Ron Parratt: Our company – in addition to Argentina and of course Nevada, we’re working in Spain. So far, we’ve found the political environment to be reasonable. Things don’t happen quite as quickly as we want, but we do have worries about obviously the Spanish economy, problems in Portugal, all over Europe right now. And it seems to me that people are just afraid to make decisions because all the government employees don’t want to lose their jobs, and if they make a decision and approve a project or grant a license, they worry that the next group coming in will hold them at fault for that, and they’ll lose their jobs and they don’t want to lose their government jobs. You have to be pretty careful.
If it’s in Argentina, some provinces, as you’ve just heard, are good to be in; some are not so good to be in. I work a lot in the US; I would not work in California. There are other states I’m not going to go to. You have to pick your battles pretty carefully. I agree with Ron. Exploration is really risky, and if you risk losing the asset you might find on top of the discovery risk, you really need to ask yourself if that’s the right thing to do, so we’re going to stick with the countries we are in now. We’ll stay in the Americas. I think Mexico would be okay, but as a small junior company we can’t be working in too many countries. I think we’ll lose focus, and I think that’ll be a bad thing.
Ross: I look at this question really from the standpoint of standing in your shoes as an investor, and I guess my bottom line to this is, don’t put all your eggs in one basket. Diversify your risks. Don’t buy one company, buy a handful of companies. Don’t invest in exploration in one country, invest in a pile of countries, because you just never know. There are so many risks in this game – not just geologic risk or mining risk but political risk, social risk, environmental risk, stupid risk that just makes no sense to anybody – but it happens and it just happens all the time. Australia – once thought to be the safest, best, lowest-tax jurisdiction – a few years ago brought in an absolutely idiotic, insane super province tax that destroyed Australia as a good place to do business. Luckily, the industry had such a big lobby power that they were able to stop the government from doing that, but BC, just a short eight or nine years ago, we had a bunch of socialists running this place, and they made a mess of it. They made an absolute mess of it. It was a horrible place to explore because they didn’t give you any value. So things can change really quickly, and you just – you can be awfully clever about assessing a risk regime in terms of political and social environmental risk, but crazy things happen.
And so for me, I’m invested in 18 countries right now; and I happen to know every single year there’s going to be one that is just absolutely wonderful beyond my expectations, and there’s going to be one that’s just a nightmare – again, beyond my expectations. The other principle I have, though, is “Life is too short.” And that means don’t go to places that are just pathologically criminal like Russia and most of the CIS. Both Bob Quartermain and I have joint experience in that. There are some parts of the world that are just super-tough that are, you know, no matter what the opportunity, it’s just not worth the effort, and I put sort of Venezuela today in that category, quite frankly Bolivia, maybe Ecuador, places like that, certain countries in Africa, anywhere in the CIS. Life’s too short. It doesn’t matter what the reward. If you have to deal with criminals and people are trying to steal from you every single second, it’s just not worth it.
Jim: Well, I think I have to agree with Ron and Ross in that, number one, of course, you’ve got a lot of risk, and I guess you have to weigh the political risk. If you had a fantastic deposit, you’d probably take a little more political risk, but I think as Ross said, I’m of an age too where I’m not going to venture out too far, and I don’t have a bulletproof jacket, so I’m not going to take a lot of risk in terms of going to places where you don’t know whether you really own anything or whether you can hold it or if somebody is going to take it, so I’m along that line too.
L: This is very, very interesting. Jimmy, I put you a little bit on the spot there because of where you’re focused, but I wanted to see if I could get unanimity, and basically we got unanimity. These are the most successful, best brains in the business and this conventional – it’s become almost conventional wisdom that the low-hanging fruit has been picked. We’ve got to go farther afield, and we have unanimity here saying, “You know what? Life’s too short. Go where you know you can work,” so that’s something – it would be interesting to ask the same question at the NexTen panel and see if slightly darker average color of hair would give the same unanimous response. But no, that’s very interesting. Words from the wise.
Okay, I think we have time for maybe one more question. Copper. Maybe a real quick two sentences, thumbs up/thumbs down on copper. You know, we have the bearish argument near-term about economic trouble. Doug Casey is talking about the Greater Depression and all these things, obviously bearish for industrial metals. We’ve got two copper producers sitting here. Obviously you want to be optimistic about copper – the world needs it. Chindia, all these things. Ron Netolitzky, just a quick take. Are you – long-term we’re all bulls on copper because we know the world needs it, but near-term, this year – are you buying copper plays and would you?
Ron Netolitzky: I would look at any mineral. I think they all have their opportunities, and in this business I’m not short-term cycled. I mean, when everything comes out of favor, it’s actually a great time to start playing in it, and you’ve got to be really contra-cyclic. We all pretend to be, but it’s a hard decision to make because when everybody hates it is when you should love it.
Bob: Right, and I go to a comment that Ross made earlier about buying people around the table. I’m a Lumina shareholder, and I’m a very happy Lumina shareholder and I’m adding it to my position because of the exploration upside that’s there. Same as my own company. I’ve owned Ron’s companies, I’ve owned Duane’s companies as well as Ross’s, and so long-term I continue to be very bullish on copper and continue to own it in my portfolio, both major companies as well as members sitting around this table. Same with uranium. I’m with Ron on this. I think now is the time to be out there buying and I don’t think you need to be concerned about what happens this year. If you’re doing that, then you really have to look at exploration as a very long-term gain. With Ross I started investing in silver back in 1993-94. That has served me very well, and I’ll continue to invest in the people around this table and the commodities that they’re looking for, and I think that’s a strategy that I’d follow.
Duane: In the short term, you know, everybody – just open the paper or watch the television. Every government in the world is in debt, and they can’t pay them, and there’s all this mess, but you know what – the world isn’t going to end. I mean even the ’30s, which was so terrible, it came to an end and life went on, and a lot of good life went on, so in the short term, I think precious metals are a good place to be because they’ve got to settle their debts, and they’ve got to do something, and they’ve got to make people believe in money again, and so on. So I think precious metals in the short term are a very good place to be, but there used to be an old expression, “Copper is king,” and copper is the main metal of civilization, and it will go on and on and on, and as all these things get sorted out and human ingenuity and despite governments, things will be good, so long term I think copper is a great thing.
Ron Parratt: I certainly agree with Duane. I think a lot of the exploration plays we’re looking at now are of course copper for the future. These aren’t going to come out of the ground this year. We’re looking at two, three, four years away, depending on the municipality that they’re located in, so I think, really, you need to be thinking about the longer-term price environment and of course it’s very deposit-specific. Each commodity has a range of production costs by commodity. You always want to try to look at those in the lower-cost curve position that are going to be sustainable long-term. They’re the ones that are going to do well, and especially if prices go down and you’re a lower-quartile producer, you’re going to have a good company.
L: Ross, I’m a little bit nervous about giving you a chance.
Ross: Okay, so here’s my pitch. So how many of you were at the Casey conference – where was it? – it was in Phoenix last November, October?
L: Yes, October.
Ross: So there’s a Casey conference in October. Were any of you there? A handful. So here was a room – now October, I admit, was kind of a bleak time. There were a lot of European governments looking pretty iffy, and there was a lot of doom and gloom in the US still, of course there always is when you get a group of Casey investors together. I mean the whole bloody conference is all about, “What are we going to buy when everything melts down? We’re going to buy guns and drugs so we can sell them.” It was like one of these, you know – I mean, take a happy pill. That’s kind of what I felt, and I was the only voice of optimism.
L: This is true; true story.
Ross: The only voice, and here we are in January, things are looking better. Copper price is up, gold price is up, silver price is up – you know what, Europe is going to live, it’s not going to die, and we are not going into a vortex of hell, financial hell – we just aren’t – and I think Duane’s comment is valid. Every day there are more people who are born, we all want junk, there are more people getting into a monetary system coming from farms into cities, more people with more money means more people want junk, junk means commodities, commodities are what we produce and discover.
So there are two sides to this copper coin. There is the demand side. Demand is strong for copper. It is being driven by all these new people in the world, the new monetary or the new people who have money in the world in India, in Indonesia, in China and Brazil and Russia and all kinds of huge population areas – forget about Europe. Who cares about Europe? In copper on the demand side, Europe is a non-event. It doesn’t matter – even the US.
The US today, nothing in the US drives copper demand. Copper demand is driven by what’s happening in the emerging countries, and it’s going crazy there. Copper demand in China went up 8% last year. The world built more automobiles last year than they’ve even built in history – I forget the number, but it was a record number of cars, and cars today use more copper than they have ever used before because there is more want, more need for, motors in the cars, there are more hybrid cars. They just use more copper, so the demand side of copper is fantastic. It’s not going to melt down, it’s good, it’s strong. But what a lot of these pundits who even know the demand side don’t understand is, on the copper supply side, it’s equally bullish. We aren’t finding as much copper as we’re mining. We aren’t finding it because the big deposits have been discovered. The new deposits are harder to find. They’re not as big. They’re not as rich. You can’t see it from a satellite by and large like you used to. These are big, big deposits, and we are just not replacing consumption as much, and long term that’s just as bullish for higher copper prices as increased demand. Now, of course it’s not going to go up forever. At some point, there’s going to be a price that people are going to stop consuming it or finding replacements, and they are going to start mining some of these really, really low-grade deposits of which there are a number in the world. But just to mine those takes five to ten years of permitting and financing and construction. Construction costs have gone off the chart, so mines are harder to build today, they’re harder to permit, they’re much harder to discover. If you look at a chart – there’s a very cool chart that a group called the Mineral Economics Group has put out, which charts exploration expenditures for copper against discovery rates. It’s an inverse curve. The more we’re spending on copper exploration in the last 10 years, the less we’re actually finding. The existing mines are becoming lower grade. They are becoming deeper. They’re becoming more high-cost. The only way that supply equation can be matched with the increased demand is with higher prices, so I am bullish on copper for both of those reasons.
Jim: I don’t think I can add anything to that, but I do agree, I mean, long-term we have the demand. We have a shortage of supply. It’s going to be difficult to meet the difference, but also the cost of production. I mean, as the costs of production go up, the price has to be there, or else we’re not going to have copper, so I have to be bullish on copper, and I feel very fortunate that we’re in production at this time to enjoy the future.
L: Okay, with that, I think we better take a break. In 10 minutes, Jeff Clark will be back here to tell us about buying and owning gold and silver. Thank you very much. Gentleman, thank you very much – a great panel.
