Should sentiment for the precious metals return to a level more in line with the historical average, demand for gold will skyrocket, Rick Rule, director of Sprott in a panel discussion with Amir Adnani, chairman of GoldMining and CEO of UEC. Adnani added that investors in the resource sector need to take a long-term view for their time horizon.
we're here to discuss the future of investments in the resource sector. And joining us today are two very distinguished guests that have worked decades in this field in a well-renowned in the both respect professions, Rick rule. Former president of Strat, who is now director and legendary investor who needs no introduction is joining us with Amir Adnani, who is CEO of UVC and chairman of GoldMining.
We'll be speaking with both of them regarding their views on the space. Gentlemen. Welcome. What a pleasure to have both of you at the same time. I feel like I've hit a jackpot. Thank you, sir. Thank you, David. I mean, we spoke recently, you and I about uranium. It was, um, it was a very enlightening interview about the industry.
I love to follow up with you on this because viewers have wanted to learn a little bit more about the industry, Rick, you and I have never spoken about uranium. We've talked about gold, the economy, the macro economic landscape, um, investments, equities, the whole works, but I haven't gotten your thoughts by uranium.
How do you feel about the space and what is your, what is your connection with uranium? Uh, I've been involved in the uranium industry, uh, on and off since the decade of the 1970s through the ups and through the downs, the, uh, last bull market that we experienced in uranium, 1989 to 2006 was probably. The single most profound speculative event of my life.
Uh, I was early into that bull market in fact, very early, too early, some might say, uh, but I remember very well that going into that bull market, there were only five remaining uranium juniors in the world. The poorest performer of that group rated a 22 to one return in the period, 1999 to 2005, 2006. So it was a pardon?
The pun. But an explosive circumstance, uh, uranium, if you're a contrarian, probably the best of all materials, because it doesn't really bore people. It terrifies people and angers people. We're back into a circumstance today. That's all oddly reminiscent, frankly, of 1998, 1999. And there's been a substantial period.
Uh, since people made a lot of money on uranium. Caveat that the last four months have been extraordinarily good in the junior uranium equities, but the sector itself hasn't attracted much attention for a very long time. And people when they lose the excitement, lose access to the facts, the facts are simply this, that irrespective of whether you like uranium or don't like uranium, and by the way, you should.
Uh, it's an important part of the ascent of man. It's an important part of electronic electrical generation. Important enough that if you're American, you need to know that uranium generates about 19% of total electricity consumption and 15% of base load generation, which means over five or six years, it can't be replaced by any of their power source, which means again, That either the price of uranium goes up to the global clearing costs.
The total cost of producing uranium, including cost of capital, or there's not enough electricity for everybody. And the lights go out. My suspicion is that, that means that the price goes up rather than the lights go out. Uh, people who believe that five or six years from now when they enter the room and flip the switch that the lights will come on believe defacto in higher uranium prices.
And I, I really think. There's a half hour more to talk about, but that probably covers the basics pretty well. I'm here. I have a question about the price. Now I spoke to a silver and gold miner recently, and I asked him the hypothetical question of what, what happened to gold and silver prices should all the pressures, miners, precious metals miners around the world.
Cease production. Spontaneously for just as a hypothetical example. And he said the price would inevitably go up. There will be a huge supply crunch. We're seeing something very similar happen with the uranium market in real life. It's not a hypothetical. You told me last, last week, you told me that in North America, there's currently no uranium production, but why hasn't the price spiked up yet?
One of the, one of the unique characteristics about the uranium market. Is the nature that, uh, the rule that inventories or secondary suppliers play, uh, in the market, uh, the availability of them and the availability of inventories, uh, is an important and integral part of the uranium market because the end-user for uranium is a nuclear power plant and a nuclear power plant is responsible in most cases for providing electricity to.
Thousands of homes in, uh, high, highly dense, uh, areas and from a population point of view. So reactor operators and owners typically don't want to wait till the last second where there's all of a sudden the need to get uranium for next week and you don't have any. And so naturally there's been stockpiles or inventories built over time.
And I think just bringing it back to a point that, uh, Rick just made how today's, uh, set up and dynamics in the market are. Very much reminiscent of periods leading up to previous bull markets where you would have looked around and said to yourself, why isn't the uranium price going up? It's a $20 just applied to math fundamentals.
Don't make sense that we're consuming more uranium and what reminding and we're depending too much on finite amount of above brand inventories. It's the exact same setup. And what has happened in previous circumstances with the same setup. Is we've seen rapid appreciation in the uranium price war. In 2005, we were staring at a $20 uranium price asking ourselves the same question you and I are just talking about.
And will you just ask David? And within two years, the uranium price went as high as $140 per pound. It's within that timeframe. When Rick mentioned there were five uranium countries in the world, or something like that, we ended up having 600 uranium companies in the world by 2007. And similarly, the run-up in 2010, where the uranium prices were hovering, sub $40 per pound.
And within three short months when to almost $75 per pound. And so in a tightly. Uh, traded market like uranium, uranium is not listed on the London metal exchange. It's not a liquid commodity in terms of the day-to-day trading as copper, gold, silver, or oil would be. And so, as a result, you can have a slower, uh, price formation periods.
You can have a slower reaction perhaps to circumstances that you're you're, that we're all looking at and recognize that it needs to be a shift higher in price, but then when it goes, the moves can be rapid. Uh, and in some cases, uh, one analyst, a former analyst used to famously say the moves can be violent.
Uh, and, and I think we've seen that already in the last 15 years with the uranium market. Okay, Rick, uh, you're an investor I'd like to ask you from the perspective of an investor when you see a commodity like uranium, and let's just take the last six months, for example, the price steadily fallen. Yet. If you look at particularly uranium stocks like UAC, for example, um, Amir's company, the stock has steadily risen.
When you see a divergence. Um, that is that significant. What are some of the first questions you have that come to your mind? I understand the question, but I have to digress a little bit. Uh, there isn't a price in uranium, despite the price that you see quoted as the spot price, which is to say the price that uranium, which hasn't been contracted trades at, and that can be.
Between 20 and 30% of the total uranium, most uranium transactions take place in the contractor term market. And what you've seen in the last three or four months has been the, the term market. Uh, although it's opaque has firmed substantially, you aren't seeing a move up in the spot market. I suggest largely because of the very slow pace of Japanese restarts after Fukushima, there is still ample material around in the very near term.
But as reactors begin to contract for the four or five or six year timeframe, That market is becoming substantially tighter. It's that tightness that I think has caused the uranium equities to go up in price. Okay. Let's turn the page gentlemen now to the broader investment landscape and Rick, I'll start with you and talk about specifically the resource sector and how the resource sector fits into a generalist investors portfolio.
How should one look at the resource sector? Is it a value play? Is it a speculative play? Is it something of a hedge. How should someone utilize the sector? Wonderful lead. I just get to say, yes, it's a value play. It's a speculative play and it's a hedge. I think it's important for people to step back a second and recognize that everything in the world that's tangible was either grown or mind.
Uh, we beneficiate things as human beings, but to the extent that we have anything tangible at all, it comes out of the ground. We grow it in mine. It it's also necessary to understand in terms of commodity plays. That they are very capital intensive and extremely cyclical. What that means is that investors, even before they categorize themselves, uh, have to understand that they are either contrarians.
They have to buy, uh, commodity sectors when they're out of favor or they're going to become victims. Uh, commodities are extremely economically sensitive. And the increase that we have seen in commodities related equities in the last six months comes from what wall street is calling reflation. Trade wall street is looking for fairly benign, uh, economic circumstances, but they are looking for increased inflation, which traditionally has treated, uh, industrial commodities, uh, fairly well.
Your listeners need to ask themselves. When they are looking at the non precious metal side of commodities, whether or not they think the next two or three years will exhibit good economic conditions. If they do the reflation trade will continue because as a society, We have under-invested under invested in the means of production associated with in particular mineral commodities for a very long time.
And if demand even hold steady, it doesn't need to increase. We're going to see supply destruction occurring because of a period of very low input. That is we've under-invested in these sectors. Uh, if you believe that we're going to have an economic decline in the next two to three years, which some people do that should constrain.
Price increases in non-industrial commodity. Pardon me? In non precious metals commodities. I think with regards to precious metals, the circumstance is very different. I think there, uh, what investors need to look at is whether the, uh, fiscal policy decisions specifically quantitative easing, uh, which as we said before, David, if you did, it would be called counterfeiting, uh, Def and deficits and negative, real interest rates will persist.
If those conditions persist, I think the precious metals will do very well. Irrespective of any other economic conditions. If you believe by contrast that economic growth will begin to outpace the U S budget deficit. Uh, if you believe that the current rise in interest rates will take interest rates positive in real terms, then you need to be cautious about precious metals for myself.
Uh, I believe that we are in a precious metals bull market. Uh, that is being driven by negative real interest rates on other savings products. Uh, I believe too, that the plateauing and the decline that we've seen in the gold price is really a function of the increase in the nominal interest rate in the United States.
And I have difficulty believing that that nominal rate increase will continue. Uh, I, in fact, believe it will decline. So I believe that we're going to resume the upward March, uh, at some point in time, three months from now, six months from now in precious metals and precious metals equities with regards to the broader commodity trade.
I think the print is a little bit overdone right now. The idea that the whole range of commodities is up by 50 or 60%, uh, seems to me a little excessive, uh, I hope I'm wrong. I believe four or five years from now. That real commodity prices are much higher, not so much as a consequence of increased demand, but rather as a consequence of supply shortages throughout the chain.
Hope that answers the question. Okay. Uh, on Mir, uh, I'll let you respond to that, but I also have, um, a more hypothetical scenario for you to address this is not a short-term problem, obviously, but, uh, I've heard that the reserves. On on, on the planet are dwindling for, for, for precious metals in particular down the line, I'm talking about perhaps the next generation with perhaps even the following one.
Will we ever reach a point where we're running out of gold in the ground and silver and there's none left on earth? What would happen then? Well, I think one of the areas, uh, of peak gold discussion, uh, was, uh, famously discussed, uh, By individuals like Ian Telfer, who has recently partnered up, partnered with, uh, Rick ruler and I on, uh, on a new gold royalty IPO that we launched and it completed last week.
And, you know, Ian is a former chairman of the world gold council. So he had a pretty, uh, uh, interesting and informed, uh, vantage point into, uh, the challenges associated with, uh, uh, mining and reserves and resources. Let's step back. There's no doubt about it. And you can simply reference that the most recent presentation made by, uh, CEO, uh, very Goldmark Bristol, uh, confirming the fact that reserves and resources for major gold producers are at a decade low.
Uh, this is a fact now whether this is due to, uh, the sheer scarcity, uh, of gold in the Earth's crust or the fact that investors. Uh, require an ESG practices required deposits and certain jurisdictions, uh, or whether we're talking about sanctions or other political issues as to what geographies and countries miners can, can efficiently enter into, bring their capital and be able to over a longterm business, realize adequate returns.
Uh, we end up with, uh, quite limiting, uh, areas, limitations around. Where exploration development and mining can take place, which is an extremely long-term business and exercise, extremely high risk and extremely capital intensive. As again, sometimes it really is difficult to treat availability of the mineral endowments with rubbed the world equally, without factoring in all those geopolitical and other considerations that affect that capital allocation decisions by mining companies.
So there's no doubt that. We were in a long bear market before entering this new bull market, which meant under investment in exploration and development, major producers work the leveraging their balance sheets rather than investing in growth. Uh, and today as we, uh, enter a new phase of, uh, seeking growth and needing to replace, uh, reserves and depletion, uh we're uh, we're faced with all types of structural issues.
Uh, permitting takes longer, uh, all kinds of complications. I think around that, uh, what, uh, I think the latest McKenzie study showed that you're looking at 10 to 12 years to permit new, uh, uh, uh, gold and golden copper related projects to bring into production. So, uh, to Rick's point, I think irrespective of what economic conditions or fiscal policy decisions have landed us in this environment of elevated, uh, commodity prices.
The realities of what it takes to build new mines anywhere in the world via gold, via copper, beat uranium, uh, simply translate to longer timelines, uh, and, uh, the re the need for a higher return. And hence, I think supports why we're going to see higher commodity prices as, uh, as it relates to the economic realities of mining.
Okay. I have one final question for both of you and this relates to price. Now I it's, it's great that we have both of you on, because Rick, uh, you can comment on this from the perspective of an investor while Amir can comment on this from the perspective of a minor or a producer. So opposite sides of the same coin as like to call it a Rick, let's start with you.
The price of gold now is as you said, we are still in a long-term secular bull market. However, undeniably the trend for gold has been. Has been embarrassed for the last couple of months. Sentiment is weaker now than when we first spoke last summer. You and I. And so as an investor, when you're seeing this happen, would you prefer to stay on the sidelines until sentiment improves or would you prefer to buy on the weakness?
No, I'm.
Putting it very crassly. Uh, I'd like to become wealthier if I believe that the price of gold is going up in the two year, three year, four year timeframe. The fact that it is falling in price now, so that I can buy more cheaply, uh, I consider to be an unalloyed good. Uh, the fact that for some reason, uh, investors seem to favor receiving a negative, real interest rate, which is to say a guaranteed loss on their us dollar denominated gold holdings.
Oh, pardon us? Dollar denominated bond holdings. Uh, I think as an irrational act, uh, but as long as they're willing to do it, uh, as long as they're, uh, willing to sell me at a bargain, a commodity where I think the price is going to go up, I'm completely unconcerned with sentiment. Uh, I'm delighted by it. Uh, the truth is that to my physical gold holdings, the physical gold holdings I have now wouldn't be for sale at $2,000.
Announced they wouldn't be for sale at $2,200 an ounce. So from its current price, I would actually rather see it go down than up. Uh, if it goes down, I can buy more. If it went up, uh, even a reasonable amount, I wouldn't sell it. Uh, anyway, so from my own viewpoint, the current weakness in gold and particularly the current weakness in gold equities is extremely appealing.
Uh, I I'd like to go back for a second to something Amir said with regards to supply, and I would caution your listeners to understand that almost all the gold that's ever been mined is still supply. We take the stuff oddly from a hole in the ground called a mine, and we put it in a hole in the ground called a vault.
Uh, but despite the fact that it's all supply, you have to consider its supply relative to its competitors, which is to say bonds, uh, Amir needs to go out and find the stuff he needs to permit it. He needs to finance it. He needs to do all that to create gold. He has to make a substantial expenditure for the government to create bonds or dollars.
All they have to do is click a mouse. The, uh, Market share of gold and well precious metals and precious metals related assets in the U S market is less than one half of 1%, which is to say one half of 1%, a little less than one half of 1% of all the savings and investment assets in the United States of America are in precious metals and precious metals related assets.
It's a tiny class. The three decade median or pardon me three decade mean is between one and a half and 2%. So if sentiment would improve well enough, uh, not that the gold has to win the war against the us dollar, but rather if the sentiment was to return to the three decade, mean demand for precious metals and precious metals related assets in the largest savings and investment market in the world.
Would somewhere between triple and quadruple. And that's precisely what I think is going to happen. Interesting. Okay. Uh, and, uh, Rick, I'll let you finish your part of this, uh, segment, and then we'll move on to a mirror to close off. So, Rick, I know that spot has a, a service that they provide to viewers, uh, and you rank their portfolios.
Can you walk us very briefly? The criteria we've spoken about this before, but I think we omitted the criteria part. What do you look for when you rank someone's portfolio? First of all, can you describe the service and then talk about the criteria. That's a very long discussion. Uh, I can only say that in smaller companies, it revolves to some measure around people, but what we're really trying to do is, uh, establish a risk adjusted net present value, and compare that with its existing, uh, enterprise value.
Uh, look at probabilities, look at political risks. Look at balance sheet risk. We're looking at companies very much from a quantitative and qualitative point of view, we rank the companies one to 10, one being most attractive, 10 being least at least attractive. And I personally comment on individual issues where I think my comments might have value.
This service is accessed, uh, on a website, Sprott usa.com forward slash rankings. You can enter all of your natural resource stocks there, by the way, please. No cannabis stocks. Uh, please, no technology stocks, please think nothing that I don't understand, uh, no obligations basis. I will send you back your stocks ranked one to 10.
And as I say, I'll comment on individual issues where I think it's appropriate. It's important to note too, that the rankings taken all of the intellectual capital, but both of Sprott, pardon me, but the bow and the blame, uh, that is the one who makes the rankings and makes the comments is me. All right, Amir, I'll let you, I'll let you comment on that in regards to the price of gold and in relation to your company, do you think are stocks out of favor right now?
Well, I think you got to take a long-term view with, uh, with this, at least I do as an entrepreneur, I've, I'm taking a very long-term view. I look at, uh, uh, uranium energy, as I mentioned, uh, I started that company 15 years ago. And, uh, in the case of gold mining over a decade ago. And so your expectation for return on your own time and capital invested is quite different than maybe someone who's got a shorter, shorter term view.
So from my perspective, as the largest individual shareholder and all the companies I'm directly involved with, um, I think I I'm doing this on my team and other long-term backers expect, uh, significantly higher outcomes, uh, for, for what we. Have created, or at least the intrinsic value that we've created, I think longer term will command much higher market value, mainly due to the fact that again, um, at the end of the day, uranium is still out of favor, uh, uh, because of the low uranium price, irrespective of, uh, some better equity performances we've enjoyed over the last, uh, few months.
Uh, this is nothing compared to the fact that if we actually have a uranium price where uranium companies would fully permitted assets, like UVC can produce it. And, and generate revenue and generate free cash flow. That will be a very different market valuation for a company. Being able to do that, uh, then, uh, than sitting in and simply waiting for that to happen, which, uh, to some extent we have to do, despite the fact that we're aggressively thrilling and developing and preparing our production capabilities, making acquisitions, I think we will be a much better place company with higher value recognized in the market.
Once we can, uh, see a higher uranium price and fully harvest at that point with production and same with gold mining. And, you know, we, uh, we entered a bull market for gold and we've seen a marked improvements in, uh, the valuation there, but we still have ways to go. Uh, as you met, you heard me say already we had an exciting value unlocking events, uh, just recently for gold mining, where we, uh, spun out a portfolio of royalties on our assets.
And I realized a very successful IPO outcome where the company that was our former subsidiary gold royalty Corp is now a company, uh, listed on an NYC American with $90 million of cash. Uh, and our company gold mining owns half of that business with almost 200 million market cap. So I would, but you got to plan long-term for this.
And I think longer term, there's going to be tremendous demand for gold. There's going to be a tremendous demand for uranium for different reasons. I love the two yellow metals. I'm putting my money where my mouth is. Uh, I've been a big investor, personally, the companies that I'm directly involved with.
Uh, and I think if you have that approach, you will be rewarded in the longterm. Well, thank you both for coming on the show. Best of luck, Amir, to your, uh, to your projects. And Rick, I hope to follow up with you again soon. I hope you're not into retirement by you stepped down, but you're still you haven't, you haven't, uh, you haven't taken, um, taking time off work.
I hope investors want to know, want to know more from you. I think I'll be much more useful to you in the future. Uh, Sprott has had reasonable constraints on me from a regulatory point of view because we're a regulated business. Uh, I'm out from under those restrictions now. So the Rick rule that you interview a month from now will be very different than the Rick rule that you interviewed three months ago.
And I think that your listeners will enjoy it more and the regulators won't have any particular say so I'll enjoy it more to retirement. Yeah, that would be a, that would be, that would be quite a show. Amir, I look forward to following up with you again soon. Thank you both for coming on the show and, uh, best of luck to you again.
Thank you. Thank you, David. Thank you, David. And thank you for watching. Kick on news. I'm David Lynn.