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Imaru Casanova

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2024-09-06
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2024-09-06
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  1. “It is a very significant factor for valuations of gold miners. Canada is certainly not Mexico. And honestly, disappointingly so. If you would have looked at the world a decade ago, a little less maybe than a decade ago, Mexico, Canada, Australia, the US would have all been sort of in that same number. You know, Mexico maybe still a bit of a discount to those other jurisdictions, very much on par. Things have changed in Mexico, the most recent administration, and that has had some negative impact for the gold mining industry, just the risks around mining in Mexico. There have been some proposals by the, well, about to be outgoing administration to potentially ban open pit mining, which obviously would have really bad ramifications.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  2. “With some challenges recently, but that asset that, you know, if you would have looked at our models for mulattos, they're mine in Mexico, we would have been cutting off that mine already. You know, in my, if you looked at our models a few years ago, we would have assumed end of mine mulattoes, you know, coming up soon, they keep finding satellite deposits and other deposits that continue to extend the life of mine in that mine again delivering further growth and value creation for shareholders. So that, you know, it's to me a perfect sample of the, and I will mention which to us is critical and I tell the CEOs of the companies we run, I tell our investors, I tell the whole world almost that something that is critical for this sector, they meet their targets. They put out guidance and they do what they said they were going to do.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  3. “If I can mention a specific gold stock, then I Is right next to the Machino gold mine that are going to own. And now this is going to be one consolidated large asset with, of course, tons of synergy. Megina was already in production. You know, some of the things that they needed to do at Island to increase production, they won't need to do anymore because they can use Magina infrastructure. These synergies are endless, very natural, very easy. Alimus bought Argonaut when the Argonauts very cheap took advantage of that and deliver, I'm sure will deliver amazing value creation for shareholders. They have assets in Canada, so their jurisdiction profile also is very attractive. They have some exposure in Mexico. You know, Mexico, it's not Canada, but it is been historically a prime minus jurisdiction.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  4. “The outlook of the gold equity year is not just based on gold price, although clearly that is the largest factor. We're also very constructive because of how these companies are running their business because costs are contained, because companies are being very disciplined on how they invest capital, because they're returning dividends to investors, they're buying back shares. They're doing a really good job managing risk when it comes to investing capital and expanding production. And so balance sheets are in good shape, debt levels, some companies have cash in excess of debt. Some have no debt. Those that have debt have manageable debt levels. So everything fundamentally is very looking very good for the gold stocks. And then, of course, the gold price continues to rise. So to us, a perfect setup for the equities.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  5. “But over the past several years, that hasn't been the case. So no, I do not think the equities are fairly valued at present. They still need to reflect that $2,500 gold price. And if you look, it's easy to see it in my view. If you, you know, obviously gold's been making new highs basically every month this year. And yet when you look at the called GDX, for example, the levels that the GDX is at today are the same level that the GDX was when gold was 1800, 1900 gold. So we do think there is quite a bit of opportunity here for the equities to catch up and reflect that higher gold price. And I'd like to emphasize that the reasons were so positive.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  6. “Great question. I know. So the reason we are so constructive on the gold equities is enlarged because they have lagged so much the gold price. One of the brokers, Scotia as well, we like a lot of their work. They do this valuation of gold versus the equities where they say, what is the price that the gold equities are discounting? And surprisingly, it's about a 20% discount to the currency spot price. So gold equities, it's not a secret, have been lagging in the metal for quite some time. Q2 was back quarter where we finally saw the equities show that strong leverage to the gold price with the gold equities outperforming the metal.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  7. “Actually, see costs contain around that $1,400 level, and to ask your question, that's the universe of companies, average cost only sustaining for a universal company is one of the brokers. Scotia, I think. And so that's for their universe, that's the average only sustaining cost. And in that note, we were highlighting the increase from Q1, which was a price of about $2,100 to Q2 at around 24. Big jump in margin from about $600 to $900 and now you're pointing out the same, even at a higher jump because we're $100 higher today with Goal at 2,500 and cost should be just around that $1,400 level still. So yeah, these companies are going to generate a lot more free cash flow if this $2,500 gold price sustains. And that is key to obviously our. Our evaluation.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  8. “That's it. You got it. That's why we put those charts there so that people can do the math because to be clear, one of the reasons I think investors might have questions about the sector is that in the past ask the gold price increase, so did cost. So that margin expansion that is the reason why you own gold stocks, gold stocks have leveraged to the gold price because of that margin expansion, because they have a cost side. If the cost keep increasing, you know, sort of offset in the increase in the gold price, then we'ren't going nowhere. So I put that chart there to show that, yes, we did have a wave of inflation in 2022, like the whole world did, the miners were impacted to it and costs did go up significantly in 22, a bit more in 23, you know, for 24 and four.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  9. “These companies are generating per ounce of reserve or resources per produce ounce. That's what we're after. And we're going to compare that free cash flow per ounce over the 20-year horizon of these companies that we model against each other. If you produce more cash per pounds, then your ounce is a better ounce, and we like it more. It means you are generating more value. We compare the companies on a relative basis and assess to your question who looks expensive and who looks cheap based on just valuation. So that's step one. I'll stop there in case you have questions on that.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  10. “The existing operation at the current levels of production. Only sustaining causes what offsets your revenue? And based on that, for each mine in our models, we come up with how much cash flow these mines are going to generate. Of course, then we have our balance sheet, you know, how much debt does the company have, how much that's going to cost in interest. Obviously, if you're interested in earnings estimates or depreciation calculations,”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  11. “The mind, and those are referred to as sustaining cost, so they're not necessarily related to the extracting and the processing, but you need to maintain your underground development in shape. You need to do things to continue to develop your underground mine on open up strip material out of an open pit. Those are not necessarily operating costs, but they're sustaining. They are operating costs. They're not cash costs related to the processing and extraction. And so you take all that in and we refer to this in the sector as all in sustaining cost. It doesn't include capital you are putting into the mine to, you know, expand your reserves or an expansion of the plan. Those are what we refer to as other capital costs that are not sustaining. This is the cost that it takes to take the existing”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  12. “At spot, so that's your revenue side. Obviously, the higher the gold price, the higher their revenue, and then, of course, you can't forget about the other side, the cost side. And so we model cash costs, which in the industry should be those costs theoretically related to extracting the gold from the ground. These are your mining costs, and then your processing costs. So it takes a lot of work. It's a lot of rock that needs to be moved. So there is usually costs or mining costs per ton of rock moved. And then you get cost per ton processed. And that's your metallurgical side. So you get your rock out of the ground, you put it through a processing, and then at the other end, you get some sort of concentrate or do how much does it cost to do that? That's one part of the cost equation. And then another part, important part of the cost equation is the cost that it takes to maintain.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  13. “For investors to understand that because if you look at that company and you value it, trust in reserves, you might be, that company might be looking quite expensive when in fact we know that a lot of what our resources will be transformed into reserves and they will be mined. So that's part of the first equation, how much production for how long that's your revenue side of your model. And then we need to worry about the other side. What are the costs that are going to offset those revenues? So obviously production and gold price to critical input. And obviously for our models, we use spot. We do everything as spot. Everything is linked to Bloomberg. We pull our data. We get real-time currency and commodity prices, gold, silver, copper, whatever commodities we have in there. And we're pricing daily our models.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  14. “To pretty much know, like in the places where I don't have holes, I can interpolate what sort of deposit I have. Obviously, it is expensive to create that level of drill density that you need to say, this is a reserve level state ounces. Then you get your ounces that are not drilled as densely as the reserve. Those are called resources. And there is basically more uncertainty around those figures. But we as experts from the type of deposits, from the geology of the deposit and just the fact that we model a lot of these mines before, we can make an assumption that, listen, we're pretty sure that some of these resources are going to become reserves and they will be mined. So even though our mind has 10 years of life as reserves, we might model 10 more years. And that's where our expertise comes in.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  15. “For how long they're going to be able to produce from that mine. And that's based on our assumption of how much gold is in the ground at each of these mines. And, you know, obviously the companies report this figure. So you go to your company statesman and they'll have a reserve and resource statement where they'll say X mine has 3 million ounces of gold. If we're producing two, three hundred, that you say 300,000 ounces a year, then we're going to probably model that that mine will produce for 10 years. Obviously, it's the variations year to year and so forth. Our in-house models and why it is key is because, you know, we know these companies. The companies can only prove up a certain number of reserves, right? It takes drilling. You can't say the goal is there until you drill it at a certain density to assess that, okay, I have enough holes.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  16. “Our in house process relies on in house models. Step one of our process is a qualitative step. Your typical financial and operating model that we maintain in-house with very carefully chosen assumptions for a bunch of parameters. Our valuation model includes mine by mine detail of this company. So if you're a company with 10, 12 assets, you know, whatever the number, say Newmont, the largest gold mining company in the world, we model each of their mines in each of the region. We model how much production is going to come out of those mines annually. So we get the ounces, which is your revenue side. And then we also estimate”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  17. “And I decided to move back to the States. And when I did that, I relocated to New York. And sort of like I didn't when I went to Venezuela, you know, what's a good job, Mark?”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  18. “So, I'm actually an engineer by education. I went to Case Western Reserve University and got a bachelor's and master's degree in mechanical engineering. I built this super duper test rig that was trying to test failures in rotating machinery so that with our tools we could predict that failure and avoid it. So we were funded by power generating companies. A lot of fun, very interesting, very hard. And then I'm Venezuelan. And originally, I was born in Venezuela. I came to the States when I was 16 to go to college, became a mechanical engineer, did go back to Venezuela, and actually it probably, not surprisingly, for those who know a little bit about Venezuela, I went into the oil industry. I worked for Shell for a couple of years, then things, as probably most audience of the audience also knows, things started to go sort of south in Venezuela.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  19. “Really looking at what interest rates are doing to decide if they're going to buy gold or not. Not really. They don't have that sensitivity. Western investor is busy investing, investing in the magnificent seven and everything else that it's yielding really nice returns and dividends versus gold. But as the environment changes as far as fit policy and the broader equity market, we think investors will have a reason to want to put gold in their portfolios.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  20. “Start to ease as a supportive. I also include the risk that inflation might not continue to go down to that 2% target, gold does well in environments of higher inflation. The risk that as the Fed eases, we could have a second wave of inflation. I think that is supportive of gold here. Again, central banks wish to be frank have eased off a bit the buying in recent months. I continue to lend support and we expect central banks to continue to be strong net buyers of gold. And then ultimately, what I think will be the catalyst, like I mentioned before, the re-emergence of the Western investor. And I think that's key. And to answer your question, you know, central banks behind this rally, do central banks...”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  21. “Gold was pressured. As they got closer and closer to a pause, gold reacted in anticipation of that cut, in anticipation of that pause, and the expectations that as low rates come down, gold would benefit. And so you're right, as the Fed actually as we speak, the Fed prepares to the, you know, we have Jackson Hole and news around that what the path is, but the expectation is very much that the Fed will cut rates in September that we view as gold positive. And it has been a driver. When I think of the drivers of gold prices this year and the drivers that I think will continue to support gold going forward, I have heightened geopolitical risk and global tensions, which support gold Fed path and the expectation that they will.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  22. “Yes, no, it's a great question. One we get asked often because you're right. The idea is lower real rates are gold positive for the obvious reasons, you know, gold doesn't pay an interest, so the opportunity cost of holding gold increases when interest rates are higher. The question is always, what's happening? Interest rates have actually the Fed embarked in a tightening program. And actually halfway through that, really that cycle goals sort of took off. And it's interesting because we highlighted that at the beginning of the tightening cycle, we said, look, look at previous tightening cycles. And what happens is like it does for a lot of markets, markets reflect not what's happening today or the next few weeks. It reflects medium term and longer term expectations. So as the Fed embarked in its cycle, yes.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  23. “How much do you tribute gold's price movement to the movement in interest rates, general traditional view that rising interest rates, particularly rising real interest rates, are negative for gold and that fall in real interest rates are positive for gold. Interestingly, the rise in real interest from 2022 and 2024, gold did not go down as much as people thought based on that model. And now the real interest rates are looking to go down. And in September, the Federal Reserve is set to begin cutting interest rates. How does that shape your outlook?”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  24. “And that's really along with the Asian consumer, very strong buying physical gold and jewelry from the Asian markets has been the primary driver of gold prices in the last couple of years and this year what has been missing from that equation is honestly the historical driver of gold prices, which is investment demand out of the West. So gold looks supported from here from central bank buy, from continuous strength from Asian buyers. The outlook is very positive in that we haven't yet seen the Western investor come back. So a re-emergence of that demand could be very positive for gold from here.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT

  25. “The setup has been right for gold for a while in my view, as gold is viewless as a safe haven. No doubt the recent geopolitical tensions around the globe have no doubt been supportive of gold. Gold has also been strongly supported by central bank buying. And that again, we think has been strong central bank buying began in 2022, really in the second part of 2022 after the invasion of Ukraine by Russia. And we thank Russia's experience with their reserves, informed other central banks. And no doubt that has translated into increased central bank buying in the last couple of years record levels of net buying by central banks.”

    2024-09-06 · Forward Guidance · Gold Stocks Are Undervalued | Imaru Casanova (VanEck Fireside Chat #4) · IDENTIFIED FROM THE TRANSCRIPT