For the first time in 20 years, Thomas Kaplan, CEO of Electrum Group, has launched a new public silver producer. In an exclusive interview with Kitco News, Kaplan talks about his silver and gold projects and his outlook for the precious metals. In November, The Electrum Group went public with Gatos Silver (NYSE: GATO, TSX: GATO), which raised $170 million in its IPO. It was also one of the first precious metals companies listed directly on the New York Stock Exchange. Looking at commodity prices, Kaplan said that gold and silver are just at the start of a significant bull market. "Once silver stabilizes and gold is going up as some monetary metals, silver then starts to follow gold and then it gets octane and it surpasses gold," he said. "That's what happened during the financial crisis and we are starting to see that again."
It was attracting new attention. And today I'm talking with probably one of the biggest silver investors in North America. If not the world, the CEO of Electrum group, Thomas Kaplan, he started his fortune in silver options in the early nineties, moved over to gold and platinum in the two thousands. And after nearly 20 years in exclusive interview with Kitco news, he says, he's back into silver Thomas.
It's great to talk with you again, welcome to the show. Thank you very much. It was great to see you. Um, so we have a lot to talk about today. The Electrum group is involved in a lot of different projects, but the first question I have to ask is why silver? Why now? Well, the truth is, um, I never really left.
Silver. Um, I just left it in the public domain. Um, and coming back to silver just essentially means that we are, as it were coming forward, um, with the assets that we've owned and have been nurturing for years now. Um, silver was my first love in terms of the precious metals. And I would say that it is still my, uh, My biggest romance.
Um, the, the difference with gold is that, whereas we've been more public in terms of our pronouncements and in terms of our engagement, um, particularly with our flagship, uh, Nova gold, um, with silver, the assets that we have have been not deliberately under wraps because we weren't hiding anything. It's just that, um, we wanted to keep them back.
Uh, because I'm not a believer in taking things public too quickly. Um, I think that, um, you garner a better reputation by, uh, making the sausages, um, in, in darkness. And then by the time you reveal something it's really ready for prime time. It's a suitable for investors, institutional and otherwise, and it's no longer dependent on the next drill hole.
And so as much as I love exploration, I think that that's an area that really should be conducted as quietly as possible. Um, if you fail, nobody gets to know, and if you succeed, um, then you get to see how big it is before, uh, the rest of the world does, which is extremely helpful. So, is it more fortuitous than that?
You've launched a new, uh, public silver, uh, company. In this environment or was this plan like, did you see the start of the year that, Hey, you know, we need to go public well, I'll tell you the truth is that, um, you know, sometimes generals fight the last Wars and, um, as an old general, um, we began in the silver business in 1993.
Um, my strategy then was to be able to act as a consolidator of exploration properties, um, and development stage assets, or shut down mines. Uh, the price of silver was a three and a half dollars. Uh, nobody was interested in being in it. Um, Hecla core sunshine. We're trying to diversify into everything from kimberlite pipes in West Africa to, uh, industrial ceramics, to gold and New Zealand.
So really nobody wanted to be in silver. And I loved that because I was a complete neophyte. I surrounded myself with incredibly talented people who could help me make deals and identify great properties. And the idea was to build a large. Um, diversify. Um, silver company, um, somewhat, I mean, we started at the same time, somewhat is Ross Beaty was doing, um, or Bob Quartermaine, uh, was doing with Pan-American and silver standard.
Respectively. What happened is that, um, we made a discovery in Bolivia. Which made the dozen other properties that we had acquired literally from Mexico to Mongolia and everywhere in between, um, seem really small. And that was send Cristo, which was discovered by Dr. Larry Buchanan. Um, Extremely renowned geologists, uh, even then, and for this, he and his team won the fair Linsley award, um, at PDAC.
Um, I have a feeling he's on his way to winning another one. Uh, we'll get to that a little bit later, but my thought was in fighting that last war, that we will combine all of our silver assets into one vehicle. And that would mean, uh, the Los Gatos property. Um, which was, uh, discovered by our team. Um, and by, um, geologists that have been working for us, I bought a Hiller Meyer and it just great, great people.
Um, and we wanted to put that together with the sunshine, um, mining complex. In Idaho. And that would then add to it, all of our other silver exploration property, which we were aggressively pursuing for the last decade. Um, I'm never, ever happy unless I know that there are drill rigs, uh, turning somewhere.
Um, I love explorations. My favorite part of the business. Well, Things happened. And you know, some of the, even though we controlled the vast majority of, uh, our silver assets, we did have a couple of minority investors and they said, look, we don't want the exploration part. You have enough with Los Gatos in Mexico.
And with sunshine, you keep the exploration. That way the risk is all yours because, and not unreasonably, the odds are terrible, but I did tell them, you know, I'm really feeling lucky. And I know you can't factor that into a business model, but I really would suggest that. You want the exposure to that? And they said, no, thank you.
Okay. So we continued on and that now has become, uh, led by, uh, once again, Dr. Larry Buchanan, um, and, um, one of our chief geos, Magdalena, Luna, and, uh, Mark Pryor, um, a very, very large discovery in Mexico, which could be as large. We think a San crystal ball. Um, so what, we have three different assets at different phases of development.
Well, I was, and I was going to say the company that you went public with is, uh, Gato silver. And that went public in November. I figured we should mention that. Yes. And that's that's producing. That is probably Mexico's most recently constructed, um, silver mine. That's absolutely. State-of-the-art. Um, we have a partner, 30% of the project is owned by DOA of Japan, which has the world's largest sink smelter.
So they have, uh, the offtake agreements, which work for both of us. So we have the Gatos asset which went public and which is really just a beautiful. Beautiful pure play on silver ends zinc. Um, in Mexico, both of them are doing extremely well. Um, because we were private, we were able to acquire an enormous amount of land, um, without having to make noise about it.
And so, um, Got to us really commands an entire district that normally in Mexico would have been, um, fragmented into several mining companies. So we think that the organic growth at Gatos is such that we could see 11, 12, 13 million ounces of production there, um, potentially multiply as we have more discoveries along the district.
So that's a producer and that appeals to a certain kind of. Investor the sunshine mining complex is another. Extraordinary story, perhaps even unique in the sense that each really the only silver mining complex in the United States, where we own everything from, um, the mine face all the way through the value chain, to a refinery that can produce silver bars that go directly to Comix.
So in terms of its autonomy, it's extraordinary. And then there's the size. Um, sunshine is probably the most famous little remind in American history. Um, it produced, um, 360 million ounces of silver. Uh, when we acquired it out of bankruptcy, uh, over a decade ago, um, the general zeitgeists was that it was burnt out, um, and not very much was left.
Um, sunshine because it always had perennial financial problems. Going back to the time when it warded off bunker hunt, um, who was trying to take it over, um, had really not undergone, um, systematic, modern, um, geological assessment including using three day. And it was very, very, very. Primitive in that sense, our geologists had the view that in short order we could test the theory that sunshine held at least as much silver, uh, as it had produced.
Now that. Was a very, very juicy target and we drilled 13 holes and all of them hit the target. And we went from several dozen, um, million ounces of inferred to over 200 million ounces of inferred. Um, with the average estimated grade of 25 ounces, a ton sunshine was the largest. I'm at highest braid, large-scale silver mine in the world.
Um, and I think that after we're done assessing it, looking at it through a three, four five-year framework, a 10 year framework, and ultimately what I expect will be. 50 or 60 year framework. Um, we'll know exactly how much we'll produce. Meanwhile, we'll use the down cycle in, um, metals, equities to, um, Consolidate a large, a lot of the land positions in the silver Valley, um, for the first time.
And so I believe that we are the largest holder of middleware rights now in the silver Valley with multiple additional targets. So this is a lot of fun. Um, I coveted this property, um, in fact, when. I got married. Um, we gave medallions to the wedding guests, which were made out of silver from the sunshine mine.
And, um, I didn't own it yet. Uh, we waited for it to go bankrupt, um, and buy it at auction. But the first property that I'd ever optioned, um, at that took me into the mining business in 1993 was. Right across the street from sunshine. And I told my then fiance, who was with me on that trip. Um, one day I'm going to own that because I really do believe it's the Juul of, uh, American silver mining, just the great size, excellent workforce permits, Idaho.
Um, and the truth is for all of the jurisdictional issues that we talk about in gold, they're just as pronounced in silver. So location, location, location, and we love Idaho. What are your expectations for silver price? I mean, is this the start of a bull run in, do we see, is it only a matter of time before silver hits?
Uh, it's all time highs like we saw with gold earlier this year. Yes. That's the short answer? Um, the longer answer is that I've always regarded silver as being gold on steroids. In fact, When I started in the mining business, as I say, I started in silver and around that time, the people who became my strategic partners, uh, the quantum fund and Soros family, um, had just become the largest, uh, shareholders of Newman mining.
Uh, they bought the it's not controlled, but certainly the largest piece of Newmont from, uh, Sue James Goldsmith. Um, and they said, you must be bullish on gold. And I said, well, eh, They said, what do you mean? And I said, look, um, any reason that I have to be bullish on gold is multiplied for silver because of the industrial aspect.
And that was my argument. Then in the early two thousands, um, I became much more bullish on gold as well as silver. And that's really when Electrum. Our, uh, corporate entity really came into its own because Electrum means, uh, or is a naturally occurring alloy of gold and silver from which the first money was minted in ancient Lydia.
Um, and I felt, I thought, wow, that is the perfect name. Um, it is, um, a reflection of our. Emphasis on both metals, um, and it's called name. And so that's how, that's how that came about. Um, but is that, um, we never really left silver. It's just that we've been nurturing the assets privately. Uh, and what you're starting to see is, uh, as it were the beginning of the coming out parties, And it's fun because people will say, wow, we didn't know that you were in silver.
And I go, well, no, I've always said that I'm bullish on silver. And I always say that silver is gold on steroids and I'm wildly bullish on gold. And so, you know, you've got our own silver, but I always caution people. You know, steroids work both ways. Um, it's great. Um, when you're on a high and it's not so great when Silver's getting, um, beaten up.
So the fact that it has two really lovely personalities, monetary, and, um, industrial. Can work against it at certain times. And about a year and a half ago, I gave a, an interview to David Rubinstein on Bloomberg and he asked me about silver and he said, we could buy it. And I said, yes, but your audience needs to understand the difference.
So I said, when you have a financial crisis and now you can just. Think about what happened, um, about a year later, um, in March, um, when you have a financial crisis, um, silver often really takes it on the chin with base metals and what I would call commodities, whereas gold. It's a little bit hit so that he can generate liquidity for someone, but at the same time, it will start to move up as a monetary metal because of the measures being taken to, um, bring confidence back into the economy.
Once silver stabilizes and gold is going up as a monetary metal, silver then starts to follow gold. And then it gets octane and it's capacity is gold. And that's what happened during the financial crisis. Um, before silver went down 50, um, it went to nine, uh, and then yeah, in March, um, silver, February, March silver went down to $12 and people thought, Oh my God, that's, you know, it must be dead.
And I said, no, I didn't know, you can buy it. Uh, and they said, well, how do you know when to buy it? And I said, Oh, it's like catching a falling knife. And it's going to be a little bit bloody, but very soon, you know, you'll, you'll have a really, really great knife. Um, and the silver went from 12 and then like a rubber band to 30.
So gold went from 17, 1800 to 1400. Silver went from twenties to 12, but then gold rebounded and silver went back to the 30. So. I keep repeating this to people, then they say, well, if you know the phenomenon, then, you know, it's unlikely to repeat itself. I go, no, because human nature is to freeze up during those panics.
So especially with COVID, you know, people were more focused on their health, their families, their employees, um, and they weren't really, you know, so focused on silver. But silver behaved exactly as it was supposed to. So I would expect silver would be more volatile than gold. It's just the way it is. But if you asked me, can silver go to a hundred dollars an ounce?
That's absolutely. Without a problem. I mean, the truth is that silver now, um, has achieved a tremendous amount of traction in the media, which is. Really extraordinary. Um, the days when the media always mentioned bunker hunt, um, are really well and truly gone. Yeah. In fact, when people talk about silver in the media, now it's primarily, um, as a green metal as something that is part of a, as it were the green new deal, let's just use that metaphorically who knows what will come of it.
But the truth is that silver has industrial properties that are extremely beneficial. Uh, it's the most conductive of all metals, the most malleable of all metals. Um, it's used in solar panels. It's the most reflective of all metals. It's an antibacterial. So water purification. So it's got all of these industrial applications that make it vulnerable to economic decline.
But also very, very susceptible to a spring back and a propulsion that even gold doesn't have because silver is still going to be cheap relative to comparables that would fulfill the same, um, industrial applications. So nobody's going to substitute it with gold or PGMs, which basically means silver can go up as a monetary metal with gold, but those people who need it for those applications.
They have to buy it. And in less, the price of silver goes to hundreds of dollars an ounce. Sure. There'll be some substitution, but that's really not the kind of thing that keeps me up at night, knowing that industrial buyers will have to pile in as silver goes up. As a monetary metal. So do you think industrial demand then is what drives silver next year?
I mean, after, you know, the catastrophe that we've seen in 2020 vaccines coming, uh, hope that the economy revives, um, is this what makes silver shine next year? I think it's a combination of the fact that the industrial demand is rising. Um, and at the same time, and the fact that silver has been reaffirmed as an asset class is, uh, extremely compelling.
When you think of how little silver is actually available in the market. Um, and one of the reasons of course is that silver is, um, to my mind, Um, first and foremost, um, in its legacy, a monetary metal. Um, if you look at what's really been money. Silver was, um, the primary monetary metal throughout history, by the way, that's a quotation from Milton Friedman.
Um, it wasn't gold. And if you look, you know, the word for silver and money in the Bible is the same cast. If, uh, if Argentum in Latin outro is money and silver in French Platia um, I could go on so silver and money are somewhat. Um, synonymous and when gold does well, silver, as I said, tends to out perform it, but the numerous industrial applications, especially now, um, mean that you're going to have a double-barreled, um, impact on silver and.
What's nice about that is that people can wrap their heads around something that's industrially consumed. Um, it doesn't mean that gold will not flourish, um, almost as much as, as silver, but as you've seen in the recovery and copper, for example, um, and even in oil a little bit, uh, people love the idea that something gets consumed.
Um, I personally think that that's, that's a myth, but that's not my problem. Um, Yeah, I think that the truth is that silver is consumed and by some buyers and not consumed by others. So it really is a, a brilliant way to, to play precious metals and industrial metals.