GoldMining Strategy Paying Off: 24.2 Million Ounces with Gold at $1,700/oz

Outsider Club founder Nick Hodge sits down with GoldMining founder Amir Adnani to discuss the how the company's strategy of buying cheap gold ounces over the past few years is now shaping up with gold in a new bull market at $1,700 per ounce.

Nick Hodge: Hi, this is Nick Hodge with The Outsider Club. I'm sitting down once again with Amir Adnani. He's the chairman and founder of GoldMining Inc. Trades in Canada under the ticker G-O-L-D and in the United States under the ticker G-L-D-L-F. Amir, how's it going? It's good to be with you again.

Amir Adnani: Hey, I'm doing well Nick and it's great to reconnect with you.

Nick Hodge: That's right. We're reconnecting this time to talk about GoldMining. We've talked about Uranium Energy Corp. (UEC) in the past, and so let me ask first, how are you doing amid this global pandemic?

Amir Adnani: You know, we're busy. We've all figured out very quickly how to adapt to the new normal. The new way of looking after the safety of your team, family, your parents, whatever the case is, your loved ones, but maintaining functionally to the extent possible. And as you can appreciate, I've been battling away in two bear markets for the two yellow metals, gold and uranium. You mentioned uranium earlier, and these two yellow metals decide all of a sudden of all years and of all times to break out into bull market, during the pandemic, during the lockdowns and we've seen tremendous moves in both of them. And of course with gold, I don't think we could have ever envisioned a situation like this.

There's a human tragedy, there's a global health concern at the heart at what is driving all of this, but unfortunately the financial calamity that's going to be become the aftermath of all of this.. the incredible amount... well forget incredible, the unlimited quantitative easing and trillions of liquidity being injected and this continued suppression of real rates into negative territory is going to be with us for a long time, and it's going to be such an important factor for elevating the gold price and we're seeing that. So that's a long way of saying, Nick, that I've been very busy, but for good reasons.

As you know, we've invested over a decade of time, money, energy, resources, myself and our team at GoldMining to build that business and it feels good to see that we're finally coming into what we planned for all these years: A stronger gold market. I just didn't think it would be this kind of set up. The set up for gold is incredible bullish right nowl I guess we won't argue with it, we'll run with it and see how it plays out.

Nick Hodge: You mentioned the new normal. That has so far included higher prices for both gold and uranium, because of some of the things that the virus has caused and as you mentioned, because of some of the fiscal and monetary response to the stay at home orders and the layoffs, and the freezing up of lending, et cetera, and you also talked about how you've been fighting through a 10 year bear market as I have as well. So why don't we start there, right? Because you really put together GoldMining as a bank of assets, if you will, acquiring on the cheap – as you and I always talk about – with minimal delusion. Assets to grow your global resource base, which now stands over 24.2 million ounces of gold across all categories, right? So here we are, that resource base is still growing, you're still acquiring as of the past couple of months. And as of this week, adding new ounces, new resources to that total. Let's throw it back a little bit, what is GoldMining all about and what was your strategy when gold wasn't $1700 an ounce?

Amir Adnani: I love the cyclicality of the resource business, commodity business. I love it because it's predictable. I mean, you know that's it going to have those ups and downs, and sometimes you just don't know how long a cycle lasts. As an entrepreneur, I've come to understand the needs of being patient and committed – and being in the uranium business does that to you. It's pretty good conditioning I have to say. But look, I was really inspired as young entrepreneur by the work and the accomplishments done by people like Rick Rule who backed entrepreneurs like Ross Beaty and Bob Quartermain in the 90s with companies like Pan American Silver and Silver Standard that were built out of bear markets that had existed for silver.

Ross did it a second time with copper in early 2000, creating Lumina Copper and the idea being that when you have a bear market for any commodity, typically projects that are sub-economic become very cheap to buy. No one's mining them. They are basically ounces in the ground or pounds in the ground – whatever the commodity or resource is – and that if you can bang together some like minded people, some investors that appreciate that kind of... model. I call it being the model of buying your Christmas decorations in January. You like that model, you get together and you go execute. Look, we did exactly that. I mean, we formed the company in 2010. Took it public in 2011. I've just mentioned a name, Rick Rule. Rick was one of our very first investors along with other well known speculators and resource investors, guys like Doug Casey, Marin Katusa.

Along the way, we've grown the shareholder base, but from the get go, had some long term strategic holders in the names I mentioned plus Brasilinvest, the group out of Brazil. One of the oldest and largest investment firms in that country. So with the foundation of like minded people that wanted to see the execution of what had had happened in previous cycles with Lumina, with Pan American Silver, with Silver Standard – to do that in this cycle for gold. So as I mentioned, we went public in 2011 but we didn't make our very first acquisition of a resource stage project until 2012. So clearly we were patient. We were biding our time. And from 2012, we made a string of acquisitions during an environment from 2012 to really 2016 where gold was more or less around $1300 an ounce. So many of these projects were sub-economic in an $1000 environment, $1200, $1100 an ounce environment.

In 2016, we saw the gold price briefly get up to about $1350 and ounce. It didn't last, it went back down. What did we do? Make more acquisitions. Got back to our knitting. We made more acquisitions in 2017, put our resources in 2018. 2019, we made more acquisitions and so... and then just recently had more news.

Bottom line is, our company's been around for 10 years. Well we've done acquisitions for eight years in a row. Majority of that time, the gold market was sub $1300 an ounce. So don't look at this $1700 environment. I think you got to consider when prices were truly low, when it was truly like buying your Christmas decorations in January. We did exactly that. We stuck to the strategy. We had our backers supported us and we kept doing deals, and we kept the company's cost in GNA exceptionally low. I mean to have a company that the last time we raised money was in 2016, four years ago. As of our latest filings, we still have C$8.5 million dollars of cash and no debt.

So all these things that you can say... and I'm saying we truly executed. Buy low, but we bought low, we didn't just say it, we executed year in and year out. Keep your costs down, we did that. Execute year in and year out and build something that... Nick, I have to say, I don't know. In the last few years or decade, I don't think any other company with this many ounces, with this many projects in this many countries has been created or even exists. We're in five different countries, we're truly diversified. This is not one of these cases where it's a big resource and it's all in a single asset. It's a truly diversified resource bace.

You talk about 10 and a half million ounces of gold resources and measured and indicated and 13.7 million ounces of gold in inferred category, that's lot of gold. That is the kind of gold resource you see intermediate gold producers and large gold producers talk about, and here it is inside a smallcap company in the gold sector. So that to me is what really sets us apart. Size matters when you enter a gold bull market and we're in one right now, in the early innings of it. And we got a lot of size here. We have a lot of ounces here and it's an exciting time for the company.

Nick Hodge: Gosh Amir, that's a lot to unpack there. Let me start by saying that I like your choice of phrasing in finding like minded people back in the day to get it started. You'll remember that one of my publications used to be called Like Minded People in fact, before it was called Wall Street's Underground Profits, so I definitely like that reference.

I guess I also want to speak to that resource and you say you normally see that inside of a major, and this is what is going to be attracting companies, but also I think it's going to be what's attracting investors, right? I mean, there's not a lot of places you can go and buy a global resource like this all in one fell swoop, and I'm talking about from an investor perspective now.

But now, I'm going to change and talk about from a company perspective, right? So you talked about how you've acquired projects in multiple jurisdictions and I happened to be on a call with somebody earlier and the Crucero Project comes up and the person I'm talking to is saying "That project is probably getting darn close to economic, if it's not economic already.” Here you are saying you were acquiring these projects years ago when they were sub-economic, and that just speaks to your strategy because here we have higher gold prices and now these projects are becoming economic. So talk to me about what's next.

Talk to me about the go forward plan and the rerating. How do we get to a place where... I don't know, either majors are ringing your phone saying, "Hey what about that Crucero Project? Hey, what about those three projects you've locked down in the Mid Cauca Belt?" and we start to get that... rerating from sub $10 an ounce where you're trading in market cap valuation out to where we know you can be much higher, right? Where analysts like ROTH are saying many multiples higher in terms of share price based on in the ground ounce valuations.

Amir Adnani: Well the companies... even our own in the ground resource valuation in 2016 would have been almost three times where we're trading at right now. So I think even as a short term goal, we could retrace our way back to our own 2016 evaluation per gold resources and that's highly achievable in my mind because that's our own multiple, not some other industry benchmark. I think, Nick, it's going to happen because look, we've seen this time around the move in the gold market has been tremendous. We're at a gold price that we haven't seen in six or seven years, but the attention for the stocks and the companies has been really dominated by flows and through ETFs, the large cap names and the royalty companies.

In fact, I think valuation for a lot of the small cap names were higher in 2016, just given as evidence by the reference I made through our own companies in ground reserves evaluations being almost three times higher. So there will be... I think as the sector evolves, as more interest comes in and frankly, as we get some of the panic selling behind us. Let's not forget, we just had an incredible amount of panic selling in late March, early April due to COVID-19. So as markets normalize and as this story with gold continues to attract more attention, there will be a trickle down effect into smaller companies catching a bid and valuations rising.

Now, the bigger trend that we need to pay attention to is this incredible decline of major gold producers' reserves and resources since 2012. From the very first year, we made our very first acquisition, 2012. Bank of America issued a report earlier this year that since 2012, resources and reserves for major gold producers are down by 42%. Other reports indicate that the pipeline for the gold mining industry is at a decade low. This is the same carrier that our company, GoldMining Inc., has been buying resources in the ground. If you just think about what happens in a sustained bull market environment is there's going to be a wave of M&A activity and pursuit of growth. We've already seen M&A activity really begin as of last year where you had the majors start to get into M&A with Barrick and Randgold, then Newmont and Goldcorp and then how you've seen a string of other M&A activity. So that certainly seems to speak the fact that this decline in resources and reserves is an issue. CEO of major gold producers have highlighted that as a fundamental problem.

Amir Adnani: The reason why it exists since 2012 we had a bear market and major gold producers cut expiration spending. They cut their corporate development budget. And they rather instead focused on just preserving cash, being able to deleverage their balance sheets, reduce that and pay dividends still. Nick, there was a report that came out by National Bank Financial and S&P Global a couple years ago that said the average discovery cost for an ounce of gold had risen to $174 an ounce from almost $30 an ounce a decade ago. So discovery cost has also gone up and discovery cost isn't that you spend a dollar today and you get a result tomorrow, it takes time to acquire a property, get your drill permits, get rigs onto the project, then drill, send the result to the lab, get the results back. That all takes time.

People were wondering why I was so attracted to the idea of buying ounces in the ground. Ounces in the ground have had tremendous amount of money invested in them. We spend $80 million in total making our acquisitions. Nick, those same projects had $280 million, almost $300 million when you had our latest two acquisitions to that. Almost $300 million of cash had gone into drilling, geophysics, geochemistry, land acquisition, permitting, to then be able to say there's this many millions of ounces. To be able to say there's 10 and a half million ounces of M&I and 13.7 million ounces of inferred. $300 million of cash had gone into it, and you can buy it for $80 million. The same companies actually had market values of over $800 million in the last bull market. The companies that we aggregated and bought their projects. These were all publicly listed companies, so you get a case of almost 10 cents on the dollar on that, but that's what I find so attractive about it.

But as far as our business model goes, our business model also doesn't expose us to operating risk, and that's a big problem right now with COVID-19. Operations have been very difficult for companies to manage. We don't have operations. In fact, we keep the gold resource in the ground and we look to add more, and we've added more gold. You've seen the acquisitions we've made just in the last few months. But to answer your question, I think the severe shortage of gold resources and reserves in the ground is the ultimate competitive advantage that we have in having been buying resources at the exact same time the major producers were under investing. I believe that puts us in the drivers seat Nick.

I believe that puts in the drivers seat in the upcoming wave of continuous M&A activity we're going to see in the sector, but the same like minded people that I mentioned to you, we have... as shareholders and myself being the largest individual shareholder of the company, we really believe in what we're doing. We believe in a bull market in gold. So I don't see us being quick to sell and I believe we're strong and patient, and really want to extract the maximum value possible for shareholders. I really believe we're only in the early innings of this new gold bull market that we're in.

Nick Hodge: Well I have to agree with that 100%. And I have to say that the lens through which you look at evaluation of the $800 million combined market caps of the companies that owned these projects before you had them… That's not that far out of line with what analysts at ROTH and H.C. Wainwright are calling for on a share price multiple target, right? If you've got a current market cap of GoldMining, let's call it US$175 million to get to that $800 million is something like the share price currently now around a $1.50 Canadian to get to those share price targets at $5 or $6. So I certainly see the trickle down effect as well. You have seen the GDX breakthrough resistance already in the GDXJ which would be the ETF for the juniors, which is where your company would fall. Sort of really knocking on that breakout door hard, almost rapping on the door as it were.

So let's talk about really the reason we got together today in the first place was because of the news that you had, as you just mentioned, increased your resources yet again by putting a resource out on the Yarumalito Project, which of course is in Colombia and you added 1.24 million ounces of gold and some copper as well. Can you talk to me a little bit about the Mid Cauca Belt, where you've now got a couple of projects and, of course, it's an easy opportunity to talk again about majors and activity in that area, right?

Amir Adnani: Well this is a really exciting area just because of how under explored it was relative to the other portions of the Andean Belt going down to Peru and Chile and maybe portions of Argentina. There was in the 90s obviously, security problems in this Mid Cauca Belt right in the heart of this area is the city of Medellin. Your listeners might remember the Medellin Cartel if you know a thing or two about a guy named Pablo Escobar, but times change and Colombia's been a thriving democracy and economy in South America for the last 20 years. And guess what? In the last 20 years, an area that was under explored, this Mid Cauca Belt has now seen upward of 100 million ounces of gold discoveries. It's been home to many successful mining and gold exploration/development stories and the most recent one was a company called Continental Gold that had the Buritica gold deposit right in the heart of this mineral belt I'm talking about, that Zijin Mining of China acquired for $1.4 billion in cash. And that project happens to be about 50 kilometers or so north of where we made our first acquisition in Colombia called Titiribi in 2016.

Then we made a second acquisition, a project that was just 10 kilometers to the south of Titiribi called La Mina with our acquisition of a public company called Bellhaven. And then we followed that up just recently with... in late 2019 with the acquisition of the Yarumalito gold project in Colombia – stringing together three acquisitions in three years, in one of the hottest addresses for gold exploration, frankly in the world. I mean, this is an area where you not only see this big acquisition by Zijin Mining, but you see companies like B2Gold, AngloGold Ashanti and others very active here and some really favorable commentary as well from the CEOs of AngloGold and Newmont about the way they view the longterm prospectivity of Colombia and this area.

We've got an office in Medellin – the same city that we just talked about earlier. It's thriving city and a great place to be based out of now. So this latest resource that we issued just recently shows a project that has 1.24 million ounces of gold, some great copper byproduct and co-product as well, so you get about a one a half million ounce of gold equivalent resource grading at about 0.74 gram per tonne. Now keeping in mind that what's exciting about this project is also not just the fact that it's uniquely positioned in this... again, as I mentioned one of the largest areas for gold exploration and resources, but the fact that this project does have also some high grade precious metal rich epithermal veins. One in particular that we highlighted in our press release, upwards of 33 grams per tonne gold over a couple of meter intersects, so we feel that there's some really exciting exploration potential on this to go with the resource, but we also like what we paid for it.

We paid $1.2 million dollars and we've managed to realize that 1.2 million ounce resource. That's a accretive. Even if you say "Amir, your own resource valuation for ounces in the ground is low and it requires a lot more upside potential." We've demonstrated we can still find acquisition opportunities to make that are accretive, meaning it cost us less than $10 an ounce to acquire based on what our purchase price is vis-a-vis the resource. That's where I think we demonstrate that look, despite this rise in the gold price, we can still find and execute attractive and accretive acquisitions.

This latest one also has... it's not just some random asset somewhere in the world, it helps add more meat to a foundation that we've built in Colombia for four years now. So we also demonstrated that when we like an area, we commit to that area. We get bigger in that area. And we like to be in areas Nick where we're not the long ranger. That there's other companies, especially much bigger ones around us, near us. And I especially love it when you enter a region, pick up assets like we did in Colombia in 2016 and a few years later, you get big companies coming around and splashing billions of dollars of cash around to acquire development assets or producing assets. That really confirms what I believe is a huge asset of ours, which is our team. Our technical team and the experience they bring to the table, decades of experience with major gold mining companies and the ability to understand the types of projects that in a bull market for gold will be attractive. Not only to develop by intermediates but majors.

Look, I think that's one of the reasons a company like Iamgold is a shareholder of ours. We did an acquisition in Colombia back in 2017 of La Mina, and that's how Iamgold became a shareholder. Iamgold is a three to four billion market cap gold producer and a good shareholder for us to have on our registry, and really confirmed their endorsement of what we're doing through remaining on as a shareholder since taking equity in our company in that 2017 transaction. All of that to say, excited about Colombia, by what we see in Colombia and the potential there and the fact that we've really created a meaningful size portfolio. Certainly the largest portfolio of gold projects and resources, Nick, for any junior company in that country we control today.

Nick Hodge: Well absolutely and like you say, you got it for a dollar an ounce. You paid actually fewer dollars for the acquisition than you ended up getting in ounces, C$1.2 million for 1.24 million ounces of gold. And I think that's just a perfect snapshot of the strategy, right? Especially as we head into the later innings of a gold bull market, especially as gold continues to sit at seven year highs and especially because that's in inferred resources with only 50 holes, so there's clearly an opportunity not only to rerate that valuation of those ounces higher through improving the resource category, but through exploration upside in the high grade epithermal areas as you mentioned. So I think that was a pretty good robust update Amir, I appreciate you coming on and walking us back through gold mining and it's value proposition and through Yarumalito, so I'm content putting it there unless there's anything else you'd like to add?

Amir Adnani: No, I appreciate it Nick. I mean, again you've been covering the company quite thoroughly for a number of years now. In fact, you say your newsletter Like Minded People perhaps was the place that you first uncovered us and talked about us. And look, for anyone listening who's a uranium bug... and not to distract away from gold and what we've talked about here. I'm a purist when it comes to gold, so I love talking about gold resources and all the numbers we've talked so far is gold only. Goes without saying that a number of our projects have significant copper byproduct and co-product, so encouraging you to also not lose sight of our gold equivalent resources, which amounts to about 13.4 million ounces of gold equivalent in M&I and 16.4 million ounces in the inferred category. And for those uranium bugs out there and as you recall, especially now with uranium prices at a four year high, we have a 75% stake in a joint venture with France's Orano in Western Athabasca Basin.

It's a very exciting address to be. It doesn't cost us anything. It was an asset that came as part of the acquisition of Brazilian Gold Corp in 2013, completely known core, a little bit of good luck and serendipity with that. But it's something that we've maintained in the portfolio and plan to monetize at some point. It becomes a little uranium kicker for what is otherwise strictly a gold resource company. Those are my parting thoughts, but other than that, appreciate this interview Nick and look forward to staying in touch and connecting again soon.

Don't forget, our next resource should be out soon with the Almaden acquisition in Idaho. That project we wrapped up the acquisition recently and also expect another resource on that project, and look forward to connecting with you to discuss that very soon.

Nick Hodge: Well you know I like Idaho Amir, and there's another little company with the ticker G-O-L-D with a guy running it by the name of Mark Bristow, who was also talking about copper this week. So you're not the only gold guy that's watching copper out of the corner of his eye. It was good to catch up with you.

Amir Adnani: Thanks Nick.

Nick Hodge: See ya.

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