Proven and Probable sits down with Jayant Bhandari the host of the highly acclaimed Capitalism and Morality to discuss currencies, the merits of owning precious metals, and how specific gold mining companies can prove to be a profitable endeavour.  Today’s interview provides an added bonus, as Mr. Bhandari will share specific companies that have his attention at the moment.

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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 & Morality, and a prominent sought out advisor to institutional investors. Today we will discuss currencies, the merits of owning gold, and gold junior mining companies.

Mr. Bhandari, welcome to the show, Sir.

Jayant Bhandari:

Thank you for having me, Maurice.

Maurice Jackson:

Jayant, it’s always a pleasure to have you on our show, as you provide a unique perspective on some very controversial subjects. I wanted to begin our discussion regarding the currency of the United States now that we have one year under our belt with the Trump administration. Are you buying, or are you selling?

Jayant Bhandari:

I don’t really speculate on currencies, Maurice, that is not really my area. But also, how do you actually put a value on paper? The currencies that we have today, everywhere in the world, is paper currencies, and there is no way to really put a value on these currencies. Now, talking about what is specifically happening with the US dollar, it might be interesting for people to look at the data provided by the World Bank, in which the World Bank provides the ratio between purchasing power parities and nominal exchange rates of countries, comparing it with the US dollar. A much simpler version is provided by the Economist and they call it McDonald Index, the Big Mac Index.

If you look at that index, US dollar even today is among the most expensive currencies. Switzerland, Norway, and Sweden are the only three currencies that are more expensive than the United States dollar. Euro is cheaper than US dollar, British pound is much cheaper, about 20% cheaper compared to the US dollar. UAE is cheaper, Japan is almost 40% cheaper than the US dollar.

Keep in mind that the US dollar is an expensive currency, so I don’t really feel bad if the US dollar falls, to readjust itself to what it should be worth.

Maurice Jackson:

Crypto currencies, they’re the flavor of the month right now. Walk us through the thought process that Jayant Bhandari takes when mass psychology is yelling things like, “Buy Bitcoin”, and, “The US currency is solid and gaining strength.”

Jayant Bhandari:

I am a value investor, Maurice, so I should have a buy price and a sell price on everything that I buy. Now, when it comes to Bitcoin and other crypto currencies, I don’t really know how to put a value on it. I don’t know whether Bitcoin is worth one dollar or one million dollar. The end result is that I stay away from investing in such products. I always do a financial analysis on everything that I invest my money in.

Does this mean I lose out? I miss out on investing in certain products? Of course, I do. Bitcoin has done extremely well, and I missed out on that increase in Bitcoin price. But again, I don’t know what is the value of Bitcoin.

Maurice Jackson:

Jayant, you have a well established reputation for identifying overlooked value propositions. How does gold factor into this discussion we’re having?

Jayant Bhandari:

Gold is a very underpriced commodity today. And the reason is that people have in the recent past, in the last 20 or 30 years, focused on investing in manufacturing and infrastructure, et cetera, et cetera, because there was economic growth happening around the world. That economic growth is no longer happening, except in my view, in China and to a certain extent, in the US and Europe. The end result is that a lot of people will be looking at gold again within the next few couple of years. And I think gold price should start performing at that point of time.

Maurice Jackson:

And actually it’s performing quite well, I think, it’s maintained that 1300 level. Are you surprised that it’s at the level it is now, or are you disappointed? Or did you think it would be higher, relative to what’s going on in the world?

Jayant Bhandari:

Firstly, I don’t think gold price has had a breakout yet. Gold price in US dollar has done quite well over the last two months. But it does not really tell you much except that gold price has only done well in US dollar. Look at the fact that it has actually fallen in Australian dollar. It has remained virtually stagnant in British pounds, Chinese yuan, Euro, Russian ruble, or Swiss frank. And in fact, gold has fallen in price in South African rand. So really, gold has done well in the US dollar, but it hasn’t really out performed in other currencies. Which means that from US dollars perspective, the increase in gold price might not be sustainable. And if it is sustainable, it is almost certainly not a breakout in gold price for now. Although, in my view, gold should break out at some point of time. But that time is not now.

Maurice Jackson:

Jayant, I’ve interviewed a number of  serially successful investors such as yourself, and they all see the merits of owning gold. What percentage do you comfortable with in your portfolio of owning physical gold?

Jayant Bhandari:

I don’t like to keep paper currency with me, either in my pocket or with banks. Paper currencies is a depreciating asset. But moreover, I subsidize federal banks when I keep my wealth in paper currency. I think everyone should own enough gold that one feels comfortable in terms of protecting and diversifying his assets.

Now, I am a financial analyst, and given that I come across a lot of investment opportunities, I would probably have a lower proportion of my net worth in gold because I can actually use my excess wealth for investment purposes. But most people really don’t really understand how to invest, and for them one of the best ways to protect their wealth is gold, and they might want to keep a much higher proportion of their net worth in gold.

Maurice Jackson:

How do you translate your thesis from owning gold into gold junior mining companies?

Jayant Bhandari:

For me, these are two completely different things. If I want to buy gold, if I am bullish about gold, I should invest in gold. When it comes to junior mining companies, it’s a completely different game. It has to be a valuation game based on the underpinning value of the property and the projects a junior mining company has.

You should almost never invest in a junior mining company expecting to benefit from so called leverage from gold price. A lot of people blindly invest in these junior mining companies expecting that if gold price goes up, these junior mining companies would go up by several multiple times. This almost never happens. The reason is that when gold price goes up, the cost of making gold actually tends to go up faster. That has been the recent history. So yes, invest in junior mining companies that do give you a huge upside. However, don’t invest for so called leverage, or don’t invest in junior mining companies because you want to invest in gold.

Maurice Jackson:

That is a very responsible comment, and if I can just interject on that. I’ve heard that for a number of years, the thesis that if gold prices go up, junior mining companies just go through the roof. In some cases that is correct, but you have to be very selective and that’s one of the things that you’re known for, is being very selective and very prudent in your selection criteria. Speaking of that criteria, are there any companies right now that have your attention at the moment?

Jayant Bhandari:

Several companies, Maurice, and a lot of mergers and acquisitions are happening at the moment. So people I think should start paying attention to arbitrage opportunities in the mining sector. Also, Nevsun Resources fell quite a bit today. The reason Nevsun fell so badly is because they released a report, which pretty much said that their Eritrea project is suffering. However, I’m not really so bothered about the project in Eritrea. My focus is on the project in Serbia, a project that I visited in November last year, and I think the company has done extremely well. So this might be an opportunity to buy some Nevsun resources.

Maurice Jackson:

Jayant, if you would please, give us that symbol.

Jayant Bhandari:

NSU, both on TSX and New York Stock Exchange.

Maurice Jackson:

How about another issuer?

Jayant Bhandari:

So there are many arbitrage opportunities in the market. But before I mention those, let me mention just about Irving Resources. The ticker is IRV, the company has projects in Japan. The share price went up quite a bit in the last one week, and that was because Bob Moriarty wrote something about the company and he wrote a very positive note. When Bob Moriarty writes about a company, share prices of those companies tend to go up quite a bit, and the volume spikes up as well.

I think when the share prices stabilizes, when it falls a bit, it should offer investors one more opportunity to buy Irving Resources, the ticker is IRV.

Now, there are many M and A opportunities in the market. One company is Primero Mining. The share price is 22 cents Canadian, and it’s merging with First Majestic. There is about 15 to 20% arbitrage upside in owning Primero, if you buy it at 22 cents.

There’s a company called Rio Novo Gold that is being acquired by a company called Aura Minerals, and Rio Novo is trading for 12.5 cents Canadian. At this price it offers you about 18% arbitrage upside. There’s another company called Rapier Gold, the ticker is RPR, and it is trading at 5.5 cents, and it’s offering you a 15% arbitrage upside. Now all these three companies that I have mentioned I also feel reasonably comfortable about the underlying values. Which means that I am very happy buying these companies at a discount to the underlying values, and at a discount to the share price of the companies that these companies are being acquired by.

Maurice Jackson:

Jayant, you referenced one of our sponsors, which is Irving Resources, and we also want to thank Bob Moriarty for introducing us to your work as well. Thank you Bob again, for all of your work for Proven and Probable. How about another sponsor of ours, Novo Resources?

Jayant Bhandari:

Novo Resources went up quite a bit today. It went to $3.75, Maurice. This is a company that continues to be the largest part of my portfolio. I feel very excited about the company. I recently had a chat with Dr. Quinton Hennigh in Vancouver a couple of weeks back. I am visiting the project in March, in Australia. So I am looking forward to the trip, and I continue to be very optimistic. On any weakness, I would suggest that at least I would be acquiring more of Novo.

Maurice Jackson:

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

Jayant Bhandari:

The registrations for the seminar is going very well. We have probably sold half the seats for the seminar, which will be held on the 21st of July 2018. And we actually have limited capacity in the room that we hold the seminar in. We have a long list of speakers, including many names that you know, Maurice. Rick Rule, Doug Casey, Adrian Day, Professor Ian Plimer. A lot of other people are speaking, about 12 or 13 speakers will be speaking at the seminar. Including Simon Roche, who will be flying in from South Africa to talk about the situation in South Africa.

And you might know that the situation in South Africa is continuing to get worse and worse. My view has been that a lot of African countries and a lot of other third world countries, as I have mentioned to you in the past, are facing huge problems, and a lot of these countries might be imploding. My website is JayantBhandari.com, and everything I do goes on my website.

Maurice Jackson:

And last but not least, please visit our website, www.ProvenandProbable.com where we interview the most respected names in the natural resource base. You may reach us at contact@ProvenandProbable.com. Jayant Bhandari, the host of Capitalism & Morality, thank you for joining us today on Proven and Probable.

Jayant Bhandari:

Thanks for the opportunity, Maurice.

Maurice Jackson:

All the best, Sir.

Proven & Probable

Maurice Jackson

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