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Maurice Jackson:

Welcome to Proven and Probable, where we focus on metals, mining and more. I’m your host, Maurice Jackson. Joining us is Jayant Bhandari, the host of the highly-acclaimed Capitalism and Morality, and a prominent sought-out adviser to institutional investors. Today, we will discuss Africa and gold junior mining companies. Mr. Bhandari, welcome to the show, sir.

Jayant Bhandari:

Thanks for having me, Maurice.

Maurice Jackson:

Recently, we conducted an interview regarding Zimbabwe. I’d like to revisit that conversation. Can you please give us an update on the latest developments in Zimbabwe?

Jayant Bhandari:

Why not, Maurice, talk about the political environment in Africa? Africa has 54 countries and I have been to Africa almost once or twice a year, every year, for the last 10 or 12 years now. It has a population of 1.2 billion people, and this is a continent that, from north to south, is an unmitigated disaster. The only countries and only areas in Africa that have done relatively better compared to the rest are countries with higher influence of Europeans in those countries. Now, if we don’t account for this, we cannot understand the problems of Africa and the ways to correct the problems of Africa.

Now, a lot of intellectuals will actually blame colonialism for the problems of Africa, or the problems of the third world. The reality is that the population of Africa was only about 230 million people in 1950. Because of Medicare, the medicine that Europeans brought to Africa, and because they reduced tribal warfare within Africa, and, remember, Africans were hacking each other to death in tribal warfare before Europeans arrived. Because of reduction in these, the population of Africa has increased to 1.28 billion, which means that in the last 67 years, population of Africa has increased by 400% or more.

Again, Africa is an unmitigated disaster, and that includes Zimbabwe and South Africa. Zimbabwe was the bread basket of Africa. During the time that the British ruled Zimbabwe, they left a person called Robert Mugabe as the president of Zimbabwe, who was finally forced out of his position later last year. Robert Mugabe wanted to place his wife as the next president of Zimbabwe because Mugabe is getting very old, and he will die one of these days. He actually often falls asleep while he is sitting in meetings, and things like those. The coup meant that the vice president, who was actually someone very close and friendly with Mugabe, a person called Emmerson Mnangagwa, became the president. Now, international media and a lot of international organizations are very happy about this turn of events because they think that this will lead Zimbabwe to become more democratic.

Now, my view is that this is not a good change. This is actually a horrible change for the worse for Zimbabwe because democracies in these third world countries do not work. Democracies always inevitably lead to increased tyranny because democracy in these backward, tribal, superstitious, magical-thinking people always lead to people getting elected who are tyrannical and irrational. This is what will happen to Zimbabwe going forward. Mugabe was a horrible tyrant but, again, he was still chosen by the British who were, compared to Zimbabweans, are much more rational bunch of people.

Maurice Jackson: 

Jayant, I hate to interrupt you here, but you sound like President Trump a little bit here when you’re describing Africa.

Jayant Bhandari:   

Maurice, I have, over a period of time, got increased respect for Trump. I don’t even understand how he has the right understanding about these third world countries because you have to actually live and grow up among these utterly irrational and tribal people to have some kind of appreciation for what tribalism and irrationality and superstitious environment means. These people are steeped in magical thinking. That is the truth across the third world, and Africa is actually the worst in terms of being tribal, being extraordinarily violent.

Trump used a word, he likely used a word, I’m not sure if he did, a word, ‘shithole,’ when referring to these countries. The reality, Maurice, is that 1.1 billion people on this planet actually go out to defecate in the open. 1.1 billion people do this on a daily basis, so there are a lot of shithole countries literally and figuratively. Africa is not just shithole. It is also a hellhole. There is not much in Africa that is not a hellhole. It is a continent replete with genocide, civil war and extreme violence against each other, and so often it seems that a lot of people there enjoy being violent.

Maurice Jackson:

Which is truly unfortunate. Sticking to theme of Zimbabwe here, Zimbabwe, their economy from the outside looking in, should be somewhat robust. They have fertile soil and they have mines, but what products does Zimbabwe actually export?

Jayant Bhandari: 

Zimbabwe, as such, is very rich in, as you rightly said, soil, and it has a lot of natural resources in that country. But, remember, you have to have the right institutions and the right people in leadership positions in those institutions, to be able to create businesses and organizations to exploit the natural resources or agricultural farms.

Now, I actually spent two days with one of the relatives of Mugabe. Actually, I visited several of the farms that had been expropriated from white farmers. Now, Zimbabweans think that all you have to do is to get hold of the land and somehow prosperity would automatically appear. It does not happen that way. You have to work hard on those farms. You have to create a strategy to put that farm into production. You have to save the seed for the next season. You have to plant the seed. There’s a process that makes the farm productive. They expropriated the farms, but they never put those farms into production.

Unfortunately, that is how Zimbabwe was. How do you get the right institutions and the right people to lead those institutions? The reality is that the best people from Zimbabwe have left Zimbabwe. They are now in London and New York. Of course, the British left Zimbabwe many decades back, which means that the very best people Zimbabwe had an opportunity to have to run that country are gone for a long time and, now, even the top layer of local Zimbabweans are gone.

In the meantime, the local culture is asserting itself by degrading the institutions of Zimbabwe, the institutions that the British left behind. The problem is that European institutions, without Europeans running those institutions, do not work. The tribalist and magical-thinking of Zimbabweans is now increasingly reflecting in the institutions and, at the end of the day, the people who lead those institutions are tribal, corrupt, irrational people. That is the problem going forward for Zimbabwe. How do you exploit those natural resources in an ecology like that?

Maurice Jackson:

Also discussing the word ‘exploit,’ their currency is weak. Do you see foreign capital, from a speculator standpoint, coming into Zimbabwe because it doesn’t sound like it?

Jayant Bhandari:

Oh, it will come to Zimbabwe because Western people have become so gullible. Political correctness has become a religion in the West today, which means that, if you talk about what I just did, now, even if I’m incorrect, at least oppose me, at least challenge me, at least reason with me. The problem today, Maurice, is that anyone in a big organization who puts forth an idea that I’ve just did in front of me, in front of you, sorry, he would be thrown out of those organizations right away. Which means that in big organizations, big institutional investors simply do not have an understanding of what I just said. Which means that a lot of money actually did go to Africa in the last decade.

A lot of money went into fund companies and infrastructure, cellular infrastructure, banking infrastructure in Africa. Most of that money is never going to return back to the West. Western people have consistently lost money in Africa, and they will continue to do so. Indeed, they will put more money into Africa, in Zimbabwe, and you can see that reflected in increased share prices of companies operating in Zimbabwe already. But, again, this change in perception about Zimbabwe will not last for too long. I think sooner, rather than later, Zimbabwean president, the new president, will show his true colors. If Zimbabwe actually becomes fully democratic in the next election, just pray that nothing terrible goes wrong in Zimbabwe.

Maurice Jackson:

Correct me if I’m wrong, but Mugabe, he actually nationalized the mines there. Am I correct?

Jayant Bhandari:

Well, mostly he did. I know of one company, which actually has done quite a good job. Again, Maurice, when I say I’m talking about the country, I’m talking about the system on average. But there are some very smart people who can find an area, and they can interact with the locals and the government in ways that they can still manage to create wealth.

There’s one company that I know of that has actually done reasonably well. It’s a mining company called Caledonia Mining. I’m actually not suggesting that you buy shares of that company right now, but because the share price, again, has gone up quite a bit in the last two, three months, wait for it to fall down and look at that company again when it has fallen by about, in my guess, 30% from where it is today.

Maurice Jackson:

What does Caledonian extract? Is it PGMs?

Jayant Bhandari:

Yes, it is a company in PGMs, and they actually have done quite a remarkable job in organizing their affairs in Zimbabwe. I’m not a shareholder. I was, in the past. I sold, but it’s a company I certainly want to keep my eyes on.

Maurice Jackson:

Jayant, if you would, give us the symbol.

Jayant Bhandari:

CAL on Toronto Stock Exchange.

Maurice Jackson:

All right. Sticking with Africa, Jayant, you forewarned us a year now about the economic and political concerns in South Africa. Now, they’re coming to fruition. What’s going on in South Africa?

Jayant Bhandari:

Well, South African case is not much different verbally in terms of what I just said about Zimbabwe and the rest of Africa. Now, of course, South Africa is the most developed part of Africa, and the rest of Africans look up to South Africa. There was a time, and even today, a lot of Africans want to move to South Africa to work because South Africa has had among the best economy in Africa. A lot more of Africans actually wanted to move to South Africa during the days of apartheid. Now, that was a horrible system, but the reality is that the changes that they have implemented since the end of apartheid has made lives of blacks in South Africa much, much worse than it was before when apartheid existed in South Africa.

South Africa has the same problem. The best people are no longer in position of leadership. They’re actually now living in, say, Toronto, Vancouver, Sydney, or Perth. They have moved on. The institutions of South Africa, which were supposed to be first-world institutions and first-world infrastructure, now is increasingly becoming third-world institutions and third-world infrastructure. You often don’t have power and electricity in Johannesburg. As I was talking with you offline earlier, there is now a water crisis in parts of South Africa.

Mining has become a huge problem in South Africa because the new regime has implemented absolutely crazy economic policies so, overall, South Africa has continued to become worse and worse. Jacob Zuma has just been thrown out as the president of South Africa. He was a tyrant, an extraordinarily corrupt person. He has had about, I think, 500 or more corruption cases against him. I think it’s probably more like 700 corruption cases against him.

However, my view is that the next person will be much worse. Again, the person who has taken over is the person who was his vice president, Cyril Ramaphosa. Don’t expect him to be much better. Actually, two days back, he announced that he wanted to seize farms of white farmers and give those to blacks, which basically encourages blacks to do a genocide of whites in South Africa, which is not a good thing for South Africa. It will destroy the economy. It will create a civil war in that country, and it will very rapidly put that country on the path to become a third-world destitute wretched country.

Maurice Jackson:   

It sounds like they are mirroring what Zimbabwe did a couple of decades ago, essentially.

Jayant Bhandari:  

Absolutely. Also, Maurice, the problem is that the political correctness of the West means that Western people simply do not have the intellectual real verbal material to understand Africa. When they go to Africa, they stay in five-star hotels or they don’t necessarily operate and work in Africa, so they don’t really get the right feeling of what Africa is all about. So they go with all these rosy feelings and all they absorb is the rosy feedback they get from the local people, without actually interacting with the local people on a day-to-day, moment-to-moment basis, which means that they come back to the West without actually learning much about what’s actually happening in Africa.

Maurice Jackson: 

And we should not, I’m assuming, expect the best and brightest from South Africa to repatriate under the new president.

Jayant Bhandari:

South Africans and Zimbabweans I meet often tell me, particularly the black Zimbabweans and black South Africans, that they actually do want to go back to South Africa and Zimbabwe. The only problem they have is that they want New York or London salaries paid in Johannesburg or Harare, and they also want hardship allowance on top of that.

Now, listen, that isn’t going to happen. Those economies simply cannot pay you those kind of salaries. This is talks of those people who always say that they want to return back to their home countries, but they’re materialist and the money and the comforts that they enjoy in the West keep them from going back. They will never, ever go back. Really, why should they? Why should I, why should you, when we have a better life in the West?

Maurice Jackson:   

Jayant, we discussed the problems in South Africa, Zimbabwe and Africa as a whole. What are the solutions?

Jayant Bhandari:

There isn’t really a solution that is practical anymore, Maurice. The only two solutions I can think of, the first one is and the best one is for the Europeans to return back and rule the third-world countries. There is simply no way out because the institutions that Europeans left in the third-world countries are continuing to degrade and decay and fall apart and you simply cannot stop that.

Now, that isn’t going to happen in the next 50 years and these countries will have imploded in the next 10 or 15 years, anyway, so forget about Europeans being able to make a positive impact on the third-world countries anymore.

But the only other option, which is a distant second-best option in my view, is for Chinese to continue to develop infrastructure, invest and control leadership in these third-world countries, which is what China is doing with One Road, One Belt Policy, by which they are investing a trillion dollars in about 60, 65 countries. They actually have invested a huge, huge amount of money in Africa. I fly through Addis Ababa in Ethiopia quite often, and when you go to that airport, sometimes it feels like as if I’m in China. There are so many Chinese workers in some of these airports, so Chinese influence has been very positive.

Now, are Chinese saints? No, they are not, but given what Africa is, Chinese influence is a positive influence. In life, we always have to talk in relative terms, not in absolute terms. Colonialism was not the best thing, but listen, when I lived in India, I prayed for America to intervene and interfere in the affairs of India because that was the only rational thing I could see in the horizon.

Jayant Bhandari:

Sure. I’ll give you four names, Maurice, people have to really watch the price. It’s very important to give limit orders, not market orders, because you destroy your upside by giving market orders.

One is a company called Primero, which is merging with a company called First Majestic. Primero’s ticker is P, P for Poland, and the share price is 21 cents. At this price, you get about 10% arbitrary upside in owning Primero, 21 cents. Do not go above that.

Two companies that I might want to mention, very speculative companies, VR Resources. The ticker is VRR, Victory, Rain, Rain, and the share price currently is 23.5 cents. They are doing a financing and they have an interesting project in Nevada.

The third company is Salazar Resources. The ticker is SLR. The country is Ecuador. It’s a third-world country, I don’t like it, but there are reasons why I am, for the moment, interested in this company. The share price is 11.5 cents. Do not chase it. A lot of volume comes at 11.5 cents.

Finally, there’s another arbitrage opportunity. Rio Novo is merging with Aura Minerals and Rio Novo’s share price is 12 cents. Ticker is RN, and there is about 7 to 10% arbitrage upside in owning Rio Novo, RN.

Maurice Jackson:

Jayant, on behalf of all of our subscribers, thank you for sharing that with us.

Jayant Bhandari:

Most welcome.

Maurice Jackson:

Jayant, please provide us with an update on Capitalism and Morality, which is the preeminent name for reasoning, argumentation and liberty.

Jayant Bhandari:

Capitalism and Morality is a seminar I have run for the last eight or nine years now, Maurice, and this is a seminar I look forward to. It is run in downtown Vancouver every year, and the next one is on 21st of July 2018. You will have Professor Ian Plimer who will fly in from Australia to speak, Rick Rule, Doug Casey, Adrian Day, Simon Roche will come from South Africa. A lot of people. There are about 13 speakers speaking at the seminar. It’s a day to look forward to.

Maurice Jackson:

Jayant as well. Prior to Capitalism and Morality, we have PDAC. Would you speaking there this year?

Jayant Bhandari:

Yes. I speak at PDAC every year. I will do so again at the Letter Writers Forum on the 4th of March at PDAC in Toronto.

Maurice Jackson:

All right. Last question, what did I forget to ask?

Jayant Bhandari:

Again, Maurice, what has been a subject of huge interest to me is what’s been happening in the third-world countries. International media, the World Bank, the IMF is extremely euphoric and optimistic about the third world. They call it the emerging market.

Apart from China, none of these third-world countries is doing well, in my view. They’re all imploding. They are all going to go through major economic and political and social problems, so I think people should be aware of it. Maybe there are ways to make profit from it, there are maybe ways to protect yourselves from getting into problems by getting entrapped because the international media and the international organizations are telling you something that is probably not correct.

Maurice Jackson:

Jayant, if someone listening wants to get more information about your work, please share the contact details.

Jayant Bhandari:

My website is jayantbhandari.com and everything I do goes on that website.

Maurice Jackson:

Last, but not least, please visit our website, www.provenandprobable.com where we interview the most respected names in the natural resource space. You may reach us at contact@provenandprobable.com.

Jayant Bhandari, the host of Capitalism and Morality, thank you for joining us today on Proven and Probable.

Proven & Probable

 

Maurice Jackson

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