Grizzle Hard Money Conference - Key Takeaways Part 1

3Fourteen Research, Amplify ETFs, West Red Lake Gold, First Nordic Metals, Element79 Gold & Hilltower

The Grizzle Hard Money Conference series keeps getting better and better, a tremendous day of conversations with the top precious metals and bitcoin strategists, portfolio managers and management teams.

We’ve provided summaries of the segments (part 1) below along with video links. The full conference is available on the following platforms: Twitter, YouTube, iTunes, Spotify & LinkedIn.

3Fourteen Research - Warren Pies, Founder

Interview Link | 3Fourteen Website

• Gold as a Reflection of Institutional Trust: Pies emphasized that gold is rising as a result of decreasing institutional trust, which has been particularly influenced by geopolitical events like the Russia-Ukraine conflict. This mistrust is seen as a significant tailwind for gold investments.

• Fed's Rate Cut Anticipation: Pies noted that gold often rallies in anticipation of Federal Reserve rate cuts. He referred to historical patterns where gold prices began to rally months before the Fed implemented cuts. For example, he mentioned the 2018 scenario where gold began to rally around April, and the Fed started cutting rates by December and January of the following year.

• Central Bank Activities and Gold Prices: He noted that central banks have been buying gold, which might not directly explain the current price rally but does contribute to a more supportive environment for gold prices. He pointed out that often gold rallies are not directly tied to immediate economic indicators but are more about broader trends and shifts.

• Gold Price Targets and Predictions: He provided a conservative target of $2,500 per ounce for gold by 2024, based on historical patterns and current market conditions. He also suggested that a bull market could potentially drive prices up to $3,000 per ounce.

• Interest Rate Expectations and Adjustments: Initially, Pies and his team expected the Fed to implement mid-cycle adjustment cuts as part of a soft landing strategy. However, they have revised this outlook based on recent economic data. Pies mentioned that inflation figures, such as the core PCE (Personal Consumption Expenditures) index, were not aligning with the Fed's targets, which made him skeptical about the likelihood of rate cuts in the near term without additional financial market stress or tightening of financial conditions.

• Portfolio Diversification: Pies advocated for a substantial allocation towards gold in investment portfolios, considering it as one of the best diversifiers in the current economic climate. He described the modern financial environment as fundamentally different from the past, where traditional stocks and bonds dynamics no longer apply.

• Comparison with Bitcoin: Pies discussed Bitcoin in relation to gold, suggesting that both could coexist as diversification assets in an investment portfolio. He stressed the importance of not overly concentrating on similar types of exposure within a portfolio.

• Fed's Inflation Target and Rate Cut Thresholds: Pies discussed the specific metrics that the Fed is looking at, like the core PCE needing to fall to a 2.6% rate by year-end to meet the Fed's projections. Given current trends, he doubted this target would be met, which could influence the Fed's decision to delay rate cuts unless pressured by other economic factors.

Amplify ETFs - Dan Weiskopf, Portfolio Manager of the BLOK ETF

Interview Link | BLOK ETF Website

• Block ETF Overview:

  • BLOK ETF focuses on investments linked to blockchain technology and cryptocurrencies, particularly Bitcoin.

  • The ETF includes holdings that give investors exposure to the price of Bitcoin, like MicroStrategy, as well as investments in cryptocurrency infrastructure and blockchain applications.

• Growth and Institutionalization of Bitcoin:

  • Dan highlighted the significance of regulated financial products like ETFs in providing institutions easier access to Bitcoin. He mentioned that the total assets in Bitcoin-related ETFs have reached $53 billion.

  • The conversion of Grayscale Bitcoin Trust (GBTC) into an ETF was seen as a pivotal moment for the institutionalization of Bitcoin.

• Impact of Bitcoin ETF Approvals:

  • The approval of Bitcoin ETFs is crucial as it simplifies institutional investments in Bitcoin through regulated, familiar structures.

  • Dan noted that Bitcoin-related assets managed through ETFs have grown rapidly, nearing half the size of gold spot ETFs in only a few months which is incredible.

• Bitcoin Halving and Market Impact:

  • Discussed the recent Bitcoin halving, dismissing concerns about its potential negative impact on Bitcoin's price.

  • He emphasized the fundamental strengths of Bitcoin, such as its role in store of value, hedge against inflation, and means of value transfer.

• Bitcoin Mining and Transaction Fees:

  • Transaction fees and their role in the revenue models of Bitcoin mining companies were discussed, with Bitcoin miners experiencing substantial revenues. On a particular day post-halving, miners earned $108 million compared to $71 million the previous day, highlighting the volatility and profitability in mining operations.

• Future of Blockchain and Cryptocurrencies:

  • Dan expressed optimism about the broader applications of blockchain technology beyond cryptocurrencies, such as in tokenization of assets and potential transformations in various industries including healthcare and intellectual property.

• Operational Insights and Miner Selection:

  • The strategy for selecting blockchain and cryptocurrency investments involves a deep understanding of each company's business model and technology. Dan emphasized visiting mining operations and understanding their technological and operational setups as crucial to successful investment decisions.

• Outlook and Growth Opportunities:

  • Expressed a bullish outlook on the future of blockchain technology and cryptocurrencies, suggesting that the growth and innovation in these sectors could potentially exceed the growth of Bitcoin itself.

West Red Lake Gold - Shane Williams, CEO & Director

Interview Link | West Red Lake Gold Website

• Strategic Positioning and Market Opportunity:

  • West Red Lake Gold operates in the Red Lake region of Canada, known historically for over 40 million ounces of high-grade gold production.

  • Williams pointed out a market disconnect where major companies focus on acquiring assets rather than developing, and many juniors are at very early stages. This gap allows West Red Lake Gold to capitalize by advancing more rapidly toward cash flow through development.

• Exploration and Development Approach:

  • The company is not just exploring but actively moving toward production. They are utilizing historical data, which includes thousands of data points from past drilling, to inform new exploration strategies. This approach is enhanced by modern technologies like AI, which helps target new exploration areas effectively.

• Financing Strategy and Gold-Linked Note:

  • West Red Lake Gold raised $30 million through a gold-linked note financing. This financing method is designed to be less dilutive than traditional equity financing. The note has an interest rate based on a floor of $1800 per ounce of gold, providing investors with potential upside based on current and future gold prices, which at the time were around $2300 per ounce.

• Production and Economic Outlook:

  • The company is planning to be in production by the second half of 2025. They have utilized a dual strategy of adding drilling rigs for both resource definition and exploratory depth, which supports quicker transition from exploration to production phases.

  • Specifically, they have increased their drilling capacity at their Madson project from one to two rigs, aiming for extensive resource definition and eventual expansion of the mine's output.

• Resource Estimates and Project Viability:

  • At the Madson project, over 2 million ounces of high-grade gold have already been defined, with grades around 7 grams per ton. This substantial base provides a strong foundation for both the ongoing exploration and the detailed mine planning necessary for future production.

• Historical Context and Asset Acquisition:

  • The project area has a long mining history, dating back to the 1930s and 1940s, which provides extensive historical data that aids current exploration and development strategies.

• Investment Appeal and Market Conditions:

  • Williams highlighted the contrarian investment strategy adopted during the acquisition phase, where assets were picked up at a low market valuation, reflecting a strategic move to capitalize on market cycles and the anticipated rise in gold prices.

First Nordic Metals - Taj Singh, CEO & Director

Interview Link | First Nordic Website

• Gold Market Outlook:

  • Taj expressed a strong belief that the gold market is entering a bull phase, indicating that we are in the early stages (first or second inning) of what he anticipates to be a 10-year bull run. He noted a 15-20% increase in gold prices year-to-date and expects further significant movements when interest rates decrease later in the year.

• Company Overview and Strategic Mergers:

  • First Nordic Metals recently completed a merger with Gold Line Resources, where Taj was previously the CEO. This merger was described as natural, with the combined company now controlling over 100 kilometers of the gold land belt in North Central Sweden, significantly enhancing their mining potential and operational scale.

• Resource and Exploration:

  • The Swedish belt, in particular, is their primary focus, where they recently discovered the Paubacken project, which shows promising geochemical footprints larger than their existing Barsele deposit.

  • The current resource on the Finnish greenstone belt stands at about 300,000 ounces with a high grade of four to five grams per ton, still open at depth and along strike.

• Joint Venture with Agnico Eagle:

  • Taj highlighted a crucial joint venture with Agnico Eagle, describing it as fully carried, meaning First Nordic incurs no cost until a pre-feasibility study is published. After that point, the JV would transition to a 70-30 split. Agnico has already invested approximately $60-65 million in this venture, underlining the project's scale and the commitment of both parties.

• Future Plans and Catalysts:

  • Looking ahead, First Nordic Metals is focusing on further exploring and potentially expanding the newly acquired projects. Taj mentioned significant potential for growth, particularly at the Paubacken project and another early-stage project to the north of Barsele. He anticipates these areas could contribute to a multi-million ounce gold camp.

• Regulatory and Operating Environment:

  • Sweden's favorable mining environment, characterized by low operating costs due to efficient practices and low-cost power (primarily hydroelectric), offers a strategic advantage. Additionally, the supportive regulatory framework and historical precedence for mining make Sweden an attractive location for First Nordic Metals' operations.

Element79 Gold - James Tworek, CEO

Interview Link | Element79 Website

• Company Overview and Acquisition Strategy:

  • Element 79 Gold rapidly expanded through mergers and acquisitions, growing its portfolio to 20 properties recently and strategically divesting them for profit over time.

  • In June 2022, the company acquired Calipuy Resources, which included two significant assets. One of these assets, the Lucero asset, is the primary focus following the divestiture of the other.

• Lucero Asset Overview:

  • Lucero is a past-producing mine in Peru, known for being the highest-grade gold and silver mine in the region during its operational period from 1989 to 2005.

  • It produced an average of 19 grams per ton of gold equivalency, with significant silver content.

  • The mine was originally abandoned due to high all-in sustaining costs exceeding gold prices at the time, leading to its closure when economic conditions became unfavorable.

• Current Production and Exploration Potential:

  • The Lucero mine has since been worked on by artisanal miners for 19 years. These miners are restarting operations as the rainy season ends.

  • The total land package for Lucero is extensive, spanning 10,800 hectares, with 74 known veins, of which only 19 have been tapped, and production historically derived from just 7.

  • Element 79 plans to collaborate with local artisanal miners, formalizing operations and potentially integrating their output into the company's broader production strategy to generate cashflow in the near term.

• Team and Operational Expertise:

  • The Element 79 team comprises experienced professionals who have successfully scaled mining operations from junior to mid-tier levels and have significant experience in managing major mining projects globally.

• Financial Strategy and Cash Flow:

  • Element 79 aims to generate cash flow through strategic partnerships with local miners, selling their output and leveraging this revenue to fund further exploration and operational activities non-dilutively.

• Future Plans and Catalysts:

  • The company plans a drilling program of 3,000 to 6,000 meters to establish a defined resource and develop a mine plan, aiming to scale production significantly within the next 18 to 24 months.

  • Element 79 Gold aspires to reach a production rate of 200 tons per day, with the historical production levels providing a promising benchmark for future operations.

Hilltower - Tracy Shuchart, Founder

Interview Link | Hilltower Website

• Demand for Silver:

  • Industrial Demand: Silver has a significant industrial component, accounting for 45% of demand. This includes usage in medical applications and green technologies such as electric vehicles (EVs) and renewable energy solutions like solar panels and wind turbines. The industrial demand for silver is expected to increase over the next decade due to the green transition.

  • Physical Investment: While industrial uses dominate, silver is also a popular physical investment commodity.

• Supply Challenges and Market Deficits:

  • Capex Limitations: Similar to the oil industry, the silver mining sector has suffered from inadequate capital expenditure over the years.

  • Supply vs. Demand: Silver demand is growing faster than supply can keep up. The Silver Institute projected a significant deficit in the coming years.

  • Historical Surpluses and Recent Deficits: Up until 2021, the market experienced a surplus of silver, but it has shifted to a deficit over the last three years. The deficits from these three years surpassed the surplus of the previous eleven years.

  • 2023-2024 Deficits: Mine production fell by 18 million ounces in 2023 and is expected to drop further in 2024. The Silver Institute forecasts a 265.3 million ounce deficit for 2024, indicating a serious supply shortage.

• Investment Perspective:

  • Silver as an Investment: Given the increasing industrial demand and the significant supply challenges, silver presents a compelling investment opportunity. Tracy highlighted silver's attractiveness due to its diversified uses and its potential for price increases driven by both industrial demand and investment flows.