Categories: Precious Metals
Topics: General Precious Metals

GoldMining Inc. (TSX: GOLD) Chairman Amir Adnani on GoldMining's 25M Ounce Gold Portfolio: “A Company Designed and Built for Gold Bull Investors”

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Chairman of GoldMining Inc. (TSX: GOLD)(OTC: GLDLF), Mr. Amir Adnani. Amir, a pleasure to have you back on. How are you?

Amir Adnani: Excellent, Gerardo. Nice to connect with you. How are you doing?

Gerardo Del Real: I am doing well, busy as I imagine you are. And I know you are because GoldMining Inc. just had some news recently. It's another million ounce deposit in the growing portfolio of over 25 million ounces of gold resource. I want to talk about that, you've had a very busy year. Frankly, you had a very busy bear market where you positioned the company very well.

Before we get to all of that, I have to get your take on the current state of the gold market as it relates to Fed activity and central bank asset reflation going on around the world right now.

Amir Adnani: There's really the perfect setup here for gold. Gold can really take center stage here and shine due to the fact that the suppression of real rates has to go on for at least til 2022 to 2023. That's the official kind of Fed commentary about, "We are not interested in raising rates." So now you're talking about basically this idea of not only zero interest, but the fact that you start to get some inflation in the system. And we're obviously in the negative territory for real rates.

So ultimately you have that backdrop, you have this fanatical debasement of fiat currencies. And then you have the limitations with the extraction side of our business. Let's not lose sight of the fact that we've been in a prolonged bear market for gold explorers, developers, major producers, their pipeline of reserves and resources being at a decade low. So that combination of physical issues – and we've seen physical issues, not only in the sense of shortage of resources in the ground. That's a function of what happened over a prolonged bear market that started in 2012. But also the fact that COVID-19 disruption has impacted mines. Mines have been coming offline. Some have turned back on, some haven't. But of course, all of that and the impact that we saw in refineries.

But the combination of all these issues from a monetary side of things, the suppression of real rates, physical disruptions and challenges in the sector. It's the ideal backdrop for both. It's amazing that we're not testing, we're not there yet with the all-time-high gold price that we saw in late 2011. The $1,900 level should be probably our next target to take out. Because if you look at total debt, if you look at various other metrics today versus 2011, when we saw $1,900 gold, there's a far more compelling case for gold as the haven of last resort right now and we should be there.

And also the fact that, Gerardo, that gold stocks and the gold sector today, generally speaking, is still very much under-owned. If you look at it in terms of asset allocation, just looking at the combined market cap of all publicly listed gold companies, big or small, majors and juniors. All of that combined is still less than the market cap of Apple. So it's a very small sector, under-owned, still very much undervalued. I expect the gold price should be multiples of where it is right now to really have fair value for it. That should only be positive for the rest of the gold sector.

Gerardo Del Real: I believe Chairman Powell's exact quote was, "We're not even thinking about thinking about raising rates." Correct?

Amir Adnani: That's it, you said that twice.

Gerardo Del Real: Let's get to what you've been able to do with GoldMining during the bear market, which has been pretty incredible. You and I have had conversations in the past about the business model and everybody has a preference. But look, the bottom line is GoldMining has spent $81 million Canadian acquiring over 25 million ounces of gold. For an acquisition cost of approximately $3.21 per ounce Canadian. 

I know there's several research firms that have price targets. One I'm looking at right now at $4.25 a share. Currently shares are trading around the $1.50 range Canadian. Obviously with $1,730 gold, a lot of runway between $1.50 and $4.25. And frankly, you and I both agree that gold is headed higher. 

You've been busy. Just this year alone, GoldMining and the team has announced 2 million ounce resources on two separate properties. The most recent one out of Idaho. Can you speak to how you were able to position the company so well and what it looks like moving forward?

Amir Adnani: Well, first of all, this is something that the ideal positioning just doesn't happen overnight. The whole point of being an acquirer at the bottom of the cycle, and a bear market cycle that lasted unusually longer than previous bear market cycles, took a ton of resilience and patience and the backing of investor base who truly supported and enabled for us to keep going. We made our very first resource stage acquisition in 2012 and we just kept going and going and going until recently, the Almaden acquisition in Idaho.

So first of all, if you were to go out there tomorrow with $80 million to $100 million of cash and liquidity to try to replicate what we've done in a diversified portfolio, it would be impossible. The only way it was possible to be consistently buying year in and year out for practically a decade to assemble a portfolio this large. Like to your point, to spend $81 million, or just over $80 million in mainly stock so we're debt-free company. And to do it without any debt and to put together 11.4 million ounces of gold in measured and indicated, and 13.8 million ounces of gold in inferred categories. Not even talking about the copper credit, silver credit, et cetera.

That is the kind of portfolio and size you see in the possession of intermediate gold producers, big gold producers are kind of the ones that can talk about that size of resource, if at all. And so it's very rare to see a small company, a pre-production company with this many ounces. I think that really makes the story today unique. There's not another company set up the way GoldMining is. But ultimately, this has to translate to the correlation and the high beta correlation to the gold price that we think we have.

This was a good point made in the Haywood report you were just alluding to in your question. Since the recovery of the gold price in late 2018, you see a 36% increase today on spot gold versus over 100% increase for the shares of the GoldMining versus the GDXJ, the Junior Gold ETF up above 58% during the same timeframe.

So we do think that this strategy ultimately will be an excellent way to try to achieve that kind of outperformance ultimately for our investors and for people that have backed this because they believe this model is a successful model to create value in the longterm, especially as we enter a multi-year gold market, which we're in the early innings of.

But the scarcity factor with resource stage gold projects is so compelling right now. Gerardo, there isn't a day that passes right now where we're not seeing some kind of M&A transaction in our sector, in the gold sector. We're already, I think,  running out of shovel-ready projects. Any projects that were shovel-ready, completely de-risked, permitted, ready to go to production has already been gobbled up. This all obviously started a year ago with the bigger companies doing M&A; Goldcorp with Newmont and Barrick with Randgold.

But really, again, as you anticipate what the next phase of M&A would be, it would be resource space projects because the world is not flushed with shovel-ready, construction-ready projects. There is a limited amount of those available. They're transacting, they're being acquired in M&A. But more growth is needed, more resources are needed. That's where I think this ideal positioning is that you alluded to.

The fact that we managed to pick up our total resource space for around $3 an ounce. And even if you look at this most recent acquisition of Almaden, we paid about $1.2 million for that and ended up getting just under 1.2 million ounces of resources. What that also really speaks to is how dysfunctional the sector is right now, where all the liquidity, because of ETFs, because of passive investment, is going to the large cap names. The microcap names, the single asset companies, companies that have less than $20 million market cap, even less than $100 million market cap, are not really participating the same way unless you've got really exciting news or you've got something driving. But there's still really a big universe out there of opportunities and assets that we're seeing.

Gerardo Del Real: That's my follow-up question to that, Amir. Do you use that disconnect that you just highlighted to continue to go after accretive acquisitions? Or is this the part of the cycle where you position the company to be monetized? You have the leverage, you have over 25 million ounces of gold, you have it spread across, I believe, 14 gold-focused projects. How do you view this part of the cycle? Are you still in acquisition mode or are you looking to harvest some of that positioning that you did during the bear market?

Amir Adnani: All of the above because we're in the driver's seat. We're starting to see increasing amount of interest from companies that are interested in individual assets in our portfolio. Remember our portfolio spans five countries in the Americas; the United States, Canada, Brazil, Colombia, and Peru. You're talking about over 11 different projects. There are lots of different ways to generate and stimulate interest in our portfolio. So we're seeing increasing interest in our portfolio.

But at the same time, we really think we're in the driver's seat. We're not in a hurry to harvest. But at the right time, at the right valuation, that's certainly a possibility. At the same time as we've demonstrated recently, we've still managed to pull off and execute on acquisitions. I think that's a very strong possibility that we'll be able to show that that is still the case. Again, we've already done that year to date.

Beyond that, Gerardo, there's some really fascinating things happening in our sector when you think about the rise and really the amount of liquidity and market cap that now exists amongst royalty and streaming companies. Probably the best multiples exist amongst royalty businesses. One thing that we have an opportunity to do – again, being in a position where you have so many different projects, such a diversified resource space – is also looking at potentially monetizing royalties off of our portfolio that we control.

That was a big part of our focus as we were making acquisitions, buy projects that don't have royalties. Or if there are royalties during the bear market, clean that up, acquire it where you can, take that interest down. There was more than one kind of lever at play in terms of what we thought was the right thing to be doing during the bear market to create value. Now I think it gives us more than one way to do the harvesting that you referred to.

So whether it's monetizing through royalty opportunities, whether it's harvesting through individual sales or joint ventures, but not losing sight of the fact that we're not there yet fully in terms of completely stopping our acquisition model and only being focused on divestiture. So we're going to do all the above, we're in the driver's seat. It is a debt-free company with over $8 million of cash and a very long-term supportive shareholder base that believes in much higher gold prices. So it is the ultimate bullish set up for anyone who's got a very ultimate bullish view on the gold price. This is a company that was really designed and built for gold bull investors for other gold bull investors.

Gerardo Del Real: Amir, from the ticker symbol, GOLD, to the over 25 million ounces of gold, to the fact that as you alluded you're in the driver's seat, you have options, you're debt free. I got to say and commend you for your execution and the team at GoldMining. It's been impressive to watch. Anything else that you'd like to add?

Amir Adnani: No, just keep an eye on what we're doing, the balance in the coming weeks and months. I expect to set a busy period ahead of us. We're working kind of around the clock with some really exciting opportunities that we're chasing. So I expect you and I will be speaking again very soon and I look forward to that. And I'm really excited about the year and years we have shaping up here for the gold market.

Gerardo Del Real: Amir, thank you for your time. I appreciate it.

Amir Adnani: Likewise. Thank you, Gerardo.

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