Gold's Crash Is Over: CEO Reveals New Floor | Mike Allen

when you start to see that sort of level of of coverage uh you know you you realize that that that a peak is coming and there is going to to be a correction. People got in when gold was going to to beyond 5500 was heading to to the moon. People got out uh when gold didn't and now [music] it people are looking at at us now and saying well this actually did fundamentally have have some good assets in it. >> Mike Allen is back. He's the president and CEO of Strikeoint Go. He was on the show a couple of months ago. Link down below for the last interview in February. Back then, gold had just corrected from an all-time high. The correction hasn't really stopped. And gold is now currently trading at around $4,000. The miners are down significantly from their highs as well earlier this year. What's next? How can momentum be sustained? And what can we expect the miners to red to do in reaction to this downturn? Mike, welcome back to the show. Good to see you. >> Good to see you. It's been a tough quarter for the miners given that uh gold has run up considerably in the last uh year. Peaked around late January and now both gold, the bullion and the miners have come down considerably from their highs with the GDX index down 35%. Still up a lot since the year ago, Mike, but people are short-term focused and so uh sentiment right now is a lot weaker. Can you just tell us about um how miners are reacting first and foremost to this downturn? >> Well, I I think that that your your point about, you know, it's it's down 35 in the percent in the in the quarter, but up considerably o over last year, you have to look at the at the overall picture of it. And I think that that as people settle into the new reality uh of where where we are and how profitable gold mining is, particularly in the the larger, you know, when you've got the leverage of a of a big producer, um I think that people will start to to expect it. I agree with you that uh that the uh people are short-term focused and you could you could see a peak um developing. Uh I was actually at at home with my my wife uh flicking through channels on on TV uh when gold was moving through $5,000 and it was on CNN and and those are the sorts of things when you start to see that sort of level of of coverage uh you know you you realize that that that a peak is coming and there is going to to be a correction. I think that there's an opportunity now that we're going to build a fairly solid base here at 4,000. And as the world continues to to move as it is, you'll start to see things, you know, return back to to where we go with a gradual uptick in in the gold price going over time. >> We've talked about last time a western catchup in the uh commodity super cycle space after China's industrialization. Which commodity do you think best represents this catch-up trade? Oh, it's I mean for for any industrial it's it's got to be copper. Uh I mean that that is life civilization is is is copper. It's everywhere around us. The screens that were that we're watching all the the the data that we're being transmitted is it's all copper. Um you know it's even in in things like the you know reflective windows and all sorts of wonderful things. Copper is is society. So, if we're going to have a a western catchup, definitely copper is a very interesting place to be. Obviously, gold is in there as well, not so much as a as a as a commodity more than more of a of a hedge, but there's also is commodity uses for for gold as we get to be more um electrically focused, for lack of a of a better term. If it's got to work, it's got to be gold. Uh and those sorts of Yeah. What role does gold play in um the modern central bank today? >> I think it's it's a it's a critical pillar of of their foundation. Um I mean there the commodity pardon me the the currencies are all over the show. Um whether it be the the paper currencies or the cryptos, they're they're somewhat for lack of a better term flighty. Uh I think that that things like uh but things like gold while solid I think is a is a good word to describe it. Both the physical attributes of of the of the investment and the investment itself. I think it's a it's a solid in investment. And I think that as some as people balance their portfolio with with growth versus risk there is definitely an upside case for for gold that can be made. But I think that the downside case for for gold is somewhat limited. >> At what point do gold miners start treating the uh current level of gold around $4,000 where anywhere around $4,000 is a new permanent rather than a temporary price level given how far gold's run from just a year ago. >> That's actually a really uh interesting question. Um I took in a talk recently and the and the CEO of Pneumont was the was the keynote note presenter and and somebody asked asked that. >> Yeah. >> Uh and and her thought was this is the new reality. So going forward from here essentially uh what you can can do with it and you can see how some of the uh the the companies are reacting um resources are getting expanded uh reserves are getting expanded and it's simply a a function of putting a larger gold price into their into their assumptions and the you know the resources get larger the pit shells or the stripping can uh can that can be sustained to make something economic uh becomes a lot a a lot higher. And so I think that you're you're going to see uh you know that resource expansion as people put in that that and they should start doing it now because that is the the reality and we need to start planning for it. What do we need to see in the economy or uh in the gold landscape to solidify uh this view that $4,000 is the new reality basically to confirm this uh and for banks and companies like yourself to start using 3,000 or even 4,000 as as a PA assumption here. Uh I've been talking to some miners and people are still using 3,000 for example uh for their models. Well, it I mean the the the basic answer to that is time. The the longer that that um a lot of studies will use a threeyear a three-ear trailing average as their as their go forward look. They'll sort of flick themselves around and and so mathematically it's it's just time at this uh at at this level. And and that time equals comfort. And and the more that you that you see um uh you know gold at 4,000, the more used to that you're seeing it at gold at 4,000. I actually actually true story. Um I can remember in my career that gold was at 250 250. Yeah, exactly. I'm I'm an old guy. Um, >> that's not what I meant by the wow, but yes, gold went up a lot. >> That's where it came [laughter] >> and and uh and you open up Kitco or whatever your your uh your preferred way of looking at gold today is and you know, gold is down a h 100red bucks and you're like, "Oh my god, it's the end of the world." And then no, it's not. Actually, it's that's you know, whatever it is, 4/10en of a of a percent. Uh versus the the price of where we are now. and and you sort of have to get your readjust your your your mind and your thinking to what the current current level is. You know, gold's down 100 bucks, gold's up 100 bucks. At 250 an ounce, that's a big swing. That's 30% or whatever that that that number is. At 4,000, it's really just chop. And so, you start to look at more, I would say, you know, long-term trends than the than the noise of a of a day-to-day movement in the in the gold price. And I think that the long-term trend is still up and to the right. >> Why do you think the seniors are were rerated so much uh from their highs? Like Agno Ego for example, just to use an example, down 44% from its top even though the producers are still um producing at a much higher free cash flow um margin than they were uh a year ago or two years ago. Uh, and so I I wonder if you think this rerating is fair. >> Um, I think that there's a certain amount of of probably we got out over our skis at 5,000 and everybody, you know, like and it wasn't remember it wasn't 5,000, it was 5,500. It's going to go to six, it's going to go to 10. and and you know you saw you know with probably people that that didn't really understand what a fundamental shift had happened in the in the gold price pile in retail for lack of a better term uh manp you know see the see the uh the interview on CNN and say you know gold is going to to the moon I'm going to pile in and then when gold doesn't go to the to the moon they they panic out and that's just a a function of the of the capital markets that that we see. >> Yeah. Well, uh, going to the juniors now, uh, individual company news, um, have been the pri a bigger driver for the stock price for a lot of companies than the market itself. Your company being a significant point. >> Um, >> so here, strike point gold >> is the bar chart and the gold price is the blue line. So here's a case in point uh to exercise what I were to illustrate what I said earlier. The company is up 50% 63% since the beginning of July which is two and a half weeks ago. What happened? >> Uh you know what I I think that we got our ourselves oversold um with the with the gold price move. This is you know again what we're we're saying people got in when gold was going to to beyond 5500 was heading to to the moon. people got out uh when gold didn't and now it people are looking at at us now and saying well this actually did fundamentally have have some good assets in it and was a good company and now you're sitting to this pendulum swinging the other way >> oversold I mean it it did follow the price of gold yeah the company's down 56% since uh March to its trough and then it recover very quickly after 60% but importantly the uh gold price didn't move up while your stock price recovered. >> It's just a momentum like we got over we got pushed pushed too far down and now we're we're we're we're starting to get back towards you where we where we should be and and people are are looking at at things like our our Hercules gold asset and and where we're going with it and realizing that you know what what you guys are are doing there uh have has has said this is a this is a good time to this is a good entry point for for people. So recent drill results uh probably contributed. Tell us about what happened here. >> Yeah, I I mean we put out the final batch of of results here for our our Hercules gold project and and it was a dozen holes that that we got and and the the main point of what came out of the drilling [snorts] that we're doing is we've now got the data to head towards a a resource estimate. the holes that that came out today. Um the headline hole is hole five and and it's 67 uh meters and and 6706 a.3 uh.3 g per ton gold with 11 g per ton silver. And there's a nice bit of high grade in in there as well. um a few meters of of about 3 g uh 3 g gold in and I think it's it just shows what we're what we're seeing is you know as you execute put proper numbers out do the work um you're you're going to be rewarded in in the stock and I think that there was a time there where we're waiting for this the data to come out where we may have gotten oversold people are waiting for results and as as you said earlier people are short-term they get bored and they move on to the to the next shiny thing and we got oversold And now we're moving our our way back with the the news and then the upcoming news of what we're going to be putting out which is uh we're heading towards uh a resource estimate uh sometime in Q4 this year. >> Have explorers like yourself spent more money on drilling uh given uh the run up in gold price in the gold price in the last two quarters. >> In other words, above above 4,000 a lot of deposits seem more economic than maybe when they were at 2,000. And so there's a higher economic incentive for you to start spending more money on drilling. Does that make sense? >> It totally is. And I mean like the the the economics uh uh of it, I mean using gross numbers, uh half gram per ton material, 200 ton hall truck, uh there's about at at $4,000 an ounce gold, there's about $12,000 in the truck. Obviously at 2,000 it was half that that much. And so you have to uh you know imagine that you know these these lowgrade big things that like the Hercules gold project are very much levered to the to the gold price. You know every truck that comes out of the pit with with ore in it uh or mineralization don't know if we can say or um in a mine has a has a uh has a huge leverage on and that's why you're seeing the the the seniors. It's not just a truck that matters. It's every day the thousands of trucks that they have over multiple operations. That's massive leverage. The juniors, you know, to to your question, you can see what could become. Um, you know, you have projects like Hercules or other other projects where that's going to be a fairly significant uh mind. Not saying that Hercules is, but some point, you know, people are saying that there's there's the potential that that can be a very significant mine in the in the future. And so people are starting to get in. But also to your question about, you know, people drilling more when there's uh when good gold prices are there 100%. And you see that in rig availability, competition for for geos, all the things the the supply chain uh that you need to execute a drill program titans. >> Are there any I guess different kinds of challenges that come up when the gold price is higher? when you come when you when you start drilling at $5,000 or $4,000 gold versus $2,000 gold. >> I mean, you you can over you can call it supply chain and and and and I would call it, you know, the the geologically or the mining specific supply chain. >> The single biggest influence on the success of a drill program is is the people in my opinion. Um, if you get good good drillers, good geos, good drillers to get the hole down, good geos to to know when to stop or when to extend a hole, that's the that's the the influence of success. When you have uh a high gold price and a and a high stock price, you get a lot of competition for for people and equipment, rigs, geos, uh, and and drillers. And so the quality of the of everything goes down um particularly in in a in a bull and you'll you'll see a you'll see a correction and you'll see poor product put out there. >> If you take a look at the latest drilling result uh that you put out, have you and your team noticed anything underground that has changed uh the way you look at your current geological model? The the biggest thing that has happened over the last two years on is with Hercules is we have identified a zone on the southwest corner of what we call the cliff's target and we've touched it in about five different holes over two programs. There's a a quite large zone of disseminated material that's that's relatively close to surface. who's touched it in in I think five or six holes over the last 2 years and it consistently gives thick you know 60 to 100 plus meter intercepts of good gold grades with a with a consistent uh uh silver sweetener. The thing that is um interesting about that is we always seem to be on the you know it always seems to be expanding whenever we try and push it further to the south further to the south. We don't we continue to hit it. So it is something that we're that we're excited about and and we'll be following up as as we go forward with uh with the company is is moving further to the south. People should check out uh our first interview with Mike linked down below where he outlines uh Strikeoint Gold's projects in more detail and he provided a thorough overview for a firsttime viewer and um follower of Strikepoint Gold. Here I have on my screen, Mike, a um a website uh strikepoint gold.com showing the topography or not the topography, the map of Hercules Gold Project situated in Nevada. tell us about the jurisdiction itself and what's unique about uh Hercules. >> Well, I mean Nevada, you know, just on on the basics is Nevada is arguably the number one mining jurisdiction in the world. It it it generally rotates between Nevada, uh Quebec and and Finland. It is a probably the the the two things that make you Nevada unique um is and all probably the top three are unique is the geological endowment. uh you Nevada without getting a whole bunch of geology is very unique in in what the the geology has been done to it over the the past and that makes for significant gold deposits that feeds into the regulators and the the the social fabric of of Nevada. People know mining. if they're not working in the in the mining industry, their dad, their uncle, their, you know, whatever it is, you know, their their their cousins are are working in the industry. And there's a comfort level for the people on on the street that they understand what it is. And, you know, it's when you drive around in Nevada, it's very obvious that this is a mining area. There are old mines everywhere. There are producing mines everywhere. Uh I did a drive uh up to look at our our Kooprite gold project relatively recently and at the end of the day I I you know got out a cocktail napkin and totaled up the amount of gold that I drove by and it's an astronomical number. It's millions and millions and millions of ounces that that you that you drive by. And this is just on the on the paved highways you're driving up toward from Vegas up towards Coupe Right. So it's it's a a very unique place with a long history and a and a and a bright future of of mining. >> When you say that uh the geology the uniqueness of the geology has reached the regulators. What does that mean? What have the regulators in Nevada done that's different from regulators of another jurisdiction. Let's say >> I I would say that that it's the comfort level. They have permitted multiple mines over the the history and they continue to permit mines. Uh and so uh they're always fresh. They're always current. They know what mining is and so that mining culture is is into the the regulatory culture there. >> Uh what about the infrastructure of Nevada? Is it uh is it developed? >> It's I mean it's world class. It's lower 48 uh obviously USA. So there are remote places in Nevada. you can still find yourself in in the middle of of nowhere, but you usually drove on a paved road to get there. Uh and and so I like to to make a comparison. I used to work on a on a job up in the Arctic. Um and I was sitting down with a with a colleague at one point in time and we're looking at at a can of Coke and how much does that can of Coke cost to get to site? And and it's you you do the math out. This was in the year 2000 when a can of Coke cost a dollar. You buy it in the store in yellow knife. You put it on a plane. You fly it to site. You pay the guy to handle it. You pay the plane. All that stuff. And you get it to site. And that can of Coke cost $7 is what it cost the company. You're sitting there drinking it in in uh in the [clears throat] cafeteria. Versus Nevada. You fly into Las Vegas, you get in a rental truck and if you want a can of Coke and or lots of them, you go over to Costco and they're pick a number 12 cents each or whatever that that number is, 23 cents each. You throw it in the back of the truck and away you go. And and so the infrastructure is world class. There's power, there's water, there's people. Um the other part of it is is is really that that people infrastructure. People know mining. they know how to run the big gear um and and make efficient operations. So, it it's the the power of the American worker is very uh pronounced. There's the the force multiplier of the big gear and the people that know how to how to run it. >> Yeah. Tell us about Anglo Gold's um Arthur Gold project in Nevada >> and how that's changed how that's changed investor perception of discoveries in that region. >> [sighs and gasps] >> Well, there's there's a how much time have we got? Um, I mean, the Arthur Gold Discovery changed the Walker Lane and and I've got my part of of that. I used to have a company called Northern Empire and we were on the southern edge of Arthur and we wound up we we got that asset uh we bought it for $10 million and 16 months later we sold out to Core Mining for $120 million made money for shareholders on on all accounts. Um we didn't hit uh we didn't take all the money off the table turned around and sold it to Anglo Gold a few years later. I think that they got $200 or $230 million for it. That's all been consolidated into the Arthur Gold project. There is a massive discovery that's going on near Batty, Nevada. And I believe that the current numbers right now are 13 million ounces discovered on two deposits, uh, Silicon and Merlin, and then they've consolidated the entire area around them. And I think that the number uh from all the consolidation efforts is north of 20 million ounces. Truly worldclass district. And the the discoveries are new. It's not a a a retread of a of an old discovery. It's a pure scientific. This should be here. So, we're going to drill a hole. And it worked. And it worked exceptionally well. Worldclass deposit there. And that is actually an interesting thing in a mature camp like like Nevada is that you can make these new discoveries. Um you know, you got to do the science, you've got to do the the work on it, but it continues to put up worldclass numbers, worldass deposits in something, you know, in an area that has has seen probably 150 years of of mining and all the mining, the modern work that goes that goes into it. >> Okay. There's been some talk that Yukon has experienced or could experience labor shortages given how low the unemployment rate is in Yukon. I'm just using that as an example for and uh if you take a look at Nevada, do you think similar labor shortages could be in effect? >> Definitely. Um I mean you see that in in what I was talking about earlier uh getting drill contractors. It's very difficult to to to get rigs right now. Uh, and I think that that skilled work particularly is or skilled labor is going to be is going to become more uh more difficult to find. I It's not a common thing to have on your resume. I know how to drive a 300 ton hall truck or I know how to to to to work a a diamond drill. there. These are specialized skills not really exposed and there there's a there's a learning curve to to getting experience with that and it's it's tough with our our industry and the cyclicalness of it to get people to commit careers to to it. >> Yeah. Last time we spoke about peak gold um which is a concept that was I guess first formulated when the price of gold was much higher. Do you think at $5,000 gold or even above $4,000 we could push the timeline of peak gold, which is the peak production or rate of production of gold peaking around the world out further? >> I I mean what makes ore is a function of price and if you increase price then you then you increase ore. It's it's direct drive. Um, and so definitely if if you increase the the the gold price, you will will make more gold and you will push you will make more ore and you will push out the peak of production to to some point else. You're going to be obviously mining lower grades and so there's a there's a a a consequence to to that. But I think that that you know you also see the interest as we talked about earlier interest in funding exploration to make more >> significant discoveries and and I you know I think that the the Arthur Gold project is is a prime example. worldclass discoveries are still out there to to be made even in mature districts like Nevada and definitely in places that have don't have the the infrastructure or the mining history that Nevada does. >> A lot of exploration models were built on much lower gold prices now that gold has stabilized above 3,000, arguably even above 4,000. How has this new price regime, if you want to call it, changed the way you evaluate projects, how you allocate capital, which ounces to that are which ounces are worth pursuing and so on? >> Well, that's actually a really interesting question because you have to you have to look at your all the assets that you discarded at at 2,000 or 1500 or whatever gold price you had and give them another >> view at at 3500. And the changes can be shocking. um you know take well I mean just do do simple math um the pan mine in Nevada it's a small producer it does about 30 thou,000 ounces a year and I think for the sake of the argument let's call their their all-in sustaining cost $2,000 at 2,000 bucks it's breaking even or and and so and at at uh at every $100 that it goes up it goes up the profit profitability goes up 30,000 times 100 3 million bucks a year you throw in 3500 100 or 3,000 or 4,000. That's a lot of dough. A and so it it definitely changes your your perception of of assets at at you know a small producer at that is near break even prices barely gets attention. But a small producer that is wildly profitable couple thousand bucks an ounce that's interesting even if it is because the the multiplier is so much. So finally the biggest change in the gold market today versus um February when we spoke for the first time is as we've talked about in the beginning of the interview the decline of the gold price and the weakening sentiment. Now $4,000 gold today is a very different environment sentiment-wise than $4,000 gold last year when gold was on an uptrend. How would you have you noticed um people, investors in particular, being a little more cautious at $4,000 gold today than when it first reached $4,000 last year? And how would you explain the situation to the same investor who is a lot more cautious today at the same price than last year when gold first hit that price? Well, I think that you have to as as an investor, you have to mind the um mind the momentum and and and you know, which way is is is the tide going and and so when gold surged through $4,000 an ounce, obviously it was was on a on an upswing and then it ebbed back to to you know, it went to 5,500 high tide for lack of a better term and then it ebbed itself back to to 4,000. And I think that the overall um [snorts] chart is is that you know it it gold is still on a long-term upcycle. I think that you have to be mindful of the day-to-day chop. Uh and and just and just say okay if if your thesis is that that gold is going to go to to 5500 you know run with it. Um obviously monitor the the the uh conditions that that you're operating under. Um, but if that's the case, I think it's a it's a it's a good bet. And then you just have to watch yourself from get falling away from your uh your original thesis a and being wash washed out um when the you know there's a short-term movement. I I think that there's uh like I said the overall chart looks pretty good. Um, we do have a recent pullback which is an opportunity for people to evaluate their their thesis and then either create liquidity or reload and go from there. >> Okay, good. Well, congrats on the latest drill results. Tell us about the next catalyst or major milestone that we have to watch for. >> The big milestone that's that's going to be coming out is is where is we're going to take all the data, get together with the with the QP and and start working our our way towards a resource estimate. and we're expecting that to come out Q4 of this year. >> Okay. Uh and just for investors who may be new to the mining space, walk us through the timeline of an entire mind's life. So what happens after a resource estimate is made. >> Yeah. Then then you get into more so the resource estimate is is the is the first of well is the first of the significant technical studies. um you actually have a a defined resource in the ground and then you can start to do things with the with the resource. You can start to increase the confidence. We're heading towards an initial resource estimate and we expect the most of the ounces to be to be uh inferred. You upgrade the confidence of them and and then you also start to apply economics to them. What would it cost to get it out? What would the pit look like? The strip ratios, metal energy, those sorts of things. and and then you start coming up with PAS and more and more detailed studies until you finally have a feasibility study and then a and a construction plan. And there's obviously permits are are running a parallel path to to that in the in uh in the background. >> How much of a company's value at any given time should be based on inferred rather than indicated resources? >> It depends on the company. Um I mean a company like you know let's pick a senior gold producer Beric >> doesn't wouldn't put a lot of value in internally in their inferred resources because they are speculative there there's no guarantee that they're going to be ever be [clears throat] economic or converted or upgraded. uh you know a company like like Strike Point which is a much smaller market cap company there's you know there's a risk profile associated with an inferred um but it it can be you know we're also a much less of a of a market cap or or even you know dollars per share than a than a bareric so I think that it depends on the company and and you know you can see valuations that are decent um based on on inferred resources. It's just it's the start and then you have to to >> judge the quality of the data or the market judges the quality of the data and tells the you know how much we want to be a part of this. >> Do you expect M&A activity to pick up or decline at $4,000 gold versus $5,000 just a few months ago? I I would say that it's it's probably it's probably there was a time there at 5,000 that things were were over overdone out over your skis, however you you want to to put that that expression. And I think that the pullback has probably created some relative um [snorts] uh bargains. uh you know there there's an opportunity if if there was uh M&A and we well we can't quite settle on the price because you know everybody's run up and now everybody's settled down and and you can sort of see how companies moved relative to each other. you could see another wave of of of M&A because, you know, the the effort to define an ounce of gold or define a a mine versus to buy a mine, it's a completely different thing. >> You would think M&A picks up when the gold price drops. Why doesn't it? Um because uh well because for acquirers their share price is down and so they don't want to be diluting at at at this point. >> I see. >> Yeah. >> Yeah. Okay. Good points. >> Yeah. The the a strong producer in this environment should be picking off weak producers with good projects. The corp dev department should be very active right now. But everybody, you know, you have to also, you know, be mindful of the the CEO's dilemma of, you know, do I want to dilute at this price? >> I [snorts] guess if you were to make a case for the shareholders, uh, long-term, it would be a creative, maybe a short-term dilutive. Would that make sense? >> It would be. Yeah. >> Yeah. Okay. Thank you so much, Mike. Congrats again on the latest results. Tell us where we can follow the company to stay uptoate on >> news. com and uh is the is the website and there's all sorts of of videos and and uh and data up there for for people to take a look at. >> All right, appreciate it, Mike. Take care and we'll speak again soon. >> Thank you for watching. Don't forget to like subscribe