CA - Gold Silver And Why All Mining Stocks Are Speculative Investments With Don Durrett
2023-10-03 08:00:00 ET
Summary
- Don Durrett discusses his unique approach to investing in gold and silver mining stocks, focusing on long-term gains based on higher gold and silver prices.
- He highlights specific mining companies with strong risk-reward profiles, including Montage Gold, Heliostar Metals, and West Red Lake Gold.
- Durrett emphasizes the macro factors supporting gold and silver, such as the breakdown of the US economy and the potential for a shortage of silver due to high demand from fabricators.
Listen to the podcast below or on the go via Apple Podcasts or Spotify .
Don Durrett joins the show to discuss his approach to investing in gold, silver and mining stocks (1:45), why the macro picture supports gold (8:30) when owning ETFs make sense (12:35) what keeps him concerned about the sector (15:25) and why investors should be stacking silver (25:10).
Transcript
Rena Sherbill: Don Durrett , welcome to Investing Experts Podcast. It's great to have you on the show.
Don Durrett: Rena, thanks for having me on.
RS : It's a total pleasure. We're really excited to get into the gold and silver sectors. It's not a lane that we have traversed very heavily on this show. So really happy to have you on the show talking gold and silver. And, also, it's fortuitous timing because you just launched an Investing Group on Seeking Alpha called Gold & Silver Mining Ideas .
I'd love to start there and talk about your approach to the gold and silver sectors or sector, and what you are looking to accomplish, what you're looking to provide with your new investing group?
DD : Yeah. I really like that question because I approach it differently than most analysts. I'm kind of – I'm very unique. I haven't seen anybody else really do the strategy that I've done.
And the strategy that I've done is that I don't invest in gold and silver mining stocks as a hedge and I don't invest in gold and silver mining stocks to make money on an annual basis. I do it with the focus of the reason why I got into it was because I believed that the U.S. economy was not sound.
And what I mean by that is that we're basically going away and everybody is becoming very obvious now, but when I started this back in 2012 is when I created my website, when I – what I recognized was that the U.S. was on a path to basically a breakdown of some type, and the one thing that's going to benefit from that would be gold. And so my focus was that gold and silver prices are going to go up significantly.
So I invest for the long-term based on higher gold and silver prices. And my targets, initially, when I started writing for Seeking Alpha in 2016, your editors were pushed back quite a bit on my approach. Because I focus at $3,000 gold, which I think is a conservative number, and then I use a GSR, Gold Silver Ratio of 30, which I don't think is crazy talk and you take $3,000 and you divide by 30, you get $100 silver.
And I think $100 silver and $3,000 gold are actually very doable. I don't see them as a very, very highly, highly aggressive numbers, but most investors think that that is just insane. But if you invest for the long-term and you're expecting that, then it's basically speculative investing. But I think all gold and silver mining stocks are speculative investing, but I do it.
I tried, I could talk about this for 30 minutes, can answer this question in 30 minutes. But I try to focus on what I call easy investments, where the risk reward – I have the risk reward at my back and I try to avoid high risk where I – stocks, and I try – and I wrote a book on how do I analyze these gold and silver miners and identify the risk. So you can find which ones are the so-called easy ones. Now easy just means that you have good risk reward. Your turn?
RS : Thank you for that. So can you get into maybe some specific examples as a way to showcase what you're talking about in more detail with maybe specific company names?
DD : Yeah, Yeah, absolutely. So let's – I was just at Beaver Creek . So there's a bunch of them on my mind. It's really hard for me to pick one because there were so many 10 and 20 baggers that I would call easy. What I mean, basically, those are the ones that have – the really beautiful risk reward. And I'm not sure which one to pick. I have three of them on my mind.
RS : Talk about all three.
DD : Okay, let's do all three of them. So I'll start off with Montage Gold ( MAUTF ). So the management team came from Red Back Mining, beautiful management team, one of the best in the business in the junior space. I really like these guys. They have 5 million ounces of gold. Last year gold was at 1650 last year at Beaver Creek, and basically couldn't get the bankers to loan them the money to get the finance and the CapEx.
I go to the Beaver Creek and they tell me, Yeah, we got it, Don. We're going to build this mine. I was, like, so excited. The market cap is $70 million. It's a 5 million ounce project. They're going to mine 300,000 ounces a year with an AISC of $1,000. It's just a total slam dunk. I don't see how this thing doesn't work. That's one example. That's what I mean by easy.
Another one would be Heliostar ( HSTXF ) down in Mexico. They stole, basically, they didn't steal it, but Argonaut ( ARNGF ) wanted to get rid of their Mexico properties. So Heliostar, they got a hold of their Ana Paula Mine down in Mexico, which is a beautiful mine that was discovered by Newstrike, and everybody was excited about this discovery that Newstrike made, then Newstrike drilled it out, then Newstrike sold it to Timmins, Timmins drilled it, added to it, and then they got into trouble, and they couldn't advance its production, and they sold it to Argonaut.
Then Argonaut, they drilled a little bit and they actually – it was actually put in a decline. It was kind of an advanced project, and then Argonaut ran into some problems, and they never advanced it.
So you have three companies who are advancing this project. It was a good project, Ana Paula. And then Argonaut decides to sell it. They gave it to Heliostar. Heliostar didn’t pay very much for it. Now, Heliostar is drilling it, and they're shocked at how good the drill holes are. It's – basically, it's another one. It's like the Montage story. It's kind of a slam dunk. I mean, it's economic at current prices. I don't really see gold going down here. That's another beautiful one, which I consider easy, if you will.
And the next one would be West Red Lake Gold ( WRLGF ). West Red Lake Gold is another story, it's another similar story to Montage and Heliostar, where they basically waiting – well, they acquired the Madsen Mine from Pure Gold and Pure Gold kind of messed it up. They had a really nice mine. They built this beautiful mills, brand-new, and they only – I think they only had production for, like, six months, and they just ran out of money, and they just went from ramp up to bankruptcy in, like, six months. It was an unbelievable story.
And then West Red Lake Gold acquired that for, I think, they paid, like, $6 million, plus they gave the bankruptcy, the guy that, Sprott, who basically owned the loan, they gave them 22% of their company. And now they're going to drill for 18 months and restart the Madsen Mine, but it gets better. So the Madsen Mine has a lot of exploration potential on it.
So you basically – they got all that for basically free. We don't know how many ounces they're going to find on that mine. And on top of that, they owned – West Red Lake owned a deposit called Rowan that's really, like, not that far away. And they're going to truck the ore from Rowan over to Madsen. And Rowan just had a drill hole of eight meters at 70 grams per ton, which is a gram meter hole of 560, and it was already an 800,000 ounce deposit.
So that one drill hole probably doubles Rowan. So you got 1 million plus of ore at Rowan that they can just truck over to the Madsen Mill. So those three – that's just three fantastic example of what I call easy.
RS : Can you get into how you view gold and silver in the present day, especially vis-à-vis what's happening in the macro picture?
DD : Yeah. So I basically follow politics economics. I've written books on politics and economics. And so I'm all about macro. I mean, that's the reason why I'm in this. That's the reason why I invest in gold is because I believe that basically the macro supports gold.
Now, yeah, it's been 10 years of nothingness, right? 2011 was really the last big run-in gold. And actually, that's 12 years ago, right, that we've been waiting every, oh, yeah, macro really supports it, but the underlying foundation of the macro just keeps getting better and better and better and it's becoming very obvious to everybody.
I mean, the world, the United States, especially, is kind of – is becoming very chaotic, it’s becoming very uncertain, is becoming, in many respects, imploding. I mean, our political system is imploding before our eyes. Political system doesn't work anymore, which is becoming very obvious to everyone, and then were used in 2008.
I think, it was actually 2007 Hank Paulson basically decided, he's a Secretary of the Treasury, but he changed the entire – our entire economic policy in the United States to one of market – capitalist markets where the markets determine winners and losers. And Hank basically said, look, this thing is going to melt to the ground. We got to bail everybody out. So – and we have the great financial crisis. When we bailed out all those banks and insurance companies, when we did that, we changed the whole strategy of how we're going to manage the economy, and we basically broke the free market.
And now – and then after that, the Fed basically piggybacked on top of what Paulson started. And the Fed, they were supposed to have a dual-pronged mandate of basically full employment and inflation or whatever price stability. Those are supposed to be their two dual mandates.
Well, starting in 2007, 2008, the Fed acquired a third mandate, which has become very obvious, but they haven't talked about it. And that third mandate is basically managing the economy, so the economy doesn't implode. And so they called it the Fed put, all from 2009 all the way to 2020 the Fed put, well, the Fed was basically making sure the stock market didn't crash.
Well, then – so what they did, they lowered rates to 0, and then they started injecting money. So we – that basically adopted MMT, Modern Monetary Theory, where you basically don't care about debt. Debt doesn't matter anymore. And if you notice from 2001, 2020, nobody in Congress said anything about debt. Nobody cared.
Even though Bush was putting $1 trillion deficits and then Obama was putting $1 trillion bad deficits, and then Trump put in $1 trillion, nobody cared. It’s like do whatever you - spend whatever you want. So we moved into this MMT mentality. Well, I call that insanity economics and eventually gold is going to profit from that.
But I'm just hitting the top. I'm just hitting the very surface of all this macro, all the macro factors that come into play. I think the Ukraine war was literally the trigger for gold because the Ukraine war now created a bipolar world, and that bipolar world doesn't help the United States because the United States used to dominate the unipolar world.
Now with the bipolar world, the U.S. doesn't dominate the entire world's economic international policy. So the dollar no longer has its dominance. And so the dollar is going to slowly die here. And as the dollar slows - begins to die, and I think it's going to start next year, once the dollar begins to die, gold is going to go to the moon. Wall Street doesn't get it. They do not get what's going to happen with gold. They do not get the miners. I mean, the miners are getting obliterated today and yesterday because nobody wants to own them. And this is like it's unbelievable opportunity, unbelievable. Your turn.
RS : Speaking of the ETFs, what do you – what are your thoughts on the ETFs for investors?
DD : Yeah, I think ETFs – I wrote a book How to Invest in Gold And Silver . It's got really good ratings. I've updated it nine times. Nobody else had written one. It's the only book that teaches you how to invest in gold and silver. And so I talk – I have a chapter on ETFs. ETFs make a lot of sense for people who don't know how to analyze mining stocks. Now that's number one.
Number two, they make a lot of sense for people who don't want to own, say, 25 stocks. If you don't want to own 25 stocks, then it makes much more sense to own like 4 ETFs. You have ( GDX ), you got ( GDXJ ), you got ( SIL ) and you got ( SILJ ). And then – and there's a couple others in, there is too. Now there's probably three or four additional ones. Sprott has one. There's another one in England, I think. And so you have, like, six, seven, eight of these ETFs you could choose from. You can just buy all these ETFs.
So the one thing about ETFs, they're not super pricey, they're like a half a percent a year on expenses, which is nothing. So I actually own four ETFs. I think they work great for hedging. So ETFs make a lot of sense. But if you want to make big alpha, ETFs aren't going to work.
RS : What – you mentioned owning, if you're not going to own 25 mining stocks , then own the ETFs, 25 because of hedging, 25 because of diversification. Can you articulate that a little bit more?
DD : You're pretty smart, Rena. That’s a good point. So, yeah, so but as far as I'm concerned, it's pointless to own 10 or 20 mining stocks because that's not enough for diversification, you're actually exposing yourself to too much risk. You're allocating too much.
I actually think you should have at least 30 in order to do proper allocation, proper risk management. If you're going to do 10, 15, 20 stocks, you have to be a trader. And in order to be a trader, you got to be kind of a special individual. It's not easy to trade stocks.
If you're going to be a trader, you have to get up every single morning and be ready to trade a stock. If you're not ready to trade a stock on a daily basis, especially involved to miners, you shouldn't be trading miners. It takes a special personality and it doesn't fit me.
But if you can trade, you're going to make much more money than me. The traders are always going to make the most money, the good traders. I mean, we've seen guys take 10,000 and move it to a $1 million because they are good traders. I don't have that personal mentality. That's it.
RS : Yeah. Yeah, it's like being a farmer a little bit. You've got to be in the trenches every day.
What would you say keeps you concerned about the sector or about specific miners?
DD : Yeah. So the one – the big concern, of course, like – and right now, I mean, that question is very pertinent, right? Because we're in the middle of a basically a big drawdown and people are losing money on stocks. And you're seeing these brutal, brutal selloffs, where stocks are down 50%, 60%, 70%, all the way down to 90%.
And so it's like – and you're wondering, do I add to this stock? Do I kind of ever get back to normal? How much money am I going to lose? Am I going to sell at a loss? I mean, it's not easy . This is – investing in gold and silver miners is not easy because when you have huge upside, you also have huge downside. You don't get one without the other.
And so – my concern is when you get these big drawdowns is how many bankruptcies are we going to have? How many companies can avoid these bankruptcies? Now because we've had a 10-year correction, a lot of these companies have not exposed themselves too direly. For instance, the only bankruptcies we've really seen over the last couple of years are companies that are trying to do ramp ups.
So we had Pure Gold ( LRTNF ) go under, then we had Aurcana ( AUNFF ), those were both ramp ups, but we really haven't seen existing producers - we had Great Panther ( GPLDF ) go under. That was probably – that was one of them. That was the pure producer, but they got – they basically had a bad luck. They had a cave-in problem. Alexco probably would have been, went bankruptcy and then Hecla ( HL ) acquired them.
So you always have to worry about bankruptcies during these big drawdowns. But the way I invested , if I used low allocation, so if a company goes bankrupt, I just replace it. I just go buy another company.
So that's how I approach it. And I always buy dips. I actually tweeted yesterday, I actually added shares to about 10 of my - 10 companies I already own, and then I bought seven new companies. So I'm buying this dip.
My thesis is that you have to buy dips to protect your portfolio. And most people don't like to do that. Most people hate to buy dips because it – the sentiment is negative, the psychology is negative, and you don't know how low we're going to go, where's the bottom?
So I use this mentality as that you buy to the bottom. And I listed, in my tweet, I listed three stocks that I'm hoping to buy here. And this is the chance where you get to buy stock that you normally would not own because they were too pricey.
A good example for me would be Osisko Development ( ODV ). I’ve kept my eye in that stock for a long time. It's always been too pricey. Well, finally, now it's cheap. So it's on the top of my list right now. It's my next buy. And so I'm hoping to get it next week, week after. So that's kind of my theory - thesis.
One other thing about risk and worries is that we don't know how prolonged this downturn is going to be. Could it be – when does gold turn? Does it turn? It's not going to turn in October. I doubt it. So we got another month of this ugliness. I'm hoping it turns in early November. I think that's about the earliest it can turn, but it might not turn until December, January, February, March. So we – that's the ugliness.
But the good thing is that if gold doesn't turn well, let me put it this way - for me, the HUI is what I follow to know when to buy and when to sell. And mainly, it's when to buy. I consider 250 on the HUI as the neutral level. I don't like to buy stocks when the HUI is above 250. Today, it's down to 208. My target was 195 to 205, now I'm lowering my target to 180 to 190, but I'm going to buy all the way up to 250.
And I might not ever buy another mining stock again. And I've been buying mining stocks for 20 years, but I'm going to buy it all the way back to 250. I'll buy all the way to the bottom, and then all the way back to 250. And this is basically how you make money. When you make money on corrections, you don't make money when the HUI is over 300. You don't find easy 10 baggers when the HUI is over 300.
RS : Right. Are there other signs that you look at in the market that might point you to a kind of a speculative catalyst?
DD : Oh, absolutely. So that – so my newsletter, I always – I've been writing my newsletter for 10 years, and I always open it with macro. So I'm looking for, what are the triggers? What is going to set this thing off? What's going to push us higher?
Now all summer long, it was all about the BRICS Conference in August. That was going to be the catalyst that basically got gold above 2,000. I've been saying for 18 months now, yeah, 18 months now, that gold's trapped. Forget about gold going above 2,000. It's not going to happen until Wall Street gets out of the way.
What I mean by that is Wall Street has to quit having this mentality that we're not going to have a crash, we're not going to have a recession. As long as the Wall Street has that mentality that there's no recession, we're going to get a soft landing. Gold's going nowhere because you got to – you have to get the trigger of Wall Street the – what I call the fear trade, which is the most important factor of getting gold to go to 3,000 and that's all I care about. All I care about $3,000 gold or higher.
And so the only thing that does that is the fear trade, is that you got over $100 trillion in stocks, over $100 trillion in bonds. This is what Wall Street does not get is that that money once the fear trade reaches a certain level and then people don't think we're going to reach that certain level. But trust me, we will. Once it reaches that certain level, the fear trade kicks in and that money in stocks and bonds, it moves into gold.
Now we're only talking about a little tiny, tiny percent. You got, let's say $250 trillion in stocks and bonds globally. All you need is about 2% of that, 2% to move into gold and for gold to go over $3,000. So that's a trigger. But the biggest trigger is I've been saying that the stock market, gold stock, we have to wait until we go into recession.
So unbelievable. And my newsletter, on the 1st of September, I did something and I did this on Twitter, too. I went way out on the edge that I always say, you should never do because if you're wrong, you're kind of screwed. But I basically said that this is it. In September, because we hit that high of 4606 on the S&P 500, and I believe that was a dead-cat bounce.
And I said that in September, we will retest 4200, which is going to be the line in the sand for the stock market because if you go below 4200 and we're just 70 points above it, if you go below 4200, it's going to be a bloodbath because everybody is going to try to lock in those gains for the year.
So everybody is going to basically start selling. And if they can't get that thing back above 4200, you're going to go down below 4000 in October. And once you get below 4000 in October, believe it or not, it's game over for the U.S. economy, in my opinion.
So I said that in my newsletter, I said that we're going to retest 4200 in September, which is going to set up the crash for October. And I still – I believe that, and I think we're going to see a crash in the S&P in October. And so that's the catalyst for gold. That's the one we're waiting for. And I'm hoping that gold bounces.
So gold is getting obliterated. Gold is only under 1,900. I think that we're going – gold is going to go down between 1,800 and 1,825 on this in October. It's going to be bloodbath. HUI is going to go down to probably the 180s, which is a bloodbath. It's going to be really ugly, really bad month, I think, in October.
Now if I'm wrong, if 4200 holds, and that's a real important level, it's the 200-day moving average. If it holds and by the way, the Dow is under its 200, but the S&P is more important than the Dow. If it holds 4200, the S&P holds 4200, if you get to the middle of October, the third week of October, and we're over 4200, if it doesn't crash in the first two weeks of October, if it holds, then that's really, really bad for gold because gold will remain trapped, and then we're going to have to wait for that, we're going to get a bounce. And so who knows how far we bounce off the 4200.
I think David Brady said, we might even bounce to a new high. But we're going to bounce significantly – we will bounce significantly up 4200 if it holds, and we could go back to 4606. And here we're – and who knows, we might be waiting until January, February for gold to break down. That's my worst fear.
RS : And what do you think about silver? And also just out of curiosity, do you have thoughts or follow other metals?
DD : No. Yeah. So let me do other metals and I’ll do silver.
RS : Okay.
DD : So I don't do other metals because I want to focus on gold and silver. So I don't do uranium. I don't do lithium. I don't do any other metals. Copper is really one that I probably should like because gold and copper go hand in hand. There's a lot of gold and copper mines out there, but, no, I focus on gold and silver only. I have 860 stocks in my data. Yeah. And so I want to focus on that.
Now, if we go to silver, I think that people really do not understand silver. And if they did, they would basically be stacking silver, they would own silver because silver is just an absolutely amazing investment opportunity. A lot of people do love silver for this reason. So I personally believe -- for instance, gold, there's no shortage of gold. You have only about, maybe 15% of gold is used for fabrication. The rest 85% is basically used for either investment or jewelry and jewelry is basically an investment. And there's plenty -- you're never going to run out of gold. There's plenty of gold inventory, there's no shortage possibility of gold.
But silver is a completely different animal. In silver, you have a competition between the fabricators and the investors. So right now it's about 70:30, so the supply is about a billion ounces a year of silver. But the fabricators need 700 million ounces.
So if your investors want more than that, then you basically have a deficit. So last year, the deficit -- so you only have supply, the mine supply coming out of the ground, plus recycling is about a billion ounces. So if you have demand over a billion, then you have a deficit. And so that deficit has to come from above ground inventory.
Last year, the deficit was about 200 million ounces. Well, what that does is it makes the above ground inventory shrink. And so the above ground inventory of silver in my opinion is less than 100 million ounces. And I think it's less than 25 million ounces. So if you have a deficit this year, another deficit of 200 million ounces, there’s such a really, really high probability that you have a shortage in silver.
Now, the last time we had a shortage in a metal was palladium. Palladium went from $150 to $1,000. I think silver is going to do something similar. Once the shortages in palladium occur, that's when palladium blasted off. And palladium went all the way up to almost $2,000. It was at $150 in the early 2000s. And that was because there just wasn't enough palladium to go around.
You're going to get the exact same thing in silver. So I love silver because I think that once gold blasts off, silver is going to follow. And once silver follows, the retail crowd is going to want to buy -- can't afford gold. I mean how many people can afford a 1 ounce coin? Not very many. But they can afford $100, $200, $300 in gold and silver every month. They can stack silver, they can't stack gold. So your retail crowd is going to want to buy silver and there's not going to be enough of it.
What's going to happen, I believe is that you will not be able to find any 5 ounce or 10 ounce bars on the internet, unless you wait. You put in your order and they'll say, well, we're going to send it to you when we get it. Unless you wait a month, two months to get it in. But my bottom line is, you're not going to be able to get your hands on it very quickly.
We're already seeing this -- these shortages in silver manifest where your local coin shops where people like to go and buy it locally they go, they can't get their hands on it. They go to local coin shops and they're out of inventory. They can't keep it in stock.
I remember reading this article and they said that in Japan, in Tokyo, you could not buy silver and then you go into the shops and you try to buy silver and they say we don't have silver. Nobody wants it. That's what they would say because they're embarrassed because they couldn't get their hands on it because they couldn't keep it in stock.
That's what's going to happen throughout the world and that's what's going to happen in the US. And once that happens, once silver, once one of these shortages occur, and I think what's going to happen is, you're going to see a news release and the news release is going to be, let's say Sony, basically, Sony shuts down their TV manufacturing plant because they can't find any silver because you can't build a TV without silver, you can't build a phone, you can't build a car, you can't build any vehicle, you can't build any appliance. There's so many products out there. You cannot build them without silver.
So any one of those manufacturing plants and they all use JIT, just in time, inventory. So once they're out of silver, they're going to have to hoard and that's what made palladium go to the moon, because these companies had to hoard silver to keep their plants running.
So silver has this beautiful setup and nobody really sees it. So I don't have any physical gold. I only stack physical silver because it has 2x, 3x leverage. Why would I stack gold when I have a 2x, 3x leverage on gold. It doesn't make sense.
RS : Very interesting. A lot of food for thought here, I think for our audience. I know for myself for sure. What are your -- do you have specific names that you want to share with investors?
DD : Well, I already did. I gave, I think four names, five names already. There's one name I would love to share.
RS : All right.
DD : But the guy that I went to Beaver Creek with told me to hold-off. I’m really sure because he's accumulating and I would really love to mention that one name. I will mention my two favorite names because these two names just make no sense.
The first one is a Avino Silver ( ASM ). So Avino Silver is trading at about $0.50, which is just unbelievable. And market cap they have 350 million ounces of silver equivalent after they acquired the La Preciosa, I can't pronounce it. La Preciosa, I'm brutalizing it, from Coeur (CDE) and it’s near their mill and all they have to do is basically permit this thing.
They don't have to spend very much on CapEx. They're going to build a decline and then from the decline, they're going to do three – they already know, it’s been drilled out. They already know where the silver is. They're going to do three different areas from the one decline.
So it's not going to cost a lot and they're going to do 500 tons per day. So they're basically going to ramp up in three phases. Keep adding 500 tons a day. And it basically is slam dunk once that, you know, they're going to get their permits, but we have to wait probably 18 months before they go into production. But it prints as a 50 bagger.
I mean, this thing is just unbelievably cheap. It's the cheapest producer out there. I don't see how you don't make a boatload of money if silver goes to $50 silver because they have -- they just have so much silver, like I said, 350 million ounces of silver equivalent and they're only producing, I'm not sure exactly how much -- I think maybe 3 million ounces a year, but they're going to ramp that up to 7 million. If you do the free cash flow, it's just – it’s fairly stunning.
Once they get to 5 million, 6 million, 7 million ounces, but with that much silver, they're eventually going to get to 7 million. And at 7 million ounces is actually I’d print it as a 50 bagger. That one is just insanely cheap. That's the cheapest producer out there that I'm aware of. Back in 2009, there were no 50 baggers like this on the table, when you get these big corrections. So Avino is just insanely cheap.
The other one that’s insanely cheap is Hummingbird ( HUMRF ). Nobody wants to own this stock. It's go -- they just, they're ramping up their second mine. They're going to -- next year they're going to be a 200,000 ounce producer generating a lot of free cash flow and they're valued under $100 million.
I've been waiting for their Board just to throw in the towel and say, look, nobody's going to buy our stock. Let's just give it to somebody else because it's just -- it's basically a 25 bagger. If you value companies the way that I do, if you have a 200,000 ounce producer with really solid margins, let's say they're all in as $1,500.
So that's basically $1,500, at $3,000 gold, $1,500 per ounce, 1,500 times 200,000 I think it’s $300 million. So if you just give it a five multiple, that's $1.5 billion. So that’s with the five multiple. So if you get it 10 multiple, it's $3 billion. And they're valued under 100 million. So if gold goes to 3,000 the leverage on Hummingbird is just insane.
But usually when you see -- Avino, I don't think Avino will get taken out. I don't think that company -- they've been around for a long time. I think they're going to stick around. I'll be very disappointed if they sell because they know what they have.
But Hummingbird -- I think Hummingbird will probably get taken out. It's just -- companies are just, they just never perform like this, but I put my finger crossed they don't, but it -- one thing about Hummingbird that kind of blows my mind is, they don't support the North American market. They're on the London Exchange and they trade on the Pinks in the US and they're a mid-tier producer. And they don't trade in Canada. And I've told them, come on man, you need to trade either QB or QX.
I'm going to send them an email today. I'm going to send a link to this. I'm going to send them a link to this and say, listen to this podcast, what I said about you guys, about how cheap you are and how you're going to throw in the towel and your Board is going to throw in the towel because -- and come on, support the North American market. This is ridiculous.
RS : What's their reasoning?
DD : Yeah, exactly. What’s the reason? It doesn't cost anything to just -- to be QX on the OTC is hardly any money at all. All you have to do is send in your financials to the SEC. It's ridiculous that they don't support it.
RS : Well Don, this has been a great first conversation and I hope you'll come back on soon. I really enjoyed diving into this sector with you.
I'd love it if you shared with investors -- first of all, if you have any final thoughts or words for them. And then also where else they can find you? The names of your books, et cetera, et cetera.
DD : Yeah, final thoughts. I mean, first of all, my website , it’s a plethora of data. Plus my newsletter has list after list that you can get, you know, what I call leads if you will, possible stocks. And then follow me on Twitter of course @dondurrett and then check out my Substack. There's a lot of free stuff on Substack. And then of course, Seeking Alpha.
And Rena, I really enjoyed this conversation. It was great. Thanks for having me on.
RS : Likewise. Can I ask you if, if you would -- I wonder if listeners are wondering themselves if there's a difference between the different formats that you write on and speak on? Like, is there certain things that they should look for on Seeking Alpha that you won't have on Substack, or that you provide in your newsletter, if there's any overlaps or differences?
DD : You're probably the best interviewer I've ever been across. You're just brainy because you ask -- you ask the most pertinent questions. It kind of blows my mind.
RS : That's very kind. Thank you. I appreciate that.
DD : Yeah. I mean, that was such an insightful question.
So the people that get the most out of me if you will is, if you subscribe to the website. So if you subscribe to the website, I put all of my paid material if you will from Seeking Alpha, or Substack because you can – my investment idea is you got to pay there and then on Substack, some people will pay - have or pay, paying there and -- but you get it all on my website. So basically I share the inform -- any paid information I share, I don't share it all in Substack, but anything that's on Seeking Alpha or Substack goes to the forum on my website.
And the reason why is because those are the guys that have been with me for 10 years. So when I started doing these paying subscriptions, I wasn't going to lock those guys out. I didn't want them to have to pay twice.
Now, I will say one final thing is that the reason why I started the mining ideas on Seeking Alpha is because Seeking Alpha's regular posts, they have editors that have a lot of rules. You can only do this, you can only do that. So I got really frustrated with that. I was going to go to only Substack and they sent me an email and said, look Don, if you create your own investing group, you have editorial oversight, you can post whatever you want. So I was like really, really so that’s the reason why I did that.
RS : Awesome.
DD : And so now I've been posting on -- yeah giving people lists, like I did an optionality list . Like I got 70 companies and I ranked them from 5 to 9 and all the 8 and 9s I basically own and added to.
I did a drilling stories list just recently, came out of Beaver Creek. I usually don't do a lot of drill stories but I can't -- out of Beaver Creek, I heard a lot of good ones. So I decided, I want to have a small position in some of these drill stories. I'm glad I did.
You're not going to get rich the way that I do drill stories because I don't go after the really early ones where you go for the 10 plus baggers on drill stories. I go more for the 3 to 5 baggers on drill stories. The ones that already have a good deposit and I'm just trying to make more money as the deposit grows in size. That's the easy part, right? So I did that as well. And so, but yeah -- but thanks for that last question. I really liked it.
RS : Awesome. I appreciate this. This has been really -- I appreciate your kindness and it's also been really edifying. So thank you so much for coming on. I'm looking forward to the next time.
DD : Yeah, yeah. Put it on your schedules. Do it every six months.
RS : Awesome. Let's do it. Deal.
For further details see:
Gold, Silver And Why All Mining Stocks Are Speculative Investments With Don Durrett