Gold Is Holding Strong. Why Are Mining Stocks Falling? - Paul Gurney

0:16Trevor Hall: All right, everybody, welcome into a special week here of Mining Stock Daily reporting from London and our annual pilgrimage to what I think is one of the most fabulous cities in all the world for LME week. And we are going to start our coverage of this week with the one and only, a good friend of mine, a good friend of yours, a man of the people, Mr. Paul Gurney of Beacon Securities and author of the Gurney Game Plan. Paul, good to see you. Great to see you. I know. I'm sorry we couldn't do this in the St. Pancras as we usually like to do, but we're trying to, you know, add a little bit more audio and video now.

0:53Trevor Hall: Mix it up. Mix it up a little bit. Some people can see your three-piece suit. Well, you know, when you're traveling over here. Yeah, the double-breasted last night, you know, rocking the 80s. That's all right. Yeah, bringing it back. Early 90s, I like. Yeah. Listen, it was good to see you. There's a lot going on. Obviously, as most people know, you kind of sit in this interesting position between institutional investors, mining management teams. Sentiment right now in the mining and metal space is quite mixed. I think all of us that live in this world are very positive, but the outside market is yet to have much desire here.

1:34Trevor Hall: Where does sentiment in mining metals sit from your desk today? I see it as negative, as negatively inclined. But four weeks ago, it was neutral positive. So I think right now it's death by a thousand cuts or trading days because things keep going down every day and the market's quite volatile. But I think overall, when you look at commodity prices like copper's record highs, gold's still holding up. So I think, you know, the commodity bull is still there, but I think short-term sentiment is quite negative, which is usually a pretty good opportunity. yeah well let's maybe stick with gold here because that's always kind of been the bellwether despite copper you know being in a really good spot you know it was interesting i i sat down with michael gentile yesterday he said a year ago yeah we were at the relatively same price where gold sits today but that was on the move up and now that it's come back down to 4100 sentiments you know in the tank But the equities in gold have just completely dispersed from the realization where the metal is today.

2:41Trevor Hall: So what do you think resolves that gap between the metal and the gold? Well, so it's gold in particular, obviously, it's a financial metal, right? So we can think about it in how's the macro looking at it, which, you know, most people on the gold long-only side look through because they're bullish gold over 5, 10, 20 years. and you're going to have the short-term turbulence. But for the most part, if rates are going up around the world, in particular in the U.S. two to three times in the next six months, then that's a headwind for gold, right? And so the prediction is that the gold price is going to sell off.

3:20It hasn't. It's held at that 4 ,100 level, but the equities have derated in anticipation because the people who play the equities anticipate the gold price is going to go down. So that's the short-term noise. I get asked every day, like, is it the midterms? Is it this, is it that? Is it oil price? And I'm like, my answer is it's all of it combined right now because you've got debt yields going up and in the UK, they're going up too, by the way. So it's, it's here, it's the US and when things are going one way, it never, it feels like it's not going back the other way. So now, you know, yesterday someone was like, well, US Treasures are going to 6%.

3:54And, you know, I was, uh, I was pitching somebody on, on gold in a, in a pub last week and a guy from across the way said, don't buy gold, buy UK gilts, they're going to 8%. I didn't have the heart to tell them that means you shouldn't buy gilts. So, yeah, you're short gilts. So, I just think we've had gold. I agree with him. It's held in nicely. And, you know, we're still very bullish on gold price. So, you know, you just have to sit and wait it out.

4:23Trevor Hall: I've been pretty surprised that gold is actually held in there despite the volatility in the global market. Totally. Right. So it's, it's a bit, it's a paradox, right? So you look at the D rating, you're like, is the D rating predicting that gold's about to crack? Or is it just people getting nervous and worried that gold's going to crack? And you'll, you'll know the answer in the next like two to eight weeks. Two to eight weeks. Yeah. Cause November tends to be a fairly good month for gold. Right. So into year end. So if it's going to crack, it's, it's through these midterms and what happens through that.

4:57Trevor Hall: Yeah. Well, the midterms are actually, I think, could be a potential catalyst one way or the other. And maybe let's transition to copper because that will have potentially have some implications on the copper market. Obviously, copper's had a huge run here in 2026. A lot of just buying as much as they can because of the tariff situation out of the U.S. But if that midterm election comes in and maybe put some resolve with the tariff policy out of the U.S., does that have a negative implication for the copper market? I think so. And I asked, like, we have a lot of traders in London this week. So the ones that I met yesterday, I was like, well, what's your best trade?

5:42And the one trader said to me, copper up 20 % in the next three weeks, and then it's going to sell off. Well, I was like, okay, what's driving that? And it's exactly the trade that you talked about that everyone's lined up on one side. And once it's realized, we're going to get some short, and that's a trader, right? This isn't a long-term copper bull, which most of us in the mining sector are. but the price has done well and equities in particular developers haven't really followed along right so it's another disconnect where price is moving the valuations aren't following along like one or the other tends to break at some point and from where i sit and what this trader was saying it looks like this is going to be the copper price in the next kind of one to two months

6:26Trevor Hall: all right so the tariffs are going to provide a little bit of theater but what is the underlying supply demand factor, despite what... Exactly. So taking away from trying to call the market every day and just looking at long-term macro, you've got a year where we've had tons of disruptions in copper. We've got issues at a lot of large copper mines. We still don't have a lot of new supply on. So from where I sit, the market's really tight. And from the funding perspective, if you look at the pipeline of new copper projects, there's not a lot. And it takes a long time to find, permit, and develop a copper mine, which we all know.

7:02But to fund a copper mine is billions of dollars. At the smaller end of the spectrum could be a billion to two billion, and that gets you 25 ,000 to 50 ,000 tons. That doesn't solve for like a deficit of 200 ,000 to 300 ,000 tons, right? And the majors can't push these or sweat these assets any harder than they are. And they're running into issues all over the world. So the market's very tight, somewhat. there's predictions for deficits in 2027. I find the market tends to balance itself, but I think that the outlook for copper remains positive, remains massively bullish. And so that's how we're aligned.

7:36Trevor Hall: Well, on the copper side, especially the equities, I think there is, I don't think, I know there's a lot of anticipation with more M &A in the copper space. There's some late stage development projects. I think a lot of people are just waiting to get acquired and then for a major to allocate that capital to get it built, you know, a huge spend. But it just, nothing's really quite hit quite yet in the copper space. We've seen a lot of gold, got a lot of gold M &A. But in the copper space, the capital allocation yet to build a new project just hasn't come. And I'm just kind of curious if that tension is so tight once we get one, do we start seeing a domino effect of others coming on?

8:20I, my view on this, I was just talking to someone at lunch about the copper space, because we've obviously funded a bunch of these development projects. And my view is the majors, they either want something of scale, which is like 150 ,000, 200 ,000 plus tons per year. And that takes years to develop. And that's a multi-billion dollar development like BHP is doing with the Lundians at Philo, or they want something early. Like they, the in between is just not attractive enough. So like 50 ,000 to 25 to 75 ,000 tons, like that, that really is like mid cap land. And we haven't really seen that consolidation in mid cap land.

9:01Like they, they want, they favor production. So my feeling is these development projects are going to have to fund themselves, get themselves a production and get that re-rate. And then companies are happy to say like, okay, I'll now I'll pay the premium on this. but in terms of developing a project in this environment they're they're very reluctant and to your point is it a domino is everyone sitting around with their price on project x and just waiting waiting for one of them to go down i don't get that sense i'm not in the room on these conversations obviously but i just look at what has happened and what's transacted and it's been things like in the 300 to 500 million market cap where you can pay cash you You don't have to dilute.

9:44Miners in this cycle seem quite reluctant to use paper to do stuff. Do you think that's kind of a problem to not use the paper? I see it as them being disciplined. And in all these panels, you listen to these experts who are way smarter than I just say, like, the key to this cycle is that the miners are still maintaining discipline. And when you see that fall apart, then you should start to get worried. it's not hard to see why because if you do the valuations of these companies on spot prices they're all trading at this cannot all but most are trading at a discount to nav so finance 101 says you issue your paper when it's expensive and when it's under nav you should be you know buying back shares or paying for acquisitions in cash avoid debt if you can right and that's again, that's, that's worrisome if someone does a huge acquisition and puts a bunch of 10 % debt on bad.

10:42So I just think it's a function of the valuations across the sector are so attractive that it's like, I don't want to dilute my paper below nav. Like, how can I go to my shareholders instead? I'd rather buy back shares, or I'd rather just take a, you know, I'd rather just take a low risk bet on a project that I can have my team internally. And I can develop that myself along the way using internal organic cash flow.

11:06Trevor Hall: Yeah. Yeah. So I maybe take a step back and I neglect to mention, you know, with HUD Bay acquiring Arizona Sonoran earlier in the year, that was a big deal. And there wasn't the follow through after that. You know, I think in hindsight, me thinking in the back of my head, like, you know, we did have a project come offline, did get sold, but there wasn't a whole lot coming off that. But it sounds like kind of that mid-tier copper developer, is that the sweet spot right now? Like I'm thinking like something like a Magna Mining, you know, has a nice copper asset in Sudbury. Like is that kind of that type of company?

11:48Trevor Hall: Completely. I think anything in production and cash flow is attractive. Yeah. Because it gives you the leverage to the price, which is high right now and is likely headed higher. And like building a mine and delivering a mine is exceptionally difficult. I've never done it. I've seen people attempt to do it. You've only talked about it. If I could build mines, I'd be doing that, right? Because there's a ton, a big shortage of people who can build projects on time, on budget, and get them into production. And the people who can do that are making a ton of money right now. But it's two different approaches here between building a gold mine versus building a copper mine.

12:29Trevor Hall: Because you were saying how the use of debt on the copper space is not necessarily attractive. But I mean, I've talked to a number of CEOs who have late stage development projects in the gold space. And actually what I'm hearing is that's actually really good. The margins are so good. You know, there's debt available and it would be mostly non-dilutive to get a project over the line. So you wouldn't have to do much of an equity raise. right i think if you have cash flow then debt is fine right it's part of your cap structure and i get that and from what i've seen from companies we speak to the debt side of the equation is very competitive so they're getting tons they're getting tons of offers or bids in great terms and so in that dynamic when you have lots of capital available and debt available like sure you should take it.

13:16If you're a company, a project company, it's tough, right? Because if things go the other way, then the equity holders are at risk. And that's not a never, right? So for a billion dollar project, it's like if you're a billion dollar project capex and you're two billion market cap, like if you do that all in equity, it's massively dilutive. And on the other token, like that's a big slug of money to raise a billion dollars on the money side. So I get that split. What I'm talking about is like a Barraclass cycle when they bought Equinox and did it all in debt. And that ended up encumbering the company and sending it into not a death spiral, but like, you know, cost the CEO his job and the whole thing had to restructure.

14:02And we are where we are like 15 years later, because instead of, you know, using their paper, which was trading at a premium at the time, they decided, oh, let's not dilute, let's use debt. Yeah.

14:15Trevor Hall: We've seen a real, on the gold side, obviously, and I kind of hinted towards this, we've seen real pickup in M &A, the gold side consolidating a little bit more. Latest news, SSR, taking out Roxmore, Nevada. And I'll be honest with you, and I think I said this to our listeners, there's Roxmore as a name that I had forgotten about. Yeah. Um, you know, that's probably my own dang fault than anything else. But, um, it, it, are we, are, are we at the start or the middle of a genuine, you know, real cycle in, in, in gold consolidation? I think it's an ongoing cycle, so it never ends, right? Uh huh.

14:52I mean, there's a short life mine, so you always need to replace reserves. I think the thematic and I kind of identified this earlier this week the thematic is like near term mine ounces like that's an easy sell to your board because it's low risk you can do the due diligence like for that rocks more I think it's six miles or six kilometers or whatever from Marigold right so that's easy it's not easy but you know what I mean it's different than building an entirely new project in a region of the world that you're unfamiliar with. So I think that type of stuff, like, so if you look at in the beginning of like the M &A cycle for these things, you look Northern Superior got bought by Imgold.

15:36Again, was a near mine consolidation play, right? Those types of things, but those are four or$500 million acquisitions. Imgold did do that one with paper, by the way. But this Roxmore one, like SSR is like, we've got this money from Turkey. Like, how do we deploy it? Like, this is great. And the CapEx bill, they gave all the numbers on that. Like it's not a cheap CapEx build out per se, but they've got synergies and they've got the team and they can do it. And they're, they're, they're way more, they're better positioned than the Roxmore guys to do it. But I look at that team and you look at what the Roxmore guys have done.

16:09Like they identify these projects that just need to be de-risked slightly and, and sell them on. Like that's, that's a much better outcome for, for shareholders. Yeah. Than sitting and waiting and doing multiple rounds of cap raises and hiring an engineering team and all that. Right. So.

16:28Trevor Hall: So does the, the playbook, if you look at a checklist of potential M &A targets in the gold sector, I mean, is that kind of backyard localization have to be like one of the top, like a resource and, you know. Totally. And close to him as a friend. I mean, you're talking about Michael Gentile, right? You're going to be talking about this. Yeah, yeah. And actually him, like he actually specifically mentioned Radisson. Yeah. Yeah. So that's the whole thematic, right? It's like the near mine deposits, satellite deposits. And the thing is, it's a very Aussie way of investing. If you look at the way the Aussies do it, like when you meet an Australian company, they're like, oh, we're only 300 kilometers from mine XYZ, but we can truck it.

17:13And so they're used to this hub and spoke production model, which is like get to cash flow, get in, get out. Right? Don't spend years drilling it out and building up a feasibility and just diluting shareholders. Right? So I think that's just, that's percolated to the rest of the world. And when you look at the history of like large scale gold mergers, like they don't really work. Right? Like they don't, I've said this multiple times. Like if you look at these big cap companies that bought stuff, like they buy the companies and they end up selling all the non-core assets. and at the end of the day you look at like the share price or whatever and it's back to where it was right so you don't get a premium like there's there's exceptions to the rule but every time i hear someone throw out like potential for this company merging with that i'm like why would they do that what are they getting out of it so you know we'll see i think the the the the goal post for the the tier you know top tier companies used to be you need 250 000 ounces a year for 10 years.

18:09And if it's not that, if it doesn't meet that kind of goalpost, then we're not going to look at it. But I think with the Rocksmart thing, you can see that if it's 100 to 150 ,000, like near mine, it's pretty attractive because it's additive to your existing mine. It's not like a new mine per se.

18:22Trevor Hall: Yeah. Yeah. There's a few specific names that keep coming up in your daily note, and I don't want to talk about specific names, but let's do talk about some specific jurisdictions. Sure. Argentina, still a very lovely place to be working in right now. Does it feel like that froth for Argentina, capital going into Argentina has come off? No, and I was just there a couple weeks ago, by the way, on the ground. And it's interesting to see, like, people are still very fearful of inflation. I think it's still a very attractive jurisdiction. I think it's early days. to the people, you know, the Argentinians there and to the people who are investing, they sit in the back of their minds and worry about 12 months from now when they have a presidential election to see if Malay can get, you know, his mandate extended because, you know, there's Peronis and everyone are chirping about what's going on.

19:19So that inherently, because Argentina's had so many cycles of boom-bust, I don't think everyone's gone all in on it yet, right? So the early adopters have gone in and done pretty well. There's a lot of Argentina stuff that's, you know, come across my desk now that looks pretty interesting, but I wouldn't say it's been a gold rush into the country. I think it's, people are still half in, half out. And as we get like, and that was like two years ago, two years ago, no one would really touch Argentina. And here we are, it's like they've got a new, you know, structure for investment, Riggi and all that.

19:51That's, that's great. but everyone who's been around long enough knows that at some point Argentina disappoints you again and you curse yourself for thinking it would be different this time. So I think that's where it is. I think it's cautious optimism and if in a year from now Malay gets another mandate then I think it's game on.

20:11Trevor Hall: We've seen effects of really a melee effect kind of just roll through the entire South American continent. I mean big election coming up in Brazil. So that's had implications like EWZ is a Brazilian ETF. That thing screamed higher after the first round of votes. You know, Peru keeps coming up. Colombia, obviously. I mean, it almost feels like, you know, South America and all these countries have been, it's finally getting the attention and the capital it really needs to get this next leg higher for exploration and development. But what is the headwind? is it still kind of that lagging effect of, well, we've been here before and we've been disappointed on the political side?

20:58I think, you know, they've got the U.S. backing in its sphere of influence or, you know, Don Rowe doctrine or whatever, whatever it's called these days. So I think having someone backing you and being in your corner has helped quite a bit. I think it's just where the discoveries are. Like, look, Guyana's 2 million people and they've had massive oil discoveries, which are like multiples, if anything, on the mining side. I just think it's people looking for where the resources are. Brazil is, again, Brazil is like one of those countries, people still like it. They're still comfortable with it. Chile, everyone's comfortable with it.

21:34I get pitched Bolivia now and then, but I still think that's pretty early days. Ecuador, Colombia. I think it's just political, I'm trying to say it's political evolution, right? You go left for a while and then you decide you're fed up with that. And then you go to a more business-friendly right government. like, you know, the flag just waves one way to the other. So right now, we're shifting right, more pro-business governments that want investment. At some point, it'll shift back the other way again. Yeah, yeah, yeah. Just make sure you're not there when that happens.

22:07Trevor Hall: You sit in the capital markets domain. Let me just kind of get an idea of how healthy risk capital is in the junior market right now. This is literally, I think, 48 hours from San Lorenzo Gold raising a gazillion dollars. You know, I mean, it was a lot of money. But that almost seems like an anomaly to me, not because of the amount that they raised, but there just isn't a whole lot of big financings that there maybe was, you know, eight months ago. Totally. Yeah, it's slow to trickle, right? So, and it's the same on our side. I mean, the saying goes, the best assets attract the best people, attract the best capital.

22:50So the fact you can raise money in a down market is, and a lot of money is, is a great indication of how people view the quality of the asset. And like I always said, from doing this for 20 years, like the best indication of like how good a broker is, is being able to raise money for people when, when it's not easy. And, and to some sense, it makes it a bit easier on the portfolio management side for the fund managers, because they're not getting hit with like 50 deals a day. they might be getting hit with deals people are trying to get across the line, but right now it's few and far between, as you said.

23:25Yeah. So we always talk about the financing window and the financing window opens and it closes and it's kind of sits like an inch open so some people can get in and out. And that's just, that's just a risk on risk off thing. And there's a lot of companies out there that are still lined up, ready to go on financings when the market's right. And the market will be right again at some point.

23:46Trevor Hall: Yeah. Could be three weeks, could be, you know, a month. But, um, so who's, who's getting funded versus who's getting starved out right now? I, I think early stage is really starving. I think if you've already raised your money and you can do your drill programs, you're in a great spot. But I think drill plays right now, and that's, that's the, that's the far alpha end of the spectrum, right? So I think if you have something like a San Lorenzo where you've got an asset and you've got a use of proceeds and people already like the drill holes and they want to see the follow on and they see the upside, like great.

24:19Uh, if you've got a project company that's got debt finance, equity finance, great. But if you're, it's just, it's like anything, the riskier you are, the harder it's, harder it's going to be. So if you're, if you don't even have drill, drill results or a resource or something, it's going to be much harder right now.

24:34Trevor Hall: Yeah. Let's, uh, well, hopefully it doesn't take a year for you and I to chat once again, but maybe, maybe in person in London, it might be a year, but let's think ahead in 2027. uh what's a commodity or theme that you maybe have your highest conviction in uh going forward into the new year in 27 still be gold still be gold yeah and here's the reason it's gold right so 20 what is it 2025 but a huge run in the gold price had a huge run in the gdx like it was due for anyone who's around gold like knew it was kind of due to like mean revert a little bit right Any times you're up 150, 160%, that's a lot.

25:17So we've got GDX as flattish on the air. GDXJ is flattish on the air. Gold price is flattish. And we've had this in-between phase. I don't think any of the thematics for gold have gone away. If anything, they're stronger. The U.S. is paying$2 trillion a year in interest payments now. Goes up probably$2.5 trillion next year. So I think gold is still the day. we got to get through this rate rise kind of turbulence and midterm turbulence. And, and I think 27 goal gets back on, back on the train higher. Okay.

25:48Trevor Hall: Uh, any contrarian thoughts on silver? It's so hated right now. This is one contrarian idea. Like nobody wants to touch silver. Nobody wants to buy the physical. Nobody wants to touch the silver equities, sentiments in the tank. If you're a contrarian, is that like, is that a contrarian play right now? You just gold goes first and silver, right? So, you know, if I'm saying gold's like 6 ,000 by the end of next year, there's not really a world where gold's 6 ,000 and silver's 30 bucks. You know what I mean? Just doesn't work that way. Yeah. So that's like the, that's the supercharged trade. But to your point, like silver ran pretty high and the bubble burst and it corrected rather sharply and that scares people for a while.

26:26Yeah.

26:26Trevor Hall: Yeah. Well, maybe back to the point, there was so much capital flying off the shelf in late 2025, early 2026. A lot of those juniors did finance really well, raised a lot of capital. But do we have a runway when you think that capital is going to run? Hopefully they raise enough for not just one season of drilling, maybe they thought two years. Is there any reason to believe that's the case? or are we talking about a one campaign and done type of? No, so when you go to do raises, you have to have a two-year budget. Okay. So at least in Canada, the exchanges make you do a two-year budget. So when you're raising, it's for at least for two years.

27:0918 months or 24 months. Like you want to be aggressive. So it's not like you've raised money for six months and you're going to run out. So a lot of the companies I've talked to this week that are in town for London say the same thing. At least we have our money because we can plan for the next drill season. We're not in a panic. We don't want to raise money here anyways because our share price is too cheap. And so you can sit and wait out the storm. Yeah. Right? Yeah.

27:32Trevor Hall: And we raised a lot of money for companies last year and earlier this year. So people are fairly cashed up. Yeah. Paul, good to see you. Yeah, thank you. Love having a beer with you. Always. Yeah, thanks so much. Good luck the rest of your week and I appreciate your time. Yeah, likewise. All right, everybody. That's Paul Gurney from Beacon Securities. We got more coming here from London and the LME week. This episode was brought to you by Tara Hutton, making the invisible investable. The information presented should not be considered investment advice. Mining Stock Daily Yants affiliates are not responsible for any loss arising from any investment decision in connection with the material presented herein.

28:09Trevor Hall: Please do your own research or speak with a licensed financial representative before making any investment decisions.