The New Rules of Capital: Gold, Bonds & America’s Mining Bet

0:04Trevor Hall: Hey, happy Friday, everybody. Welcome to this week's long form episode on Mining Stock Daily. Another two segment episode for you. First, welcoming in continued guest, Mr. Jared Dillian from the Daily Dirtnap talking about his new book that's coming out called The Awesome Portfolio. And we go in depth of what gold will represent and what is the meaning behind gold in that awesome portfolio. I'll put a link to his new book in the show notes. In the second segment, we welcome Chris Berry from House Mountain Partners and the host of the Power Current podcast on Clear Commodity Network, talking about some of the deals that were announced post the mining executive roundtable discussion in the White House last week.

0:50Trevor Hall: The winners, the losers, what's missing from the deals, and really, where does this go in the next election cycle. So great conversation with Chris Berry as well. Special thank you to Integra Resources, Visa Silver, Equinox Gold, and Revival Gold for the continued support of Mining Stock Daily and all of our content. Let's jump into my first segment here with Jared Dillian. Have a wonderful weekend, everybody.

1:33Trevor Hall: All right, everybody, welcome into this week's long form episode. We're going to kick things off with a recurring guest, one of my favorites, my brother from South Carolina, Mr. Jared Dillian, who I will be mentioned in a little bit of time. actually Jared you are going to be the most prominent author in my home library because I think I will this will be once the awesome portfolio comes out it will be my fourth or fifth book of yours in my catalog and which will surpass the previous author I had the most books which was Peter Zion actually so congratulations you've made it Peter Zion that's a that's a big name that's I you know I met him once um he's very he's very tall he's like six foot six he might be six foot seven he's very tall uh and he is incredibly full of shit but a very nice guy i'm sure he is but i actually it was funny because uh i saw him right after he got on rogan and uh i was like hey man how did you get on rogan and he's like he's like you can't he's like you can't apply to you can't pitch rogan he's like basically rogan has like a bunch of feeder podcasts and if you show up on one of his feeder podcasts and he likes you then he'll take you on but like you can't pitch rogan so so it was i had a nice conversation with peter he really helped me out so yeah he lives here in colorado and i fact sometime i feel like i'm just going to run into him you know but it just has never happened yet and i've i've reached out to his people a number of time in the past years for an interview and it's just never got a response.

3:14Trevor Hall: Um, but listen, congratulations. I'm going to put a link, uh, to the pre-order for the awesome portfolio up in the show notes. Uh, but I thought we'd might go back because you first kind of opened up your awesome portfolio ideas in no worries. Got that right here. Uh, you wrote a chapter on it, but then you're, now you're turning that chapter really into a full fledged book. And this isn't, you know, the first financial book book you've obviously written, No Worries, was really about markets and finances and investing. But this really opens it up. Why did you feel like now is a great time to kind of go deep in depth with your theory here?

3:55Well, you know, it's funny. No Worries was a pretty successful book. And I was talking to my editor at Harriman House, Craig Pierce, and he's like, what do you want to do next for a book? And I'm like, dude, I have no idea. And he's like, well, why don't you do a book on the awesome portfolio? And I said, Craig, I don't think there's enough there, there. Like, I don't think I can do a whole book on that. Um, so no. And then I thought about it for a couple of weeks and I was like, actually he's right. Like, you know, there's, there's a lot there. There's a lot to talk about. Um, so it's not a long book.

4:30It's about 50 ,000 words, 200 pages. There's a lot of, uh, graphs and charts and stuff. Um, but, um, I, you know, of all the books I've ever written, you know, I've told people like, I want it to be successful, but not so I can get famous, not so I can make money. I just want people to adopt these ideas because I think it will make everybody's life better. I think it is a vast improvement on the way people save for retirement right now. So, yeah.

5:05Trevor Hall: Well, I think, listen, for the last couple of years, there's been a challenge that 64 to 60, 40 portfolio makeup of a port, you know, makeup of your personal investments has been challenged and actually has been disproven in many different ways. And we can go through anecdotal reasons why that is, but you, your awesome portfolio idea spreads across five different asset classes, including stocks and bonds, obviously, but you add an importance of gold, real estate, and obviously cash in there. I mean, and that's been known since no worries. So each roughly equal weight. But let's talk about how this idea also is kind of, it goes against the societal norm right now where the market is very much AI driven in those index concentrations, retail piling in to leverage ETFs and more of those seem to be popping up each and every week.

6:04Trevor Hall: So how do you explain to someone why they should want to own a portfolio designed in this fashion you have laid it out to be and not to maximize returns, which is basically what we've been fed to do for the last couple of years? Yeah, I mean, there's a lot to say here. I mean, people just have too many stocks, right? Like, because it's worked. It's worked for the last 18 years. I mean, the stock market has done very well. like especially the nasdaq the nasdaq has returned like 15 for the last 20 years you know so any any trade with a high sharp ratio attracts sponsorship right so the thing is is that when this unwinds and it will at some point whether it's this year next year five years ten years from now who knows it will unwind and it is going to hurt like a frozen tampon right so you You have to be diversified across asset classes, right?

7:09So you talked about the 60-40 portfolio. The 60-40 portfolio is great. Over the last 20 years, no, sorry, not 20 years, since 1971, it has returned 9.44 % a year, which is very good. The problem is the reason nobody likes it anymore is because they got sconed on it in 2022 because stocks and bonds became positively correlated. They both crashed at the same time and the 60-40 portfolio lost like 20%. So and since then, bonds have not done well. Yields are on the highs. And people are like, why do I own these things? They only lose money, right? So I'm just going to be in stocks. Well, that's not really the answer.

7:52You know, you want to have exposure to uncorrelated things. And when you take something that's uncorrelated and add it to your portfolio, it brings your volatility down. It brings down the volatility of the portfolio. So the awesome portfolio returns about 9 % a year and has about half the volatility of the stock market, right? Like you're giving up 1 % or 2 % in terms of performance. You have half the volatility. And even better, the drawdowns are minimal. So the worst year for the awesome portfolio was down 12%, which was 2022. The second worst year was down 9%, which was the financial crisis.

8:40The third, fourth, and fifth worst years, it was down 1%. So most of the times you don't even experience drawdowns, right? You just have this thing that's not very volatile, that grows at about 9 % a year, and you never have to worry about it and you never have to look at it.

8:59Trevor Hall: Do you mention about kind of, you know, cutting bait and running and cutting your losses within the portfolio? Like, what is kind of that? Is there a number out there where, like, there's too much down? Or is that just not even in the cards here with the Austin portfolio because it's unnecessary? So it's kind of, it's pretty much impossible for everything in the awesome portfolio to go down at the same time. Right. And like I said, the worst year was in 22 was when stocks and bonds went down. Right. And gold, gold went down as well. Um, but in the crash, like say like the crash of 87, you would have been okay.

9:38Stocks went down 25 % in a day. Bonds went up, gold went up, real estate went down and you had cash. You actually did fine. I've actually back tested it all the way back to the great depression. I mean, the funny thing is, is that from 1929 to 1933, if you had all stocks, you would have been down 89%. You would have had an 89 % drawdown. Even if you just had a 60-40 portfolio, bonds were up 11 % during that time period, which would have greatly cushioned your loss. And the thing is, is that nobody owns bonds, nobody owns gold, nobody owns any of this stuff. It's all stocks all the time. We have 80-year-olds with portfolios of 100 % stocks with Mag7 and semis and memory in it.

10:31And I'm like, the amount of like just degenerate risk taking that's going on is really unprecedented, you know?

10:39Trevor Hall: Yeah. Well, you and I have talked about this for a number of years, Jared. I mean, I consider you a real, you know, kind of a, I guess, mentor to me because I've been able to show, you know, share some ideas of mine and you have been very candid with me, whether those are good or absolutely dogshit, horrible ideas. Do not do them, Trevor. I've more or less heard that from your mouth to me directly. But the tension remains with your awesome portfolio and today's market culture really continues to be behavior. The system works, but most people will stick to that triple leverage ETF that the neighbor has gained 40 % on, right?

11:23Trevor Hall: because that's what society feels like they need to do to stay ahead. So how do you solve for the psychology? Is it going to take some sort of wipeout, some sort of bear market or bad bear market to really get back to the structural makings of a market that makes something like the Austin Portfolio work? I mean, I hope not, but inevitably that's really the only way that people learn, right? Like even 30 years ago, there used to be this rule of thumb that said, if you were 70 years old, you should be 70 % in bonds. Nobody does that anymore. Like nobody does that. I was in a room full of people in Boston, high net worth investors.

12:08And I said, who has their age as a percentage in bonds? Nobody. And this was the conventional wisdom in like the mid to late 90s. This is what people did. You know, if you were 50 years old, you had 50 % in bonds. The thing is, is that the reason you like the awesome portfolio is because the way we do things right now is really dumb. We invest in the S &P 500 and you say, look, if you dollar cost average the S &P 500, you're going to make 11 % a year. just buy the dips, buy and hold, buy a dollar cost average, even through bear markets. But the thing that that advice is missing is the behavioral or psychological part of it, right?

12:57If you're in a 30, 40, 50 % drawdown, you are shitting your pants, right? You had a million dollars, now you have$500 ,000, right? And what are you going to do? You're going to sell because you don't want$500 ,000 to turn it into$250 ,000, right? So most people are going to sell. Some people won't. Some people will keep the face. Some people will be dollar cost averaging. But then you're just going to be miserable for years until you get up to the high watermark, right? So I just, I don't want to be miserable. I don't want to experience those emotions. You know, there's a reason why the hedge fund industry exists.

13:37Like places like Millennium, Exodus Point, You know, all these pod shops, right? Because you get these returns that are about 12, 15 % a year with like teeny tiny drawdowns, right? Drawdowns are the enemy of investors because that's what hurts your psychology and makes you do stupid things.

13:58Trevor Hall: So let's kind of break a few of these things down here and I think we can extend on it. But obviously I do want to ask you about gold here, Jared, and it's kind of its position within this portfolio. and historically everybody's saying, well, you should have 5 % allocated to gold. And I've come to realization that 5 % just isn't anywhere even close to being enough given the volatility in this market and the devaluation of the US dollar, global currencies. So how do you kind of position gold as a key factor in the Austin portfolio? What is important to note here? Well, first of all, When I was putting together the awesome portfolio, I really wanted that to be commodities.

14:46I thought you should have a 20 % allocation of commodities, like a whole basket. So like the GSCI or the Dow Jones AIG or the BCom or something like that, some commodity index. But the problem with that is commodities are negative carry, right? Gold is also negative carry, but not that much. It's pretty cheap to store gold. but some of these other commodities have, you know, there's cost of storage and there's a lot of negative carry. So if you invest in a commodities index, it's not going to perform well, right? So I like to use gold as a proxy for all commodities, right? And just say, look, that's your commodity exposure.

15:27And the nice thing about gold is it has no correlation with anything. It's not correlated to the S &P. It's not correlated to bonds. It's literally the most uncorrelated asset in the world, which makes it perfect to add to a portfolio. I don't know if you've ever heard my spiel on this, the Dennis Rodman spiel. Have I ever told you about this? Gold is Dennis Rodman. Okay. So Dennis Rodman, as a basketball player, like he's in the Hall of Fame, but he only scored six points a game, right? He only scored six points a game. And there was all this debate about whether to have him in the Hall of Fame because he doesn't score, right?

16:07But he's the best defender and the best rebounder in history. Now, if you had a team of Dennis Rodman's, if you had five Dennis Rodman's on a team, it would be the worst team in basketball, right? But if you take Dennis Rodman and add it to four other players that can score, now you have a championship team, right? Right. So is so so Dennis Rodman is gold and some people overdo it with gold. Some people have like all gold. Well, now you have five Dennis Rodman's. Right. So so really Dennis Rodman should be about 20 percent of your portfolio. That's what it should be. A lot of people say 20 percent.

16:48That's not too much. It should be. I don't I don't. The same people have like 80 percent in stocks. I'm like, that seems like a lot to me, you know, anyway.

17:01Trevor Hall: Well, let me, so if you have a proper allocation to gold here, equal weight against everything else in your portfolio, is it something, and the gold bug in me wants to kind of leverage that and continue to ask, is this something you physically own or in storage? Or is this something you would be buying like the GLD and the derivatives side of things? Does it matter to you? I don't really care. I think that, you know, look, the awesome portfolio is for your average Joe, right? And I think for the average Joe, the high transactions costs of buying and selling in physical and also the pain in the ass of storage and everything else makes it hard.

17:43Just do what's easy. Just buy the ETF. I'm not one of these black helicopter conspiracy theorists like you don't own your gold unless you actually have possession of it. like look maybe at some point 50 years from now uh like there will be some crisis and gold will decouple from the etfs i kind of don't think that's going to happen in my lifetime and even if it does i think i'm going to sell it long before it gets to that point so yeah have you

18:13Trevor Hall: seen the dialogue online and specifically on twitter with the gold bugs like screaming bloody hell that Rand Paul went to Fort Knox and then came out and said the gold's there. But yet, you know, everybody's wants the audit. Have you been seeing this back and forth? I saw a little bit of that. Yeah, I saw. And I it's interesting. Like I get all sides of it. Right. Like I do understand. And I'm also like, OK, why? Why is the Fort Knox audit so important? Like, do you trust that China holds as much gold as the data reports or the country of Poland is like? Like, why aren't we screaming to audit other countries?

18:50Trevor Hall: Why do we have so much distrust in the U.S. Fort Knox compared to other countries in their gold positions? I mean, it's kind of a black box. Like, you can look at the Fed's balance sheet and you can see the gold that we own. And you can see that it hasn't changed since 1972 or whatever. And, like, I understand the curiosity. Like, I kind of have a curiosity about it. But, like, I, you know, look, I don't think it's a super high priority, but I think somebody should probably go in and count it at some point. You know, it's just like if you have$800 billion of it, like, you should probably make, you know, make sure it's all there.

19:30Somebody's not smurfing it out in their backpack, you know, so.

19:33Trevor Hall: Well, so if they audit it and it shows that it's there, is there a responsibility to share that with the American public? I mean, do we do that for like for every for, you know, for nuclear warheads? I mean, that's just a general question. You know, I mean, all I'll say is I think I think any kind of transparency is a good thing up and up until the point that you're infringing on national security. Right. So the amount of warheads we have is probably classified. So I don't think we should tell people that. But, I mean, our gold holdings, like I said, it's on the Fed balance sheet. We know theoretically what we have.

20:18Like, you know, so I don't see any problem with sharing that information.

20:22Trevor Hall: Yeah. About a month ago, you and I just had a quick phone call in private and we were talking about the gold market. It was just about$4 ,000 an ounce. Obviously, we've seen a nice bounce, almost$500 move upward here, Jared, over the last month. What do you feel is driving this? Is this more of a technical foundation that was made on the chart and had just nowhere to go but up? Or is there more something fundamental that's been driving this$500 move? Well, so I think it was mostly technical. Beautiful chart, beautiful bottom. You know, I look at DeMarx. You get a 13 buy about a month ago. Then we made a slightly lower low, nice base.

21:06We took off from the base. The thing I always say about gold is that gold actually discounts things better than anything in the world, right? So gold went from$4 ,000 to$4 ,400. Okay, we're going to find out why like a month from now. There will be a reason. Maybe it's something with Iran. Maybe the Fed cuts rates. Who knows? But gold will have discounted that. And then when the thing actually happens, gold will not react. happens every single time. You know, gold is an incredible discounting machine. So, yeah, yeah.

21:44Trevor Hall: You have really spurred an idea for a long time. Well, at least not a long time, two months, you've been a bond bull. And I think I said to you, it's like, Jared, I don't, I think I disagree with you on this one. I will admit to you today, like I am starting to come around to the idea that the market has a Fed hike in September absolutely wrong. I think that the jobs numbers last week was a huge eye-opening moment. We'll get another report here before that September meeting. The CPI print was a nothing burger here this week, with the exception to a few intricate details that were definitely higher.

22:26Trevor Hall: but I actually think the market is maybe overpricing a Fed hike in September. And we should really start thinking more about not only keeping rates where they are, but actually a cut. I think that would be a huge surprise. So you're starting to have me come around here. Yeah. I mean, I don't think we're going to cut anytime soon, but I think if you look at the data that we've had in the last six weeks, we've had two crappy payroll numbers, two soft CPI numbers. We had a soft PPI. We had a soft PCE. We had a crappy jolts number. The PMIs have been lower. All the data has been bad. Like, and what's weird is that we have like this inflation mind virus where all people can talk about is the affordability crisis and the price of eggs and all this crap.

23:21And I'm like, look, Like if you look at the data, we're actually slowing down and nobody is connecting the dots, you know? So if I were Warsh and I were looking at the data purely at face value, I would be considering a cut, a preemptive cut. It's not going to happen. Could be just the politics of the Fed and all that stuff. It's not going to happen. But, yeah, I don't think we hike in September. I don't think we hike at all, ever. I think the data continues to get worse and the conversation is going to change over time.

23:58Trevor Hall: So do you have a kind of a thesis or idea that would cause like a bull steepener within the curve, you know, where short rates fall faster than the long rates? Yeah, I mean, that's kind of what we're having right now. Like when Warsh held rates at the last meeting, it was a big steepener, although that was a it was more of a bear steepener. but basically i'm going to give you in a hundred words what warsh is trying to do warsh is trying to diminish the role of the fed in setting monetary policy he wants markets to figure it out so when he held rates basically what he's saying is like we're we're not an activist fed we're not going to do anything the bond market can figure it out and the bond market immediately tighten policy for him, right?

24:46So 10s, 30s went up, mortgage rates went up, interest rates went up, and that has an immediate tightening effect, which is actually what he wanted, you know? I actually think if he hiked rates, it would have been stimulated because long rates would have come down, right? Right. So.

25:03Trevor Hall: Well, and I'm trying to figure out, and you'd have a better answer just off the top of your head than me trying to dig it in think through the rat's nest that's in my logic of thinking. But what I'm trying to work out is we've seen a number of tech companies and tech deals reliant on the debt market to keep that thing afloat, to call it a bubble, if you will. But if we continue to have higher rates, what, I mean, that seems like a huge headwind for that thing to keep going. And they're just kind of scratching at the surface to try to keep interest in the market. I mean, what is that correlation here between a bull steepener thesis and what you laid out and what's currently in play against this tech bubble right now that's driven by AI?

25:56Well, all right. So you're getting all these bond deals. Like we had one from Google the other day. I forget how big it was, like 30 or 40 billion or something like that. Yeah. And every time they issue one of these things, it puts pressure on bonds, like rates go up because they're so big, right? If I'm Google, why are you borrowing for 10 or 30 years against an asset that's going to be obsolete in two and a half years? Like that seems like an asset liability mismatch to me. I wouldn't take on long-term debt for something that's not going to exist in a couple of years. um so like if i if i'm you know moody's or s &p and i'm watching this like you know google i think is double a easily like maybe double a plus it's a very high bond rating like i would i wouldn't be taking a pretty dim view of this you know if i were the rating agencies so yeah yeah i mean are

26:55Trevor Hall: we starting to have we started to see that you know i'm just not terribly enthralled and you know dig deep into the tech industry, but are we starting to see some of that happening yet or not yet? Now. Now. Okay. There's another thing we haven't talked about, and I think it's important to note that we haven't talked about. In fact, I don't think the market's kind of shelved it, but that is the Iran story and Hormuz. I mean, that was the dominant story all summer. You know, we started with Hormuz and MOU collapse, you know, the declaration of the battle of Hormuz, but Wall Street appears to have gone on vacation, forgotten about it.

27:40Trevor Hall: Is that rational complacency? Is it dangerous complacency? Or do we need it? I don't think so. I think that, you know, markets are about probabilities and there's a range of outcomes, right? And the market is priced in a range of outcomes, which include the straight being closed, which include the straight being open, which includes something in between. And unless something out happens outside that range of outcomes, like this is a dumb example, but like we nuke Iran, like that would have an effect on the markets. But the, you know, basically within this range, like we've, we priced in pretty much everything happening, you know?

28:24So I don't see a hundred dollar oil. I don't see$60 oil. Like I, I think 80 is probably a fair price. It's the middle of August. I'm getting out of office replies. Everybody's gone. Like you're leaving. You're leaving. This is your last name. Yeah.

28:44Trevor Hall: where are you going on vacation miami nice nicely done all right uh jared you got a conference coming up in october looking forward to attending uh full boat is there anything is it sold out i assume it's sold out it's sold out it's sold out okay all right but if we don't talk if the next time i talk to you is the first part of october at the dirt nap conference what's the one thing that you think markets might be surprised by the most between now and then? I think rates coming down. I think rates coming down. I think, you know, this is a question I always ask myself. What would surprise people the most?

29:27Inevitably, the thing that surprises people the most always happens. Always. You know? So you think about oil. I don't think there's any surprises there. stocks. I don't think there's any surprises there. I think there's so much negative sentiment on bonds. I think if bonds rallied 50, 75 basis points, I think everybody would be caught off sides. And by the way, a bunch of people have sent me this stuff. Spot Gamma actually did the work on this, looking at the commitment of traders and bonds. You've got record short positions, like massive record short positions in bond futures across the curve, like massive record shorts.

30:09Trevor Hall: So, all right. We will be watching. We'll talk to you here in two months time. Jared, thanks so much. Uh, I will put a link, uh, to the pre-order for the awesome portfolio in the show notes. In the meantime, read no worries. Maybe some night moves rule 62 and the others in the collection. I don't currently have on my shelf. All right, Jared, thanks so much, buddy. Good to see you. Thanks, man. Hey, stay right there. We'll be right back after a very short break. In mining, the difference between a good project and a great investment often comes down to one thing, visibility. Terra Hutton is a Sweden-based mining investor platform built to make the invisible investable.

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31:51Hey, everyone.

31:52Chris Berry: Justin Hewn of Uranium Insider here, inviting you to check out the Going Nuclear podcast, co-hosted by yours truly and Trevor Hall and produced by the Clear Commodity Network. Each episode, we dive deep into the uranium sector and the fast evolving world of nuclear energy and uranium investment. From supply dynamics to policy developments and market trends, we bring you the insights that matter most to energy investors and industry watchers. You can find Going Nuclear on Apple Podcasts, Spotify, and at clearcommodity.net. Clear Commodity Network, digital news on the physical markets.

32:30Trevor Hall: All right, everybody, welcome to another segment here on the long-form episode this week on Mining Stock Daily. There was big news last week coming out of a roundtable discussion with mining executives within the White House. and President Trump kind of convened this big group, and there was major announcements, $3,$4 billion worth of deals announced following that roundtable. We're going to break this down with our good friend. He is the guy over at House Mountain Partners and also a great friend and colleague, the host of the Power Current podcast here on the Clear Commodity Network, the one and only Chris Berry.

33:11Trevor Hall: Hey, Chris, how are you?

33:12Chris Berry: Trevor, always good to be with you, my friend.

33:15Trevor Hall: Yeah. You know, I thought about, we needed to, actually, I feel like we should have had this conversation like sooner, like immediately after that round table. But, you know, we obviously had more time to digest this news and break down each little piece of this. And just to make a note, like the Power Current podcast, when you and I first launched this Like a few years ago, it was really kind of this, you know, power, this energy transition metal type discussion. And it has just kind of really transformed into more of a supply chain policy, like general conversation. It's not necessarily just about the energy transition.

34:00Trevor Hall: It really is come down to a policy. So right now, I mean, you're like absolutely crushing it. Like every week there's something new.

34:09Chris Berry: There is. There's almost there's almost too much to to digest in some some weeks. And so I don't know if the late summer doldrums are going to help us or not here. But, you know, you're correct. I mean, when we kind of hatched the idea, you know, Biden was in the White House and the focus was energy transition and ESG and green growth. And of course, that has remarkably, I think, or significantly changed. I mean, self-sufficiency and to your point, supply chain development under Biden and even under Trump, I think is still a major goal. But I think how you get there now in terms of how involved the U.S.

34:47Chris Berry: government is going to be. And we can certainly chat about that because that's one of the main differences. Right. I think obviously the Trump administration wants literally wants a piece of the action with these with these projects. Whereas under Biden, I think it was more in the form of loans and grants. So, you know, a lot has changed, but I think the general direction of travel and the goals around, okay, we want to reshore as much of this as we can or bring as much of the supply chain home. I do think that, you know, just in the last couple of years, everybody along the supply chain, whether or not you're a policymaker, in particular, if you're a policymaker, I think you've realized how deeply entrenched supply chains are with China.

35:28Chris Berry: and also what it's going to take to unwind them to the extent that we even can. And so that's probably a longer discussion and a debate. But yeah, you're right. I mean, the issue now on the podcast is it's not so much where's the lithium or where's the scandium going to come from? I mean, I think those questions have been answered. And you can argue about specific companies or parts of the world. Now the question is, you know, from a cost perspective, from a geopolitical perspective, I mean, how do you price these risks, policy risks, geopolitical risks, because those all factor into the cost of capital, right, to get this stuff out of the ground and get it refined.

36:05Chris Berry: And so that's what a lot of, you know, the inbound that I'm seeing these days is focused on. And that's the general direction of travel for the for the podcast.

36:15Trevor Hall: Yeah, absolutely. So, and the reason I called this meeting to order here, this roundtable between you and I and everybody listening, Chris, is because the timing was quite interesting to kind of set this up. So we're going to go kind of through the announcements and the deals post the roundtable and kind of break down winners. I don't know if losers is the right way, but maybe who doesn't come out of this and really what the policy sets up. But what was interesting to note, Monday last week, so on August 3rd, Trilogy Metals put out a news release. It was an update on the Department of War strategic equity investment that was announced months ago in the form of$35.5 million.

37:01Trevor Hall: And basically what the news release said is discussions are ongoing. It didn't seem like Capitol had actually crossed the wire yet from the DOW to Trilogy. And this was literally, this was very much a head scratcher because people think people are expecting that to have already have happened. And then this roundtable, following this news, the roundtable gets announced. Now, I'm not saying if it was maybe, maybe there was coincidence and it probably was coincidence, but the timing of the Trilogy medals announcement. And then when the roundtable was announced, you know, the roundtable happened shortly thereafter.

37:37Trevor Hall: And then fast forward to last Friday, you have this big roundtable, a lot of big miners and a few people that us in the resource industry will know to recognize and respect, such the likes as Robert Freeland, right, was there. And they announced, you know,$3 to$4 billion worth of deals, one, you know, one after the other in short order. And so can you kind of break down, is it just a coincidence between Trilogy and the roundtable announcements? Am I looking into this way too much and head scratching or was there some sort of maybe push this way?

38:13Chris Berry: Usually, look, I mean, these loans and grants, and again, this was very similar under the Biden administration. They are conditional, right? I mean, this isn't just, you know, I jokingly like to say that there are twin bazookas of capital that are pointed at the critical minerals supply chain right now. Bazooka number one is the government, and that's from the Office of Strategic Capital, the Department of War, Department of Energy, what have you, the Trump administration overall. and that is very much a ready fire aim theme. In other words, okay, we know we need the scandium. We know we need the copper.

38:48Chris Berry: We know we need the lithium and the refining, right? Same thing for the rare earths. So let's go out, if we're, you know, the administration. Yes, you do the due diligence, but of course you want to make sure that the domestic projects or friendly allied nation projects can get at least started on the capital that they need to get these projects built because we also know that the permitting issue is something that is still to be dealt with. So, you know, the conditional aspect is the real key here. And that's, of course, a phrase that's kind of buried in the third paragraph of these very splashy press releases.

39:24Chris Berry: And I don't say that to be cynical. I mean, you know, we're not going to give taxpayer money to junior mining plays without some very serious guardrails in place. And so even the deals that we saw, you know, last Friday,$400 million Sunrise Energy Metals, which, mind you, is not a U.S. domestic play, right? It's an Australian-based play. And so that was a very interesting one. I think$1.4 billion in loan capacity to SILA nanotechnologies for battery materials. And then I think there was like another$85,$86 million for a pre-revenue bauxite play. So, you know, the bazooka is being spread far and wide, and that's a good thing.

40:07Chris Berry: But again, you know, the idea, I think, in utilizing government capital or taxpayer capital, wherever you want to phrase it, is that it's designed to crowd in capital as opposed to crowd it out. So, you know, if your sun rise and you have the opportunity here for a$400 million conditional loan, of course you're going to take it. And the other bazooka of capital that I referenced, the Wall Street bazooka, you know, theoretically should take note of that and say, OK, so there's$400 million in loan capacity here. Look at the CapEx. Look at the timing. Look at all of those tangibles and intangibles that I mentioned beforehand and say, OK, well, how much is and how is Wall Street willing to get involved?

40:48Chris Berry: Is it equity? Is it debt? Is it convertibles? And that's sort of what I see Wall Street looking at right now when they look at antimony or scandium or rare earths, right? It's not so much, you know, yes, these markets are small and opaque, but we know they're critical and we want to get involved. The question is, once the government has fired the bazooka, how do we, the private sector, join in the funds, so to speak? And so, you know, that's really the key. Back to your original question about Trilogy, I don't have any special insight there other than, you know, I don't know if there ever are any coincidences.

41:23Chris Berry: I mean, things always seem to happen for a reason, whatever that is. But again, I wouldn't necessarily say there's a problem there. I mean, I just think, again, because these loans are conditional, even though the grants can be conditional as well, there are a host of what we call CPs or conditions precedent that the company would need to meet before they can access that capital. Right. And so, you know, again, these these big numbers that are getting splashed all over the news headlines and we're talking about today are great. and to be clear, they are absolutely necessary. I do think that the Trump administration is being pretty selective, at least thus far, in terms of where it shoots that capital.

42:05Chris Berry: Again, we can argue about projects that some are better, some are worse, whatever. I mean, that's an argument for another day, but the point is at least we're now thinking about, again, scandium, rare earths, and the refining aspect as well, similarly with bauxite and gallium. So anyways, I could go on, but that's really how to think about it. But I mean, the Titanic is moving. Maybe that's the wrong analogy. The freight train here is moving. It's moving in the right direction, but it's moving slowly.

42:31Trevor Hall: Yeah, I think I posted on Twitter shortly thereafter, like, this is all great news. I happen to see it's great for the mining industry by and large. What is missing is follow through public investment dollars, as you mentioned, Wall Street, or invest generalist investors coming into this sector. And I'm just kind of curious to know the federal government can, has the ability to bazooka capital from its own coffers. They control the dollar. They can decide where it goes. And they can do that pretty, you know, handily. Wall Street institutions will not take that much risk. And mining is a very risky business.

43:14Trevor Hall: And for decades, those people have left Wall Street that know the industry. And Wall Street has turned their back for the most part. Now, there are obviously specific, you know, big institutions that continue to be active in this sector. But, you know, it's I think I can't remember what bank it was if it was Goldman Sachs came into a mining deal a couple of months ago. And that was huge. That was the first time they come into mining in months or years. You know, so I'm just kind of wondering if that brain drain is a real thing and recognizable just by the fact that they're not piling in.

43:48Chris Berry: Yeah, I think that, you know, if you take lithium as an example, back in 2016, so about 10 years ago, lithium was the bell of the ball, right? And I was doing all of these calls with your typical hedge funds out of New York or what have you saying, wow, this is amazing. Look at all these gigafactories that Elon Musk is going to build. And, you know, you do the back of the envelope math and you need hundreds of thousands, millions of tons. And where's it going to come from? And wow. Wow. And, you know, I think what happened was a lot of those funds, the typical faster money hedge funds, right? This is impatient capital.

44:22Chris Berry: They looked at it and said, you know what? It's a small market. Yes, it's growing. Pricing is kind of opaque. China dominates the midstream. We're going to we're going to take our foot off the gas here. And that's kind of what they did, you know, not entirely, though. Right. And so this is where, to your point, those mining specialist funds come into play for every TechMet or every Orion or RCF. I mean, we need 10 of each of those, honestly, if we are serious about building not even U.S.-based or North American-based mining infrastructure. I mean, spread that to allied nations as well. And there you go.

45:05Chris Berry: Oh, and the other interesting thing that I would say about, you know, where is the capital, the private capital coming from is that it does seem to me that the mining, the Silicon Valley tech bros are sniffing around mining. Okay. And I say that based on one deal in particular that was announced, I think probably last week, which is the Mariana Minerals deal,$310 million Series B, mind you, this isn't like a Series F. I mean, that is a lot of money for an early raise to be spread across a copper project and a DLE lithium sort of project. I think it's on more on the tech side than anything else, as well as potential whatever else could be in the pipeline there.

45:50Chris Berry: But again, you know, that to me is an interesting example of, again, privately held capital, specifically Silicon Valley tech bro capital, looking at the upstream, which you and I both know. like what good is a recycling facility or a, you know, a midstream facility or even a gigafactory if you're reliant elsewhere for the raw materials, right? So security supply is job one. And it seems to me that if this Mariana Minerals deal is any indication, maybe the tide is starting to turn there. Maybe it's venture capital money that's going to get us over the hump here. I would be that would be surprising given the fact that, OK, you know, this is sort of shorter term, higher risk capital that has a relatively narrow investment window.

46:38Chris Berry: I mean, I think what you ultimately want to see again are larger sort of PE infrastructure funds that kind of widen their view of what infrastructure is. Right. I mean, infrastructure used to be bridges and tunnels and, you know, things like that. And you can make a very compelling argument. And I think there are funds out there that are saying, well, wait a minute, you know, maybe lithium mining or rare earth refining or magnet manufacturing is infrastructure for the next sort of generation. I totally buy that. And that's why you want to have that larger patient capital, because a lot of those big PE funds, you know, they'll write 300, 400, 500 million dollar checks.

47:20Chris Berry: That's just that's just what they do, right? That's their level at which they're playing. Whereas most of the Silicon Valley VC guys are, you know, much, much smaller in terms of the, the quantum of capital that they'll, they'll play around with. So we need it all. Um, and again, I wish we had again, 10 Orions or, or 10 RCFs or 10 tech mats, and maybe we will, but you know, this is the same argument that I'm sure you've had with, uh, on with, with folks that have been on in the past is we should have been investing like this five or 10 years ago. And, you know, we should have, But at least we're doing it now.

47:54Chris Berry: So that's the positive takeaway, I think.

47:57Trevor Hall: Yeah. That Mariana deal, that Series B, it was, call me pessimistic, I guess, but we've seen the Silicon Valley, the tech way of doing business and raising capital. That's not the first time we've seen it. But yet on the handful of companies that have been funded that way, we haven't seen really any follow through. We haven't seen major discovery, major resource, a tier one project. And so it's just not to say it can't be done. It just makes me think, it's like, why do we have to do one way or the other? You know, why does Silicon Valley need to do it their way instead of relying on the people that have done it for decades and generations and have done it well?

48:48Trevor Hall: Yeah. You know, we don't need it.

48:49Chris Berry: Their argument, sorry, I didn't mean to interrupt you. No, go ahead. I would think that the Silicon Valley argument is, yeah, you mining guys, you know, you've been doing this for decades, building open pit, underground, you know, refining, what have you. and it's, you know, the mining industry has a terrible reputation because it's always over budget. You know, all of the excuses, right? It's late, it's over budget, it's this, it's that. So, you know, let us with our, you know, technology know-how come in and redefine how to process lithium or redefine copper mining. I personally, I'll believe it when I see it.

49:28Chris Berry: But that's, I think that's the Silicon Valley argument is we're going to do it our way because your way, your traditional way, which ultimately does work and has been proven literally for centuries, is expensive and slow and we can't afford to wait type thing. So, you know, we'll see. Like I said, I'm glad the capital's there.

49:49Trevor Hall: But if they're worried about being over budget and late, wait until the hyperscaler build out says, hold my beer. Right.

50:03Trevor Hall: Listen, what's interesting, back to this roundtable and the deals announced post the roundtable, the instrument mix here is quite, not all over the place, but it's mixed, right? Like that$1.5 billion Wardicilla you mentioned, a$400 million conditional loan to Sunrise with a government right of first offer. Yeah, and that's huge, by the way. That's huge. $150 million award to Niron and a pending equity stake in Trilogy Metals, as I shared earlier. Does the government know which tool it's searching for? Does the choice of instrument just tell you something about the underwriting discussions with each company?

50:46Chris Berry: I think the underwriting discussions with each company are important. I mean, if you're the CEO of one of these mining companies, I mean, sure, you could go the equity route and dilute your shareholders into oblivion and have the U.S. government on your shareholder register, which maybe you want, maybe you don't want. But, you know, my sense is that the MP deal or that model where there is an equity component and then, you know, the banks came in with, I think it was about a billion dollars in loan capacity, if I'm not mistaken. I'd have to go back and double check that. But my point is that that wasn't like one way or the highway type thing.

51:27Chris Berry: Like, yes, the Department of Defense owns 15 % of the company. um but again you know on the equity side it's like okay so the government now owns a chunk of this company what do you do with it I mean is there a plan to sell are you going to hold it forever um how does that work what if what if the company needs more capital in the future right is the US government going to allow itself to be diluted so there my point is there are all of these questions that the government whether or not that's the department of war and the CEO of these companies have to think through in terms of the optimal capital structure and capital stack.

52:02Chris Berry: And it looks to me like it's a mixture of both, right? There's going to be an equity component, which is your upside, obviously. And, you know, that capital goes right on your balance sheet. And then, you know, on the equity side, it's a function of, okay, well, how risky is this project, right? Like MP was an operating mine and they needed to go to phase two and phase three, which was separate the material and ultimately produce magnets. And it looks like they're getting very close on part three as well. And so that's why the government and by extension, I think the private sector banks are willing to lend to a company like that because they know they're going to be around in a year.

52:43Chris Berry: The other issue here is, of course, and this is probably the most contentious piece of all of this discussion, even more contentious than should the government be involved, is the subject of price floors. okay right um i think they're entirely necessary uh i don't care if it's lithium or rare earths or antimony or whatever i mean um we are at a cost disadvantage here in the west end of story relative to the rest of the world and if we have to at least help these companies get up and running and get it to scale by some sort of a price floor then i i don't really see the problem with that And I don't see what a viable, workable alternative solution would be.

53:26Chris Berry: I mean, other than having, you know, private offtakes between the producer of, again, this could be magnets or rare earths or whatever, and the end user. And you can have like ceilings and floors embedded in those contracts. But again, you know, if the U.S. government is involved and they're an equity shareholder, I think that that's a pretty good indication that should a company that has, you know, the government as a as a shareholder run into financial trouble, you know, there's a better chance that they would be saved than the company that did not. And it speaks to, you know, the national sort of championship or national championship.

54:05Chris Berry: You can tell I'm thinking about football already. The national champion argument versus, you know, just another play trying to, you know, swim in the pool, so to speak.

54:16Trevor Hall: Yeah. It seems like the administration is backing away from price floors in the critical mineral space. In fact, Reuters had an article out not too long ago that an official from the DOE, and I actually, I'm glad you mentioned this because I wrote this quote down. An official from the DOE quote was saying, we're not here to prop you guys up. That was his quote to industry.

54:42Chris Berry: Okay, well. That's a little bit of a gut punch. It's a gut punch. And look, in an ideal world, right, markets are efficient. And Adam Smith's invisible hand clears the market. And, you know, survival of the fittest, right? I mean, Adam Smith, Charles Darwin. We can talk about the theories of all of these historical figures and what they mean for the markets. But, again, because we're at a cost disadvantage and we're reliant on, you know, foreign nations for a lot of these materials, I think that a lot of the companies that can prove, right, that they can produce these materials at scale are deserving of some sort of support.

55:20Chris Berry: And again, I don't necessarily think equity ownership is that support. It's a mixture of price floors and offtakes. And so to your point about, you know, the ROFO with Sunrise Energy Metals, that was very interesting because it's basically the government saying, no, no, we, because of this$400 million loan, we're first in line to take anything off your hands, right? So if you're a solid oxide fuel cell maker or you're an aluminum scandium alloy manufacturer, that type of language should concern you, right? Because you're not first in line to get it. The government's going to pay whatever they have to pay to get the material.

55:59Chris Berry: So that was very interesting. And I think it speaks to just how serious scandium is in terms of its usefulness in these next generation apps.

56:09Trevor Hall: Well, maybe that's the best and very first step to real price discovery in the West, perhaps, if the government is transparent on what they pay.

56:18Chris Berry: Yeah, the government is transparent on what they pay. And you need like a larger ex-China or even ex-Asia market for these materials, right? I do think that the idea of a bifurcated pricing market, we already are starting to see it, actually, for some of these materials. um as the markets in the west get larger for tungsten for scandium for rare earths i mean the list goes on you know you you can be less reliant on the china price and a little bit more reliant i think on on whether it's south america or north america or europe or probably a combination of of the of all three i mean you know there are for example um santiago prices for lithium or Santiago-based prices for lithium.

57:03Chris Berry: Same thing for Europe and obviously here in North America. It's just that everyone defaults to China because the majority of the material is refined there. And there's just a lot of pricing in country, I would argue, there's a lot of pricing visibility. And so we just need these markets to get bigger. And that really only happens through time.

57:22Trevor Hall: All right. Let's talk about something that's missing in these deal announcements. You and I have both been pounding the table that throughout the number of years, whenever there was a capital out of Washington going into the mining industry, whatever capacity, that what's always been missing is that midstream processing. You know, the problem is refining. It's not mining. We can mine for generations. We cannot process. that we continue to have to send that rock after its mines somewhere else, mostly China still. How much of this$2,$3 billion actually lands in that midstream processing versus just project generation?

58:08Chris Berry: Well, the majority of it, I would argue, has been going towards project generation and upstream development. um there are there are instances of of kind of midstream tolling operations you know companies like stardust that are saying hey we're we're not necessarily going to be miners per se but we will do the midstream you know we'll and it remains to be seen how that works right how they can get that build how they can process different types of feedstock at scale so um similarly with like a lot of these D DLE technologies, right? I mean, one type or, or combination of direct lithium extraction might work, for example, in the smack over in Arkansas, but it wouldn't necessarily work in Alberta or the salt and sea out in California for a host of different reasons.

58:55Chris Berry: And so, you know, getting, getting that technology right and scaled is crucial. Um, I'm not sure if refining economics alone, uh, are enough, right. Enough to work because you still, in my view, you still subject yourself to what has always killed investment here, which is the price volatility, right? Spadjamine at$600 a ton and Spadjamine at$2 ,600 a ton mean very different things, both good and bad. Speaking of winners and losers, right? To different players along that supply chain. Similarly, you know, I'm trying to think. I've been reading a lot of earnings and listening to a lot of earnings calls over the last week or so.

59:40Chris Berry: And, you know, there's a company out of Vietnam, Ma San, I'm going to mess it up, Ma San Technologies, M-A-S-S-A-N. You know, they are a tungsten producer. And in the last quarter, you know, bear with me here. I might slightly mess this up. But as I understand it, they generated more operating profit in the last quarter because of sky high tungsten prices than they have in their entire history. OK, so you want to talk about winners. I mean, they're obviously like the window is open. They're producing what the market wants and they're getting an elevated price. It won't always be like that. I mean, you know, the antimony price was$30 a pound not long ago and today it's 10.

1:00:22Chris Berry: And so it's good or bad for you, depending upon where you are on the supply chain. How do you insulate yourself against that? Coming back to your original question, you have to vertically integrate, right? And that is an economic question. And it's starting to happen in lithium. I mean, we'll see Lithium Americas with their clay-based project, Thacker Pass, out in Nevada, probably in a couple of years as that one is built and scale is being built right now, obviously. But I just don't think it's enough. Even, you know, you can, I don't want to come back to the price floor argument, because I think you only would want a price floor if you had some sort of a vertically integrated operation, right?

1:01:04But I think that you got to vertically integrate if you want to survive.

1:01:10Chris Berry: And I'm not sure if just having a mine, but no midstream or having a midstream, but, you know, various upstream is enough. And so it becomes an economic question. And again, that comes back to our original discussion about what is the proper role of the government here. And again, longer conversation, but the government's going to have to be involved as we vertically integrate.

1:01:32Trevor Hall: Another big winner in this deal, academia. $180 million being allocated to 14 mining schools. There's a good reason for this. We don't graduate too many mining engineers or geologists anymore. but the U.S. mining workforce, like, is going to have a high turnover rate come 2029. And so we are, there's going to be a gap there. And, oh, he don't like it either.

1:02:00Chris Berry: And my dog does not like that gap. Look, I mean, you're absolutely right. We've all seen these stories, right? China graduates 10 million, that's not the right number. They graduate 10 times the number of engineers we do in this country. You know, coming back to my point about we need 10 TechMets or 10 Orions, you need 10 Colorado schools of mines, right? I mean, and so of all of what we learned last Friday in terms of the money and where it's going and so on and so forth, you're correct. Like, I feel like that$180 million was kind of glossed over. Arguably, like, that is really what sets the foundation for future success.

1:02:44Trevor Hall: Yeah, yeah. Last question for you, Chris. Sure. We got to talk about the politics. Does this survive a different administration?

1:02:54Chris Berry: I think it does. I think that the China issue, and I use air quotes when I say that, really is bipartisan. And I do think you're going to see a situation where, you know, let's just say the Democrats do take control of the House and or the Senate in November, which, you know, again, separate podcast, separate discussion in terms of what might or might not happen. But yes, a lot of these CEOs are going to be hauled in front of Elizabeth Warren and say, well, you know, I got this X hundred million dollar loan. Like, where did it come from and how did you qualify for it and how are you using the money?

1:03:32Chris Berry: And some of it will be a show trial, to be honest with you, I think, because there's no evidence to to support the claim that there's anything shady going on here. Right. I mean, as I mentioned before, this is just a bazooka of capital being blasted at these deals. and it's too early to tell, right? Which is not and which is not going to work. But yes, if the Democrats, you know, get control, you're going to see some theater for sure.

1:04:01Trevor Hall: So there's maybe political risk still on the board even after all this?

1:04:06Chris Berry: The question you could, if you're a mining company CEO out there and you have not applied for one of these loans or qualified for it, I mean, maybe you don't want it, right? And maybe it has nothing to do with, I don't want to screw up my capital structure or whatever. Maybe it's just, I don't want government capital. I'm going to do this alone. And depending upon your project and its attributes and the metal in question, I mean, maybe that makes sense.

1:04:37Trevor Hall: All right, Chris, I know you're on vacation, so I appreciate your time.

1:04:43Chris Berry: Never on vacation, man. Just different location. I always keep my head down.

1:04:48Trevor Hall: Well, and you're sending one of your own to college next week. And I'm like, maybe with this new capital into the mining academia, is it too late to change the major or anything like that?

1:05:02Chris Berry: She's going in as a freshman, and so I will do my best. But I don't know. I'm not optimistic.

1:05:11Trevor Hall: Very good. All right. Chris Berry from House Mountain Partners, also our incredible host over at the Power Current Podcast here on the Clear Commodity Network. I'm forever grateful for your time, Chris, and everything you give us. Thanks so much. Have yourself a great rest of your vacation.

1:05:27Chris Berry: Sounds good. Thanks.

1:05:30Trevor Hall: The information presented should not be considered investment advice. Mining Stock Daily and its affiliates are not responsible for any loss arising from any investment decision in connection with the material presented herein. Please do your own research or speak with a licensed financial representative before making any investment decisions.