Hugh Agro | Positive Sentiment at Recent Gold Mining Conferences

Hugh Agro understands the gold mining investment industry from several different angles.  He has worked as senior executive with multiple major gold miners, co-founded a private equity mining investment fund, served on the board of directors of several mining companies, and is currently the President and CEO of Revival Gold Inc., a growth-focused junior gold exploration and development company. In this interview, Hugh shares his insights and key takeaways from the recently-concluded Denver Gold Forum and Beaver Creek Precious Metals Summit and what that means for the junior gold sector.

0:05 Introduction

1:46 Hugh Agro’s background in the gold mining sector

2:57 Sentiment at Denver Gold Forum and Beaver Creek Summit

5:54 Key takeaways from major gold producers’ presentations at Denver Gold Forum

7:05 Major gold miner mega-mergers bring discipline to the sector

8:26 Major gold miners mining significantly above average reserve grade

10:18 Mid-tier gold producers and future M&A

11:37 Gold up-cycle for probably 3-5 years more

13:17 Discussing Revival Gold Inc.

TRANSCRIPT:

Bill Powers: Hugh, welcome to the program. This is your first time on Mining Stock Education and perhaps you could begin by providing a little more background on yourself so listeners can get to know you.

Hugh Agro: Good to be with you, Bill, and thank you for having me. I’m a mining engineer by background. I’ve been in the business for 30 years, most of it on the growth side of the gold business with major companies as you indicated. Cut my teeth with Placer Dome and then went on to Kinross Gold where I was part of leading the growth of that company from 1.7 billion market cap to 17 billion market cap, when I retired in late 2009. Over the years I’ve learned a lot about this gold business and when I saw the opportunity emerging in the space two or three years ago, it was really just too compelling and I came back to the space, founded Revival Gold with a number of colleagues that I’ve worked with in the past and are underway now.

Bill Powers: You recently were at the Beaver Creek Precious Metals Summit, and then also the Denver Gold Forum. Can you share with listeners the sentiment or the feeling that you experienced there?

Hugh Agro: Well, I have to qualify Bill first, in the first instance by saying we explorationists tend to be glass half full people. Take my view somewhat with that in mind, but I do feel that there’s a general improvement in the sentiment. Obviously the price of gold is up almost 20% or thereabouts since the spring and that brings a good mood to those conferences. Beaver Creek is focused on the more junior players and what I would say there in the stats, we saw about a third more buy-side attendees this year than in the previous year and there was clearly an intent on the part of those buy-side participants, those institutional investors to find a good value in the junior sector. Having made some some healthy returns in the more senior stocks over the past a few months and years.

Bill Powers: Is that a mandate that comes down from their higher ups within a lot of those funds where they say, “Okay now I need you to start looking at the juniors?”

Hugh Agro: I think it’s just a matter of balancing their portfolios. As you probably know, the senior gold stocks tend to move first in a cycle. We’re in a positive move in the gold price, an upward move in the cycle on gold, I would say it’s been that way since about 2015 with a few bumps along the way. We’re on an uptrend and it takes a while for it to filter down through the intermediate cap companies and then into the junior cap companies. And of course it’s where the juniors are that most of the money is made in the cycle because that’s where the best leverage is.

Bill Powers: If you had to choose just one adjective to describe the sentiment at these conferences, what would it be?

Hugh Agro: “Positive.” I wouldn’t say buoyant, but I would say “positive” and that’s a very good sign because I think at the point where you see a buoyant mood, we’re probably reaching a peak again. And so I view the current mood as very constructive for junior miners and investors in the space. And if I could just continue on the theme for a moment. The big, big problem in our business is that there are not enough projects to go around. And when the gold price starts to move and the senior gold companies look to fill replace their reserves, they’ll be scrambling for a place to sit. There just aren’t enough good opportunities and good geography for investors and big gold companies to find assets to replace reserves and build growth.

Bill Powers: On that note, when you listened to some of the majors present at the Denver Gold Forum, what were some of your key takeaways from those presentations?

Hugh Agro: There’s a lot of discipline and I think that again is good for the business. We won’t see a mad rush to find those seats that I spoke about earlier. It’ll be well executed this time around. And I think the senior gold company’s will be somewhat patient. The other thing is we saw quite a lot of talk on what’s now being called ESG or “environment and social governance”. These are, these big gold companies are wanting to appeal to generalist investors and they have to pull up their socks on ESG and ESG-reporting. And we saw that as a big theme at the conference this year. Again, it speaks to, first of all being disciplined in your approach. And secondly, making sure you have high standards on ESG and operate in good jurisdictions because those are the places where the big gold companies and the large institutional investors want to invest.

Bill Powers: With the major mergers between the gold producers that we’ve seen in the last year, how do you think that affects you as a CEO of a junior gold development project? With this expected divestiture of projects, how does that impact what you’re doing?

Hugh Agro: It’s fascinating to me. We’ve seen this tape before back in the 1990s, early 2000s. The gold industry went through a consolidation phase when investor interest disappeared and so I think we’ve seen that now in the discipline that it brings to the sector is good. It causes folks like me to become all the more excited about the opportunity for us to fill the void, so to speak. Because as you say, there’s a real crush for good growth projects in gold, in safe geographies and these gold companies, although they may get bigger and although they may enjoy some operational synergies from those mergers, they still haven’t solved the problem of how to replace reserves in doing so. It makes it actually harder for them. They become bigger, they need more reserves to feed their growing production demands and their investors do as well. And the pressure will build.

Bill Powers: Wasn’t one of the things noted at the Denver Gold Forum was that over the past five years, a lot of the majors were mining significantly above their reserve grade?

Hugh Agro: Yes. One of the stats that came out of the conference was something in the order of 20% to 45% for a number of the leading players. That is to say they’re mining a grade from their deposits which is above the average grade, which means they’re enjoying the benefits of that today. But in the future they’ll eventually be mining below grade and having to do so at much greater expense. And so it compounds the problem. Another interesting thought here, just as we’re talking about this, these senior gold companies, it’s fascinating to me that a year or two ago they were talking about rationalization. They were talking about delivering cashflow to shareholders. And interestingly enough, one of the biggest players in the space, Barrick was talking about exploration.

Again, I think this move in gold price, the confidence that the senior gold producers are feeling around their cashflow and their situations, the fact that we’ve got past these big mergers and are now thinking about how we replace reserve has led these companies to make the next step, which is, exploration and then the next step after that of course is the feverish pitch is to find those great growth projects in gold that they can add to their portfolios that juniors are developing.

Bill Powers: If Barrick was talking about exploration, was it because it was material news or they just wanted to assure their shareholders that we’re working on new reserves?

Hugh Agro: I think it’s the latter.

Bill Powers: Okay. And of course they would have to grow their companies as we’ve alluded to here through acquisition. I guess what was behind one of my previous questions, Hugh, was with the expected divestiture from some of these non-core projects that the gold producers are expected to sell off, do you think for a company like you, would that increase the likelihood, if you decided to sell your project in the future and be taken over, that the potential buyer would be one of the mid-tier gold producers rather than a major? What are your thoughts here? What can you share?

Hugh Agro: That’s an interesting question. Everybody tends to focus on what the big players, the Newmonts, the Barricks, the AngloGolds are doing. But there’s a whole cadre of two to three dozen intermediate players, some of them quite big. And that’s a relatively new situation over the last decade I would say. And it creates a broader spectrum of potential business partners, acquirers and the mix is actually very advantageous for junior developers today because you’ve got a lot more folks to talk to about your project.

Bill Powers: Before we move on to talk about your specific project, what are your expectation for this upward move, gold move? How many years do you think cyclically we could look at an upward trend?

Hugh Agro: Oh gosh, I’m no better than the next guy in predicting the cycle in gold. What I can tell you is the last cycle was about about 10 years. And typically they run between two and seven years. I think if you go back to the research. I would say, in 2015 we bottomed out in the gold price in the most recent window. It’s taken awhile to sort of get some foundation, but over the last six to seven months, I think we’ve seen that and I think we’ve got three to five years ahead of us here.

And there’s no reason to believe that the fundamental causes for the pickup in the price of gold, which is I think related to the central bank activity, there’s no reason to believe that any of that’s going to disappear overnight. Equity markets have topped out. And have been toppy for some time. Central bankers have put lots of money into the system. There’s been an erosion of the savings in the world. And, in fact, we’re in negative interest rate territory for much of the world’s savings. That all of bodes well for the price of gold. And I see no end in sight in that regard.

Bill Powers: As the CEO and president of Revival Gold then, do you see this three to five year potential window as your time to capitalize and make the most of this project?

Hugh Agro: Absolutely. And the great thing about the scenario we’re in now is there is still good value in the junior space and while the bigger companies have enjoyed some benefit from this pickup in the price of gold, and while there’s large institutional investors who are now coming back into the space, we still see value in the space. And so that means for a company such as Revival Gold, focused on growth, not only can we grow organically, but we can also look at opportunities to grow inorganically. That is to say, we have our eyes out looking for other opportunities to bring to our shareholders where we can crystallize value. It’s a good time to be in the gold development business in good geography.

Bill Powers: Hugh, we featured Otis Gold Corp, your peer in Idaho, which is a sponsor of the show. You have two projects in Idaho: the Beartrack gold project and the Arnett gold project. Please give us an overview of these projects.

Hugh Agro: Well, firstly let me say we love the guys at to Otis Gold. They’re doing super work on that project. Kilgore’s an impressive project in its own right. And it’s part of the general theme in Idaho where companies have come back to the state, recognizing that there’s really interesting geology and really perspective gold projects and prospects. Beartrack is the largest former gold producing project mine in Idaho. It’s got a great pedigree and we have on site a lot of the infrastructure remaining, including processing plant and roads and power and so on.

That’s given us a bit of a headstart with our Beartrack project. And when we got started in Idaho, we assembled the neighboring land position at Arnett, which is right next door. The combined Beartrack-Arnett project is some 12,000 acres. We have two million ounces of gold in resource and just today we announced additional results in the Arnett area, which is completely outside of the existing two million ounce resource and we’re developing up oxide gold resources for a plan to update a resource in the first quarter next year. It’s an exciting state to be in. We’ve got some great peers like Otis Gold Corp. In the state and together we’re building Idaho into the next new Nevada in terms of gold production in the United States.

Bill Powers: Idaho has had a very favorable mining jurisdiction ranking. Remind me, what is the recent Fraser Institute ranking of Idaho?

Hugh Agro: Yeah. I can’t give you the specific number, but I can tell you that it ranks above some of Canada’s premier jurisdictions for mining like Ontario and British Columbia. It ranks above Mexico. It ranks above Finland. It’s really something and folks are starting to wake up to that of course. But the opportunity for gold in Idaho and good value in Idaho for investors is still there.

Bill Powers: The company is Revival Gold. You can find more information on the website at revival-gold.com. That’s revival-gold.com. Hugh, as we conclude, would you like to share any final thoughts with my listeners?

Hugh Agro: Just a thank you, Bill. Your program is super and I think this is exactly the kind of information that investors will profit by.