You're listening to Strictly Business Podcast with Lindsay Williams.
When the America's Mining Forum 2024 was held, the gold price, I suppose,
was mucking around about $2,650 to $2,700 per ounce.
It's recently concluded, the 2025 version, of course, and the gold price has been
above
$3,800 per ounce, albeit rather briefly.
With me now is somebody who has attended both events, and that's George Cheveley,
Portfolio Manager Resources at 91 in London. George,
the name's changed because it used to be the Denver Gold Forum.
I think it did anyway.
And the mood must have changed over the last few years because you've been an
attendee on several occasions.
No, I've been going for a number of years, and certainly this was the best mood we've
seen for a number of years.
And not surprisingly, because of the move in price and earnings for Gold Company.
Yes, well, let's start with the moving price in US dollar terms.
First of all, why?
I hear so many reasons, but you've got to rank them, haven't you?
So number one reason, please.
I think people are worried about the US dollar and fiat currencies in general.
And that's not just individuals, that's governments as well.
And we've seen a major shift in the view of gold and it's seen as a safe haven and
a hard asset that
people can rely on.
when fiscal policies around the world have certainly been more risky and we've seen
governments spending too much money.
The dollar bear market, so-called, some people say it's too early to call a dollar
bear market.
Other people say, well, we're in the first stages of a full-blown structural dollar
bear market.
If it continues, has gold already anticipated it or will gold continue to
follow?
Always very hard to say, but it certainly doesn't feel that the
Current move in gold prices is about to end.
I mean, clearly, we will have cycles within it, we'll have, you know, some
sell-offs at some point.
But certainly, when you talk to a lot of people, and when you see the buying
behaviour of people,
there still seem to be a number of people willing to buy at this price.
And in fact, if anything, we've seen a lot of people, you know, who haven't
participated yet.
Yes, well, let's talk about the people that have participated.
A lot of talk of central banks buying gold, loading up.
Are they the number one buyers?
Since 22, they've been one of the major buyers.
And we've had record central bank buying in 22, 3 and 4,
and roughly double what we've ever seen since the 1950s. So they've bought over
1,000 tonnes each year.
This year is actually, year to date, slightly lower.
partly, I think, because of the price moves.
But we certainly still see them participating.
What's interesting this year is we've also now seen the number of ounces in ETFs,
that's the gold ETFs, have started to increase substantially.
So a year ago, there were 80 million ounces or so.
Now we're up to 95 and rising.
Yeah, well, you've got two different types of buyers there.
You've got the speculative buyers for the ETFs, and they can turn tail quite
quickly,
I believe.
Whereas the central banks tend to be strong holders.
I mean, they're not going to see it at, say, 4,200 and say, I bought it at 3,200.
Let's ship this out and take a quick profit, are they?
No.
And if you look at the history, central banks, if you go back 20 years or more,
were sellers.
You know, in the
90s, they've been net buyers for the last 15 or more years now and look set to
continue.
Once they've decided, they tend to be very strong holders.
Good.
Where else are we seeing demand?
Jewelry, not so much, I would imagine.
The last time we spoke this year,
you talked about platinum group metals with me and you talked about the number of
jewellery
manufacturers that are switching to platinum.
So maybe that's to the detriment of the gold jewellery sector, that is.
No, no.
And definitely there are price sensitive sectors of which jewellery is definitely
one of them.
And obviously we've seen demand slower in that area.
But I mean, frankly, ETF buying and central bank buying are very important.
So, I mean, you know, central banks are buying roughly today a third of annual
mine production.
So, I mean, these are quite influential.
And on that note, that's a neat segue to production and to supply.
We've spoken about demand.
Mine production, is mine production keeping up?
Is it increasing?
Or is that not the case with gold?
It's just more or less a constant.
Mine supply, if you look over the last, you know, 10, 20 years, it averages around
1% growth per year.
So it is growing.
And definitely we are seeing companies now keen to grow.
We'll maybe see that accelerate a bit.
But it's very hard to grow it fast.
Permitting, you know, the cost of doing these projects, getting skilled people.
And you've got to remember gold mines generally, they're not as long life as
copper or iron ore mines.
And so you're having to replace.
reserves and new mines all the time okay so one percent a year it may increase
given the price
sensitivity of production to a certain extent but what about hedging i mean some
of these mines are making
enormous margins at the moment there must be someone in the treasury department of
some of the mines that says
come on chaps we've got to lock in another 10 percent at these levels yeah we
definitely that's the sort of discussion what's
interesting um You know, hedging companies used to hedge a huge amount 20 years ago,
and they got caught out when prices rose in the early
2000s, where the hedges actually ended up below the cost of production.
So since then, they've been much more wary and only hedge tactically.
What we've actually seen the last few years is companies hedging through what
are called zero premium
collars.
So they...
They sell a call at a higher price to buy a put at a lower price.
And if the price stays in that range, it costs them nothing.
Obviously, if it goes through the top, they lose the upside.
But it costs them nothing to put on the position.
What we're actually talking to companies this year is because their cash flows are
so much stronger,
more companies can now essentially afford to buy put options.
And that's straight away, you're just buying insurance.
So you're saying.
I'm buying protection.
If the price goes down 10%, I get that basic price.
I don't lose any more.
It obviously costs you money.
If the price doesn't go there, you spend the premium.
But with cash flows as they are, they can afford that.
So it's really just straight buying insurance against lower prices.
And we are seeing a number, particularly mid-cap companies, those with higher cost
operations,
doing that because it makes sense at this stage.
I'm looking at the gold price graph now.
If you go back 10 years, a little bit more than 10 years, George, it's essentially
quadrupled.
So if you were long of it, if you're lucky to have been a long-term holder of gold,
you're one of those gold bugs that can't bear to sell anything like Goldfinger in a
James Bond film.
He just wants to accumulate all the time.
But you see this, you must be tempted at some stage.
This giddy-making graph that I'm looking at now must take some sort of breather?
No, no, clearly it does have to at some point.
It's very hard to say when.
And in a sense, myself as a gold fund manager, that's not my decision, really.
My job is to outperform my index by investing in gold equities.
My investors, obviously, they have to decide whether they want to be allocated
to gold or other asset classes.
So frankly, that is not my issue, I would say.
My issue is to make sure I find the best companies to express that investment.
Let's talk about the best companies.
I spoke to one of your colleagues earlier this year, and he had bought South African
gold mines,
and they had run very nicely.
But he put forward the argument that the international, as he called them, because
they're outside of South Africa,
the international gold miners hadn't run as hard and were just getting started.
Would you agree with that?
Yeah, I mean, look, we've seen it.
We've had a very strong two months now.
And certainly we've seen some catch up.
I think when I last spoke to you, even though miners had run hard this year, my
point was they were up 50%
and their margins have more than doubled.
Now, obviously, your average, you know, the index is now more than doubled this
year.
But actually, if you look at current prices, their margins on average are
probably three times what they were a year ago.
So you could still make an argument that there's still more to go if prices hold.
And, you know, that's the way we look at it.
So, you know, yeah, we've seen mining companies basically do three times the
gold price this year,
displaying that leverage they have via margins.
But, you know, arguably, if prices stay up here, not go higher, just stay here,
you can argue there's still more upside in these companies.
Yes.
And on that note, how are you positioned?
What is your strategy at the moment at 91 in London?
Well, obviously running a gold fund, I'm exposed to those miners.
And we have added some juniors where we see more growth because a lot of the
seniors don't have much growth.
They are reducing costs, but they don't have a lot of growth.
So we've increased the number of holdings we've had and added some smaller ones.
In our more general resources fund, we remain overweight precious metals.
And I say precious metals because that's overweight gold, platinum.
and silver within the fund.
Though, you know, that has been, we've moderated that slightly this month after a
very strong run.
Okay, so everything set fair for gold, seemingly.
And copper, I just quickly want to talk about copper because of where you've
recently been for that gathering.
And it's had a nice few weeks, actually.
It's gone from the sort of 4.4...
$4.4 per pound level up to around about close to $4.80
per pound.
So a nice steady move and everyone's quite excited about it.
Are you as excited as they are?
Yeah, we've been excited actually for two or three months on copper.
And in fact, there was very big news yesterday because Freeport, who have a
large mine, the second largest copper mine,
it's in Indonesia called Grasberg.
Yes.
They've had a major incident.
They had a major flow of mud, basically, into one of their mines.
Sadly, two people died, five are still missing.
But that happened two weeks ago, but they came out yesterday and they've reduced
their production for this year by
250,000 tonnes, roughly, and next year as well,
because it's going to take a long time to sort this out.
And that's a major...
Supply disruption on top of several we've already had this year with problems in
Congo, problems in Chile and several mines.
So that's why we've seen copper jump in the last day.
Frankly, I think it hasn't done enough.
I think, you know, we have a very tight supply demand balance now,
particularly over the next six months when that mine will produce very little.
And stocks of copper outside of the US are quite low because most of the copper was
moved to
the US.
in anticipation of tariffs, which didn't arrive.
Given the fundamentals that you've just sketched out and also the potential for a
dollar bear market to
continue, could copper be the new gold in the future, in future years?
I think particularly in the short term, copper looks, you know, very exciting.
We always, we felt the market was tightening and we felt that we needed an
overweight,
not that we knew it was going up.
but the risks were much higher.
It could end up higher than lower.
Clearly, the news yesterday is encouraging that.
And I think over the next few months, if demand holds up, and that is an if,
I think we can see copper push higher from here.
George, thank you very much for your time.
George Cheeverly is a portfolio manager, resources at 91 in London.
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