‘Fiscal Uncertainty Unchecked’: People Are Losing Faith In USD | Robert Eckford

‘Fiscal Uncertainty Unchecked’: People Are Losing Faith In USD | Robert Eckford

gold has seen a bit of a pullback this week uh as investors take profits following the release of some good economic news that came out on Thursday what’s next for the gold market and the mining sector we’re talking today about gold with our next guest Robert eford who is the CEO of Rua gold a very interesting Project based in New Zealand we’ll be talking about what it means to be mining New Zealand as well which is not a jurisdiction that a lot of people associate with gold mining welcome to the show Robert thanks for having me David St by talking about gold itself so $2,400 above $2,400 what we saw earlier this week and last week had a bit of a pullback you think this is the end of the ball rally no I mean I think whenever we’ve seen gold consistently rise I think you always see a bit of a pullback a bit of profit taking I don’t see this as the end I mean the the fed’s still printing money we’re still in election year geopolitics is still geopolitics are still up in the air and and so there’s no reason why this is the I think it’s just as you said a pullback and I I I see it continually trending upwards for the next 12 to 18 months at least sorry what do you mean the fed’s still printing money are you are you expecting them to renew QE or what no I mean they’re still printing money if they’re living beyond their means they’re not balancing their budget they’re they’re not able to drop pay down their debt and so the the fiscal uncertainty in in the US is is uh still unchecked in my view you’re right so the CBO which is the Congressional budget office is projecting the deficit to widen over the next decade or so what does that mean for the gold market though well I mean I think we’re starting to see people lose faith in the US dollar and and people now switch to Gold when they when they want to Value storage that’s that’s dependable they see gold as that I mean give it five years ago we had this run on crypto and people thought Bitcoin would be the new gold and and it has its place but it’s not a value storage it’s too volatile whereas gold has always been there gold has never had these huge volatile movements and and when people lose faith in the US dollar which historically has been a good store of wealth has been very stable people are starting to lose faith in that in my view and and I think they’re seeing gold as as the safe haven investment at this stage I think uh you probably got asked this question a lot certain thing I’ve atress this several times in my show but ious get your thoughts why have the gold miners not caught up with the spot price over the last year there’s a number of reasons I mean we’re an industry that historically has bad Capital Management I mean you look at some of these major projects out there at the moment there we talk about an $800 $800 million capex project suddenly ends at 1.5 billion you’ve got marathons Argonauts I mean it’s not a welld disciplined group generally uh you also see inflationary pressures and so when you’re when you’re working for a bul commodity uh you see this first but even gold sees it when you’re low grade and you’re moving 1 gr a ton material you’ve got to move a lot of material to get gold out the ground when you start putting on inflationary pressures of fuel of labor costs and you you put that into your cost model any move upwards of of the gold price is eaten up by your margins being being fewer because your cost are going up so one of at least in my history and why I’m at at r right now and I’ve just come out of a company called Aris mining is you sort of have to in the gold space at least you have to aim for this high grade and high grade means you you don’t have as much inflationary pressure that eats away your margins you can move less rocks to get more gold out and and you just are a bit more protected in the industry sorry sorry David in short answer to your question the reason that gold miners haven’t moved is pressures well let’s talk about that for a minute so we’re going to get to your projects in New Zealand for uh in just a minute but I want to ask you about these cost pressures because you’ve had a history of working for the major minors right you were consultant for yamana before then you were in finance for baric so you you know how these miners uh work for the largest miners in the world then uh generally speaking what are the biggest cost components let’s break down that first for the audience yeah no for sure and i’ I’ve also had the benefit of working both in developing world and and first world and it’s very different between the two uh I think the biggest cost driver that I’ve come out of now is is labor labor always makes up 50% of your cost base both just keeping the right skilled people involved but also retraining people because you do have naturally a high turnover of of staff and I’m talking more in my history of developing World producers you big turnover of Staff you’ve always got to put effort into training staff and then you pay your staff above average wage because working on a mine is difficult uh been there I’ve lived it it’s it’s not a luxurious job and so you have to attract the talent and pay a bit more and and the costs of General wages goes up every single year in Colombia in the company of Aris that I just came out of we were seeing salary increases statutory by law being at least 10% now uh for a company like uh the of baric how you know how are cost pressures usually uh controlled in other words how do you maintain fiscal discipline even when gold prices are rising that’s a great question and and barck is a good example because they’ve got the scale to be able to do some of these more intricate strategies such as sort of centralized supply chain so if if barck picked their top eight consumables that all of their minds use cide tires fuel and they come up with Global Supply agreements they can actually negotiate much better rates than your Standalone single asset producer and and it’s it’s that scale that gives Barrack a bit of an advantage verse a single asset producer out there in the market okay so basically they have buying power because of their size correct I mean on the flip side and I’ve I’ve worked in enough big companies to say this that whenever you’re a big company you’ve got people managing people managing people managing people and you create a lot of bureaucracy and fat in the organization and and so that is the the trade-off of of size and complexity versus a nice Nimble Explorer SL Nimble single asset producer do budgeting priorities have these big companies change depending on the gold price very much so yep and and you you postpone capex and and one benefit I can sa had is is working with the likes of Neil wooder for the last eight years and he’s an invest Banker by background he’s a chared accountant by trade chared accountant by trade and and he we started the last two companies together from shells and and threw them into hundred million multi hundred million do companies and we went through a phase where gold was 1,200 and we went through a phase where gold was 2,000 and and the pressures and the capital allocations look very different you’re you’re choosing to push equipment maintenance out maybe 6 months or a year beyond what the EM would Rec recommend on the basis that you just can’t afford to do it at the time whereas in today’s world at 2300 gold you may have a bit more flexibility you may be able to invest a little bit more in in sustaining capex and making sure your productivity runs as perfectly as possible because having the most tons going through the Mills suddenly becomes the most important thing let’s talk about uh m&a right now in the sector now you are experienced both on the junior side and on the senior side so what is it that a senior looks for when picking a project to acquire what are the criteria that a Barrack for example where you were at is on their checklist so I mean you’ve got acquisition and disposition on both sides of it and and uh both are equally as important a group like barck uh they went through that that merger with rang gold they divested some of their non-core assets and divesting non-core assets is so key to these Majors not not because they should be shedding their assets but the cost of of Barrack running a 50,000 ounce mine and all the overheads that go with it because they’ve set up this quite bureaucratic process and and it’s necessary when you get to that size you need that process place but to run a 50 000 Oz mine it’s not worth the time I can tell you firsthand that the amount of time that management spend managing a 50,000 ounz mine versus 200,000 O Mine is exactly the same and so if you’re trying to allocate your time correctly you want to keep your core assets so disposition is very important at the same time acquiring assets and seeing synergies available to you is very important and every commentator in the industry will say consolidation is so necessary in this industry because we have mines right next to each other all with the same asset all with the same or bodies that should just have one mill taking all the ore out the ground and we don’t need multiple Mills next to each other well well do you agree with that do you think we need more consolidation we do yep and and I I don’t see the con the consolidation for instance the most recent one new M and new Crest that consolidation I don’t think there’s as many synergy in that one from an operations point of view as much as it’s now you’re the biggest mining gold mining company in the world and by the way the ETFs and the funds work they have to now buy more new mon shares because they’re a bigger piece of the pie I think that’re they’re playing at at that level you’re playing a sort of banking game and you’re trying to get indexed and you’re trying to get people to buy your shares bring it all the way back down to let’s call it ruer gold level I’m not going to buy another explor that’s sitting in Indonesia for instance because there’s no synergies with I have a a second gold asset in Indonesia unless I love the asset maybe it’s good there but there’s no reason that I can now spread myself between these two jurisdictions and say it’s better for the shareholders because they’ve invested in a New Zealand gold mining company so there’s always a time in a place we always have m&a on our Playbook I as I said I’ve just done heavy eight eight years with Neil woodan and we did maybe seven Acquisitions over that period and and a lot of them were very successful because the strategy of the company was was always being played out okay do you think we’ve reached Peak gold which is to say that uh either uh the maximum amount of reserves in the world have been discovered and or the maximum volume of production per year has already been reached I don’t think so because I think the what what’s happened in the world is uh the majors don’t carry out exploration as effectively as an exploration company does and so you need a constant regeneration of explorers finding reserves same time the capital markets have been terrible for the last 36 months and so explorers hasn’t been able to fund themselves until now I mean now we’re seeing a turn we’re seeing people raise money and so I don’t think we’ve really even started the exploration curve where we’re finding some big resources I mean Great Bear was one of the few success stories in the last five years and they found a 5 million deposit the Kun sport for off the top of my head one and a half billion if I’m not mistaken well why is it that uh first of all why is it that the seniors aren’t as effective in in you know exploration as a Juniors it’s a it’s a time management thing there’s there’s no they’ve got the capital bandwidth and exploration is very much high risk High reward game and investors of Majors don’t buy you don’t buy a new month stock to have a potential 10x by finding the next gold producer you look for steady dividend type income and that’s what you get from operating minds and so the risk threshold of a of a major is much better to just go out and let let’s buy that Explorer sure it’s gone from a startup phase of 10 million it’s now worth 200 but we know we can build that mine and and turn it into A2 billion doll mine so that’s a that’s our MPV growth well even the large company like baric their life M you know the the the life shelf or the shelf life of their minds is not infinite right eventually they’re going to have to replenish the reserves what is their strategy then for the big miners is it to force themselves to explore more or to acquire companies like like Ru gold yeah and and that’s 100% And and in nine times out of 10 the majors will just acquire an exploration company okay uh let’s talk about Ru gold there that leads to into our discussion about your projects you’re based in New Zealand my first question is why oh I mean New Zealand is is very underexplored and and it’s it’s for good reason I mean it’s been a difficult jurisdiction for the last two or three decades through through environment practices through politics it’s been had a very much monori on on mining and and the politics has not been favorable to miners uh a lot of misinformation out there uh but still at the same time Oceana gold have been mining in in New Zealand and Newmont were there before and we’ve had gold mines operating there for 20 years and so there definitely is a mining history there but if you’re a startup like R gold and you’re sitting here a decade ago it would have been very hard to see a pathway through the project completion where we today it’s a brand new government they had elections last year and and November 23 the the new prime minister was sworn in and New Zealand’s in a difficult place they’re in an economic recession they’re seeing all the young people move over to Australia to work on the mines there’s no jobs for KES in New Zealand and so you’re getting this aging population and all the young people leaving because there’s no economic growth they’re having a in a recession there’s no jobs for them there’s housing which is expensive because they’ve opened up housing to foreign investment so so they’re in a bit of a tough position and and so the prior party just in ardin she got voted out overwhelmingly everyone’s sick of being not being on the global economic landscape and the new guy coming in is a guy called Chris luxon and he’s not a lifetime politician he was a he was the CEO of a New Zealand up until 2020 and so he’s coming from a business background much more Center center right and he’s putting in policies to really push economic growth in New Zealand and there was actually a a speech a state of the Nations on the 23rd of May today from Shane Jones the resource Min Minister saying he want to double mining exports between now and 203 and he’s between him and and Chris luxon they’ve introduced a FasTrack Bill and they’ve only been in I’ll R you they’ve only been in power for six months they’ve introduced a fast track bill to make sure that permitting for mining projects can happen with a maximum of six months so you’re now in this new jurisdiction that is very un underexplored the gold rush back in the 1800s in New Zealand was bigger than the California Gold Rush there’s been a lot of gold coming out of there and now you’ve got this political landscape that’s very supportive so it’s it’s a it’s a place that has huge potential well you’ve worked at the DRC before and I I know that maybe it’s not um you know some would say the safest jurisdiction to work for but we can’t argue that there’s a lot of good high-grade Minds there where I’m going with this is why did you not choose perhaps some of the highest grade jurisdictions in the world even though they may not be the safest no I agree and I’ll remind your your viewers I’m just coming out of Aris Mining and and there’s a really nice highgrade minine in Colombia also not the most safe jurisdiction be in um and high graders is what I really love I I mentioned at the start if you have high grade you have better margin control lower how do how do you define high grade in this context I always see high grade as as a six plus gram a ton so that’s that’s the average grade being produced in the whole world right now is 1.1 gr a ton so that’s that’s average grade six times that I’d start saying we’re in the high grade you can afford to go underground and you’re not doing big open pit mines so so that’s I really like highgrade mines I’m an accountant so I see it as a lower risk on capex because you build a smaller plant and you have lower risk on your Opex because you move less dirt and so you need less people less Machinery less fuel Etc so it’s a nice place to be in in this industry then bring it all the way back to New Zealand I mean it like you say why not go to the riskier places where it’s high grade New Zealand’s never seen a a drill hole in the areas we’ve been since the 1950s it’s so underexplored because it’s so environmentally focused and there’s there’s whole practices there’s processes that we’ll follow we’ll make sure we’re doing everything to an environmental regulation which we need to do anyway as a Canadian listed company whether we’re in the DRC or whether we’re in New Zealand we’re always going to follow first world environmental practices so we’re going to do things in the right way but because it’s all and and the region we’re in in the south island has this history of mining there up until the 50s they m 2 million ounces of gold at 25 grams a ton it’s insane grades down there and it’s the first world and and we’ll do everything in the environmentally sustainable way because it’s such high grade we can afford to do things underground and and your footprint is way smaller so so what are what are some of the major differences in mining and let’s say we’re exploring rather uh in in a in a place like New Zealand versus Australia which is not too far away but widely considered a more recognizable jurisdiction for mining sure I mean Australia has been historically a very friendly place to do mining if you ever look at something like a Fraser index and Fraser index for anyone doesn’t know is is a list that comes out annually of geographies around the world and it ranks them one to 100 of of where they sit in mining attractiveness New Zealand’s had a huge uplift Australia’s always been in the top 10 and because of that it’s been heavily explored New Zealand’s always been at the back end of that list and and it’s worked its way up from the back end it’s right smack bang in the middle now so it’s it’s had a huge Improvement but it’s so underexplored and so the reason we’re in New Zealand is because no one else has been there before and we see a real need for putting a drill bit in there I mean David you’ve been at this for a while now and you would have seen in your time a number of assets that have been recycled and rebranded and brought to the market again it’s not the case for Ru gold we’ve got brand new assets that have huge potential that haven’t been explored yet New Zealand sounds exciting and all but your investors might be wondering if you’re expanding anytime soon would you consider exploration in another jurisdiction suppose you had the funding to do so yeah I mean as I said I I’m not adverse to m& I really see m&a as necessary uh for all stages of mining but right now our current strategy is a New Zealand rollup story and and so if there’s opportunities in New Zealand we really see New Zealand as the place to be there’s a lot of opportunity in New Zealand and so if there’s m&a more closer to home and that’s where we actually see synergies because we’ll have one operating team in the country we won’t be spreading ourselves between jurisdictions then we we will definitely be open to that what’s your long-term uh endgame here if you have one are you planning to go into production 100% And and one thing I’ll urge your viewers to look at is if you look at us our investor presentation and you look at the overview of Reon you’ve got three companies in that gold district you’ve got us you’ve got an ASX listed company called siren and most importantly you’ve got this small dot in the middle called Federation it’s a private Australian company they’ve got a small land package they’ve got 700,000 oun in third resource at 23 gr a ton so nice high grade exactly where we want to be they’ve raised 225 Australian a million Australian dollars and they’re partway through developing that mine and they’re private all raised by one major shareholder Australian superannuation fund and so is there a world where the whole consolidation of the region happens it makes sense is there a world where we build our own Mill and and we have a couple of mills in the area it the economics will just definitely justify it so short answer to your question it’s too early to say we’ll we’ll definitely be looking to grow this the board behind this team is a group of Mind Builders we’re talking about Oliver Lenox King who built Frontier Gold who built rocks gold his coo Paul kidle is is on the board as well as his rightand man huge amount of operations experience he’s built mines he’s run mines this isn’t your normal exploro let’s drill a few holes prove it out and sell it this is a team of people that have all built major companies before how are you finding financing in today’s environment 2400 gold I mentioned earlier uh is it are you seeing a difference in sentiment from investors versus just a few months ago yeah it’s it’s definitely uh improved uh I I must say I’ve had the advantage of of working on really good projects that have always found financing uh this not being in a difference I mean this one we we raised $7.5 million when we came out of the gates uh in a very difficult gold market we’re seeing some really good results as we come out to to Market and we continue marketing and and we’re continually releasing exploration updates and and drill results and we see a lot of interest in the stock uh and so I don’t foresee difficulty not just because of the gold tape but I think because of the assets and the management team you’re always going to get players out there that struggle to raise money because as I said it’s recycled assets it’s it’s something that No One Believes In and that they’ve been pedling it for too long so I think it’s that’s just comes with the market okay what what’s next for R gold what’s your uh short-term to intermediate term uh goal and next steps so this year it’s it’s with the two projects North Ireland we’ve got permitting underway we just got that project last October we just started exploration as of this week um and we expect to be drilling there by the end of the year so it’s really a permitting story and early exploration Play in the south island and reefton that’s where we actually started this company privately four years ago we’ve raised $8 million privately and we’ve spent that all in in proving concept and now we have drills turning down there so for the for the whole year of 2024 we’ll make sure we have drw results coming to the market and and we expect they’ll be favorable and and we expect the share price to react excellent well thank you very much for your uh for your time today where can we learn more about Ru gold uh ruag gold.com okay we’ll put the link down in the description below so make sure to follow that link thank you very much again and uh we’ll speak soon take care thanks you David thank you for watching don’t forget to like And subscribe

Robert Eckford, CEO of Rua Gold (CSE: RUA | OTC: NZAUF), discusses the outlook for gold, and M&A in the mining sector.

This video was conducted on behalf of RUA Gold Corp, and was funded by Gold Standard Media LLC and/or affiliates. For our full disclaimer, please visit: https://portal.goldstandardir.com/disclaimer/NZAUF-233

*This video was recorded on May 23, 2024

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0:00 – Gold price outlook
2:26 – Gold miners vs. gold
4:00 – Mining cost pressures
8:00 – M&A
11:20 – Peak gold
13:42 – RUA Gold

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