Why Gold Miners Can Finally Shine

Published on
September 17th, 2018
Duration
25 minutes


Why Gold Miners Can Finally Shine

The Expert View ·
Featuring James Rasteh

Published on: September 17th, 2018 • Duration: 25 minutes

James Rasteh of Coast Capital Management is a deep-value investor who has turned his sights on the gold miners. He points out that these stocks have destroyed billions of dollars in capital, and have chronically underperformed the gold price, even during rallies. According to Rasteh, the managers are the problem, and yet they have paid themselves millions. He says it's now time for a change. Filmed on September 11, 2018 in New York.

Comments

  • RD
    RP D.
    30 September 2018 @ 18:00
    First time on RV that I feel the need to SLOW the pace of the speaker. 0.75 por favor! So much valuable content coming out of this guy I need more time to absorb it. Thank you Mr Rastah, you are a breath of fresh air. I will have to watch this one a few more times.
  • RR
    Raj R.
    24 September 2018 @ 10:22
    Barrick Gold to buy Rand gold
  • BH
    Ben H.
    24 September 2018 @ 05:55
    I dont think you can replace the industry's reserves through consolidation.... thats a zero sum game? They have to spend on exploration which can be helped by consolidation but only by the majors buying the juniors and then funding them correctly to be able to bring their potential orebodies into reserves
  • MW
    Mike W.
    22 September 2018 @ 21:33
    I’ve owned GDXJ since early 2007 at 11 & 17. Consolidation is selling assets or having to shrink the size of the business to execute in better conditions?
  • jd
    james d.
    20 September 2018 @ 19:27
    thank you for the transcript, much improves your value; more improvement would be to reduce the typos!
  • JB
    Jason B.
    19 September 2018 @ 04:17
    Good interview but James Rasteh is incorrect about the AISC for primary gold miners. Barrick Gold is one of the lowest cost producers and their claimed AISC guidance did not match their Q1 2018 financials. Free cash flow margins should have been higher if AISC was as low as many miners claim. I think many primary gold miners AISC average is NOT $950/oz. It's closer to around $1100-1150/oz now and costs are rising due to higher energy input costs, lower metals prices and lower grade ore processed. Primary gold miners margins got worse industry wide from Q1 2018 to Q2 2018 as oil rose and metals prices fell. And margins for Q3 2018 will be a lot worse than what the miners were working with in Q1 2018. The primary gold miners need oil prices to fall and metals prices to rise for their margins to start improving again. Oil/diesel input costs make up about around 33% of all mining costs.
    • JM
      John M.
      19 September 2018 @ 16:33
      For AISC I seem to recall hearing a range, $1,000 to $1,200 if memory serves me correctly. I don't think I've heard anyone claim <$1,000 except James Rasteh. So I think he is out of consensus. If so, it would have been helpful if he would have provided some insight as to why his estimate is a little different from others. Your comment, 'Oil/diesel = 33% of all mining costs' is interesting since I was recently David Hay's 'The Oil Market's Massive Repricing'.
    • MB
      Matthias B.
      20 September 2018 @ 15:04
      to Jason and John, the crux with AISC is the calculation method. pre the 2013 price implosion, companies were all over the place the way the calculated the cost structure below the "cash cost" line. The world gold council and many sell side brokers then started to push for a more unified calculation mechanism. But given the various accounting gimmicks some companies apply, it is a fair observation that the true underlying costs structure is not necessarily what the issue with the quarterly updates. The 950 James is referring to, is most likely derived from sell side sector reports. the good thing these days is that sell side brokers then specify how they calculate the cash cost, AISC and most importantly AIC (all in costs including brownfield and greenfield expansion). In that sense, broker Scotia call is "full enchilada costs" which should basically include everything and at current gold prices, the sector on average does not generate positive free cash flow, a key parameter to attract new money for the sector.
    • MB
      Matthias B.
      20 September 2018 @ 15:05
      apologies for the typos in the text.
  • JB
    Jason B.
    19 September 2018 @ 04:04
    The 5 largest precious metal royalty and streaming companies are the ones generating all the value now in this gold and silver bear market. They will be doing more immediately accretive or smart long term deals for future quality cash flows.
  • MS
    Mitchell S.
    18 September 2018 @ 21:07
    An excellent quality presentation: a well developed thesis, specific investment examples. More of this, please!!
  • EF
    Eric F.
    18 September 2018 @ 20:35
    Great transcript, includes graphics etc. Please do this consistently. Not always time to watch every video and sometimes just listen to audio only. This lets me scan transcript and not miss out. Much appreciated.
  • DR
    Daniel R.
    18 September 2018 @ 17:57
    This is why I subscribe to RV TV. Please bring him back every 6 mo or so to update, as we get closer to a peak gold event. If Rick Rule is a 10, this interview was an 11.
  • BH
    Ben H.
    18 September 2018 @ 14:51
    interesting interview James, Thanks for sharing your thoughts.. You mention no new significant gold discoveries im an interested to know if you are following what is happening in Australia in the Pilbara region of Western Australia with the conglomerate gold? Watermelon seed shaped nuggets found over a vast area 100's of sq kilometers some are comparing it to the Witswatersrand find in SA.. For those who are interested check out Artemis Resources listed on ASX code ARV IMO great risk Vs reward-they are refurbing a mine and installing gold processing circuit as we speak. They have around 20 mil cash in the bank ( i think) and large land holding, Inc some JV land with Novo Resourses- proving up the grade has been the issue only way is with bulk sampling as its so nuggety ARV are the only ones with a soon to be operational mine that will be able to bulk sample. There are number other exploration Co's in the region DEG, KIA and Kirkland Lake are also involved, Novo Have a Large land holding as well.. I could go on but dont want to be accused of ramping lol, disclamer i only hold ARV not a big position which i may come to regret.. Seperate to the watermelon seed nugget story an interesting discovery the other day at the Beta Hunt Gold Mine in WA "The find, including 95kg and 63kg specimens containing 2440oz and 1620oz of gold respectively, put a rocket under the previously ailing RNC Minerals’ share price in Canada" https://bit.ly/2QFNp4G All IMO, DYOR etc etc
    • JH
      John H.
      19 September 2018 @ 05:56
      Ben, great comments about the Pilbara region. I also l have held Novo and De Grey Mining and am looking to get back into those stocks.
    • BH
      Ben H.
      19 September 2018 @ 08:12
      Welcome John, hope you didi well when previously held.. FYI link to investor presentation for ARV that just came out- could of saved me writing the previous post if id waited a day lol.. https://t.co/i5J7jLZHjE Its also listed in Frankfurt ATY and in the US on the OTC code ARTTF
  • JD
    Jonathan D.
    18 September 2018 @ 08:42
    No question miners are dirt cheap. Problem is: lower lows and lower highs.
  • JR
    JOHN R.
    18 September 2018 @ 03:54
    When I'm watching an interview the numbers on the screen indicating time left and elapsed are a negative.
    • RH
      Rick H.
      19 September 2018 @ 18:33
      move your mouse off the screen
  • HJ
    Harry J.
    18 September 2018 @ 03:12
    If his analysis is right I’d agree this a great place for investors. Don’t know how average investors can play this game. The story makes me glad I hold hard gold. It would be nice to see gold bullion double.
  • IM
    Istvan M.
    18 September 2018 @ 02:36
    please more of these type of guests as opposed to always a high level macro view on the underlying commodity
  • RA
    Robert A.
    17 September 2018 @ 21:45
    Great job by Curator Milton. I have never seen the Miners approached from this “activist” perspective and appreciated the bits of statistics that I was not aware of. This is what I love about RV—a chance to hear analysis from a different point of view!
  • DS
    David S.
    17 September 2018 @ 20:26
    Interesting point for me is gold is getting harder to find and poorer grade. I will just stay in gold itself. DLS
  • TS
    Thomas S.
    17 September 2018 @ 20:16
    The gold mining industry has been so horribly managed for so long that one has to wonder what is really going on. Because there is no way such value destruction would continue over and over, through cycle after cycle, in a free market. Oh, wait. Is gold a free market? Are these managers really independent? Impossible. There is no way the gold market is real or that industry management is not on the take from whoever it is that operates the gold price suppression project (UST, ESF, credit cartel). Lastly, the old trope "I'm not a goldbug" is growing stale. It's time to shake off the conditioning and be unafraid to admit the obvious - that gold is the ultimate financial asset because it is independent of whatever empire is currently in control of the world.
  • MB
    Matthias B.
    17 September 2018 @ 19:37
    he is spot on about the operational underperformanes; there are way too many crooks in this industry with a primary goal of self enriching themselves in a “ club med” manner. there are a few good managers out there such as Sean Boys from Agnico or Mark Bristow from Randgold but unfortunately not enough. combine that with the unpredictable geopolitical risk of new taxation regimes, extortion etc and it is no surprise investors have fled despite very decent margins on gross proft levels. shareholder activism is long overdue but neither Evy Hambro from Blackrock nor Paulson are good enough for this. it kind of needs fresh disruptive blood to break up the cosy and complacent c-suites
  • YW
    Yowshi W.
    17 September 2018 @ 17:41
    Gold is like Blockbuster/Kodak
    • WM
      Will M.
      17 September 2018 @ 22:56
      dear dear dear........
    • MS
      Michael S.
      18 September 2018 @ 03:54
      Only millennials think that VHS had been around for 6,000 years.
  • CC
    Christopher C.
    17 September 2018 @ 15:43
    I am not exactly sure how you can talk about any miner in this space and not give serious consideration to what is happening in currencies. Unless a miner were to discover some hugely rich deposit with vast reserves which could be mined far below market prices..... this sector is the tail... and it does not wag the dog. From what I have been seeing miners move when the metals move... and currently the metals are moving in lockstep with the USD/Offshore Yuan cross primarily and to a lesser extent with the dollar in general. If I am missing something I am certainly willing be to be disabused of my position. Outside of the "fundamentals" moving the paper gold price which I see as the driver for this space, I would be much more inclined to listen to someone in this (at times overly hyped) space who has gotten their ticket punched in a few more places, if you will, by walking the streets of Vancouver for 20 or 30 years and has personally visited most of the mines in the world. Who understands that all boats in the space rise or fall based on the price of gold, who will tell you jurisdiction matters first, people involved in the operations matter second, (you want those folks to a.) have a large percentage of their personal wealth tied up in their current projects (show me the incentives and I will show you the outcome) b.) have a track record of past success.) and thirdly they have enough cash/financing to make it to the next flood. For my mind space and money the folks that satisfy those requirements are people like Marin Katusa, Rick Rule, and others in that very small, distinguished group. My 2 cents.
    • PC
      Peter C.
      17 September 2018 @ 21:03
      Very interested in an update with Marin Katusa. Macro voices podcast had one a couple weeks ago but they focused on Uranium. RV please bring him back.
  • HO
    H2 O.
    17 September 2018 @ 15:00
    Don't understand where he is coming from. At the end of the day miners do one thing. Under-performing companies - because they are poorly managed - are not "great companies". And if you are buying miners, especially juniors, you are essentially just buying leveraged options on the price of gold. This firm professes to have no view on the price of gold. If gold prices spike, even bad companies rip in disproportionate fashion to underlying gold prices (and vice versa). Their strategy and time horizon does not seem consistent with a typical macro view on gold. If the sector itself is an operational disaster, LT positions are just quicksand.
    • JM
      John M.
      18 September 2018 @ 06:47
      Surprised that he is agnostic about gold price (given macro environment). I wish the interviewer would have asked why he is agnostic? What's his framework for thinking about gold prices? Meanwhile it doesn't appear that anyone is interested in gold miners or gold. What is the catalyst to change investor psychology???
  • SD
    Sebastien D.
    17 September 2018 @ 12:31
    Hi, not sure what is their website, it seems they did not do their SOE correctly. If it is http://www.coastcapitalllc.com/ then it does not work (404 not found). They should also engage with their IT team and ask for some operational improvements ;) Anyway, I was wondering about the companies where they already have their team on the board. It sounds very much like Paulson's approach so wondering if they partner on some or go their own way. This could have been discussed in the interview i guess. Interesting interview anyway, thanks.
  • PU
    Peter U.
    17 September 2018 @ 12:17
    cogent analysis . . . I am in agreement.