for having me. Things are nice in New York. It’s a cloudy day, but we haven’t had, you know what? We’ve had, like, a very nice fall, very pleasant weather. The leaves are turning, actually now. It’s like, I think they’re a peak around New York City. So terms of the colors, very, very nice, beautiful, beautiful.
James Connor 1:22
Yeah, New York. New York is a great place to be in the full time. I love going there, yeah? So I was going through my notes this morning, and I thought, man, there’s not much going on in the world. Okay, aside from the fact that we have Google, Microsoft, Facebook, Amazon and Apple reporting this week, and we also have the non farms coming out, and then we have an election going on next week.
Chris Mancini 1:44
Can you believe all that? Exactly everybody really wants to hear from me, for sure, with all that going on, I’m sure that. But then I’m like, the way top of the list, but yeah, as a distraction, you can listen, maybe listen to me.
James Connor 1:58
And of course, I can’t forget the World Series going on too? York Yankees, LA Dodgers,
Chris Mancini 2:04
yeah, we’re so as of now, the Yankees just lost last night four to two. So they’re down three to nothing against the Dodgers and the Dodgers, I have to say it do this really annoying dance every time they get a hit or they get on pace, they put their hands over their head and they do some horribly ridiculous dance, which makes it even worse that they’re beating us. So, yeah, so, but it’s, it’s nice that they got that the Yankees got there we were close to a Subway Series, which would have been fun too. So anyway, so
James Connor 2:39
I don’t know if you heard this, but the average price for a ticket to a Yankee game for the World Series is 2000 bucks. And even the cheapest ticket in the four hundreds is 500 bucks minimum. And if even in if you go down to the three hundreds, you’re looking at 1500 bucks. Yeah.
Chris Mancini 2:56
I mean, yeah, I don’t know what to say, like, like, again. I mean, I think it’s amazing. Well, you have, you know, I think part of it really is this big asset price inflation. So, you know, as we know, a lot of New Yorkers are in the markets, you know, work on Wall Street or what have you. And they own assets. They own stocks and houses and things like that, and and, and with the with the rates being, you know, they’ve gone up, but But historically low and just on their way down now the asset prices, and also, frankly, the huge amount of fiscal stimulus that we’ve seen has has also found its way into the system. So with asset prices going up in a place like New York, where people own stocks and are involved in selling stocks as brokers and things like that, and bankers and whatever, you know, there’s just, it’s amazing. It really is an indication of just how much money has been really pushed into the system.
James Connor 3:57
So let’s talk about that in a little more detail. Gold is a great investment to own during these inflationary times. It’s up over 30% on the year, in addition to inflation. What else is driving the gold price?
Chris Mancini 4:10
Well, I think that right now, what’s a big deal is I do think that its rates are coming down, and I think that there was a general sense that as rates went up, the opportunity cost to holding gold, which yields nothing, also went up. And so there were outflows out of gold backed ETFs. And so the gold price did hang in there, you know, Notwithstanding these really huge outflows out of gold backed ETFs. And what we’re seeing now is that with rates starting to decline with the first Fed rate cut, and a view that there will be some more, we’ve actually seen inflows into gold back ETFs. And I think that that’s really the key now of what’s driving like the day to day move in the gold price. Dollars is this increase in or this, you know, purchasing of shares of gold backed ETFs, which then go out and buy the physical gold, and that increases demand. And so I think to the extent that rates continue to decline, we’ll see flows into ETFs and gold will go up. So
James Connor 5:19
Gold is trading around 2700 $2,800 an ounce. Do you have a target price for gold? Where do you see it going a year, two years out?
Chris Mancini 5:29
I mean, I just think that that there’s no specific target price, but it we’re in an uptrend now, and these inflows into gold back ETFs, I think are very significant. So I think that we will continue to see these flows continue, and as long as they continue, the price will go up. And there’s no reason why it couldn’t go to $3,000 or more from here. That’s a that’s a relatively small move in the context of what’s happened historically in terms of just, you know, from a percentage move perspective, to go to 3000 isn’t such a big deal. And I do think that that’s in the cards next year,
James Connor 6:11
$3,000 is a chip shot. I was hoping you were going to say four or $5,000
Chris Mancini 6:17
I mean, it’s, it’s, yeah, I mean, it’s, it’s one of those things where I’ve been involved in this for so long, right, where I’ve been studying and analyzing and looking at the gold price every day of my life for the past 1516, years, whatever it’s been as I’ve been doing this. And the concept of 3000 again, for someone like me is is like, never would have thought, because that’s that’s really an all time high, you know, you know, you know, 2015 years ago would have been something that, that I, that we would have, you know, said, Oh yeah, that’s, that’s a ways off. So 3000 Yeah, it’s one of those things. It’s a mindset. But for sure. I mean, when you’re looking in the content, you know, could 4000 be in the card, sure, you know, why not? I mean, but you know, you look at again in the context of what bitcoin does on a monthly basis, it goes from 660 1000 to 70,000 so a similar percentage move for gold, you know, from here would be, I guess, something like 3500 or, you know, something like that. So, so why not? I guess is, a response to that.
James Connor 7:21
And so you don’t have a target price per se, but what about, what price do you use to value a gold producer? What
Chris Mancini 7:29
we do is, you know, we put in the model the spot price. So we assume that the market is valuing the stocks based on the spot price of gold. And so, you know. And then in terms of how we position the portfolio, we try to figure whether or not we are in a bowl, you know, for an uptrend, which stocks would do better if the price of gold were to go up, and which stocks would do worse if the price of gold would go down? And so, you know, to the degree that we think that we’re in a bull we’ll, we’ll price the stocks at the spot price, but we’ll, but we’ll, you know, we can stress it. We can just plug into our models higher gold prices and see which ones would do better in that scenario. And so like, one example of that, say, is Anglo gold, which is a big producer. It’s relatively high cost, but it had and it also has debt, so we’re valuing it right now based on the 2750, but I’ll stress it in my models at 3000 and see what it does look like and and you know what it would trade at, at at those levels. So, so, you know, we use spa, but we we play around to see where they would go in in certain circumstances.
James Connor 8:46
So I want to ask you about a few specific names, but before we do that, I want to spend a little more time on inflation. And we started this conversation by talking about how much tickets were to the World Series. But it doesn’t matter if you’re talking baseball tickets or tickets to see Taylor Swift. The prices of everything have exploded here in recent years. Inflation is at 40 or 50 year highs. And because we’re seeing this increase in inflation and also this move in the gold price, are you seeing, what sort of flows are you seeing into your funds?
Chris Mancini 9:17
We’ve seen, you know, since we’ve actually seen the flows. So for most of the year, they were pretty flat to negative. And it seems like they’ve trended kind of in line with the flows into and out of the ETFs, the gold backed ETFs, like the GLD and the IAU So, but like on a more muted basis. So the beginning of the year, small flows out, then they kind of leveled out, and now we’re getting small flows in, and again, kind of in line with the market’s broad interest, I think the US market’s broad interest, or disinterest, really, at the beginning of the year, and now interest in gold
James Connor 9:57
and how large is your fund? Now? In terms of AUM,
Chris Mancini 10:01
the funds around $400 million now is our, is our open end long only gold fund. We have a couple separately managed accounts which are like 30, 40 million. And we also sub advise for a German fund which is around a German long only gold fund which is around 60 million and
James Connor 10:19
I’m surprised given the move that we’ve seen in gold this year. It’s up over 30% in the year. But why aren’t you seeing more flows or more interest? I
Chris Mancini 10:28
just think it’s still really muted in the US. I mean, I think that although we started to see flows into gold backed ETFs, they’ve been, you know, it’s a positive trend, but it hasn’t been a huge spike upwards. And I think that the broad markets done really well. You know, we see, you know, gold’s up this year, but Nvidia is up a lot more, you know what I mean, and, and, and I think that the stock market generally is working. And so when the stock market’s working, you know, like, again, with, with the guys who are listening to this, like, with, if the advisors call them, call up their clients and say, we’re thinking of, you know, putting, starting a position in gold. You know, I think that the general kind of view from the from someone, you know, a wealthy individual, who’s owns a business or something like that, might be, well, why would you do that? You know, the stock market’s doing well, and it’ll probably continue to do well. So I just think it’s not so much that that there’s a huge disinterest, or I guess it’s not so much that people don’t like gold, but it’s just that they it’s not that they hate gold, it’s just that they don’t really think about gold. And I think that’s still the case. So I think that we’ll have to see maybe interest rates decline more, you know, maybe, and that that lure of the cash become a little bit less. And so advisors say, Okay, let’s put something that’s let’s put some of your assets from cash into something else. So that might happen. A recession would help it too. So,
James Connor 11:59
so it’s basically because there’s more interest in other asset classes. Other asset classes that are doing better than gold is,
Chris Mancini 12:08
I think so. I think so, and especially the broad stock market, which is doing really well. And so that’s where, you know, Americans interest I mean, every American knows about the stock market every single day and when it’s doing well, and that’s where most of their assets are. That’s what they think about. And to be even, you know, for an advisor to say, you know, how about thinking about this other asset I think, is, is risky for them, you know what? I mean, even, even professionally. So there’s just this, this lack of interest, yeah, because the other asset class, especially stock market is doing well. So
James Connor 12:41
one of the things that really stands out to me is inflation, right? And it’s in spite of what the government says. You know, they say, oh, it’s approaching our 2% target rate. I disagree totally. I think inflation is not going away. I see it pick it up in tooth picking up again in 2025 the Longshoremen on the West Coast just negotiated a 32% pay increase over six years. The east coast longshoremen negotiated 60% wage increase. We have the Boeing mechanics currently on strike, and this is all going to trickle down to mean you in the coming year, right? And that’s only going to result in higher prices for everything. So what do you think this does, you know, six or 12 months from now to the gold price?
Chris Mancini 13:26
Yeah. I mean, I think that if we’re an environment, I think that, like, almost a best case scenario for gold is, like the stagflationary type of environment, because, I think, or an environment like you’re mentioning, in which, you know, the economies, well, yeah, weakening somewhat. Rates are coming down, and inflation is really sticky. So in in that type of scenario, I do think that people start to say, Well, wait a second, you know, like, like, my cash is yielding less and it’s also purchasing less because of inflation. So like, you know, that’s when they start to realize, wait a second, I need another asset class. I need something that will hold its value over time. And I think that that’s the really good scenario for gold. So I think that in in that type of environment that you’re talking about where because we are seeing the economy start to slow and and in fits and starts, we are seeing the jobs numbers, you know, weaken now. They go up and they go down there, and they’re kind of seasonally adjusted, and that kind of thing, but, but we have been seeing a weakening in the job market, and we have been seeing unemployment go up partly because we haven’t been seeing as many jobs, and partially because people are coming back into the labor force. So I think that if we are in that environment that you talk about where, where inflation goes up because of of labor pressure and and jobs in the broad. Economy start to weaken a little bit like then people will start to freak out a little bit and say, just, you know, let me have some gold. Hi
Andrew Brill 15:07
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James Connor 15:45
So we also have to talk about the fact central banks have been very aggressive buyers here in the last few years, I believe they’re acquiring around 25% of all production. Why have central banks been so aggressive in acquiring gold?
Chris Mancini 15:58
Yeah, I think that what’s happening is it was just a huge, this monumental shift. I spoke about this before, but it was, it was really, really a huge shift in the whole paradigm. When the United States and Europe confiscated Russia’s reserves, Russia’s US Dollar and Euro denominated reserves after it invaded Ukraine. And so, you know, Russia thought that they were, you know, these were assets that they had that they could use in a pinch, and that’s what their their reserves were for. And then all of a sudden, boom, you know, with a with a push of a button, essentially, they’re gone. And and so I think that other countries are starting to see, like they saw that, and especially China, but not just China, and they’re saying, okay, like, How can my reserve, all of my reserve wealth, our entire nation’s savings, Be be placed in an asset which can be taken away just with the push of a button. And so, like, like, conceptually, I think they’re talking about this and going, okay, like, this doesn’t make sense. So what can we have that can’t be fit, you know, actually taken away from us? And gold is the answer. I mean, that’s, that’s the one. It’s in a vault. You know, it’s why it’s been money for as long as people have had money. So, so that’s, that’s a huge deal. And I think that that will continue to be like, like a base load source of demand for gold.
James Connor 17:32
So you’re, you’re bullish on gold, I gotta ask you about silver. Now it’s trading. Where’s, I think, around 3435 bucks an ounce, where, what are your views on silver?
Chris Mancini 17:43
I think silver is, you know, it’s, it’s going to do well, if gold has a run, I think what will happen is, like my view is that it’s, it does have a lot of torque, because Silver has an even bigger base load source of demand. So I was talking about gold having that basal source demand from Central Bank, sure, but that could go away. Silver’s base load. Source of demand is industrial from solar panels and other industrial uses, like it’s antibacterial, that kind of thing. So, so that’s over 50% of its demand is has that solid baseload, and it’s growing. And so the marginal source of demand is, the is from investment and like investment demand, and it, I think it really is more of a retail investment demand so central banks. And part of the reason is that, you know, if you’re the Russia, if you’re the Chinese central bank, and you want to own an asset which can’t be confiscated, and you’re looking around, you need a lot more silver at $35 an ounce, and you do need gold at $2,800 an ounce, just physically to be able To store to be meaningful. So I think that, and that’s, again, that’s part of the whole analysis. So I think that that, that the I think that the central banks, again, are going to stick with gold, but I do think that the retail like when they see gold moving, will move into silver and and they’ll move into a quickly, and because there is that base load 50% or a higher source of demand, it’ll make silver run real, really fast and like, kind of catch up to gold, kind of as we’ve seen in the past couple weeks.
James Connor 19:34
So we always hear about people talking about this increase in industrial demand for silver, but and how much is growing? But in spite of that, it doesn’t really Yes, sure, Silver’s at 35 bucks, but the all time high is $50 that was set back in when was that 2011 2012 Yeah. So in nominal terms, what’s the real price like? Maybe it should be 75 or 100 Why isn’t the seven? Overpriced, significantly higher than where it is right now.
Chris Mancini 20:02
Yeah, I think that that, you know, I think part of it is just that there’s like lot of silver is produced as a byproduct. So to the extent that some gold mines did shut down, or when, when the gold price declined, that didn’t really happen for silver, because silver produces a byproduct of lead and zinc, you know. So I think that that, that the demand stayed pretty constant. And I just think again, that notwithstanding the fact that there has been an increase in industrial demand, I mean, one thing actually, it’s not a huge deal, but there has been a decline in demand. Was photography was a big source of demand, actually, back 15 years ago, because that’s was used to develop photos, and now that’s not being done anymore with the advent of iPhones and things like that. So I that’s a small kind of lack of demand. And then, and then, you know, the other thing is that not with again, not withstanding the increase in industrial demand, we still haven’t seen the investment demand and, and I do think that it’s like gold gets the first degree of investment interest from institutional buyers who can buy a lot of it. And then I, my sense is from back from my having done this for as long as I have, the real move in silver was when it was like a retail like my, again, I don’t have any data on this, but just from talking to people, whatever it’s like. It was the retail move. It was the idea of someone saying, okay, I can either spend $3,000 and get one coin at Costco, or I can spend $3,000 and get, you know, 80 coins. Or, you know, then it was like, Okay, 3000 gets 75 coins, 70 coins and and it just feels like it’s more. And that, again, you know, drives the price up as as the retails just buys up the buys up the physical silver. So I think that that for it to really move. I think gold to move first, and then you’ll have to see it trickle down into retail, retail in the US, and then, and then it’ll cause it to catch up. That’s my sense.
James Connor 22:20
So it sounds like you’re really bullish on gold, not so much on silver the short term. I
Chris Mancini 22:25
mean, I, you know, I like gold better than silver. I do because it is the monetary metal. I mean, at the end of the day, the real play for for a gold investor is a or for precious metals investor is a significant debasement in the currency. And so the real play, really, and, you know, I suppose before, is just the idea of the US having a scenario like Argentina, and when Argentina had a hyperinflation, or when it has its hyperinflations, it ties its currency to a hard asset. What it does is ties it to the dollar. If the US has a hyperinflation, you know, which is a which is a distinct possibility, it will have to tie its currency to a hard asset. And it’s not going to tie it to the euro or the yen or anything. It’s far too big. What it’ll do is it’ll tie it to gold, because the US owns gold in Fort Knox, the biggest owner of physical gold in the world, and so, and all these other countries are thinking the same thing. So gold is the the monetary asset. That’s the real play at the end of the day. But I do think that silver will have its moments.
James Connor 23:34
So inflation hit 300% last year in Argentina. Do you see that happening in the US?
Chris Mancini 23:40
You know, it’s, you know, I was looking there’s something called the committee for the responsible budget, I believe is the name of it, and it’s this bipartisan committee, and they did an analysis of all of the promises and things like that that both Harris and Trump have made on their campaigns, and what they’ve written in their statements, whatever their platforms, and it’s like under both of them, there would be an enormous increase in the deficit over the next 10 years, or whatever time frame They mentioned in their report. So, you know, in the in the realm of trillions and trillions of dollars of an increase in the deficit. So, you know, that’s the whole situation. I mean, we’ve also seen rates. So it’s, it’s, we’ve all heard the story before. In terms of the spiral, rates are really high, the interest on the debt goes up, and then there, there will be pushback from the market at some point when the borrowing just continues and continues. It continues, and both parties are pushing for increased borrowing. And when you have to borrow more, you have to pay more to borrow. That’s just how it works. And so interest goes up. And, and, yeah. I mean, it’s a it’s a distinct possibility that the United States is in one of those inflationary cycles, which of which eventually leads to hyperinflation, like happens and has happened all over the world when you have fiat currencies, especially
James Connor 25:15
if you see unions negotiating 3040, 50% pay increases, like we have seen in the last two years exactly. And
Chris Mancini 25:22
I think, I think something else to remember also, and to think about Jimmy, is just that what we’ve seen actually, is that, from a payroll perspective, the the cyclical employment has been declining, so meaning, like industrial jobs and things like that, non cyclical has been increasing. So that’s essentially government workers, so people in education, health care, defense, you know, other, you know, federal jobs, things like that, and and that’s what tends to happen, too in places like Argentina, is that the when the economy weakens, they just, they just hire more people, and government backed jobs. So you, so you also, you have the Longshoremen getting paid more and things like that. And then you also have government jobs continuing to sop up a certain amount of demand and that, and but, but it’s, but it’s in the context of a weakening of broad labor market. So it’s this weird kind of, it’s artificial, and it does lead to, like a stagflation, and then eventually a potentially hyperinflation.
James Connor 26:29
And that is exactly what’s happening in Canada, yeah,
Chris Mancini 26:34
yeah. I mean, yeah. I think I’ve, well, the Canadian dollar has been weakening. I mean, I think that’s one of the, you know, first I’ve seen just one of the weakening, and has really weak trend to it. And, yeah, I mean, I think that the that the, you know, Liberal government in Canada, it’s the Liberal Party, right? That’s, that’s what it’s called, right? Yeah, they’ve, yeah, I mean, it’s just been, it’s been, for my understanding of it, it’s been a huge mess. It’s, it’s more down the down the road than the US is in terms of that eventual conclusion. So, yeah,
James Connor 27:14
yeah. And just to clarify, we actually have two parties running the country now. We have the the Liberal Party, but they have a coalition with a Socialist Party referred to as the interest. And so these two parties together have really driven this country into the ground. And but I bring it up because you made mention of the fact that in a country like Argentina, what they do is, in a declining economy, they keep growing the number of people that are employed by the government. And that’s what this government has done, exactly,
Chris Mancini 27:44
I mean, and it’s the playbook, you know what? I mean, it’s just a playbook of how these things work and and it’s, it’s in the US to we’re saying, I believe that it’s happening in a much more severe way in Canada. And, you know, I mean, it is what it is at this point, and, and it seems like, you know, there is pushback for sure, you know, we’ll see what happens in terms of, like you said, there’s a little thing going on next Tuesday here, that that, that you might have heard about in Canada. So we’ll see what happens then, you know, week from today, but, yeah, so, so there is some pushback, but from, from the electorate, but it’s like, once you’re on that path, it’s, it’s hard to to get off of it. So
James Connor 28:31
I want to talk about equity valuations now, okay? And one of the reasons why we invest in, in gold equities is because we want the leverage. Okay? We don’t want to make 30% we want to make 60 or 90% or whatever the number is. And we both know mining is extremely complex. You got there’s so much to consider metallurgy and grade and size and geopolitics, of course, and this impacts a company’s profitability. But I want to look at a couple of names now, and I’m going to say Newmont, it’s the world’s largest gold producer. They just came out with a disastrous q3 and one of the things that really impacted them was inflation, you know, topic that we’ve already discussed, but they’re all in sustaining costs. With 1600 bucks an ounce, up from 1400 a year ago. What are your thoughts on Newmont and the quarter that they just reported,
Chris Mancini 29:21
you know, Newmont, like, like you said, I mean, it was disastrous. And it actually, you know, like, disclaimer, it’s the biggest position that and Agnico are the two biggest positions in our fund. And it was disastrous messaging more than anything else, and and the management really should be called to task on the disastrous messaging that they gave in that, in that, in that quarterly report. Because what happened was they came out with the they put their press. Lease out at night, Wednesday night, and then Thursday morning. It actually traded in Australia just on that, because it trades on Australia through the through the new crest deal, and it was down around like 5% I think because of that, because, like you said, they’re all in sustaining costs were higher for the quarter. Then in the morning it traded in the US again down around 5% maybe even less than that goal was up a little bit. So, so three, 4% that kind of thing. Then on the call, which is 11 o’clock Eastern time, they just bungled the messaging on the call and and I think that they need to go come out on the street and say that they messed up with the messaging, and that the message is still the same. I mean, the big picture is that the reason that the costs were higher for the quarter was primarily because one of their minds, which was shut because of fatality, actually, in Argentina, Sara Negro is is ramping up. And so it’s not at full production. Another mine that was acquired from new crest causal here was did maintenance on their plant, and so their production there was a lot lower than it should have been. And then they’re, they’re non core assets, which are held for sale, which are going to be, you know, which are in the process of being sold, you know. So they will be sold within the next actually, all six of them, because none of them, none of the sales have closed yet, even though two have been announced. Those were actually very high cost, too. And so when you take a step back and say, okay, like the here will be at the maintenance will be done, that’ll be at a full run rate, the costs will come down. Sorrennegra, hopefully will have ramped up from the startup process. The costs will come down. And then when the other when the non core assets are sold, the average costs will come down. And the story is still that next year, when all of this is done and taken care of, it will be in the lower half of the cost curve of the all in sustaining cost curve. So I still think that that’s the story, and, and, and that’s what they need to come out and, you know, hit the road and talk about but, but, but that was a huge bungling of the message. And I think what it tells you more than anything is not so much that that the costs are going up so much. It’s just that the market is really spooked by the concept of cost potentially going up. So what we’ll see at the end of the reporting period, so like, they were one of the first to report. So we’ll see Barrett come out with their cost and Agnico, I think that’s important Kinross, these will be important ones which have a wide range of assets, open pit, underground, really, all except for Agnico, like all over the world. So we’ll see what the cost trends are and but, but that did spook the market, and they and they didn’t do and they also brought their guidance down for the year on the call and not in the press release. And that spooked the market. So it was like, and again, it’s because of these, the LA here, which had the maintenance, and then another new crest mine, which they called Bruce Jack, which they’re which they need to do more drilling on to get a better sense of the deposit. So this is, you know, again, it’s a long way of saying. I think this was Newmont specific, and there’s a messaging issue. But because of that, I think the market is like spooked about costs.
James Connor 33:40
So and just to provide a little more clarification for our audience, it was up 30% on the year. Now it’s only up 15% on the year versus GLD, which is up 30% so I want to ask about Barrick now, because Barrick is the second largest gold producer in the world, it’s up 10% on the year. Okay, so which is shocking. What are your thoughts on Barrick, and why the dismal performance?
Chris Mancini 34:06
I think it’s, you know, I think it’s really interesting. I mean, I think you do have to pick your spots within the sector. Um, I think Barrick, you know, they, they’ve had, you know, again, it’s like they’ve had issues in terms of their costs going up, as you say, and, and they’ve also had issues in terms of their messaging and in that, in that, like they they don’t have any growth, and they are very reluctant to do deals. And, and they’re also their growth is in, they’re building a big project in or they aren’t building it yet, but they will likely announce that they’re going to start building a new they’ve been talking about a lot, building a big project in Pakistan, and so you’re like, you know, get. And multi billion dollar investment. So So I think the market is just saying, Okay, you guys are aren’t really willing to do acquisitions. You’re not growing. Your costs are going up, and you’re allocating your capital to a big project in a place where there are no mines that are owned by Western companies that I can think of, and I don’t think there are any. So, so it’s, it’s, it’s, I think the market is kind of of questioning their strategy, and it’s also seeing that the costs have gone, have gone up and are and have been trending upwards. So it’s like, so, yeah, I mean, it’s now, you know, question, Jimmy is, are you going to mention Agnico next, which has done really well?
James Connor 35:48
Well, I Yes, and I just want to provide. I’m glad you brought that up, because I talked about, I brought up Newmont and Barrick, which are both having abysmal years. But then at the other end of the spectrum, you got a Nico, which is doing extremely well. It’s up 60% on the year. Kinross is up 80% I am gold is up over 100% so we have this very big divergence happening within the industry. And to your point that you made earlier, you got to be very careful on your selection. You
Chris Mancini 36:16
have to be careful. Yes, actually. So we are so Newmont again, like Newmont. So Agnico is our biggest position now, because Newmont had to pull back. So they were kind of like the same size. Now, Agnico is our biggest done really well. I’ve just been a just and they have an excellent strategy, and they they execute consistently. Their minds are in Canada, mostly, you know, couple, one mine in Finland, one, one mine in Mexico, one in Australia, but really their base is in Canada. Great team been around for a very long time. Great culture there. And very solid, you know, again, we still have the feeling that Newmont is creating that type of company with the Newcrest acquisition. So we’re betting on that. And but, you know, again, it was like, it’s very, very frustrating what happened last week. But Kinross is, I mean, Northern Star is an Australian company which has done well, and that’s a big position for us, and Kinross is also a big position for us. And that one is, you know that one had its moments where we you know it, it had a mine and more tan, it has a mine in Mauritania. There was an issue with the government there wanting a bigger piece of it. They also had mines in Russia. Those mines, eventually they were able to sell those quickly, which was smart. They moved quickly. They sold them right after Russia invaded Ukraine, and then they bought a deposit in Canada, which didn’t have a resource, but in the market, questioned that called Great Bear. But they’ve, you know, they’ve proven themselves there. So that one, I think, has a lot of runway, generating free cash flow, paying down their debt, buying back stock. So you really have to pick your spots and, and, you know, and, and, you know, Barrick is a smaller position for us now because we are questioning their their strategy to some extent. And, you know, Newmont again, we have to, we have to figure out whether or not the management is capable of executing and telling the story. But they’re really all over the place, and that’s why, you know, you know, hopefully you’d want to hire us to to, you know, to to manage, to manage the stocks, right?
James Connor 38:32
And I think one of the takeaways I just got from what you said is the importance of being in the right country, because geopolitical risk is a big is something that can really negatively impact the stock price. And you just talked about Barrett going over to Pakistan, Kinross, where was their big asset? Oh, you said in Russia. And then, of course, first quantum, it’s not a Yeah, yeah. And then, of course, first quantum. They’re not a gold producer, but they had their asset, largest asset effectively stolen in which is in Panama. So big Nico, 75% of their production comes out of Canada. So once again, jurisdiction is very important when it comes to mining,
Chris Mancini 39:20
exactly. And I think that part of the reason that it’s so important is because, you know, we as portfolio managers of a gold mining fund have to all have to figure out which is the best, you know, which are the best assets and which are the best managements. But we also have to try to figure out where the generalist will go right when they do become interested in gold, and I think that, you know, again, just, you know, having to analyze all these different stocks, it’s the same thing. It’s like, if you you sometimes you see things, and you immediately say, within a stock, a certain characteristic, and you say, Yeah, forget it. Not going there, you know. Know, like, you know, like, I could look at something and say, yeah, it’s, it’s a big development stage. Projects going to need huge amounts of capital. The market’s not there yet. I’m not even going to really pay attention to it. Or, like, you’re saying, you know, the the metallurgy is an issue on this. I know the market will never get behind the metallurgy. They need to use an untested technology. They need to use some kind of ore sorting or something like that. The market won’t get behind it. Won’t finance it, you know. And I’m just going to, you know, spend my time focusing on other things. So I think the broad, generalist investor also looks at the market from that perspective, like he said, he or she will say, will say, you know, okay, yeah, so tell me about, wow, I should have some gold. And we’ll call up a broker, and I’ll say, you know, like, like, like, like you used to do, Jimmy. So Jimmy, tell me about what I can have, you know, I need something that trades a certain amount per day, you know, has a certain market cap, right? And, and all that kind of stuff. Okay, well, Barrick Newmont agneco, okay, well, tell me about, you know, Barrick blah blah blah. It has a, it’s, it’s growth project is in Pakistan. Like, no, no, thanks, you know. And okay, tell me about, Alright, tell me about Newmont Newman blah blah blah. Now we think again their, lot of their assets are in Australia, North America. So we think that that’ll fit that criteria. But at this point, it’s, you know, they they messed up the quarter. So at this point, you know, the guy, maybe they’ll say, okay, that’s an opportunity or not, so, whatever. But with like Agnico, it’s Tell me about it. Okay, well, where are their assets, Canada, you know. Okay, what’s their growth? Well, their growth is in Canada. Okay, great, you know. Okay, so, yeah, just give me Agnico. And I think that that’s, you know, we have to assess that too, terms of where the market will go. But that being said, there is a price for everything, you know. So like, you know, one of our big holding for us too, is endeavor mining, which has all of its assets in West Africa, but it’s trading at a 25% free cash flow yield off of next year’s free cash flow once they bring these two mines online. So it’s like if those assets were in Canada, all in Canada, it’d be trading at an 8% free cash flow yield. So you know, there’s we think that eventually the market will realize the free cash flow generation from that company and trade it up. So, you know, but, yeah, but jurisdictions is extremely important.
James Connor 42:29
Chris, you’ve been at Gabelli now for 16 years, and I want to get a sense of how you would characterize this time period right now in the gold space. Okay, I know that the last, until the last couple of years, things were quite tough. Yeah, yeah, yeah. I
Chris Mancini 42:45
mean, what I’d say is that, like, it’s, it’s very nice. It’s very nice to have this high gold price, and really to look at my models and see the company’s reports and say, and really say, wow, these companies are really doing really well. They’re generating lots of free cash flow. Things are good, you know, like, great, some breathing room, finally, like you’re saying, but we still have days that are extremely disappointing, like the Newmont day last week, where I went home and was like, really, you know, I was really disappointed. And, you know, I think some of that is the function of our being in a bear market, where we’re I think we’re still at like that, like we’re coming off of a horrible bear market. So I think the when, when, you know, at the end of the day, the message is still the same in terms of what Newmont will be next year and in 2026 but the messaging was was botched, and the market just says, Forget it, and just sells the stock off on the botched messaging, it shows just a lack of confidence that the market has in the sector right now. So we’re still not it’s not, you know, happy days are here again, like, I was at the gold form Americas in Colorado Springs last month. And, you know, again, it was, it was that kind of feeling. It was like talking to the companies, lots of companies, all of our holdings, you know, potential holds. Like, things are good, actually, for the first time in a long time. But it wasn’t a lot of like, you know, bottles of champagne and cigars being smoked at the bar. It was still, you know, pretty, pretty sad in terms of the stock price performance of lots of these stocks and, and just the sentiment was, was still kind of heavy.
James Connor 44:33
So the gold guys are not celebrating like the Bitcoin guys,
Chris Mancini 44:37
no, definitely not. No, definitely not. We’re not there, and, but, but I’ve seen it there, you know, 2011 you know, when I went to the gold farm Americas, it was, you know, there I, I was like, okay, you know, waited like, people are really happy, you know, again, maybe that was a sign of, because that was the top for a time, right? And I was so, i. It was like, Okay, people seem a little bit too happy, but we’re like, so far away from that at this point. You know, I think that we will get there if and when gold does go to 3000 and these companies, we finally see a stabilization in costs. I mean, you know, one other thing to think about is the Canadian dollar is very weak. And there are lots of like Agnico and lots of other companies have mines in Canada, so their costs are in Canadian dollars. So it’s at, like a five year. Anyway, you know better than I do, but 72 maybe even it’s it’s been close to 71 cents. So very weak, and that’s helpful from a cost perspective for companies that have mines in cannabis. Same things happening now in Australia, the Aussie dollars hitting like the point the 65 cent level or around there, Mexico has had a very weak currency recently. So like those. Those little things also help too. Just to throw in there, in terms of us hopefully seeing stabilization and cost, the energy price coming down. You know, if Donald Trump is elected and he says he’s going to drill, drill, drill, that’ll be good for the gold producers.
James Connor 46:18
So, so your message is, this is just early, early innings in in the gold price, and there’s still lots of time, even though gold’s up 30% of the year, still lots of time for investors to get involved. If
Chris Mancini 46:31
you know, I think that there’s a lot of time for investors, yeah, to see that. You know, if you want to wait to see a stabilization in the in costs, and we might see that just within the next few weeks, as these companies do report. Then, then maybe then you could buy. But if you think the price of gold is going to stay here and the costs do stabilize, or if you think even better, if the price of gold is going to go up, I mean, there’s a there’s a lot more to go for in the gold stocks. I
James Connor 47:00
think, Well, Chris, that was a great conversation, and I want to thank you very much for spending time with us today. And if somebody would like to learn more about you, or maybe get your thoughts on what’s happening within the gold sector or learn about the Gabelli funds, where can they go?
Chris Mancini 47:13
Well, I’ve done I did this last time, and only one person emailed me. I’ll give you my email. C mancini@gabelli.com you can email me. I’d be happy to get back to you. And also, gabelli.com is our website, so all of our information is there. I’ll make
James Connor 47:31
sure I get my wife to email you.
Chris Mancini 47:33
Thank you, Chris
James Connor 47:35
once again, thank
Chris Mancini 47:36
you. Okay. Okay, thanks, Jimmy Good talking to you
James Connor 47:39
Well, I hope you enjoyed that discussion with Chris Mancini on gold and how it can benefit your portfolio. If you would like to learn more about gold and how it can add safety and diversification to your portfolio, visit our sister company, hard assets alliance.com. Hard assets Alliance is a trusted platform that’s being used by over 100,000 institutional and retail investors to buy and store physical gold. Once again, that’s hard assets. Alliance.com there’s a link below in the show notes. Don’t forget to subscribe to our channel and give us a like and also share it with somebody else. And by all means, leave a comment below and tell us what you liked or didn’t like. If you want to check out more content, look at this video now.
