Friday, 17 May 2024

By Nick Hubble Editor, Strategic Intelligence Australia

[4 min read]

Dear Reader,

What do Canada and Australia have in common?

‘Archean belts’ probably wasn’t top of your list.

But what if our shared geology could be about to make you rich?

Actually, it already has.

Canadians and Australians are usually in the top 10 in international wealth comparisons.

And our comparatively low government debt to GDP ratios are also unusual.

Both statistics come on the back of resources. Our minerals made us wealthy.

The resources industry provides high paying jobs, often to low skill workers.

Governments tax resources highly, giving them plenty of revenue.

And commodities tend to be exported, helping put the trade balance in our favour.

Resources aren’t free. It takes vast investment to get a mine up and running. Not to mention finding the deposit in the first place.

But at least we didn’t have to buy them off anyone else, let alone subsidise or protect the industry that’s laying the golden eggs.

This gives us a distinct advantage over other developed economies that use manufacturing or value-added industries to prosper.

So, both countries have come a long way on the back of their mines.

But mining investment legend Rick Rule reckons Australia now has a distinct advantage over Canada for resource investors: a badly hidden opportunity.

He once told me about ‘the next big thing’ in mining. ‘They’ll be digging to Hades!’ is how he put it. And we may finally be on the cusp of that moment.

But the whole thing rests on a rather awkward premise…

Australians are lazier than Canadians

Australian and Canadian geology has some surprisingly similar features. Our Archean Age rocks can be found close to the surface. Well, close enough for us to mine. If we look deep enough.

The Canadians have been doing this for years. They often mine deep, using underground mines. And they find a lot of precious metals as a result.

But we Aussies don’t often bother digging that deep. Partly because nuggets of gold used to be found when people just bumped into them. In some cases, literally.

Of course, those days are long gone. We now mine enormous open pits, often at very low ore grades.

Australia’s era of mining the high-grade deposits found at depth has barely begun at scale.

Until now, we just haven’t had to. There were plenty of minerals near enough to the surface.

But if the similarities in Archean geology hold true at depth too, then we might find a Canadas’ worth of gold lurking beneath our existing mines.

Proof of concept, confirmed

As Rick Rule told me with a cheeky smile, ‘It took Canadians to find the Swanzo’. He was referring to the Swan Zone – one of the exceptions that proves the point I’m trying to make.

The Fosterville mine is an Aussie legend. But underground mining only began in 2005. In 2016, things got more interesting.

Canadian mining firm Kirland Lake Resources acquired the owner of the Fosterville Mine. They decided to drill a little deeper, below the existing Fosterville mine.

And they soon found a pair of ore bodies which completely changed the fortunes of the company (and its owners). The more famous of the two discoveries was called the Swan Zone.

Kirkland’s share price went from below CA$2.5 to over CA$50 in four years as it became the lowest cost gold producer in the world, by some estimates.

Consider it a proof of concept. There really may be a Canada’s worth of gold lying beneath your feet. If you happen to be standing at the bottom of an open pit mine…

The question is, ‘who will get at it? And how?’

Innovators versus gold bugs

It’s a two-horse race.

One of our editors is focusing on the next generation of mining ‘disruptors’. He believes following the right people is the key to speculating on mining stocks.

This echoes another one of the lessons Rick Rule sometimes reminisces about in his interviews. He once said that his biggest mistake was to focus on mines rather than people. If he’d just stuck with the proven teams over the course of his career, he’d have avoided many investing losses.

But picking the right people can be just as difficult as the right stocks. You’ve got to be on the inside – know who’s who. Here’s how you can do that.

The second horse is focused on gold specifically. Brian Chu believes the house of cards that is the global monetary system is about to come tumbling down. Gold bugs will be proven right about fiat money, again.

And gold mined at depth is one of the best ways for Aussies to play this trend. Gold stocks can leverage gold’s gains. To find out more, go here.

Who do you think has it right? Let me know by sending through your feedback here.

Until next time,

Nick Hubble,
Editor, Strategic Intelligence Australia

Nick Hubble found us at Fat Tail Investment Research in 2010 after a stint inside Wall Street’s most notorious bank, Goldman Sachs, during the 2008 GFC. That’s where he saw the true nature of the investment banking business. Since then, he’s been the editor of the Daily Reckoning Australia and the UK-based Fortune & Freedom and Gold Stock Fortunes.

He’s delighted to work as Investment Director and Editor for Jim Rickards’ Strategic Intelligence Australia. Here he helps turn Jim’s big-picture views into specific actionable advice and ideas for Australian investors.

By Bill Bonner Editor, Fat Tail Daily

[3 min read]

Here’s the news from yesterday. First, the latest inflation data came out. Producer prices were a little higher than expected, but no big deal. 

More interesting was this, from Fox: 

‘Dozens of Democratic lawmakers signed a letter to President Biden, pleading with him to act on high grocery prices that have been slow to fall as inflation has come down.’ 

The premise of the letter is, of course, preposterous. Biden plants no wheat. He is not about to set up a jelly roll factory. There is no way for him to lower food prices honestly. What’s more, a Fed study, announced yesterday, said corporate greed was not the cause of price increases. CNN: 

‘Economists at the SF Fed found that corporate price gouging was not a primary catalyst for the inflation surge of 2021 to 2022.’ 

But that didn’t stop the children’s crusade in Congress. Fox continues: 

‘Sen. Elizabeth Warren, D-Mass., led the letter on Monday morning, calling on Biden to "exercise your executive authority to take additional action to address rising food prices without congressional action." Democrats asked Biden to direct his administration's Department of Justice to "prosecute actors in the agricultural and food sectors for price fixing and other anticompetitive behavior" and task the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) with creating a joint task force with the purpose of investigating the manipulation of food prices.’  

That’s right. She wants Biden to use threats...and penalties — the brute force of government – to punish businesses that raise prices. 

Of course, if they could be lowered by ‘executive authority’ prices would never go up. The feds have plenty of lawyers; they could put all the major food company CEOs in jail...that would get prices down, wouldn’t it? 

In the blatantly fraudulent language of modern politics this is called a ‘progressive’ proposal, even though it would drag us back into the darkest days of price controls, shortages, and poverty. 

System Collapse

And if corporate CEOs really were prosecuted for price increases — much like the show trials in Moscow in the 1930s or the ‘struggle sessions’ in Mao’s China — the country would slip backward...like the Soviet Union...until the whole system crashed and was discarded.  

In other words, instead of worrying about the real cause of inflation — themselves! — lawmakers want to sic Justice Department lawyers on businesses that raise prices.  

We looked at this as ‘self-limiting corruption’ yesterday. The more of it they do, the faster the system collapses.  

Another way to look at it, which might be more helpful, is that as elites get more and more power, they become less benign, more out-of-touch with reality and more parasitical. Then, their societies gradually shift from voluntary, ‘gentle commerce’, to coercive rules, regulation, laws and policies. 

The shorthand version:   

In win-win deals between willing participants, people pay one another to improve each other’s lives and thereby produce ‘wealth’. 

Win-lose deals on the other hand, backed by government coercion, redistribute wealth…and destroy it. People get less of what they want (wealth) and more of what their rulers want them to have. 

Stay tuned. 

Regards,

Bill Bonner,
For Fat Tail Daily