Grizzle Commodity 1x1 Conference - Key Takeaways Part 1
Goehring & Rozencwajg, West Red Lake Gold, Power Nickel, Hot Chili, First Nordic Metals, Blokland Multi-Asset Fund, Bloomberg Intelligence
The Grizzle Commodity 1x1 Conference series streamed live to over 25,000 investors on December 4th and was full of market and stock specific insights. A tremendous day of conversations with top market strategists, portfolio managers and well positioned mining companies.
We’ve provided summaries of the segments (part 1) below along with video links. The full conference is available on the following platforms: X, YouTube, iTunes, Spotify & LinkedIn.
Goehring & Rozencwajg Associates - Leigh Goehring, Founder
Commodities as a Historic Investment Opportunity
Leigh emphasizes the unique, historic opportunity to invest in commodities today, claiming they are at their cheapest relative to financial assets in over a century. Drawing parallels to the late 1960s and early 1970s, he highlights how cheap commodity prices relative to financial assets preceded major market shifts. For instance, during the 1970s, gold surged from $35 to $850 due to economic and geopolitical upheavals. Despite gold's 30–35% rally in 2023, institutional investors remain disengaged, with gold equity investments down 20%. Leigh predicts a psychology shift toward hard assets, potentially triggered by an unforeseen "black swan" event, echoing the Arab oil embargo of 1973.
Gold and Valuation Frameworks
The discussion explores gold stocks as undervalued and compares them to options on the gold price. By applying models like Black-Scholes, Leigh argues that current gold equities are priced as cheaply as in the late 1990s, a period that preceded a massive bull run. Gold miners, viewed as options with fixed costs, offer exponential growth potential if gold prices spike. Using historical parallels, he posits gold could rise tenfold, potentially reaching $15,000–$25,000 over time, with gold stocks benefiting significantly. He critiques investors’ preference for passive vehicles like GLD ETFs over individual equities, noting that a substantial price rise might force capital back into miners.
U.S. Shale Oil and Gas Production Constraints
Leigh discusses the declining growth in U.S. shale oil and gas production, a sector responsible for 90% of non-OPEC supply growth over the past 14 years. Using advanced AI modeling, he reveals that most U.S. shale plays, including the Permian Basin, have reached 50% of recoverable reserves. EIA data corroborates stagnation, showing flat U.S. oil and natural gas production since late 2023. He warns of parallels to the 2000s, when overestimates of non-OPEC production led to a fivefold oil price surge. This impending supply crunch could similarly drive oil prices upward, as U.S. shale loses its dominance in global supply growth.
Global Natural Gas Trends and Emerging Markets
Leigh asserts that global natural gas prices are likely to converge due to growing demand for LNG exports, particularly from developing countries. Structural deficits in gas supply persist, exacerbated by warm winters delaying price corrections. Despite construction delays, U.S. LNG capacity will increase by six Bcf/day by 2025, alongside Canada’s LNG exports. Leigh highlights that as emerging markets like India and China grow wealthier, they prefer cleaner fuels like natural gas over coal. For example, India aims to triple its natural gas consumption within a decade. He links this trend to the broader structural shortage of natural gas globally, which sustains high prices.
The Future Energy Mix: Natural Gas, Nuclear, and Coal
Looking ahead, Leigh predicts a global shift in energy preferences, with coal being phased out in favor of natural gas and nuclear power. He argues that middle-income countries, as they develop, prioritize cleaner energy sources, despite the higher costs of infrastructure like LNG and nuclear plants. China and India are leading this transition, with China building 50 reactors and India ramping up nuclear projects. He forecasts small modular reactors (SMRs) as a game-changer in making nuclear power more accessible, offering a long-term solution to carbon emissions and energy reliability.
Final Remarks and Research Directions
Leigh concludes by emphasizing the need to analyze historical cycles, including Hubbard's peak theory, for insights into current shale dynamics. He hints at the transformative potential of SMRs in nuclear power and underscores the importance of recognizing undervalued sectors, such as natural gas and nuclear energy. His recently released quarterly letter (HERE) delves into these topics, alongside broader commentary on the future of energy and commodity markets.
Power Nickel (TSXV:PNPN) - Terry Lynch, CEO
Interview Link | Power Nickel Website
Current Commodity Market Dynamics
Terry Lynch describes a "choppy market" for base metals, influenced by short-term economic concerns. Despite these challenges, long-term supply disruptions for critical commodities like copper and nickel are anticipated due to insufficient investment over the past decade. Lynch predicts a positive outlook for explorers as commodity prices are expected to rise by the end of the decade. This sets up a favorable scenario for companies like Power Nickel, which focus on exploration.Market Disconnect and Catalysts for Growth
Lynch highlights the disconnect between strong demand for critical metals and the undervaluation of small to mid-cap exploration companies. Market manipulation, including spoofing and naked short selling, has exacerbated this problem. However, increased M&A activity and anticipated regulatory crackdowns are expected to catalyze change. He describes the current environment as ideal for value investors, with opportunities for significant returns (e.g., "10, 20, 30, 50, or 100 baggers") over the next 6–12 months.Geopolitical Impacts on Critical Metals
The strategic importance of domestic production of critical metals is growing, especially in light of China’s actions and potential policy changes under new U.S. leadership. Lynch anticipates the rebranding of the Inflation Reduction Act to focus on defense supply chains. Despite progress in government programs to support critical minerals, market response has lagged due to structural issues. He expects regulatory action to address these challenges, particularly in Canada and the U.S.Power Nickel’s Polymetallic Discovery
Lynch introduces Power Nickel's NISC discovery in Quebec as a potentially transformative polymetallic project. The resource is estimated to contain 33% nickel, 33% copper, and 33% noble metals (PGEs, gold, silver). The discovery includes 8 million tons of high-grade nickel sulfide and new drilling results showing copper equivalent grades as high as 10% over 10 meters. Lynch compares it to world-class deposits like Norilisk and Voisey’s Bay.Exploration Success and Expansion
Power Nickel’s drilling program has expanded the discovery, achieving a strike length of 550 meters and projecting a potential extension of up to 5.5 kilometers. The company has completed 10,000 meters of drilling and plans to triple that figure, aiming to establish a world-class deposit. Historical data suggest the potential for significant nickel sulfide beneath the copper deposits, reinforcing the discovery’s value.Strategic Partnerships and Future Plans
Power Nickel has attracted prominent investors, such as Robert Friedland and Rob McEwen, and technical experts like Steve Beresford, a leading authority on polymetallic deposits. Lynch credits their involvement to the strength of the NISC discovery. With a fully funded $20 million budget and plans to engage institutional investors, the company is positioned for significant growth in 2025. Lynch emphasizes that the focus remains on exploration and value creation before engaging with potential industry partners.
West Red Lake Gold (TSXV:WRLG) - Gwen Preston, VP of Communications
Interview Link | West Red Lake Website
Overview of West Red Lake Gold and the Madsen Mine
West Red Lake Gold was established 18 months ago by Frank Giustra, a renowned mining financier, and Shane Williams, an experienced mine builder, with the vision of leveraging a gold bull market. The company’s core asset, the Madsen Mine, is located in the prolific Red Lake gold district in Ontario, Canada, which has historically produced over 30 million ounces of gold. After a series of ownership changes, including Puregold’s stewardship from 2015, the mine entered bankruptcy due to operational missteps, despite having defined 1.7 million ounces of indicated resources at 7.4 grams per ton. West Red Lake Gold acquired the mine in 2023 and has since worked to rectify its operational challenges, positioning it for a productive restart in 2025.
Past Operator’s Challenges and WRLG’s Strategy to Increase Accuracy
The previous operator, Puregold, faced significant setbacks due to incomplete definition drilling, which led to delivering ore with a grade (3.5 grams per ton) significantly below expectations (8.5 grams per ton). This discrepancy, along with high operating costs stemming from deferred capital expenditures, drove the mine into bankruptcy. West Red Lake Gold is addressing these issues through intensive definition drilling, reducing average spacing from 20 meters to 6 meters, thereby improving resource accuracy. They also plan to employ more selective mining methods to extract high-grade ore efficiently. By completing essential capital projects in advance, the company aims to lower operating costs, ensuring that ore grades align with expectations (between 7 and 8 grams per ton). A formal mine plan, expected in January 2025, will solidify these projections.
Positioning on the Lassonde Curve and the Golden Runway
West Red Lake Gold is currently at a critical juncture known as the “Golden Runway” on the Lassonde Curve, transitioning from development to production. Historically, companies in this phase experience significant valuation rerates as they move from spending to generating revenue. The company’s price-to-net-asset-value (P/NAV) ratio is anticipated to rise from the current 0.2-0.3 range to 0.6-0.7 as production ramps up, with potential for a premium due to the high-grade nature of the resource and the prime mining jurisdiction of Red Lake, Canada.
Production Potential and Future Expansion
Initial production at the Madsen Mine is expected to reach approximately 60,000 ounces annually, with the company targeting growth through the inclusion of additional high-grade zones. West Red Lake aims to demonstrate its capability with this asset before acquiring additional projects to expand production further. The ultimate goal is to evolve from a single-asset producer into a multi-asset growth-oriented mining company, capitalizing on its foundational expertise and market timing.
Strategic Vision and Market Outlook
The company’s strategy hinges on capturing value in a rising gold market by leveraging both production growth and exploration upside. Founders Frank Giustra and Shane Williams foresee sustained opportunities for West Red Lake Gold to grow its asset base and deliver value to investors.
Hot Chili Ltd. (TSXV:HCH) (ASX:HCH) - Christian Easterday, CEO
Interview Link | Hot Chili Website
Copper Industry Challenges and Project Timelines
The average timeline from discovery to production has grown from 13 years in the mid-2000s to 17 years today. Christian attributes this delay to external factors like regulatory processes and securing essential resources, such as water rights, which took Hot Chili 10–12 years. Additionally, internal challenges, such as capital-intensive exploration and bulk commodity characteristics, contribute to these elongated cycles.
Hot Chili’s Vision and Key Differentiators
Hot Chili has built a billion-ton resource base on Chile's coastline over 14 years. It is one of only five projects globally capable of producing 100,000 tonnes of copper annually outside major mining companies. The company aims to sustain a 20–30 year mine life with scalable production, initially targeting 100,000 tonnes of copper and 50,000 ounces of gold annually. Pre-feasibility studies aim to double the project's scale to 150,000 tonnes per annum and extend mine life to 30 years. Hot Chili’s coastal location, access to infrastructure, and low elevation set it apart in the copper sector.
Funding and Strategic Partnerships
Hot Chili has benefited from strong shareholder support, including Glencore and Murray Black’s group. These relationships enabled the company to weather low copper prices and quadruple its resource base. With over 4.3 million copper equivalent tonnes, the company is advancing financing plans for a billion-dollar project while pursuing additional institutional support. The goal is to complete key milestones, including bankable studies, to finalize project financing by 2026 or early 2027.
Water Rights and Strategic Advantages
Hot Chili holds the only maritime concession in Chile's Wasco Valley, a region critical for copper production. Unlike most mining projects that require desalinated seawater, Hot Chili’s assets achieve better recoveries using untreated seawater, reducing capital intensity. This strategic water position enables potential partnerships and revenue streams by supplying desalinated water to nearby projects, as seen in other Chilean ventures like Antofagasta’s $600 million water rights sale. Hot Chili expects to reduce its own capital requirements by $150 million through water-related monetization.
Catalysts and Growth Prospects
The company is finalizing two pre-feasibility studies by Q1 next year, alongside an environmental impact assessment (EIA) submission planned for mid-2025. Additionally, Hot Chili is expanding its resource base from 1 billion tonnes to a potential 2 billion tonnes through aggressive exploration. Recent acquisitions, demonstrate this growth strategy. Hot Chili envisions the Costa Fuego district as a hub for copper production, targeting 2 billion tonnes across its holdings.
Market Position and Long-Term Goals
Hot Chili is strategically positioned to capitalize on rising copper prices, with its first phase of production targeting the late 2020s. By combining a robust copper portfolio with unique water rights, Hot Chili offers a dual-value proposition in mining and global water management, appealing to investors seeking exposure to both industries.
First Nordic Metals (TSXV:FNM) - Taj Singh, CEO
Interview Link | First Nordic Website
First Nordic’s Strategy and Focus Areas
Taj describes First Nordic’s philosophy of setting clear, achievable milestones across three-month, six-month, one-year, and three-year plans to build trust with investors. The company focuses on gold exploration in Sweden and Finland, aiming to develop one or two major gold camps in these regions. Sweden and Finland are considered untapped frontiers for gold exploration, with First Nordic holding significant land packages that replicate the potential of Canada’s Abitibi Greenstone Belt. Sweden’s 100-kilometer-long Gold Line Belt, for example, is geologically similar to Abitibi and holds potential for multi-kilometer-deep deposits favored by major mining companies.
Why Sweden and Finland?
The company highlights several advantages of operating in Sweden and Finland. These include strong governmental support for mining, low corporate tax rates (20%), and tier-one mining jurisdictions with low-cost power and skilled labor.
The Barsele Project and Agnico Eagle Partnership
The Barsele Project, a joint venture with Agnico Eagle, already holds a 2.5-million-ounce gold resource. Comparable deposits in similar greenstone belts suggest that this resource could grow to 5 million ounces with deeper drilling. Agnico has invested over $60 million in Barsele’s development, focusing on regional exploration and potential high-grade, gold-rich VMS deposits. There are plans for further drilling to test the resource depth and potentially increase its size. The project is expected to undergo preliminary economic assessments (PEAs) and pre-feasibility studies (PFS) to showcase its value.
Innovative Exploration Techniques
Exploration in the Nordics involves navigating glacial till, a layer of transported material covering bedrock. Taj explains how till sampling and base-of-till drilling (using low-cost percussion drills at approximately $1,000 per hole) help refine exploration targets. These techniques, proven in regions like northern Canada, allow for efficient exploration and cost savings. First Nordic is employing these methods to identify gold deposits across its properties, following models used successfully by companies like Rupert Resources and Agnico Eagle.
Recent Funding and Expansion Plans
First Nordic recently raised C$11.5 million to fund further exploration, particularly along the 50 kilometers of strike north and south of the Barsele resource. This funding supports a 30,000-meter diamond drilling program, one of Europe’s largest, to test four key targets. Taj notes that $6–$7 million of the raised funds will be allocated to this program, with additional funds reserved for further advancements in 2026.
Listing on NASDAQ First North Growth Market
To expand its investor base, First Nordic plans to list on Sweden’s NASDAQ First North Growth Market. This move responds to strong interest from Swedish investors and aligns with the company’s position as the largest gold deposit holder in Sweden. The listing is expected to enhance visibility and valuation, particularly as Sweden’s market values similar explorers and developers at higher market caps than First Nordic’s current $90 million CAD valuation.
Upcoming Catalysts for 2025
The company’s 2025 priorities include the 30,000-meter drilling program, completing pre-feasibility studies, and advancing targets identified through glacial till and geophysical data. The Barsele Project, in partnership with Agnico Eagle, will also see further development as gold prices rise. Taj anticipates a news-rich year, with updates every three to four weeks, showcasing progress across the company’s major initiatives.
Blokland Smart Multi-Asset Fund - Jeroen Blokland, Founder
Interview Link | Blokland Fund Website
Performance and Strategy of the Blockland Smart Multi-Asset Fund in 2024
The Blockland Smart Multi-Asset Fund, designed to focus on scarce assets like quality stocks, physical gold, and Bitcoin. Specific trends like central banks purchasing gold (e.g., China and Poland) and the rise of Bitcoin ETFs breaking records contributed to the funds success in 2024. Jeroen noted "the great rebalancing," where state pension funds and other institutional investors reevaluated their asset allocations, emphasizing the importance of true diversification. The fund’s strong returns, despite volatility, validated its strategy during an unpredictable year.
The U.S. Debt Experiment Under Trump’s Administration
Under President Trump, the U.S. is embarking on a unique experiment to address its aging population and debt-fueled GDP growth. With Trump securing control of the presidency, House, and Senate, he is initiating measures such as the Department of Government Efficiency, led by Elon Musk, to tackle budget deficits. Despite these efforts, rising costs from mandatory outlays, including Social Security and Medicare, challenge the feasibility of reducing the deficit below the critical 3% of GDP threshold. Jeroen emphasized the structural difficulties posed by aging demographics and welfare-state commitments, which push mandatory expenses to unsustainable levels.
Trump Administration’s Impact on the Crypto Industry
The Trump administration appeared poised to support the crypto industry by rolling back restrictive SEC regulations and promoting a level playing field. However, Jeroen warned that Trump’s America-first agenda and focus on U.S. dollar supremacy could conflict with Bitcoin’s decentralized nature. Although Bitcoin might align with U.S. interests in the short term, the administration's long-term stance remains uncertain.
Risks in Private Equity Investments
U.S. investors allocated an unprecedented 35% of their portfolios to private equity, a figure 7% higher than traditional equities. Jeroen criticized the industry’s reliance on artificially smoothed volatility metrics, arguing that real volatility in private equity is higher than marketed. Furthermore, the surge in private equity funds from $100 billion to $1 trillion chasing limited high-quality projects has diluted investment quality and will dilute returns as well. This oversaturation risks disappointing returns and could lead to a shift toward other scarce assets like gold and Bitcoin. Jeroen also speculated that the inflated private equity allocations might sow the seeds for the next financial crisis.
Inflation Trends and Future Risks
While peaks as high as 17.1% (observed in the Netherlands in 2022) are unlikely, inflation volatility is expected to remain above 2-3%, a departure from the low-inflation environment between 2008 and 2020. Future crises could exacerbate these spikes, making them a regular feature of the current economic system.
Europe’s Economic Decline and Global Position
European quality stocks are losing weight in global investment baskets due to Europe’s structural economic decline. Jeroen highlighted that only two European companies are among the world's top 20 largest firms, underscoring the region's diminishing competitiveness. Jeroen contrasted Europe’s policies with the growth-oriented approaches of the U.S., China, and India and expressed frustration over Europe’s apparent neglect of economic prosperity. This decline is reflected in the reduced representation of European stocks in high-quality investment portfolios.
Bloomberg Intelligence - James Seyffart, Analyst
Interview Link | James Seyffart on X
Bitcoin ETFs and Their Market Impact
Bitcoin ETFs have seen significant success since their launch, attracting cumulative inflows of $31 billion, far exceeding initial expectations of $15-20 billion for the first year. While some of the largest holders, such as hedge funds like Millennium and Citadel, use these ETFs for basis trades, the flows into ETFs have been largely price-impacting. However, ETFs represent just one part of the broader Bitcoin market, with fluctuations in price also driven by other forces. Adoption in client portfolios is still in its early stages, signaling continued growth potential for ETF-driven flows.
MicroStrategy and Single-Stock ETFs
MicroStrategy’s large Bitcoin holdings have also influenced the market, particularly through the advent of single-stock ETFs that offer leveraged exposure. These products, such as 2x MicroStrategy ETFs, have become popular despite their complexity and reliance on dealer swaps for leverage. Recent market developments, however, show that banks are reducing their participation in such products, compelling issuers to use alternative methods like out-of-the-money options to maintain leveraged exposure. This adjustment has occasionally led to deviations from the promised 2x leverage, raising questions about the sustainability and risks of these products. Potential outflows from MicroStrategy or these ETFs could create instability due to the concentrated leverage in a single stock.
Trump Administration’s Impact on Crypto Regulation
Under Trump, the presence of pro-crypto advisors and a reduction in enforcement actions could create a less hostile regulatory environment. While significant structural changes, such as a U.S. strategic Bitcoin reserve, are considered unlikely, even minor regulatory clarity and a shift away from punitive actions would be a major improvement. Broader bipartisan support for crypto-related bills also points toward a potential easing of regulatory uncertainty in the industry.
Emerging Altcoin ETFs and the Regulatory Landscape
The success of Bitcoin ETFs has prompted issuers to file applications for altcoin ETFs, including products focused on Ethereum, Solana, XRP, and others. Ethereum ETFs have already started gaining traction, with over $1.25 billion in inflows since the U.S. election. The approval process for altcoin ETFs, however, faces hurdles due to regulatory disputes. For instance, while some SEC divisions may approve ETFs based on altcoins, enforcement actions claim that many of these assets are securities, complicating approvals. Additionally, the lack of robust futures markets for these altcoins, a key factor in Bitcoin and Ethereum ETF approvals, poses a challenge. Applications for products like Solana ETFs have been delayed, and approvals may depend on significant changes in SEC leadership or regulatory approaches in 2025 and beyond.
Future Prospects for Crypto ETFs
While Bitcoin and Ethereum ETFs have set a precedent, broader adoption of altcoin ETFs may require new frameworks, such as surveillance-sharing agreements with major exchanges. Although the timeline for altcoin ETF approvals remains uncertain, shifts in regulatory sentiment could open doors for diversified crypto investment products in the coming years.