Pierre Lassonde: 1:1 Dow to Gold Ratio – $25,000 Gold Coming
Tom welcomes mining legend Pierre Lassonde to the show. Pierre is the Co-Founder of Franco Nevada and Formerly President of Newmont Mining.
Pierre discusses how the dollar and a low-interest-rate environment are good for gold. Real interest rates have to remain low or the debt can’t be repaid. Effectively today, we have negative interest rates, and that is always good for gold.
When a reserve currency is strong, you don’t need gold, but when it is weak, gold becomes the anti-dollar. The U.S. is doing everything it can to devalue the currency, particularly against the Yen and Yuan.
Pierre expects the Dow to Gold ratio to once again reach parity. He compares the 1976 to 1980 cycle where gold went from 90 to 800, and we saw rampant inflation. Today’s situation is very similar, and that is why he expects gold to ramp up over the next three to five years.
He explains his metric called the Lassonde Curve and how it defines the lifecycle of a mine on a time-value basis. The curve highlights the relative risk-reward over time and where the opportunities occur for investors with patience.
The gold market has changed greatly over his career. Demand for gold as an investment is steadily increasing, while jewelry demand is relatively flat. Gold behaves as insurance, and often, price doesn’t matter when people think they need it.
Pierre details the enormous power of the royalty business model and why it creates a lot of optionality.
There are advantages to having multiple metals in a deposit particularly of interest is copper-gold deposits. Copper is essential in the modern world, and demand for it will continue to increase due to electrification.
Pierre agrees that we are being deluged by information, and much of it may be wrong. He recommends going back to the source and conduct your own research. Then compare your results with others that you value. If the numbers are similar, you can likely trust their opinion.
He expects the next three to five years will be unbelievable but make sure that you have real value in your portfolio to outperform.
Time Stamp References:
0:00 – Introduction
0:38 – Low Rates & Gold
2:00 – The Anti-Dollar
3:47 – Dow/Gold Ratio
6:40 – Seven Gold Cycles
8:38 – Mine Input Costs
10:35 – CEO Discipline
12:24 – Equities & Margins
13:19 – Lassonde Curve
19:38 – His Book
20:53 – Investment Demand
22:35 – Shareholder Value
24:34 – Royalty Model
28:15 – Optimal Deposits
31:44 – World Gold Council
34:28 – Philanthropy
36:22 – Be an Outlier
40:20 – Evaluating Sources
42:30 – Concluding Thoughts
Talking Points From This Episode
- The dollar and why gold is the anti-dollar.
- Comparing gold cycles with today’s markets.
- The lifecycle of a mining operation.
- Finding value in a world of information.
A philanthropist and talented businessman, Pierre Lassonde is recognized as one of Canada’s foremost experts in the area of mining and precious metals. His cumulative giving to the University of Toronto exceeds $10 million, the largest contribution to mineral/mining engineering education in Canadian university history. The Lassonde Institute of Mining, the Lassonde Mineral Engineering Program, and the Lassonde Mining Building bear his name.
In 2001, Pierre was granted an honorary degree by the University of Toronto. Lassonde has received many other awards, including the Order of Canada, Mining Man of the Year, and Developer of the Year. He was inducted into the Canadian Mining Hall of Fame in 2013.