Miners’ Capital Destruction | Expert View | Real Vision™

Miners’ Capital Destruction | Expert View | Real Vision™


This idea that gold-and-silver mining companies
are brilliant at capital instruction, I think, is just wrong. And it comes from a lack of understanding
of this problem of costs versus the gold price. So just to go into that a little bit, gold
is money, silver is money. And they’re pricing of full stature in the
bond market. And I’ll say, for me, that, that it’s not
just the work John Williams of Shadowstats. There are other things as well, which indicate
that inflation can be around probably average 9% over the last 20 years. I know that sounds completely shocking. But by the way, in truth, , you know, a lot
of the most-interesting investors I meet would agree with me. They want to be up 10% net per year. Otherwise, they feel they’re down. So that actually confirms that point. But if you accept that, then there’s a huge
input-cost problem for these companies. And we see it consistently when you model
them out proper. You can see it’s there. And they’re not able to hedge that away or
avoid that problem. If costs are rising at 10, and gold is up
1, it’s not a management problem. Now, don’t get me wrong. There are issues with corporate governance,
renumeration. But I don’t think there are any bigger than
they are elsewhere in other sectors. I think that there’s a narrative here which
doesn’t really bear out when you really dig into it. The issue is with the way inflation is reported,
and thereby, the way real-interest rates price gold. And that’s where both the problem has come
for a very long time, but also, where the enormous- investment opportunity lies because
if gold does start to break out in a major way, you’re going to see massive margin expansion,
operational gearing to the upside for these companies. And people can make fantastic returns on that
basis.

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