Garrett Goggin: All Things Gold & Silver Mining Stocks

Episode Summary

Executive Summary: The conversation centers on Garrett Goggin’s framework for finding value in gold and silver mining stocks: prioritize management alignment, grade, recovery, profitability, and per-share value creation over headline ounces-in-the-ground. He argues royalties are the highest-quality exposure, warns against dilution-heavy “moose pasture” projects, and suggests the sector is early in a broader precious-metals bull market.

Main Topics: How Garrett got into resource investing (Priority: 4/5): Garrett explains his background in traditional mutual funds, his skepticism of buy-and-hold equities, and how that led him toward gold and silver as alternative assets. He discusses training, credentials, and years of fieldwork visiting mines globally. Jurisdictional risk vs. opportunity (Priority: 4/5): The discussion challenges home-country bias in mining. Garrett argues that seemingly risky jurisdictions can still host exceptional deposits, while even safe jurisdictions can have operational disasters. He cites examples in Latin America and Morocco. Why dilution and per-share value matter most (Priority: 5/5): A core theme is that mining companies must increase value on a per-share basis; otherwise even large resource growth can destroy shareholder returns. Garrett repeatedly criticizes companies that endlessly issue shares while failing to generate cash flow. Grade, recovery, and economics (Priority: 5/5): Garrett explains why headline ounces and silver-equivalent metrics can be misleading. He emphasizes that profitability depends on grade, recovery, processing costs, and whether a mine can generate operating cash flow above break-even thresholds. Royalties as the best business model (Priority: 5/5): He makes a strong case that royalty companies outperform most miners because they have fixed costs, no operating risk, free upside from exploration success, and frequent takeover potential. He frames royalties as the cleanest way to play gold. Portfolio construction and exit discipline (Priority: 4/5): Garrett describes his equal-weight approach across a diversified basket of miners and royalties, while also advocating a 'don’t sell winners' philosophy. He says to use market froth, GLD shares outstanding, and the gold cycle as cues for trimming. Macro backdrop for gold and silver (Priority: 4/5): The conversation closes with a bullish macro view: rising debt, persistent inflation, rate cuts, global currency instability, and potential BRICS gold-related moves all support a sustained precious-metals bull market that is still early.

Key Arguments: Management quality is the first filter because bad teams can destroy even strong deposits through dilution and poor capital allocation. Per-share value creation matters more than raw resource growth; a company can add ounces and still destroy shareholder returns if shares outstanding rise faster. Grade is the main driver of profitability in mining because costs are largely fixed per ton, so higher grade directly expands margins. Headline silver-equivalent figures can distort reality, especially when companies rely on byproduct credits or concentrate sales rather than direct precious-metals production. Royalty businesses are structurally superior because they have fixed costs, leverage to metal prices, no operating costs, and significant free exploration upside. Small royalty companies often get acquired at premiums, making the sub-sector especially attractive for long-term compounding. Equal-weight diversification is important in junior mining because some names will fail completely, while a few winners can generate most of the returns. The sector is still early in the gold bull market; despite record gold prices, many smaller miners have not rerated meaningfully yet. GLD shares outstanding can be a sentiment gauge: rising shares indicate broad public participation and may signal a more mature phase of the gold rally. Macro conditions like high debt, inflation, and weakening confidence in fiat currencies are supportive of precious metals over the next several years.

Data Points: Gold target price update: $2,700/oz - Garrett said he is raising his gold target from $2,500 to $2,700. Silver target price update: $32/oz - Garrett said he is raising his silver target from $30 to $32. GLD shares outstanding (current): 304 million - Used as a sentiment/participation gauge for the gold market. GLD shares outstanding (2020 peak): 435 million - Garrett compared current GLD shares outstanding to the previous gold-price peak. Aya Gold & Silver operating free cash flow: About $3 million per quarter - Cited as evidence that the company could fund development without excessive dilution. Aya Gold & Silver production ramp: 2.7k tons/day - He said Zagounder is tripling production from ~700 tons/day to 2.7k tons/day. Boumadine resource estimate: 300–400 million silver-equivalent ounces - Garrett said the newly discovered Boumadine resource is already very large and could become a billion-ounce deposit. Boumadine average grade: ~450 g/t - He cited the deposit as high grade and still being expanded. Break-even silver grade: ~250 g/t - Garrett said this is the approximate average grade needed for break-even silver production. Royalty industry long-term return: ~13,000% - He estimated that a royalty portfolio over 13–15 years could have produced roughly this return. Newmarket/Silence/industry compounding example: ~45,000% - He cited Newmarket Gold/Kirkland/Fosterville as a massive multi-stage wealth creation example. Silvercrest mining return: ~50,000% - He said Silvercrest went from about 6 cents to $12 after being acquired/spun out. Highcroft share count growth: 2 million to 24 million shares outstanding - Used to illustrate dilution destroying per-share value. Highcroft stock price reference: $2.65 - Current approximate price mentioned during discussion of long-term dilution. Lake/previous peak gold sell-side sensitivity: $2,200/oz max sensitivity - He criticized an investment bank model that stopped at $2,200 while gold was already above that. Food prices: 203% increase - Garrett referenced rising household costs to support his inflation concern. Fed rate cut reference: 50 bps - He noted the Fed cut rates by 50 basis points, comparing the setup to the 2007–2011 gold rally.

Pivotal Quotes: "What if inflation starts rising higher, what sector is the best place to be? And naturally, I was inclined towards gold and silver." — Garrett Goggin: Explaining how he was drawn away from traditional mutual funds and toward precious metals. "The major cancer with the mining industry is dilution." — Garrett Goggin: Core thesis on why many miners fail to create shareholder value despite growing resources. "The royalty business is the greatest business I've ever seen in my life." — Garrett Goggin: His strongest endorsement of royalty companies as the best way to gain precious-metals exposure.

Implications: Listeners should focus on management, grade, recovery, and dilution rather than ounces alone. For the industry, royalty companies and high-quality producers appear best positioned as the gold cycle matures, while many juniors may remain value traps.