By 1999, Stanley Druckenmiller was already a legend.

From 1981 to 2000, his hedge funds had never had a losing year.

His returns averaged a crazy 30% per year. Druck caught the attention of George Soros and was soon running the legendary Quantum hedge fund.

In 1999, Druckenmiller saw the internet bubble forming and built up a $200 million short on tech stocks.

But the bubble kept inflating. Soon he was down $600 million on the short position.

So Druck hired two tech “gunslingers”, and gave them some money to manage. They bought all the hot stocks and were soon making 3% a day.

The young tech bros were making their boss look like a dinosaur.

Druckenmiller describes how the FOMO (fear of missing out) seized him:

“So like around March [of 2000] I could feel it coming. I just — I had to play. I couldn’t help myself. And three times the same week I pick up a phone — don’t do it. Don’t do it. Anyway, I pick up the phone finally.

I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks I had left Soros and I had lost $3 billion in that one play.”

Let’s pause for a second and reflect. One of the greatest investors in history bought the tippy-top of the dotcom bubble. And took a $3 billion loss.

Druckenmiller has since said that he already knew it was a bad idea, but simply couldn’t resist.

“I didn’t learn anything. I already knew that I wasn’t supposed to do that… I was just an emotional basketcase and I couldn’t help myself.”

This is the power and danger of FOMO. Watching stocks go up can cause us to do irrational things.

Berkshire’s $397B Cash Hoard

Berkshire Hathaway (BRK.A, BRK.B), the famous firm founded by Warren Buffett, is sitting on a record $397 billion in cash and Treasury bills.

Berkshire is a holding company. That means they own big chunks of different stocks, and private companies too (like Geico insurance).

$397 billion is almost a third of Berkshire’s assets. Capital that’s only earning 3-4%, while the market has moved higher.

But Berkshire is standing firm. They are patiently waiting for “fat pitches”. In other words, they’re waiting for a crash and much cheaper stocks.

The conglomerate did something similar before the 2008 crash. Their cash reached 23% before the crisis set in.

So when those juicy pitches finally came, they had cash to spend. Berkshire famously invested in Goldman Sachs (GS) at a time when bank confidence was shaky.

Buffett bought $5 billion in preferred stock with a perpetual 10% dividend. And they got warrants to buy $5 billion in stock at $115 a share. Goldman Sachs trades at $917 today.

Berkshire’s best investment during the crisis was Bank of America (BAC). That “blood in the streets” investment returned an impressive $20 billion.

Buffett and team also bought GE, Dow Chemical, and many other stocks at bargain basement prices during the crash.

It was a lesson in patience and waiting for great opportunities.

However, Warren Buffett has intentionally limited his choices. He refuses to look at emerging market stocks, and hates precious metals.

So while it is good to keep some cash around, we don’t have to sit on 32% like Berkshire Hathaway.

Assets With Less Downside, Huge Upside

Before we get into it, I want to make one thing clear. What I’m talking about here applies to long-term investments. If you’re just in hot stocks for a trade, that’s fine.

But the long-term portion of my portfolio is invested in stocks that will weather the coming storm. Natural resources, emerging markets, precious metals. And I think most people should have more exposure to these sectors. A lot of people own none.

When the crash hits, you don’t want to be overweight the most crowded sectors. When it happens, the exit door will be very small, and millions will be rushing through it.

For example, from 2000 to 2002, the Nasdaq fell 78% peak to trough. The S&P 500 fell about 49%.

During that same period, oil stocks gained around 20%, plus dividends. Gold miners did even better, with the NYSE Arca Gold BUGS Index rising more than 100% from 2000 to 2002.

And these natural resource stocks continued to outperform for another 8 years.

Emerging markets also crushed the S&P 500 and Nasdaq during the dotcom crash. The MSCI EM index only fell around 25% during the crash, quickly rebounded, and outperformed U.S. stocks for years to come.

The point is simple. U.S. stocks are very expensive today. Historically when this has happened, forward returns have been very low.

The chart below shows the CAPE ratio (a 10-year measure of how expensive stocks are) of the S&P 500 (x-axis) and the annualized returns which followed (y-axis).

Based on today’s CAPE ratio (around 36), returns have averaged around 0% over the next 10 years.

Source: Tom McClellan

Sure, the S&P 500 could rocket up another 15%, but that would likely signal a “blow-off” top. There will be a crash at some point. And following that crash, we don’t know how long it will take overpriced stocks to recover. After the 2000 dotcom bubble bust, it took over a decade.

I’m not saying to go out and sell all your stocks. What I’m recommending is diversifying into alternative investments. Natural resources, emerging markets, and precious metals.

All these assets have pulled back hard over the past few months. Especially since the Iran war began. But I’m holding and adding when I have excess cash to deploy.

Eventually, the time will come to sell these unusual assets, and shift into more traditional growth and income stocks.

But that time will only arrive when yields on “normal” U.S. stocks are much higher, and prices are much lower.

Just to reiterate – this applies to long-term investing. For quick trades, buying overpriced stocks can be profitable. Just be sure to manage your risk appropriately.

The post He Bought the Tippy-Top appeared first on Daily Reckoning.

No matter how we feel about China, their industrial power can no longer be ignored.

In a short time, China has become the world’s largest carmaker, steel producer, electronics exporter, and patent filer.

But not long ago, in the 1980s and ‘90s, China was among the poorest countries in the world.

More than 90% of the country’s population lived in extreme poverty in the early ‘80s.

In one of the most remarkable growth stories in history, the country has (at least according to government statistics) eliminated extreme poverty.

Source: Wikipedia

The real change began in 1978, when Chairman Deng Xiaoping began to open China up to foreign investment. He created “special economic zones” in areas like Shenzhen, where companies could take advantage of cheap labor and low taxes.

Industrialists from Taiwan, Japan, and the U.S. moved factories to mainland China to take advantage of the low-cost labor and loose regulations.

The image below shows Shenzhen in 1985 (top) vs 2015 (bottom).

Source: CGTN

The 1980s were the beginning of China’s industrial rise. The country went from typical communist central-planning (a disaster) to a unique form of “state capitalism”.

Ever since, China’s economic rise has shaken up the global economy. And it’s likely to get more challenging from here.

From Humble Beginnings

At first, China was attractive for its huge pool of low-cost labor. This was the “sweatshop era”, for lack of a better term.

Toys, garments, shoes, plastic widgets, etc. Components were mostly imported rather than made within China.

Since then, China has steadily climbed up the industrial ladder.

In the 1990s, China moved up the chain, creating more of its own components. It shifted into electronics, appliances, chemicals, and low-end machinery.

The 2000s was when explosive growth began. China was admitted to the World Trade Organization in 2001.

The country began to dominate in steel, cement, aluminum, electronics, solar panels, and industrial machinery. The scale of their industry became a serious threat to the world.

The Chinese government supported a massive buildout of industry. Cheap land, cheap loans, and subsidies rained down. It became increasingly difficult for the world to compete on price.

Countries began to put up tariffs on metals and other areas where China was the clear cost leader.

From 2008 to 2015, the China threat escalated. The country continued to move up the value chain, making increasingly complex machinery and products.

Companies that built in China got access to cheaper labor, but sacrificed their manufacturing secrets.

The Everything Threat

Historically, China has not been a hub of innovation. It is an iteration hub. They take someone else’s tech and hone it until the cost is rock-bottom.

Some of the tech is essentially stolen, and some of it China requires as payment for entering the massive Chinese market. For example, when China contracted European high speed train companies to help build their massive network, they required it to be a joint venture which included “technology transfer”. For the European firms involved, it was impossible to resist. China was building the largest high-speed rail system on the planet, by far. So even if it meant giving up tech secrets, it was irresistible.

Other tech is essentially reverse-engineered and “borrowed” permanently.

We’ve also seen it play out in steel, aluminum, electric cars, phones, telecom equipment, and more.

Let’s look at two examples where China is threatening major Western industries today.

Pharma

In a recent interview, Pfizer CEO Albert Bourla said, “I go to bed and wake up with two things on my mind. China and AI”.

The company just signed a $10.5 billion licensing deal for oncology treatments from a Chinese firm.

Pfizer isn’t the only one looking to China for new treatments. Last year, pharma companies spent a massive $137 billion licensing Chinese drugs and drug candidates.

Pfizer CEO Bourla said the following about Chinese competition:

“For every one area we have a company working on something novel, the Chinese have ten companies working on it too.”

Bourla warned that in terms of research and development, Chinese companies “do things 3 times faster and at half the cost”.

Pfizer and other pharma firms are currently licensing tons of potential treatments from China, but Bourla warns that won’t last. He says that eventually China will cut out the middleman and attempt to sell these products to the world directly.

China has expanded its mega-scale playbook to pharmaceuticals. This is potentially good for patients (more new drugs), but could be very bad for Western pharmaceutical stocks in the long run.

Auto-Mation Nation

The other area which is especially painful for the U.S., Japan, and Europe is automobiles.

Over the past few decades, China has invested heavily in car production. And today they’re far ahead of everyone else.

Source: Global Statistics

In 2000, China’s auto production was maybe 2% of the global total. Today it’s at least 35%.

Take a look at the past 10 years of car exports by the top 3 countries.

Source: The Economist

Ouch. China went from exporting around 1 million cars a year in 2016 to around 9 million today.

And in terms of electric vehicles, China is absolutely dominant.

In China, entry-level electric vehicles start at around $8,000 out-the-door. Ford CEO Jim Farley has called Chinese electric cars an “existential threat”, and their manufacturing process “the most humbling thing I’ve ever seen.”

Additionally, Japanese, European, and American car companies are now struggling to compete within the massive Chinese market. Selling into China was a huge profit center for Japanese and Western carmakers over the past few decades. That era is ending.

A Wakeup Call

China has its problems. Too much debt, not enough domestic spending. Citizens save too much, at least according to modern economic theory.

And “state capitalism” is far from perfect. Sometimes the result is “ghost cities” and bridges to nowhere.

But we can no longer ignore the threat of China’s massive scale. When they decide to move into an industry, shock waves radiate throughout the globe.

Today China has set its sights on semiconductors and advanced electronics. They are making a disturbing amount of progress on that front. I expect that within a decade, they’ll be fully caught up with Nvidia, Intel, and the memory giants like Samsung and SK Hynix. Costs and profits at Western giants will plummet as competition soars.

As Americans, we must heed this wakeup call. We can no longer dismiss Chinese goods as low quality junk. The country isn’t just a big pool of cheap labor anymore. It’s an industrial titan like the modern world has only seen following World War II, when America dominated with 50% of industrial capacity.

For too long we’ve coasted off of cheap Chinese goods. Corporations exported their manufacturing to the country to save a few percentage points. This kept corporate profits high, and inflation low, but hollowed out our manufacturing base. Millions lost high-paying jobs.

Now China has moved up the value chain and threatens our most profitable sectors.

We can’t win this war by cutting off China’s access to key high-tech gear. We’ve seen this play out with GPUs and other AI hardware. We cut off their access to top GPUs, and the machines that make semiconductors starting in the late 2010s. Now China has made incredible strides in these areas thanks to these restrictions, which gave them all the motivation they needed to build up domestic capabilities.

China is now making phones, GPUs, and CPUs without Western components.

Instead, America needs to stop importing cheap foreign labor, and lean into empowering Americans to do what they do best: take risks, innovate, and grow.

Tackling fraud and waste must become a top priority. Efficiency is everything in this global industrial competition.

If we do these things, we can regain our place as an industrial titan. But it’s going to take time, sacrifice, and major political reforms.

The Chinese industrial threat is not going away anytime soon. It continues to grow and expand into new areas. What we covered today is just scratching the surface.

To compete, we must streamline regulation, lower taxes, and most importantly – re-industrialize with haste. We’ve made some early progress on the re-industrialization front, with the Trump administration bringing advanced chip manufacturing back to the country with TSMC’s new Arizona fab. But we need much more of this.

We may also need to let the dollar fall in a controlled manner, in order to make our exports more competitive.

The U.S. has all the ingredients required to regain our rightful place as a manufacturing powerhouse. Talent, natural resources, capital, and most importantly – the greatest entrepreneurial spirit the world has ever seen.

The future of American industry can still be bright. But we have work to do first.

The post How We Can Win vs. China appeared first on Daily Reckoning.

Michel de Montaigne once said he’d rather keep company with peasants than professors.

Montaigne said the peasants had not been “educated sufficiently to reason incorrectly.”

He wasn’t in awe of ignorance. He was diagnosing something worse: a kind of education that trains sharp minds to be wrong with great confidence, at great length, and in great comfort.

You already suspect this about the experts running your country. Montaigne just gave you the receipts he wrote 450 years ago.

The Original Anti-Expert

In Montaigne’s France, “education” meant years of Latin drills, logic puzzles, and formal debate. A young man could leave that system able to argue any side of any question. He could quote Aquinas, Cicero, or Augustine at dinner and win the room.

But he often couldn’t grow a potato. (As a Gen Xer, I sympathize. I couldn’t build anything without IKEA instructions before I owned a house.)

Montaigne thought this was backward. He argued learning should build judgment, not just vocabulary. An education that produces confident talkers without sound judgment is a dangerous failure. (If only he could see today’s Federal Reserve Board!)

Plain ignorance is easy to fix. Polished error isn’t, because it comes wrapped in credentials, initials, and a job title.

The peasants around him weren’t wiser men. They were simply men whose mistakes cost them something immediately. Misjudge the weather, lose the crop. Misjudge the soil, go hungry. Their thinking received immediate, brutal, random feedback.

The scholars in their robes got applause instead.

Why Some Reasoning Gets Corrected, and Some Doesn’t

As Thomas Sowell once said, “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” My God, that man is a national treasure.

The great British conservative statesman Edmund Burke lamented, “But the age of chivalry is gone. That of sophisters, economists, and calculators has succeeded; and the glory of Europe is extinguished forever.”

Luckily, old Edmund didn’t live long enough to see what British, French, and German politicians are doing to their countries.

Though they, and Montaigne, lived hundreds of years apart, all of them are talking about the Consequence Gap. That’s simply the difference between where someone makes a decision and the cost of being wrong. Close the gap, and bad reasoning gets punished fast. Widen it, and bad reasoning can survive indefinitely, dressed up as expertise.

The farmer has no Consequence Gap. A trader has none (unless he’s The Donald’s buddy, of course). The small-business owner, pricing inventory amid an inflationary mess, has none either. Their P&L is the teacher, and it doesn’t grade on a curve.

Now look at the people setting your monetary policy, health guidance, or economic statistics. Their Consequence Gap is enormous. When they’re wrong, they don’t go hungry. They go on television and explain that the shock was “unprecedented.”

In March 2021, the Fed said inflation would peak near 2.4% and fade quietly. By June 2022, it hit a 40-year high of 9.1%. No one at the Fed took a pay cut, let alone got tarred and feathered.

When the Ruler Becomes the Target

There’s a second trick hiding inside the first, and it’s one every reader of this newsletter has felt in their grocery bill.

Economists invented the CPI to approximate a real thing: the general debasement of money. But once CPI became the official target, officials began managing the number rather than the underlying reality. A war spikes oil prices, and suddenly that’s labeled “inflation,” even though no one printed a dollar to cause it. GDP works the same way. Government spends on a bridge to nowhere, GDP rises, and somebody calls it “growth.”

The ruler stopped measuring the terrain and became the terrain. The people managing the statistics never have to live with what the statistics hide.

A Very Old Word for the Cure

Thomas Aquinas called the solution to this problem “prudence.” He defined it as the virtue of applying right reason to actual choices, not just winning an abstract argument. Aquinas deliberately separated prudence from cleverness. A man can be clever and still choose badly. Prudence is what closes the gap between knowing and doing well.

Montaigne’s scholars had cleverness. Whatever their limits, his peasant friends had something closer to prudence, because reality forced it on them daily.

If there’s no consequence, there’s no correction. No iteration. It’s the same idea in three different centuries and three different vocabularies, and all three point at the same truth.

Watch the Hips, Not the Lips

Before you believe a forecast, ask what the forecaster will pay if he’s wrong. If the answer is “nothing,” discount it heavily. Listen to people whose own money and reputation are on the line.

Watch what insiders and institutions actually do with their capital, not what they say in a press conference. As an old trader friend of mine once told me, “Watch the hips, not the lips.”

And keep your own decisions sized so that if you’re wrong, you feel it fast enough to learn from it. That discomfort is the whole point. Master that discomfort. It’s what keeps your reasoning honest.

Wrap Up

Montaigne’s peasants never held a press conference explaining an “impossible choice.” They didn’t need to. Reality graded their homework the same week they turned it in.

Our modern experts are educated enough to reason beautifully and wrong enough to keep doing it, because the bill never lands on their desk. It lands on yours, in your grocery bill, your savings account, and your retirement statement.

You already sensed the credentials were a smokescreen. Now you’ve got 450 years of philosophy, a Catholic saint, and modern traders all agreeing with you.

That’s not cynicism. That’s just paying attention.

The post The Consequence Gap appeared first on Daily Reckoning.

Note from Adam: Today we have a special guest article by author Mickey Maini. It’s an excerpt from his new book, The Entropy Trap.

This book is fascinating. It changed the way I think about risk, markets, and history. Our pal Jim Rickards is a fan, and wrote the foreword. Here’s an excerpt from Jim’s introduction:

“The publication of Mickey Maini’s book The Entropy Trap marks a major milestone in the growing field of econophysics—the use of physics and other rigorous scientific disciplines to unravel the complexities of economics, banking and capital markets.”

Today’s excerpt revisits the aftermath of the 1929 crash through the eyes of legendary investor Bernard Baruch. While most investors were celebrating the recovery, Baruch was watching something far more important than prices. He was watching the hidden stresses building beneath the financial system.

That’s a lesson worth remembering today. Read on…

New York, April 1930

The rally convinced Livermore, but not Bernard Baruch. He had sat in his office reading the same newspapers, checking the same prices, and listening to the same experts as Livermore.

He was one of the most successful speculators in American history, having built and rebuilt fortunes over three decades on Wall Street. He had advised presidents and was known for spotting what others overlooked.

At fifty-nine, Baruch was tall and silver-haired, with a calm presence that came from knowing how costly constant action could be on Wall Street. While other traders paced, shouted, and clung to the ticker tape, Baruch stayed seated and read. Most mornings, he walked alone in Central Park, thinking through numbers and testing his ideas. His office was simple, without a ticker machine, which some peers found odd and rivals found suspicious. He got price quotes by phone, usually once a day or even less. He had learned long ago that the tape only showed price changes, not what was happening within the system.

Now, he noticed something the rally was hiding.

Baruch was not focused on prices. Everyone could see they were rising. Instead, he watched the system beneath the prices; the foundations were still crumbling even as things looked better on the surface.

The banking system was still fragile. Deposits were still draining. Credit was still contracting. The interventions that had produced the rally: rate cuts, public reassurances, coordinated buying, were getting larger and achieving less. Each one a little more desperate. Each one a little shorter lived. The stress was not dissipating. It was being suppressed. And each suppression cost more energy than the last.

But Baruch was also looking beyond the immediate crisis. He watched where the stress was building pressure, not just what was breaking, but what was becoming scarce because of it.

The gold standard was under visible strain. Governments were defending their currency pegs with reserves that were depleting. Monetary credibility, the trust that held the entire system together, was eroding with every intervention. Baruch saw what that meant. The constraint was not liquidity. The constraint was trust itself. And the assets that did not depend on trust would be the last ones standing.

He saw where the fault lines intersected: where sovereign stress met monetary fragility met physical scarcity.

He stayed mostly in cash throughout the rally, not out of fear, but because his indicators had not changed. For weeks, the rally went on. Newspapers said the panic was over. Former critics praised themselves. Money returned to the market. Some of Baruch’s friends wondered if his caution was turning into fear. Even Baruch had to ask himself if he was wrong. Still, he chose not to act.

For two years, the market dropped, rallies failed, and interventions became bigger but less effective. The old system struggled and then weakened; people still distrusted the system, banks kept failing, and political talk was against capital.

Baruch’s discipline was not just in what he avoided. Before the crisis, he had positioned himself in assets that did not depend on the financial system’s survival: a stake in Alaska Juneau gold mining, land in South Carolina he had owned for decades, and the physical commodities he understood better than anyone on Wall Street. As the monetary system fractured, he began accumulating gold bullion, reading the constraint map before the policy confirmed it.

By 1931, Baruch had begun accumulating gold. He read the monetary stress clearly: the gold standard was breaking, and the government would eventually be forced to reprice. Over the next two years, his vault in New York received shipment after shipment of gold bullion from Alaska Juneau—so much that Roosevelt’s Vice President described it as “a whole vault full of gold bricks.” He was right about the diagnosis. But when the Executive Order came in April 1933, the government confiscated his gold at $20.67 an ounce, nine months before repricing it at $35. Even the greatest speculator of his era could not outrun the government’s response to the very stress he had correctly identified.

What survived was not the gold itself but the positioning that preceded it: his stake in Alaska Juneau mining, bought years before the crash, that appreciated sharply after the devaluation. His land at Hobcaw Barony, purchased a quarter-century earlier, held its value while paper assets were destroyed. Not new acquisitions. Prior positioning. The assets that carried him through were the ones he had measured into long before the crisis made them obvious.

Livermore and Baruch were operating in the same financial  landscape, but while Livermore was asking whether the market was going up, Baruch was wondering about what the stress was creating, where it was accumulating, and what it would squeeze.

He was measuring the system. And the system told the truth.

Editor’s note: The Entropy Trap: What Physics Knows that Markets Don’t is available for purchase on Amazon in hardcover and electronic (Kindle) formats.

I truly enjoyed this book. It’s a fascinating look at markets through the lens of physics and hard science. With rich stories from finance’s biggest moments in history, I predict this book will be a hit.

DR contributor and financial risk expert Chris Whalen also loves the book, stating:

“The Entropy Trap does not offer another market forecast. It offers a framework for understanding the conditions that make forecasts fail. Mickey Maini examines how stress builds across financial systems, institutions, technology, and geopolitics before it becomes obvious to the market.”

The post The Entropy Trap appeared first on Daily Reckoning.

On August 24, 2006, I joined Dr. Steve Sjuggerud on a trip to Tennessee. He asked me to come with him to visit a zinc smelter, of all things.

For those of you who don’t know Dr. Steve, he was one of the most successful newsletter writers and investors ever. He retired from Stansberry Research to surf, invest, and live the good life.

He wanted to go to Clarkesville Tennessee because the company, Zinifex, was an anomaly. His research showed that Zinifex would earn $2.5 billion in profit that year. But its market value was just over $5 billion.

In other words, it traded for about two times earnings. That’s super cheap and an oversight by the market. That’s exactly the kind of thing that Dr. Steve loved to find.

I went along and discovered why the Clarksville refinery was so profitable. It was re-mining old tailings ponds…for germanium.

Tailings ponds are the trash heaps of mines and smelters. It’s where they put the material that isn’t the metals they want. This smelter complex began life back in the late 1970’s. It’s the only primary zinc smelter in the U.S. The ore that carries the zinc also carries associated metals like cadmium, thallium, indium, and germanium.

At that time (2006) the price of Germanium rocketed from around $360 per kg to $660 per kg. The smelter’s waste ponds were full of metal. The company realized it could pad the zinc profits with germanium…

Today, the price of Germanium is over $7,000 per kg. That’s 960% gain since I was there last.

Fast forward almost 20 years and the Clarksville smelter has new owners. Korea Zinc Co. bought the smelter in December and has big plans…that include those same tailings.

Korea Zinc says that it has 600,000 metric tons of material to process now worth more than $3 billion. The ponds contain zinc, copper, lead, silver, and Germanium. The company believes it has about six or seven years’ worth of material stored in the old tailings ponds.

Korea Zinc plans to invest $7.4 billion to convert the old smelter into a critical minerals complex. And this story is part of the bigger U.S. critical metals independence theme going on today. According to the company’s press release:

• Korea Zinc and the U.S. Government, through the Department of War and the Department of Commerce, have concluded an initial, conditional commitment – including U.S. federal and private investment – that will support a domestic critical minerals project with an expected $6.6 billion of capital expenditures. The agreement will support Korea Zinc’s plans to expand operations, including the building of a 650,000 m² smelting facility in Tennessee.

• The Tennessee project aims to create an integrated smelter producing both base metals as well as critical and strategic minerals, with phased commercial operations targeted for 2029.

• 11 out of 13 nonferrous metal products that the U.S. Smelter will produce are designated as “critical minerals” by the U.S. Government. This conditional commitment strengthens the critical minerals supply chain for the U.S., South Korea, and other allied countries, ensuring a consistent, steady supply of key elements and minerals.

This is a huge development for the domestic critical metals industry because there are few smelters in the U.S. The reason for that is smelters are considered “dirty”. Even though, back in 2006, the smelter complex was the least industrial looking campus I’d seen.

However, the result of decades of anti-mining rhetoric left byzantine hurdles to build new smelters. The permitting alone would take years to navigate. Not now. Not anymore. The company says it can get to production in just two years…

I may have to hop another plane to Nashville and revisit the project.

Korea Zinc shares have pulled back significantly from recent highs, but the company doesn’t trade in the U.S.

Fortunately, this re-mining story is one that will play out all over the world.

The entire mining sector has pulled back in recent months, and there are bargains to be found. We’re on the hunt for well-positioned re-mining plays and will share anything interesting we find.

The post The “Re-Mining” Revolution appeared first on Daily Reckoning.

I spent last week in Florida at Rick Rule’s annual investment symposium. And as the old saying goes, “What a Crowd! What a Crowd!”

I was surrounded by geologists, mine builders, financiers, 800 paid attendees — the fire-department limit — and about 3,000 online viewers who still believe that rocks, rigs and real assets matter. There’s more to tell than I can fit into one note, but three themes stood out:

First, gold had an early run this year, then a pullback. But it’s not done.

Second, copper and rare earths are not merely “green” metals; they are essential, irreplaceable innards of modern civilization and national power.

Third, energy prices — oil, gas and, increasingly, uranium — set the cost of everything else.

Let’s dig in.

Takeaway No. 1: Gold Is Money… Again!

Early this year, gold prices moved fast, up into the $5,500-per-ounce range. Then came March, the Iran conflict, a stronger dollar and the market’s old familiar “risk-off” reflex. Gold prices faded and many mining shares got hit with a cave-in.

Still, it’s odd — almost bizarre — to see investors sell down producing miners, many of which are reporting record earnings on solid gold prices, with silver, copper and other metals helping the mix.

Consider Alaska’s Contango Silver & Gold (CTGO): a profitable gold producer with exceptional exploration upside in Alaska and British Columbia, yet shares are down almost 50% from its early 2026 high.

For now, market psychology favors future speculations in tech, space, semiconductors and the like over present cash flow from up-and-running businesses that are — literally — mining old-fashioned money.

Well, look at the bright side: the pullback across precious-metal plays has shaken out the tourists.

Meanwhile, despite gold’s ups and downs, the larger monetary story remains intact for the yellow metal. Central banks continue to diversify reserves. Investors still want an asset that is no one else’s liability. And the dollar, for all its current strength and historic staying power, is no longer the unquestioned storehouse of global trust.

I spoke with Andy Schectman of Miles Franklin, a gold and silver dealer who dwells close to the beating heart of physical metal markets. His point was simple: the world is still buying gold, and much of that buying is strategic, not speculative.

China, for example, has used the recent slump to buy gold “off the books,” so to speak. This means Chinese buyers are accumulating metal outside reportable state-level channels. According to Andy, you just have to know where to look — and yes, airplanes are flying beaucoups gold to Chinese ports of entry.

Brien Lundin, who runs the annual New Orleans Investment Conference, made a similar point from the Florida stage. Monetary debasement has not gone away; it has merely been upstaged by louder headlines: Hollywood celebrities, World Cup soccer and Washington soap-opera politics.

Meanwhile, about 40% of the annual U.S. budget is outright deficit, and the national debt continues its space-shuttle trajectory upward. Can or will the U.S. ever pay down its approximately $40 trillion of debt — and that’s just the on-the-books debt? No way.

In fact, annual interest on the national debt already far exceeds the Pentagon budget. Follow that trend far enough, and every tax dollar Uncle Sam collects heads toward the payout window for interest. After that, the U.S. government will only run on the magic phrase: “Take this legal tender, or else.”

Meanwhile, the mining side may be profitable for operators, but it’s not easy by any means. Good gold deposits are scarce after two generations of underinvestment in basic geology. Permitting is slow almost everywhere. Capital costs are high because the industry competes with many other sectors for top-flight labor and basic materials — concrete, steel, electrical equipment, machinery and much else.

Put another way, mining now competes for labor and capital goods against data centers, reshored factories, shipyards, aircraft builders and every other sector with urgent demand.

Sean Roosen, who runs Osisko Development (ODV), shared thoughts about his first big mine-building project, Canadian Malartic, now Canada’s largest gold mine, which he sold off to Agnico Eagle Mines (AEM).

Sean said he wished he had drilled deeper, sooner and “not left so much for the next guys to find.” That explains his drill-drill-drill approach with ODV at Cariboo in British Columbia, a locale that looks like a pincushion but shows eye-popping numbers for gold in the ground and ore grade.

Sean’s lesson is both geological and investable: there is no substitute for drilling that delivers really good numbers; and he has 11 rigs working this summer up there. Ounces in the ground become more valuable when you have a lot of them close together, with grade to match. “I built Canada’s largest gold mine,” he said. “Now, I have a billion dollars and I’ll do it again with this new project.”

Takeaway No. 2: Copper and Rare Earths Are Strategic, Not Optional

Steve Enders of the Colorado School of Mines reminded the room that most of the world’s copper — about 70% — comes from what geologists call “porphyry” deposits. Don’t worry about the petrologic details; the point is that juniors can find them, but juniors don’t build them.

In fact, major companies build big copper mines because a porphyry deposit is not something to develop with a small-cap company approach: a couple of geologists, a helicopter and drilling program, and (one hopes) a string of strong finds and assays.

No, building a big mine is a multi-year, multibillion-dollar industrial, capital and political project: social license from locals, regions and even national capitals; plus roads, power, water, mills, tailings, permits and patient effort up and down the line.

Just ask Rudi Fronk of Seabridge Gold (SA). Up in northern British Columbia, he has spent 27 years advancing one of the world’s truly great copper-gold deposits toward development. Now he’s in the late innings of finding a “big guy” with whom to partner and transform this phenomenal asset into a producing project that could last a century or more. Rudi is taciturn about details, but he is also smiling.

Stock-picking is nice, but this kind of mine development is crucial because copper is key to electrification. Data centers need it. Power grids need it. Electric vehicles need it. Defense systems need it. Even the oil patch needs it. You cannot “software” your way around copper wire, bus bars, transformers and electrical gear.

You either have copper, or you don’t. And if you don’t, you will not go far.

Rare earth elements (REEs) and other critically needed materials are the same story, only with more geopolitics baked in. My keynote address was titled “Mass in Orbit,” and I focused on what goes into rockets, satellites and space systems.

The plain-English version is that everything that reaches orbit begins on Earth. It begins as rock from a mine, then metal from a mill, refinery or separation plant. Magnets, alloys, rocket motors, batteries, power systems, sensors and every other facet of high-performance technology depend on REEs and other specialty metals. And right now, a shockingly large percentage of almost every key supply chain runs through China.

At the Florida symposium, I met with one company that gets it; its flow sheet shows the future for the West. The company’s project will produce copper, lead, zinc, gold and silver. But from the same ore material, it also aims to extract indium, selenium, tellurium and bismuth.

These last elements are not household names. They don’t get breathless cable-news coverage. But they matter in electronics, defense, energy systems and advanced manufacturing. The West must rebuild the ability to find, process and use these materials. That’s a megatrend, a very investable national-security theme.

Takeaway No. 3: Energy Prices Run Through Everything

As noted above, the Iran conflict in March threw the proverbial monkey wrench into the global energy machine. Oil and natural gas prices spiked, then backed off, and now are moving up again on renewed fighting. We’ll see where it goes, but the lesson is already clear.

Higher energy prices run straight through the hard-asset world. They raise the cost of drilling, blasting, hauling, milling, smelting and shipping. They raise mine operating costs and lift the price floor for metals. Then they ripple outward through food, transport, chemicals, plastics and every product that moves by truck, ship, rail or aircraft.

That’s why the energy conversation cannot stop at oil, natural gas and even good old coal.

Looking ahead, uranium will grow in importance over the years ahead, because nuclear power is scalable, high-density and round-the-clock — exactly what the grid needs when it’s loaded with data centers, new factories, electric transport, defense demand and all manner of new battery systems.

For a pure-play American uranium name, have a look at Uranium Energy Corp. (UEC), with operations in Texas and Wyoming.

I had a long discussion with company president Scott Melbye, who described UEC as the “American champion” in a market crowded with national-scale competitors. “We’re up against uranium companies with state backing from Russia, China, Kazakhstan and many more,” he said. “If you want American uranium in our country’s nuclear power plants and Navy submarines, then UEC is out in front to do this.”

If the goal is reliable baseload power, industrial heat, and assured grid stability, uranium belongs near the center of the discussion. After several decades of raw emotion, bad policy and slogan-driven energy debate, parts of the world are rediscovering a basic point: electric power does not come from green-sounding bumper stickers.

The bottom line is that energy comes from oil, gas, coal and uranium, with much help from steel, concrete, copper and deep levels of engineering. There’s no room for wishful thinking about energy.

The Bottom Line

So, here we have three takeaway messages from Boca Raton: Gold protects against monetary disorder. Copper and REEs are essential to running the modern world. And energy prices decide whether the whole system works at a profit or at a loss.

In other words, hard assets are not a sideshow. They are stars of the show: gold is money again; copper and REEs are critical to industry; and everything needs energy.

Investors who understand geology, energy and supply chains before the crowd begins its next stock market stampede will have the advantage.

That’s all for now. Thank you for subscribing and reading.

The post Three Takeaways from the Rule Investment Symposium appeared first on Daily Reckoning.

There have been 3 major long-term bull runs for precious metals in the last 60 years.

The 1970s is the most famous, and for good reason.

Today many investors view the 1970s as one epic bull market for precious metals.

But technically it was two separate bull markets separated by a 2-year bear market.

From 1971 to 1974, gold rose from $35/oz to $195/oz.

Then, from December 1974 to late 1976, it fell 48% to around $100/oz.

Source: Sharelynx

Those of you who have studied gold during the 1970s know that after this selloff to $100/oz, gold went on to rally to over $850/oz by 1980.

How many people managed to trade this rollercoaster perfectly? Few. I would guess that most of the people who profited from the entire 1970s move either held strong throughout, or consistently took profits while buying the dips.

Almost nobody traded it perfectly. But with such large gains, even selling within 30% of the top is just fine. And the gains in select gold miners were even larger than the underlying metal.

I don’t think we’ll get a 48% drop in gold like we did in the mid-1970s. And I seriously doubt this correction will last as long.

Governments and central banks were major sellers back then, and today they’re buyers. We’re simply reviewing this period to reinforce that even in long bullish periods, there will always be corrections. Like the one we’re experiencing now.

Today, let’s look back at what caused the mid-1970s bear market in gold.

Reason #792 to Ignore Mainstream Media

Let’s start with an article from Time Magazine dated August 2nd, 1976. It was titled “The Great Gold Bust”. As a reminder, this is just after gold fell from $200/oz to $120.

Let’s look at an excerpt:

“What has taken the glitter off gold so suddenly? One major factor is that the U.S. has been relatively successful in its campaign to remove gold from the international monetary system. Last year the U.S. persuaded other countries, including a reluctant France, that the International Monetary Fund should auction off one-sixth of its gold hoard, or 25 million ounces.”

The United States, as the world’s economic, military, and monetary leader, led the charge to de-monetize gold. And our decision to break from the gold standard set off a chain reaction around the world.

As a result, the IMF, governments, and central banks reduced their gold reserves by selling into the open market.

Let’s look at one more interesting section from the 1976 Time article:

“Meanwhile, the economic conditions that triggered the gold boom of 1973-74 have largely disappeared. The dollar is steady, world inflation rates have come down and the general panic set off by the oil crisis has abated. All those trends reduce the distrust of paper money that moves many speculators to put their funds in gold.”

Now this is fascinating. By 1976, the crisis seemed to have passed. Inflation had cooled off, and the dollar had steadied.

This article in Time, and similar pieces in mainstream media, undoubtedly scared many gold investors out of their positions at the worst time.

Another wave of inflation was coming. They just didn’t know it yet. See the chart below, which shows the 3 waves of inflation during that period.

Notice how each wave was progressively larger. This is ultimately what drove gold from around $35 in 1970 to over $850 in 1980.

Takeaways

The 1970s was a unique period. A time when the world abandoned hard money and switched to paper currency.

During the 1970s the U.S. dollar lost about 75% of its purchasing power. And debt wasn’t even the primary concern. Here in the U.S., debt-to-GDP was only in the 35% range throughout the 1970s. It’s well over 120% today.

Today debt and deficits are front and center. Simultaneously, trade and currency wars are raging.

This is why central banks and investors are seeking refuge in precious metals.

While I don’t expect a 48% drop in gold like we saw during the mid ‘70s, it was never going to be a straight line up.

Corrections like the one we’re currently experiencing are to be expected.

But the fundamental forces driving this bull market aren’t going away. So those with patience should sit tight. That’s what I’m doing.

I may trim some positions later this year, but will continue to hold an oversized allocation to gold, silver, and miners for years to come. This is my portfolio insurance, and I don’t plan to abandon that until global debt and deficit are reigned in. And that’s not going to happen anytime soon.

There will be a recession sometime in the next few years, and when it hits, deficits will reach unprecedented levels. Spending will soar, tax revenue will plummet, and stimulus checks will flow.

Vast sums of money will be printed, and the rush into precious metals will be one for the record books. What we’ve seen so far is just a warm-up.

In 1976, those who sold gold may have gotten out with a significant profit. But they missed the 8x gain to come.

The ‘70s era bull market only ended when Fed Chairman Paul Volcker jacked interest rates up to around 20% in 1980.

Before then, the Fed and U.S. government had tried to get by with half measures. That’s what we’re seeing today. Half measures, at best. This debt crisis is still building.

Until governments around the world get serious about solving their debt problems, gold and silver should trend higher. Volatility, however, will be extreme at times.

The post Gold Lessons from the 1970s appeared first on Daily Reckoning.

There’s a martial arts technique the Chinese call “Dim Mak” (点 脉). The idea is to strike an opponent at a specific spot with a focused blow that inflicts instant trauma. Done properly, a well-placed hit can cause severe pain, paralysis, or even death. In fact, the Chinese call Dim Mak the “touch of death.”

Peculiarly, Dim Mak is related to another ancient Chinese technique that’s medical rather than martial, namely acupuncture. If you’re unfamiliar with acupuncture, the idea is to find nerves or other body pathways and insert thin needles to channel energy along what are called “meridians.” Done right, acupuncture heals injuries and cures illness. (And it works. I’ve used acupuncture.)

As an outsider looking in, I find this characteristically Chinese. With one hand, acupuncture can heal; with the other, Dim Mak can kill. And it’s our starting point for discussing China’s tight control over global supply chains for critical materials and metals indispensable to modern technology.

That is, we won’t discuss Chinese martial arts movies, like those starring Bruce Lee, nor will we get into how an acupuncturist can fix your aches and pains. But we will discuss how certain discrete industrial skillsets have geostrategic consequences… And how they are investable.

Welcome to the Periodic Table

Let’s begin with some chemistry, namely, a look at the periodic table.

Periodic table; rare earth elements highlighted. Courtesy KJMagnetics.com.

Don’t worry; this isn’t chemistry class, and there’s no need to solve any math or mass-balance equations. But you need to know that the periodic table is filled with what we call “critical” elements that are essential to modern tech. And that much of the industrial side of the materials and metals here is dominated by China.

Of course, the West – certainly the U.S. – produces iron and steel, as well as copper, aluminum, lead, zinc, and more. Absolutely, the West has mines, mills, refineries, and factories. The West builds buildings, bridges, ships, aircraft, cars, refrigerators, and you-name-it. So, what’s the problem?

The problem gets us back to that Chinese Dim Mak analogy above (or use the acupuncture side if you wish). Because almost all modern tech requires certain critical elements to work, beyond just steel, aluminum, copper, etc. And China controls many of these materials, in some cases up to 95% of the world’s total output.

That is, critical metals and materials are China’s Dim Mak, the “touch of death” if China so chooses.

For example, your smartphone contains about 63 out of the 92 elements in the periodic table (give or take an element or two; it depends on the make and model). The touchscreen only works because of an indium paste on the back of the glass. The vibration system requires tungsten. The screen optics use phosphors such as europium and lutetium. The integrated circuits inside contain germanium. And much more, much of it Chinese.

Or consider your car. Depending on the make and model, it may use 40 or more strong permanent magnets – made of neodymium and praseodymium, plus other elements – that do everything from moving the windows and windshield wipers to adjusting the seat to powering the fuel pump or the traction motors for an electric vehicle (EV). No Chinese metals, and your car is just a block of American steel.

On a larger scale, a Virginia-class nuclear submarine has several tons of strong magnets just in the electric drive motors, let alone everything else “electronic” inside the vessel. These systems range from the sonar dome and transceivers to computers, internal gauges, and screens that allow the crew to dive and steer the beast. The torpedoes, too, require critical materials; quite a story.

Estimate of rare earth materials inside a submarine. Credit CRS.

And while we’re talking about submarines, don’t neglect the super-strong steel alloy of the hull itself, made with an assortment of critical elements that add strength and durability to the basic iron metal. Again… Chinese materials, much to the chagrin of people at NavSea who buy these ships for the Navy.

I could go on with nearly countless examples, but you get the idea. And again – I cannot emphasize this enough! – many of these critical elements and materials originate in China. If it’s not the actual ore deposit, then it’s certainly the refinement process and downstream manufacture. China-China-China. There are no two ways around it. And absent Chinese materials, it’s that “touch of death” because the tech won’t work.

China Controls Global Supply Chains

Nothing about China’s metallurgical dominance is accidental. Since at least the 1960s – during Mao’s Cultural Revolution, no less! – China has had a long-term strategic plan to dominate key segments of the global market for critical materials and metals. Indeed, China’s first national step came in 1963, when the country’s ruling authorities established an institute to study rare earth elements (REEs), namely the so-called “lanthanide” series in the periodic table above.

Since then, for over 60 years and despite internal political turmoil and every sort of economic and social challenge, the Chinese have focused on dominating global supply chains for a long list of critical items: REEs, as we’ll amplify below, but also other metals like tungsten, antimony, indium, gallium, germanium, and more.

National capability like this begins with human resources, of course. In the 1960s, 70s, and certainly over the past forty years, China sent many of its smartest people abroad to study at then-Soviet (now Russian), U.S., European, Japanese, and Australian universities. Their assignment was to learn everything possible. Just flood the zone, so to speak, with eager and intrepid students. Bring home the knowledge.

Plus, for 60 years, Chinese researchers scoured patent offices across the globe to learn whatever was available in the records. And thus, in recent decades, China has dominated the global patent landscape. In fact, for every U.S. patent on REE tech, China files 30.

Data on global REE patent filings. Credit Congressional Research Service.

Today, China has entire universities focused on REE, as well as other critical metals, mining, metallurgy, refining, processing, and applications of these substances. That is, China has literal armies of scientists, engineers, and technical specialists in many fields; numbers in the mid-hundreds of thousands at least, and likely more.

At a personal level, over the past 20 years, I’ve attended numerous industry and scientific conferences and met many Chinese scientists and engineers who specialize in REEs, and/or a host of other metals. For example, I once met someone and asked, “What do you do?” And he replied, “I study the thermodynamic and quantum properties of lead and bismuth.”

At national political and strategic levels, China has planned its economic dominance from the top down. For example, in 1992, China passed a law designating REEs as “strategic” and barring foreigners from investing in Chinese projects. So, in China today, these kinds of resources are reserved for domestic production and downstream, value-added use.

In fact, China focused its industrial control over metals and materials with the end goal of military purposes. One angle is what’s called the “16-Character Policy” towards critical materials.

China’s 16-Character Policy. Credit Senate Armed Services Committee.

These characters became national policy in 1992 and remain legal mandates across China, particularly for mines and minerals. The translation is:

• Combine the Military and Civil.
• Combine Peace and War.
• Give Priority to Military Projects.
• Let the Military Support the Civil.

I could go on, but by now you get the point. For many decades, China has built up its capabilities and imposed export quotas on REEs and other critical metals. And China’s tight control over production and global sales always favors Chinese interests.

Of course, China welcomes foreign companies to invest there and utilize its materials, as long as China gets something in return. For example, Apple has spent 30 years building products in China (eg, iPhones). Along the way, Apple and its subsidiaries trained over 25 million Chinese in advanced technical skills and created a vast level of Tier I, II, and III suppliers throughout the nation. (Just in case you wonder why China is so advanced in, say, EVs.)

In another example, in the 2000s and 2010s, much of the global light bulb industry moved to China. This is not because China needs all the world’s light bulbs. It’s because China told foreign manufacturers that if they wanted tungsten for filaments, and later REEs for LED bulbs, they were required to build plants in China… oh, and to teach Chinese engineers and workers how to make the products.

Name just about any modern technology: batteries, EVs, computers, lighting systems, radars, lidars, robots, drones, AI, quantum computing, space development, and much else… and the foundational materials – exotic items like high-end graphite, or metals like REEs, tungsten, tin, indium, gallium, and much more – are controlled by Chinese producers and suppliers.

The Western Response

It’s not that some people in the West didn’t see what was unfolding with China and its control over critical materials. Keith Bradsher of the New York Times has long been out in front of the issue. I’ve written about the situation with Paradigm and its predecessor publishing group since the late 2000s, and I began following this problem in the 1980s when I worked on the staff of the Chief of Naval Operations.

Still, despite clear indications of what was happening, many Western governments and industry sectors were unmotivated to do anything (i.e., to spend any serious money) despite clear warnings from outside observers, if not intelligence and military services, as well as even National Laboratories like Ames, Los Alamos, Oak Ridge, Livermore, and others. It’s a long, sad tale of frustration.

But in recent years, alarm bells have rung loud and clear. It has dawned on both government and industry that so-called “tech” is just a high-end children’s lemonade stand without the primary materials that go into making the actual equipment, whether it’s iPhones or what are called “exquisite” weapons like anti-missile systems.

And now, what took China 60 years to build, with great expense, diligence, and focus, the West is trying to compress into maybe five. Yeah… good luck.

The takeaway is that REEs and many other metals and materials are vital to future tech, and without them, the West will not just lag but be unable to move far ahead at all. It’s much like that above-noted Chinese Dim Mak “touch of death” hit, but at an industrial scale. No exotic metals? Then no exotic tech. Game over.

So yes, China remains dominant, but the good news is that the West is investing and diversifying through redoubled efforts to find mineral deposits and develop mines, mills, refineries, and downstream processing. Money is moving, and at investment levels, there’s high growth potential, along with high risk, so you must always do your homework to find credible projects, government support, and some element of technology advantage.

Finally, China has been working for 60 years to dominate global markets for high-end, critical materials and metals. And the Chinese are quite good, which makes the challenge all the more daunting. But the West – and the U.S. in particular – is working to catch up. And we follow it all here at Paradigm Press.

That’s all for now. Thank you for subscribing and reading.

The post China’s Touch of Death appeared first on Daily Reckoning.

Yesterday, we did a deep dive on one of the largest gold miners in the world, Barrick (B).

Today, we’re going to explore a smaller (junior) miner.

There’s no clean definition of what makes a miner “junior”. But it generally means smaller producers, as well as companies that are in the exploration or development stage.

Junior miners can produce big gains for long-term holders. But there’s also higher risk. Political risk, execution risk, and market risk.

As an example today, we’re going to look at Aris Mining (ARIS). Aris is on the larger side for a “junior”, but I didn’t want to pick anything too small and illiquid for this newsletter, which is read by more than 100,000 people.

I don’t own the company, and Paradigm never takes money from the stocks we cover. I mention this because it’s important, especially when it comes to junior miners. The mining world is full of stock promotion and if you’re not careful, you’ll end up buying a tiny stock someone else is being paid to promote.

First up, some basic ARIS stats:

• Market cap: $3 billion
• P/E ratio: 17.8
• 2025 gold production: 257,000 oz
• 2026 gold production guidance: 300,000 to 350,000 oz
• Revenue (last 12 mo): $1.1 billion
• Net debt: $2 million (low)
• FCF: $173 million (last 12 mo)

Aris operates in South America, primarily Colombia, but also has a mine under development in Guyana.

Now let’s dig into a repeatable framework we can use to analyze junior miners.

Start With the Presentation

Whenever I’m examining a new potential mining investment, I start with the corporate presentation. Every public mining company has one.

Management knows how critical their presentation is, so they condense their best data into it. Here is Aris’ slide about their mines.

Source: Aris Mining corporate presentation

As we can see, Aris owns 4 large mining projects. Segovia, Marmato, Toroparu, and Soto Norte.

The cash cow today is Segovia, located in Colombia, South America. Segovia is a very high-grade underground mine. At a headline ~15.3 grams of gold per ton of rock, this is an elite-grade mine. Here’s what it looks like in the tunnels:

Source: Resource World

In 2026 Segovia should produce 265,000 to 300,000 ounces of gold. That’s the vast majority of the company’s current production. This number includes gold the company mined itself (about 60%), as well as gold they mill for other miners at their facilities (about 40%). Margins are higher on self-mined gold, but the “contract mining partners” is a nice topper.

The company expects to reach 300,000 ounces of gold per year at Segovia. This is their mature mine.

Aris’ goal is to reach 1 million ounces of gold produced per year. That would put them in the big leagues, but will require basically 4xing current production.

That will require all 4 projects to get fully permitted and up and running. It’s a multi-year goal.

If they can get all 4 projects humming, 1 million ounces a year is attainable. But in the mining world, getting environmental approvals and permits is a huge part of the challenge.

Political Geography

In the world of mining, politics plays a big role. Getting mines permitted depends on a company’s ability to navigate labyrinths of bureaucracy and red tape.

Three out of four of Aris’ mines are in Colombia. A country rich with natural resources, but with a mixed record on friendliness to miners.

So it’s fortunate for the company that a conservative just won the presidential election. On June 21st, President-elect Abelardo De La Espriella beat Gustavo Petro in a very close race.

On August 7th, new President De La Espriella will take office. This is a very good sign for Colombian miners. The old president was not friendly to the mining industry. The new one is pro-business and more likely to encourage regulators to issue environmental permits.

Aris’ Soto Norte site is still conducting its environmental studies, and will need to get permits in order to reach the company’s 1 million ounce a year goal.

The election of a conservative president will help with this process, but it’s no guarantee.

When we buy gold miners, junior or senior, we need to consider the geography and political environment they’re operating in. Mining is a very political sector.

So far, the management team has navigated the political side of things well. Aris’ CEO and Chairman, Neil Woodyer, is a mining vet and has assembled an experienced team of operators.

More Risk, More Reward

When we buy junior miners, we take more risk. Companies at this stage will likely need to raise money, diluting existing shareholders or adding debt. In the case of Aris, they’re already generating significant cash flows, so may not have to raise again anytime soon.

But with multiple development and exploration projects, there’s endless permitting, drilling, and construction to be done. Each takes time and money.

If companies spend it well, raising money is not a problem. It’s part of the game.

If Aris pulls off their plan, the rewards should be significant. Of course, their success will also depend on the price of gold.

And just like yesterday, this article is not an endorsement of Aris. I think the company could do well, but don’t currently own it.

It’s simply a good example of a larger junior miner. One which could be an attractive target for a gold major to acquire down the road. Aris has mines with excellent grades of gold, impressive growth, experienced management, and multiple promising mines in development.

Because juniors have a higher risk profile, sometimes it’s best to buy a diversified basket like the Sprott Junior Gold Miners ETF (SGDJ). I’ve owned this fund for years and it’s done quite well.

Since the Iran war began, juniors have pulled back significantly. I don’t believe this precious metals bull market is over. So both junior and senior miners look great here. SGDJ is a nice way to play juniors.

Have a great weekend everyone.

The post How to Invest in Junior Miners appeared first on Daily Reckoning.

Barrick Mining (B) is a gold mining giant. They also produce lots of copper, silver, lead, and other metals.

Today we’re going to do a deep dive on the company. The goal is to help readers understand just how much money miners are making today, and how they’ll spend it.

First up, Barrick’s all-in sustaining cost (AISC) to mine one ounce of gold was $1,708 in Q1 2026. Their cost-of-sales (CoS) was $1,922 (this metric includes amortization and depreciation – accounting stuff).

Gold currently trades at $4,148. So for every ounce of gold they mine, they earn over $2,000. In 2025, Barrick produced 3.26 million oz of gold. In 2026, they expect to produce 2.9 to 3.25 million oz.

In the ground, Barrick has around 85 million ounces of proven and probable gold reserves. At current rates, that’s enough to last about 28 years. More is indicated and inferred, and additional discoveries will be made. And it’s likely Barrick will acquire junior miners with attractive reserve profiles.

Cash Flowing

In the first quarter of 2026, Barrick generated about $1.2 billion in attributable free cash flow (FCF). In 2026, the company is expected to produce around $5.7 billion total FCF.

With a market cap of $64 billion, the company is trading at about 14x attributable free cash flow. It trades at a P/E ratio of 9.8x. Pretty cheap.

This is why we say miners are printing money.

Today Barrick has $7.1B in cash, and $4.7B of debt. Of course, they could pay off the debt, but they’re already fairly lean. Back in 2014 they had around $14B worth of debt. Barrick, and the industry as a whole, have shored up their balance sheets.

So that leaves a few interesting options to spend the money.

Nice Dividend Yields

Over the last 12 months, Barrick has paid a 2.5% dividend. That includes a regular quarterly $0.175 payout, plus an additional yearly payment based on FCF.

In February, Barrick announced it would aim to pay out 50% of attributable free cash flow as dividends going forward.

Based on current gold prices, this could amount to a 3.6% yield for the next year. If gold goes higher, so will the dividend. And of course, the opposite is also true.

That’s a handsome yield for a gold miner.

Stock Buybacks

Barrick has also authorized up to a $3 billion share buyback. This can be a good use of cash, depending on the price the company buys back shares at.

Buybacks reduce the total number of shares outstanding, while helping support the price. But honestly, if I owned the stock, I’d prefer higher dividends or acquisitions.

Buybacks should be utilized strategically to buy back shares when they’re dirt cheap. Sometimes companies use buybacks to push shares higher, regardless of price. Then executives can exercise their stock options more profitably. I’m not saying Barrick does this, of course. But it’s always a risk.

I expect they will utilize some of that cash to buy back shares. And at current prices, that seems like a reasonable use of funds.

Snapping Up Smaller Miners

In their Q1 earnings announcement, Barrick announced they are actively looking to do “selective acquisitions”. This is a change from their previous focus on organic growth and expansion.

Barrick has new leadership, having parted ways with long-time CEO Mark Bristow. New CEO Mark Hill has different ideas about M&A, so it’ll be very interesting to see if they begin to snap up attractive companies during this pullback.

The important takeaway here is that gold producers have bundles of cash to spend. This is a good reason to have exposure to high quality junior miners which might be targets. But please, don’t go out and just start buying junior miners you read about online. That’s a dangerous path.

Unless you’re a pro, make sure you’re following the recommendations of independent experts like our own Jim Rickards, Dan Amoss, Matt Badiali, and Byron King. Buying random juniors you find online often means you’re the target of a marketing campaign.

Ok, now let’s get back to Barrick.

Upcoming Spinoff

Barrick plans to spin off its North American mining operations by the end of 2026. The company will IPO its safer U.S. and Canadian mines, while maintaining a majority ownership. This will allow investors to choose whether they buy the “safer” North American projects, or its riskier, but very profitable operations in places like Mali.

Why? Barrick has had some problems dealing with Mali’s government and regulators. Some investors don’t like dealing with the uncertainty of emerging market exposure.

As a result of their issues in Mali, and the gold price falling, Barrick shares have fallen significantly from their recent highs. B hit a new all-time high over $54 in January and trades at $36.70 today.

Conclusion

I don’t own Barrick currently. So to be clear, this isn’t necessarily an endorsement of the stock. It’s a breakdown of how much cash miners are generating, and how they’re spending it.

However, I think Barrick should do well over coming years. Its higher-than-average dividend yield makes it attractive for income investors. And it has more copper exposure than most gold miners, which is a positive in my opinion.

Personally, I’m more focused on miners with heavy silver exposure, as well as smaller gold producers and developers.

But if you’re looking for a (relatively) stable gold miner, Barrick is a solid pick. It’s a giant of the sector.

We’ll explore some smaller gold mining stocks soon. Junior miners have fallen significantly since the Iran war began, and there are some excellent buy-the-dip opportunities out there.

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