Gold Investor Fireside Chat: 2020 Learnings & 2021 Outlook

0:12 Hi, everyone. Thank you for joining a very special Gold Investor Fireside Chat today hosted by 6. I'm pleased to introduce our panelists today, Anil Raj, Executive VP and Director at Stepgold, Lawrence Lecker, Partner at Equity Management Associates, and Stephen Suk, Equity Research Analyst for the Mining Category at Stiefel GMP.

0:35 I want to let our audience know that we will be setting aside some time towards the back half of this event for a live Q&A session, so please submit your questions directly to any of our panelists during the using the Q&A panel on the right hand side of your screen at any point. Now before we really dive into the 2020 learnings and 2021 outlook, I'd like to pass it over to you and Neil for some quick opening remarks and what you hope to achieve here today because you really were the driving force that brought everyone together today. Thanks very much Jane and thank you everyone for joining today. I really appreciate Lawrence and Stephen taking time out of your busy schedules near the end of this year to join this panel. We thought it'd be something unique and a little bit different from what we've done all year providing a normal corporate update and maybe even some more insight from people who are actually gold influencers and not just the miners.

1:29 And I think this platform will allow for our investors to ask the questions. It's an informal discussion to discuss, I mean, what we learned this year and what we're looking forward to in the new year. And please submit any questions you have for any of us and we hope you enjoy this webinar or fireside chat.

1:51 All right, thank you very much, Neil. Well, to start things off, we're talking about 2020 learnings today. And 2020 really was a year for the books, right? Globally, financially, and at every individual level. Let's go around the room and talk about what you would say was your biggest surprise this year. And this doesn't have to be about markets, it can be something personal as well. How about we start with you again, Emil? Yeah,

2:18 I think what I really discovered, I think, is how quickly we all can adapt to this changing environment. And everyone here is working from home, As you can see, and how very quickly we turned that on and have been able to be very effective, I think, efficient. And hopefully, like I did, is learn how to have a balance. Because I think the first month or 2, it was kind of rolling out of bed and working, and at nighttime, still working, and there was no kind of separation between the work and life balance. And I think we certainly learned over the last few months how you can spend more time with family and still be effective. And be effective from home and not have to be on a plane every few weeks like I was the year before.

3:05 So true. How about you, Lawrence? Well, I echo what Neil said. First of all, thank you, Jane and Neil, Stephen for doing this with me and including me. I echo what Neil said about the balance and I haven't figured out how to achieve that yet. But the 2 big surprises to me were the obvious ones of COVID. Nobody could see that coming and it did and it rocked the world. The related surprise on the investment side was the fact that the

3:32 stock market just melted up. And I could see what COVID was doing. We could all see it. And of course, initially when COVID struck, it melted down. And then we had historic global monetary response, printing whatever it would take to keep things going, and it just came roaring back and melted up. And in spite of a lethargic economy, a lot of people out of work, large unemployment,

3:58 etc., we've got stocks at record values, just general stocks, not gold mining stocks. Gold mining stocks have a long way to go. And so I think we're late in that stock trend and early in the gold mining stock trend. But I must say, I mean, if you'd have told me that the S&P or Amazon or any of the big companies that made new highs post the COVID crash were going to make new highs when we were in the crash at the bottom. I'd have said there's absolutely no way that can happen. And I was totally surprised by how much the monetary stimulus that took place flowed into flowed into the old asset class of stocks. Thanks, Lauren. And last but not least, Stephen. Yeah, I mean, obviously very kind of right across the spectrum. Didn't think we'd be working from home for this long.

4:48 I knew it was going to be a while we'd be set back. You told me we'd still be all working from home, however it is, 9 months later. I would have told you you were crazy 6 months ago, but it seems like it's been for the best. So, you know, I think it's been

5:01 good in some ways. It's really shifted the paradigm for what work looks like and what work will look like going forward, which I think everyone's still wrapping their heads around and will be fluid going forward, but it's definitely gonna be a bit of a new normal. So yeah, I think it's been good. People have, like you said, tried to find that work-life balance successfully or not. And that's going to kind of remain at the forefront. I would also echo what Lawrence said, that I didn't think we're going to see a V-shaped recovery in the broad market the way we did. I know I didn't think it was it was the financial apocalypse or anything like that, but thought it was going to take a lot longer for us to reach new highs in the market. But, you know, I guess there's something to be said for the saying don't fight the Fed. Just, you know, to point out that it's interesting if you look at the S&P pricing gold rather than US dollars, it's kind of eye opening how much of those returns are driven by stimulus versus kind of something tied to a little bit more real of an asset like gold.

6:02 Perfect. Thank you very much. Now I want to go back to our predictions at the end of 2019 and how they fared given how much unpredictability we've all faced.

6:15 More importantly, do you still remain bullish on Gold? How about we start with you, Steven? Sure. I was looking back actually, and some of my predictions at the end of 2019 fared pretty well, all things considered. Our mining team, Steve, highlighted how Gold miners are in a good position going into 2020 before kind of everything melted down. Balance sheets were strong. Cost discipline had been a trend at the majors over the last several years. We're starting to see a cycle of good free cash flow and maybe slightly higher dividends across the board. Maybe a little more M&A, what we're looking forward to. And it seems like a lifetime ago, but if you remember, the Fed had stepped in in September 2019 in the bond market doing open market purchases to try and try and stabilize the price action there. So the macroeconomic backdrop on Gold was already looking pretty good before we hit kind of the crisis mode.

7:09 You know, all that ended up being very important for a bunch of different reasons. You know, the strong balance sheets allowed

7:15 major miners to weather COVID quite well in terms of shutdowns and access to lines of credit. I know the low operating costs meant that as things did open back up that some incremental COVID-related ongoing costs wasn't a make or break proposition. And then obviously with the run-up in the Gold price, free cash flow and dividends have come in with force through 2020 and allow the gold miners in good positions to reap that benefit. So, you know, I'd say kind of right for all the wrong reasons is how I would characterize some of my 2019 predictions.

7:51 Perfect. How about you, Lawrence? How did your 2019 predictions fare? And are you still bullish on gold? I'm extremely bullish on gold. I'm probably the most bullish on gold of anyone on this panel or most investment managers. I think it's going multiples higher than where it is today over the next 5 to 10 years. But I thought gold would be higher and it is. I thought the gold stocks would be much higher and to some degree they are. One of the most shocking things about the year to me is that the gold stocks typically represent a stream of gold coming in. As Buffett says, gold just sits there, it doesn't lay eggs. It goes up or, said another way, the dollar and other fiat currencies go down. So in fiat terms, gold prices go up. The companies mine a stream of gold and so they represent a cash flow stream on a discounted basis coming back.

8:38 And the history shows, historically, when the metal goes up 10%, the companies go up 30%. There's generally about a 3x multiplier.

8:47 I was just checking it this morning. I was rather shocked to find that year to date the metal's up about 19% and the GDXJ is up about 20%. So there's really the stocks have not performed the way they should have. And I attribute that to what I call battered gold bull syndrome. So and what that is, is that I, you know, I think people are still afraid of their own shadows investing in these things because it's like me and I think these 2 gentlemen as well, they were around between 2008 and present. You know, we all lived through a hellish bear market from

9:20 2011 to 2015. And so a lot of people, and I even see it in people I talk to in the mining industry and the banking industry related to mining, well, we're going back to 1700. So don't build any models on $2,000 gold. Well, I just don't see how we're going back to 1700. I think we're going to 2500 and relatively soon. So but but I think the market is telling you that the price of the stocks are telling you that The average gold stock investor thinks we're going back to 1700.

9:49 And I think when I think of this next run up when we take out 2050 or whatever the last high was, you know, in early August there, you know, these stocks are going to take off like a scalded dog. I mean, it's because there's a lot of catch up that has to take place. I mean, we've got companies, I mean, like the one represented here, they're selling it 3 times cash flow, which is that's just insane. I mean, I've never seen an industry so oversold and so relatively cheap compared to its underlying fundamentals. So, you know, I was very bullish coming into this year on the stocks and the metal. The metals worked out the way I thought it would. The stocks have gone up, but not nearly as much as I thought. How about you, Neil? Well, listen, I think we're the miners here on this call.

10:35 And for us, we were going into production for the first time ever. So we weren't relying on a higher gold price. We didn't need one. We were happy with where it was. We just wanted to bring production online and generate cash flow and be able to control our own destiny.

10:49 Well, with what we've experienced last 9 months, we still did. So that's to us. That was our hope without even thinking COVID would shut down the world as it has. So, yeah, for us, our prediction of being a producer, generating free cash flow, which we would have at $1300 or $1500 gold as well, certainly has come to fruition and we're just getting started. So,

11:15 yeah, I guess we're quite happy with how things have progressed from a year ago to now. You know, we started the new year with not a lot of cash in the bank and a lot of potential risk, not COVID related in terms of startup risk and procurement risk and all those good stuff. So certainly we're happy with how things have proceeded for us as a company operationally.

11:41 As Lawrence pointed out, maybe not on the valuation side, but having a strong balance sheet means that that can fix itself without having to go raise capital to do so. So again, I think we're happy with how we enter the year and how we're ending the year and how we're set up for what I think is a great new year. That makes sense. Great. It sounds like a lot of good things to look forward to. My next question is for Lawrence specifically. In April, you published a report on why gold should do well on the way to hyperinflation. Now that the US election results are in, and country after country has announced economic stimulus packages, do you still predict a future hyperinflation?

12:25 Well, no. I don't, you know, look, the future is always uncertain and no one knows what's going to happen. I think hyperinflation is certainly one of the possible outcomes. There are some people who are absolutely convinced it's going to happen, and then there are others who think there's no chance of it happening. I think the probability obviously lies between the 2 boundaries. You know, we could do a restructuring, we could have high inflation for a number of years, or we could slip into hyperinflation, depending upon what people do. You know, the issue here really is that there's too much debt and that the U.S. Obligations and the U.S. Dollar are being substantially debased in order to keep the economy and the world economy going, and that in light of that, there needs to be and there will be inflation. There has to be inflation. If not, if the government doesn't continue to set up a situation where we run substantial negative real interest rates, And we have negative real interest rates now, but I wouldn't say they're substantial.

13:21 You know, we have to run substantial negative

13:22 real interest rates the way we did after World War II, where in a couple of years you had negative real rates of 10, 12, 15%. We're not gonna be able to avoid an overall collapse of economic activity in the economy. We're going to have something like the Depression. So in light of that and knowing the way the politicians operate, they are going to do what they absolutely have to do, which is to provide the money necessary to keep the system functioning. And as we've seen, and anyone who Googles and looks at the charts of the growth of M1, M2, central bank balance sheets, whatever, they were all ramping up and getting larger year on year before COVID. COVID literally made them go almost straight vertical. And they can't take it back. If they try and turn it, I mean, they can, yes, they could take it back in theory.

14:12 But if they were to take it back, the economy would collapse. The banks would collapse. Everyone who's levered would collapse. We would have a 1929

14:21 slash 33 style deflation that would just be horrific. And I think that faced with the choice of that or the face of or the choice of printing the money, providing the liquidity necessary, doing the stimulus necessary, that's being talked about by Biden and others. There's no doubt that they're gonna make the choice of keeping things going and deal with the inflation down the road. They're gonna hope they can outrun it, which is unrealistic. I mean, we can outrun it because we've got sound assets, but the average stock, the average person is not going to be able to outrun it. And so could it go all the way to hyperinflation? Yes. Will it go all the way to hyperinflation? I don't know. I think it's I think it's a possibility. You know, the system is broken and the people who run the system are trapped.

15:07 And that's what informs my decision to be in this area with a very large piece of my own personal net worth and assets. And that is that there's really only one outcome here, and that is that they have to debase the dollar in gold terms, gold and silver and Bitcoin terms. So, you know, they'll do it. I have little doubt of that. They will do it. How they do it, the course of them doing it, how fast it happens, some of the rules they might change on us. I mean, they're going to do everything they possibly can to try and hold the system together without having hyperinflation. And they may be able to hold it together without having hyperinflation, but they're going to have inflation. In fact, they know they need inflation. They don't say that, but they know they need it because there's no way the debt level as it exists today can be serviced, you know, under the GDP structure that we have today.

16:00 All right, thank you very much, Lawrence. My next question is for Stephen. Stiefel Canada just made some positive executive hires. Is that the way of signaling confidence in the economic recovery and prospects for 2021?

16:15 Is there a change in business focus? Can you speak a little bit to that? Yeah, for sure. I don't think it's a change in focus. Stiefel GMP has always been focused on being the dominant brokerage in Canada in the small and mid-cap space. And mining has always been a key piece of that. Recent additions to our team certainly allow us to build more clout in that arena, as you mentioned, some significant hires in our mining team in both research and banking and sales as well, right across the board.

16:47 We brought some really smart people on. Since the Stiefel acquisition, people have seen Stiefel GMP as the best platform in Canada to make an impact. As a firm, we've always been nimble and hungry with lots of differentiated ideas. We dig a little deeper, we like to think, And that energy certainly attracts good talent. Now, I think we're in a great spot for the next leg of this economic cycle, looking forward to a post-pandemic world. And I think precious metals investments are going to continue to be a very large part of that. Gold and Silver and gold and silver equities definitely had a spectacular year, even if they didn't quite keep up with gold as they should, the way Lawrence pointed out. And they definitely rushed to the forefront of investors' mind during the depths of the COVID crisis and kind of backed off from that. But I don't think it's a 1 and done scenario.

17:34 I think we're still very much in the early innings of this where the whole picture for precious metals is unfolding.

17:41 We're coming into the end of 2020 and investors are looking for where to best deploy capital going into 2021 for the next leg of this recovery. And quality mining companies like Step, among others, are going to benefit from that. Across the industry, we're actually seeing relatively low valuations on a spot P now basis, a metric we track. They call it adjust for the current Gold price into all of our models and then looks at the current share price, especially compared to the last run up in Gold. You know, while the last Gold bull cycle may have been a tad overdone. We certainly aren't seeing nearly the same kind of multiples yet. But as I said, we're still still early in this cycle and would expect to see kind of those multiples expand as this gold bull market kind of takes hold and continues to roll along.

18:33 I know the rollout of the COVID vaccine is great news, obviously starting in the UK and Canada just got its first shipment today, I believe.

18:41 And that's not going to kill by any means. A vaccine is going to take time to distribute and it's going to take longer for the global economy to build back real strength, not just money printing. You know, as Lawrence mentioned, the Biden administration has been pretty committed to stimulus spending to try and kickstart the economy, which is going to devalue the dollar. They're kind of trapped in their own low interest rate, negative real rate regime.

19:11 And that's going to be something that we definitely keep a close eye on, but is going to stick around as a key factor behind gold and then flow through the gold equities for the next few years. When I look at individual junior companies, free cash flow generation and growth are key to capitalize on this Gold bull market and Step's in a really great place for that. I think coming right online at a perfect time in the cycle, you can't predict the Gold price dead on or where it's going to fluctuate, but they couldn't have timed it better. So I think that's great.

19:48 We've seen a phased approach work well, the same way Steps is using with initial oxide production and then expanding from there. So I think the macro gold backdrop for gold and then the way Steps positioned it is really great and they're one of several companies I think is going to get a lot more attention as investors look to platforms like Stifl to direct their investments to the high quality companies. Great, thank you very much, Stephen. Now over to you, Anil. Anil, I know that you're going to have specific views on Gold Outlook as an executive of StepGold, but what do you underhand as a long-time financial capital markets professional in Canada? What trends do you see for 2021 as you look forward to the new year?

20:40 Yeah, so obviously the logical trend of gold's continuing its path, march up, but not something we rely on. And as a miner and executive, not in the forecasting business either. I don't want to put a number on where it's going, but certainly I think starting this year, it's always set up with the amount of debt that's out there. It's probably 2 times what it was in the crisis, the finest crisis that I was. I lived through in 2008 and 9 as a capital markets professional and seeing that a lot hasn't changed since then in terms of debt and balance sheets around the world. So I think, you know, the fundamentals for precious metals still remain super bullish. So I think what you're going to see is that what Steven mentioned is those guys who have leverage and torque to the price, but also have the healthy and strong balance sheets is where people will be, will attract investors because bottom line is we can't predict what will happen in a year. It could be a third wave. It could be some other macro factor that we can't control.

21:47 And you need to be able to weather those storms. And I think that's what's going to attract a new investor base. Yes, there's always good expiration names, but the producers that have very strong balance sheets with a lot of upside and growth, Guys like us who are just getting started, I think, is where you're going to see the capital flow into because, you know, it's already trickled through the majors, I'd say, and now it's slowly, slowly making its way down to guys like us. But again, it's not even there yet. So that's, I think you're gonna see a lot more interest in the junior producer space or juniors and mid-tier pressure on the space. Awesome, thank you very much, Neil. And yeah, I know you're super modest today about focusing on the Step Gold. So I'm gonna turn the tables a little bit and direct this question to Lawrence and Stephen. Lawrence and Stephen, I know, of course, you're here because you are experts in the gold sector, but you're here also because of your relationship with StepGold.

22:44 So I'd like to ask, what do you think investors should pay attention to or should know about Stepgold's value proposition.

22:52 Stephen, how about we start with you? Yeah, thanks, Jane. So I think the first thing I want to mention is how the value of the sulfide deposit and the phase 2 expansion are not yet reflected by the market. You know, the Stepgold team's done an excellent job bringing the first phase of oxide production online and starting to generate cashflow and ramping that up. But I don't think that the market fully appreciates the value contained underneath. I'm anticipating that the upcoming resource update will be a major catalyst and start to re-rate going into the new year. And then with the 2021 feasibility study really kind of solidifying in the eyes of the market what this company is sitting on and what it's going to grow to become.

23:39 This is really developing a second asset all while the first has been brought online, keeping that pipeline full as it is. It's certainly not done there. Like you said, the yield has been modest today, but the ore bodies have kept growing as they've kept drilling them, which is something that I'm really excited to keep up with and see. It's been a lot of drilling to support the first phase of the operation and to support this resource update. But I'm also really excited by where it goes from here of that further exploration, drilling along trend and at depth at kind of the ATO deposit, as well as kind of the early results from UK. I think that's really gonna attract some attention and bring some eyes onto Mongolia more broadly as well, with Step kind of leading the charge in country.

24:34 The other important part, I think, here is the team unlocking value. This is now a proven build team who's shown that they know how to get things done in Mongolia. The existing camp and mine infrastructure is only going to serve to make the execution of the phase 2 sulfide expansion easier. And with the significant cash generated from the oxide mine going a long way towards funding it, limiting that equity dilution, which is something that shareholders always love to hear. The SEP team has managed to commission a brand new mine in a COVID-restricted world, on time, on budget and without any significant hiccups, which is a feat in itself, let alone with the COVID restrictions. I see this success as largely attributed to the way the company views its partnership in Mongolia, having the right team in place right from the guys on the front lines operating equipment and then right up to the board level, really forming a partnership and being the view that is a Mongolian mine with Canadian support, and that's what allowed them to bring it all online with the travel restrictions that we all know COVID has kind of brought down on all of us here.

25:42 And that Mongolian relationship is key. It's still in the early innings there as well as the country is still so broad open for exploration. That Mongolian relationship and fact that they've proven that they have a solid relationship with the government, with the lead debt order for the phase 2 expansion coming from the government as well. That didn't necessarily, wasn't required by any means. But I think that the government is keen to show their support in a real and monetary way. The first thing a lot of people think when they hear Mongolia and mining is the OT, Rio Tinto, call it more of a public relations back and forth between those 2 entities. And I think that's very Rio Tinto and Olympia Togay specific rather than Mongolia broadly.

26:38 I think that's a matter of scale where the country was maybe a little bit bullied by the entity that was Rio Tinto. And the way that Rio Tinto approached that relationship certainly hasn't done them any favors long term. And I see the exact opposite with the way the way STEF kind of presents themselves with Mongolia and with their involvement with the government. And I think that's going to pay dividends for years to come. Thanks. How would you pay attention to in terms of Step Gold's value proposition? Yeah, so step is one of the largest holdings in my fund and I love it as an investment.

27:23 And I'll tell you the reason why. There are really kind of 3 things that I'm looking for when I'm trying to find investments. And I think the sweet spot for all mining investors is, I mean, you want a company where you've got 3 ways to make money. I mean, 1, you'll make money of higher gold prices, and that's true of all gold miners. But the other 2 things that really count are what multiple you're paying for the cash flow that you're getting and what's the production growth going to look like on a go-forward basis. And if you look at the production growth here, you know, you're producing at a 60,000 ounce per annum rate right now, and phase 2 will take them to 150,000 ounce per annum rate. So you're looking at almost a triple of production growth, admittedly, over 2.5 years, and with some risk and financing involved. But the point is, Barrick's not going to triple its production in the next 3 years.

28:11 And then you look at the multiple that you're paying for this. Today, you've got a massively cash flow positive business that you're paying 2 times mine profit or 3 times free cash flow at this run rate at these prices at $1,900, $2,000 gold. I think you're going to have higher gold prices. So Barrick's trading, Big E's are trading at 9 to 12 times cash flow, and this is trading at 3 times cash flow. So even if you just held everything constant, you weren't going to grow your production, you know, you could get a re-rate that would double the value of this stock easily and I wholly expect that that will probably happen in the next 12 months. So you combine the re-rate of the multiple with the fact that you'll be applying the multiple to a bigger number of ounces produced, and then you combine that with rerun the numbers at $2,500 or $3,000 gold, which is what I sincerely expect in the next 18 months, you got a stock here that's easily a 5 bagger.

29:08 That's why it's a big weight in my portfolio. The way I look at these management teams and companies is I look at how they've done it, they've done what they said they're going to do. These guys did an incredibly good job of getting a mind, financing and getting a mind built on time, on budget, in an area that a lot of people regarded as tough. They did it with working with local partners, hiring local people, putting local people on the board, cutting a deal with the government. An indicator of the fact that they've done it right, a guy who's pretty conservative and with respect to jurisdiction, Eric Sprott, stepped up and basically financed this thing. In fact, he financed so much of it, he wouldn't let me in this last deal, which really pissed me off enormously.

29:55 I've got a bone to pick with Anil over that. The point is that this is a good company. It's going to be a much larger company. It's going to be a valuable company. The other thing I don't think people are realizing is these companies had a lot of money spent on them by other people and we're getting the benefit of that. The market cap is $100 million and this thing, it was spun out of, it was Sentara, right Anil? It was spun out of? Yes? Yes. Yes. Sentara had spent what, $30, $40 million on this property before you guys got a hold of it? So you're getting the benefit of a lot of other people's spending that allowed them to then come in and build this mine for a modest amount of money and suddenly without that much capital out the door, you've got something that's creating $30, $40, $50 million of cash flow depending on what you want to assume for a gold price.

30:56 That's pretty amazing value creation and you've got a market cap on that of $100 million US. I'm like, go figure, what's wrong with this picture? I get it, some people are nervous about Mongolia but as they continue to operate and things go well. You know, I mean, I remember when people were nervous about Papua New Guinea and they were shitting all over K92. Well, you know, I was in K92 at a dollar and it's at 7 bucks now. So, you know, there are people grow more comfortable with jurisdictions as operations proceed without problems. And so far this company has proceeded through a lot of operations without problems. I think that'll continue. And I think the multiple growth. So I view it as a really outstanding investment opportunity. That's why I'm in it. Thank you very much Lawrence.

31:45 Now we are starting to see a lot of questions coming from the audience, but before we open it up, let's go around the room 1 more time. What is the one thing you want everyone to remember when we're investing in gold in 2021? Let's start with you, Neil. One thing to remember when they're investing, well, gold is an asset you can't print. You can't print it. It's a hard asset. It's obviously been a currency of choice forever. And it's proven itself in every, I guess, crisis over and over again. So there's a lot of history to back up the value that gold has over time. I think that's the history does repeat itself and you can just read history to get yourself comfortable with gold and for those who are new to gold, which seems to be a lot of millennials.

32:41 My biggest piece of advice to everyone would be to understand that we're on the right side of this trend here, but this is a volatile game. And it's very easy, if you let your emotions overtake you, you can even lose money in a bull market. And so, actually right now, when everyone's a little worried and talking 1700, now's a pretty good buying opportunity and I've been buying like crazy. In July, June, July and August, when everything was running super hard and everyone thought it could only go higher, I was a seller. So you have to understand that it's not a one-way street in this game. I mean, I think we've got a five-year bull market here, so even if you buy at one of those tops, if you're willing to wait through one of the downturns, you know, you're going to be fine. But the point is you're going to find you get better results if you buy the dips and you sell the rips, because there is volatility in all this stuff. And I think I've seen I've had investors, I had some investors who joined me right in the top of July and August, and they're pretty nervous right now. And, you know, we're what are we down 10 or 20 percent?

33:48 It's not a big deal, but, you know, it's the nature of this game. It is volatile and people need to keep that in mind. Yeah, I think I kind of echo that as well, that, you know, in March we saw the broad market correction and the sell everything dip, even while all the fundamentals were lining up for Gold. I think if there's any sort of repeat of that in the next year, I'm not saying there will be, but if there is, you know, to kind of take that step back and realize the bigger picture and what you're looking at when you're buying the real asset of gold and then companies leveraged to gold. I think the other important thing to keep in mind is that, you know, as the gold price does continue to increase on the back of devalued fiat currencies, that a rising tide will lift all ships, as the cliche goes, but that high quality companies will always outperform.

34:48 Those with generating real strong free cash flow, those with growth, as has been pointed out, and with proven execution to boot. So you can kind of apply those 3 key aspects and see if those 3 boxes get checked when you're looking at individual companies, when you're looking for those bargain opportunities and any sort of panic-driven drawdown which is in the gold market in the next few years due to be short-lived, in my opinion. All right, thank you very much. Let's now go into the Q&A section from our live audience today. Our first question is from James, and this is in reference to some recent commentary by the major investment banks such as JP Morgan.

35:34 James asks, does the growth and adoption of Bitcoin represent a headwind for gold industry? Who would want to take that? I'll take that. I like gold and I like Bitcoin. There are 2 different things. First of all, Bitcoin is small compared to gold. So, you know, $300 and $400 billion Bitcoin market compared to a $7, $8 trillion gold market, depending on how much of it's tradable. You know, Even if a lot of people chase Bitcoin and come out of gold to do so, you know, the relative size of the 2, I don't think it hurts gold a lot. At the margin, does it hurt a little bit? Sure. But the thing to keep in mind is there are different assets. One is 5000 year old money that has no energy deficit going forward, the energy spent when you pull it out of the ground.

36:20 The other is the best performing asset class on the planet in the last 12 years. And I own a lot of it because of that. But it also is subject to drawdowns. It went from 19,000 to 3,500 on the last drawdown. And that hasn't happened to gold and probably is unlikely to happen. So, you know, people need to decide how much volatility they want to live with. You know, but they both, in my opinion, they both have merit. And I find that when people sit there and the Bitcoin people think gold's going out of business, the gold people think Bitcoin's a fraud, I think they should both recognize that we're all on the same team fighting fiat currency. And there's going to be, they're going to coexist for a long, long time. Gold's not going away and neither is Bitcoin, by the way.

37:09 They both have value and they represent slightly different approaches. And, you know, Bitcoin's a lot easier to transfer big amounts of it quickly over long distances. Pretty hard to ship 1 billion dollars worth of gold. You can do that in Bitcoin with a few keystrokes. So they're different is the way that I think about it. Anyone else want to jump in about Bitcoin? I don't know enough about Bitcoin, but well said. That's a great, those are great points. Even the guys who are in the business, the gold business. Yeah, you shouldn't hate on guys who are on the same team. There's enough to go around. There's plenty to go around. I mean, one of the things I tell investors when they're looking at my fund, I think it's important for people to understand, there's $300 trillion worth of financial assets in the world. $300 trillion.

37:57 That's bonds, stocks, not even including real estate. It's really just bonds and stocks and cash around the world. The entire gold and gold stock industry is about $4 trillion. It's like a little over 1%. So 99% of the financial assets in the world aren't gold. So if that 99% starts thinking to themselves, you know, these governments that we've got, they're really out of control. They just can't stop spending money and they have to print money in order to keep their economies going. That's going to mean debasement And that's why gold has gone up 9% a year on average since 2000. I get 0 on bonds and I can get 9% on gold. You know what? I'm going to sell some of those bonds and buy gold.

38:45 We don't need all 99 of those people who come chase gold for us to do plenty well. If just a couple percent more, if 5% of them or 10% of them or even a couple percent of them say, you know, I don't want these stocks, I don't want these bonds, I need something that can't be debased, our stuff's going to go up enormously. It just is. And so to me the great lie that's been told by the Keynesians and the powers that be that run the financial markets in the world, the great lie that's been told is the notion that fiat money has value. And you know it's a lie and it's coming to be seen as a lie because just like so many other things, the establishment tells us are lies. And as more and more people come to see that, they're going to say, OK, I get it. I'm going to protect myself. You know, I'm going to buy something that a government can't destroy.

39:32 And they're going to come after gold. And you know, we're going to see $2,000 and $3,000 and $5,000 and $10,000 and then some number probably higher than that but frankly you know we'll be doing well all along the way if we just see those numbers so that's that's at least that's my opinion. All right, thank you very much. Next question is for Steven. Harry's asking, what other exotic jurisdictions does CFO have investments in? And what would you suggest is currently off our radar, but should really be in focus? A few key ones. You know, came up earlier that Papua New Guinea is 1 that's viewed as exotic with K92 certainly doing well there.

40:24 But that's certainly a jurisdiction that's worth keeping an eye on. I'd say there's swaths of West Africa. I think that's starting to be realized in the broad market that there's gold trends through there, geologic trends I mean, that are starting to definitely get active and sometimes just separated by international borders and starting to look at how to piece some of those together and form kind of new camps. Another one that I think is interesting is Morocco. They've certainly been hit hard by COVID with tourism being a big part of their economy and started to look a little bit more towards metal mining and trying to modernize that industry there. So I think those are some, call it 3 key regions off the top of my head that I think are exotic.

41:19 You know, it's certainly not not Timmins in Canada or, you know, Carlin trend in Nevada. But I think we'll start to hear more about the next next couple of years. Great, Thank you very much. Our next question is for Neil. Nigel is asking, apart from, of course, the valuable funding that Eric Sprott provides, what else does he bring to the STAT table? Does he provide consulting advice or anything else? Yeah, no, there's no consulting advice provided by Eric, but the reason we did take his capital when many were looking at us saying we didn't need it, was, well, I guess there's 2 reasons. One was it did provide us the bullet of cash to have that bulletproof balance sheet, as I mentioned earlier, that if there was, we didn't know where we were in the pandemic, we were still in startup ramp up mode, having that extra bit of cash from a brand name like Eric Sprott gave us the strong balance sheet to, like I mentioned before, to weather any storm. So people can't look at us and poke holes.

42:22 In fact, we had a better chance of re-rating, like Lawrence mentioned, to the 2 and 3 and 5X without raising capital to get there. So take it at those levels, you probably have a better chance of getting to those multiples instead of doing it along the way. And the second, and I think very important, was the fact that he chose Step as one of his 1st Mongolian investments. For the last 18 months, he's been obviously investing in a lot of junior companies in the precious metal space, as we know. So we're not the only ones by any means. But they were in the Americas. They were in North and South America. They were not Mongolia. And him providing that endorsement, that blue chip endorsement. He is a fund, right? I mean, he's a family office or a fund manager, obviously in the billions here.

43:12 That provided a blue chip manager to attach to our roster, which added a lot more eyeballs to the story. And you don't see that effect all at once. Yes, we saw some on the uptick of our stock price, but now going into the new year, we probably have thousands, if not hundreds of thousands of people who, through Eric's investment, will have eyes on the step story. So it's very strategic to get more eyeballs globally in that endorsement from Eric. Great. Thanks, Anil. Our next question is in response to our discussion about hyperinflation with Lawrence. This question says, what are the contrapoints to hyperinflation? Is that the US is currently entering a period of reduced consumption and productivity due to the aging demographic as experienced by countries such as Japan and parts of Europe. What are your thoughts on this and the impact on gold?

44:06 That's a great question. I mean, 2 things, you know, people say, well, Japan hasn't had hyperinflation, they've done a lot of money printing. It's true, they're a nation of savers. That's one of the reasons why. And they don't have the safety net that we have, and that's why they're a nation of savers. Part of the hyperinflation thesis here, as it's laid out by Luke Grohman so well, if you follow him on Twitter, is the notion that we don't just have $27 trillion of federal debt. Of course, we do have that. That's what's known. But we also have off-balance sheet liabilities and depending on how you calculate it whether you use Kotlikoff's numbers or the Congressional Budget Office numbers we have off-balance sheet liabilities of between 140 and 200 trillion dollars. What does that mean? That means that for my generation, I'm 63, I'm right in the middle of the baby boom. My generation is retiring and every one of those people is expecting Medicare and Social Security. And if you did a net present value of all that, it's another $150, $140 trillion, even by the CBO numbers, which I think are low.

45:08 So the U.S. Isn't just running at $27 trillion in debt and a huge deficit every year, but we've got a pay-go deficit on a go-forward basis of $140 trillion. I mean, there's never been a country that's been, you know, certainly not a world reserve currency country that's been as bankrupt as we are right now. The U.S. Just cannot meet its obligations without printing money. So the difference between the reason that hyperinflation is a possibility, and it really all comes down to psychology, is when do people, when do savers and other investors lose confidence in the US? Or do they lose confidence in the US? Are they willing, like they did post-World War II, to sit there and live with negative real interest rates?

45:53 Very possible that they are. If they are, we're just going to have inflation. But there's something called CSIP, which is Currency substitution inflation psychology, which is something I coined, and I believe it comes when if people decide, you know, these dollars are losing value, I'm getting killed in these things, they're going to say, I'm going to sell them, and I'm going to buy something else, and that something else is going to be gold. By the way, a small version of this happened in the 70s bull market. I mean, gold in the 70s, gold went from 35 to 800. And I remember talk, I was an early investor at the time, I remember talking, the dollar is going to fail. And Paul Volcker came in, put interest rates up to 20%, nearly bankrupted my father. And as a result of that, they were able to save the dollar and create the deflation that we've had for the last 40 years.

46:40 But what happened, there was a miniature version of Gresham's Law. Gresham's Law is good money drives out bad. And so if people start going after gold and silver and other forms of hard money in a big way and abandoning the dollar and other paper currencies, that will create hyperinflation by definition, because nobody will want to hold the dollar because everyone will realize what has to happen is people have to realize that they can never stop printing and they can never stop printing in accelerated amounts. And once that happens, people are going to, you know, that's how Weimar happened. That's how you got wheelbarrows full of money would buy a loaf of bread. The money becomes worthless because the demand, it's not a velocity issue, It's a demand for the money issue. I mean, if everybody thought they were holding monopoly money and that they could just print unlimited amounts of it, everyone would instantly rush to exchange that money for something that was real, whether it be a piece of real estate, an automobile, clothing, food, a car, whatever. I mean, It just doesn't matter. I mean, and obviously gold and silver and Bitcoin, but they would rush to get out of that thing which is falling in value because they know that they could see where it's ultimately going to end up and that is worthless.

48:00 That's what hyperinflation is. Will it happen here? I don't know. There are a lot of factors. I mean, there are a lot of factors. No guarantee that it's going to happen. But I think 5 or 10 years ago, smart financial people would have said that's absolutely impossible. The odds of that are less than 0 or less than 1%. I hear smart people, very smart financial people discussing it, implying that it's at least on the table. Ray Dalio and many, many others who are world-class money managers have pointed out that this is one of the very real risks. And because it is a risk in my view, it's absolutely essential that everybody do something to protect themselves, you know, protect themselves and their savings.

48:48 And obviously, I think the first place to go is gold silver and Bitcoin All right, thank you very much Lawrence Our next question talks a little bit about M&A and it's open to any of our panelists here today if you'd like to answer it. It says, as a general point, why do we see limited M&A by majors and mid-tiers? Is it because their pipeline of production is so deep that they can deliver it all internally? What are your thoughts? I'll jump in on that one, Jane. I think part of it is 2 different mindsets. The potential acquirers want everyone to pay $3,000 Gold and the acquirers are saying we're not willing to do that yet. I think part of that comes down to the history too, that in the last Gold bull cycle, a bunch of the major producers definitely paid up for assets that they maybe shouldn't have and were punished as a result and took them quite a while to deal with the implications, balance sheet implications, as well as perception implications as some of those investments didn't exactly pan out the way that they planned. So I think that sense of history is something that's showing a more restrained M&A market for now.

50:08 But I certainly don't think it's because they have production profiles that are packed to the gills from now until forever. I think that, if anything, it's the opposite, that major producers do need to be active either through much more exploration than they've done in the last decade, quite frankly, or more likely through a creative M&A to be able to maintain their production profiles, let alone increase it. So it's something that I still do think is on the horizon for the industry. We've certainly seen some little pieces of M&A, but certainly not many of the multi-billion dollar, 35% premium deals that we've seen kind of in previous cycles. But I do think there's more of it coming.

50:55 I echo what Stephen says. I think there's a lot of M&A coming. And I, more importantly, I think, you know, if I had a big company with access to capital, I'd be buying the shit out of everything that was small and cheap. I mean, to me, this is a classic example of the managers of these big companies, you know, driving from the rearview mirror. You know, they got burnt last time, paying way too much, and now we're in the early days when good assets are still cheap of a bull market and they've got expensive paper that they could use to buy those assets they should be buying the shit out of them and they're all totally fucking up because they're stupid and they're missing an opportunity and what's going to happen is we're going to have a real bull market here and the price is going to get a lot higher and of course then they're going to come along and totally overpay and do exactly what they did last time.

51:40 But you know the answer is they should be buying right now but they're not and that's what tells you that we're still in the 2nd or 3rd inning. And by the time when they start buying and really overpay, we'll know we're much closer to the top in the market. At least that's my opinion. And that's where we're willing to entertain offers. We'll wait till then. But yeah, those guys hit it right on, Steven and Lawrence. So I don't know if there's anything for me to add. Obviously COVID does slow some of the M&A down as well with the lack of site visits and due diligence. A lot of people can't write the big checks without having already completed those that DD in the previous year, which some have, mind you, but I think that that was a delay. But same thing, they're being gun shy because of what happened last time and they end up doing the same thing because they're waiting too long.

52:31 Right. Thanks, everyone. Next question is for Neil. Can you help us wrap our head around the foreign currency implications of a Canadian company that's operating in Mongolia and reporting in US dollars? I wish I had my CFO on the line for this one. Yeah, listen, we changed our reporting currency to USD because obviously originally a lot of our costs were in terms of CapEx in USD and now today as a producer our sales are in US dollars as well. So it becomes a lot easier when that's your functional currency. We've raised capital in USD and Canadian obviously with equity as well as USD for some of the convertible ventures.

53:19 But going forward, a majority of our sales or all our sales are in USD. So it just makes more sense because then you can then look at how much you keep in certain currencies. Local currency going forward is operationally 60 to 70% of our costs going forward are in local currencies. So you want to keep it in the high interest rate accounts in country. USD is obviously where things are going in the future. I don't think you need to hold a lot in Canadian dollars. It's just not a functional currency for us anymore. It's just a listing we have, obviously, here in TSX. But I won't go any further than that. I don't have the answers fully. This is our first year of operations. We just made that decision earlier this year, I believe, in terms of functional currencies. I don't think you've seen the full effect of all of that question, but I'm happy to get back. And whoever asked that question, we're certainly happy to get our CFO on the line who's doing all that work.

54:19 Perfect, thank you very much. Okay, let's go on to our next question. Many countries have very weak external accounts with high risk of debt default or restructuring. For example, Zambia, Suriname, and Mongolia looks vulnerable. What are your views on that? And is there any implications for Stead Gold? Who would like to jump on that? I'll go from at least from the from what we're doing to diversify that risk again to having accounts in Canada offshore Singapore and in Mongolia so diversifying our capital as we produce we do send money offshore capital sits in Canada Singapore in different currencies as well So I think we're doing our best to diversify some at risk where there is some vulnerability.

55:11 Again, exactly as that question was asked, you've seen that in African countries, for sure. Not going to dispute that. But so the only way we're currently handling that is by diversifying our capital into other stronger countries and institutions as well. I don't know if anyone has anything else to add to that. How do you feel about Mongolia's jurisdiction? I guess I'll jump in a bit on that one that I feel that it's a fair bit more stable from a broader geopolitical standpoint than many of the other kind of goal producing nations. Now, I mentioned West Africa before, which I do think is emerging, but certainly comes with its share of geopolitical risks that you see governments switch hands, not always peacefully. You see sometimes, like you mentioned, you see in Zambia the financial accounts of the country is not managed, you're not able to withstand a shock, and sometimes some scrambling to get that back under control.

56:22 In that context, I think Mongolia is on the safer end of the spectrum. You know, I'm not going to pretend, like I said before, that it's Canada or the US or Sweden or anything like that. But it certainly is, you know, am I afraid of broad civil unrest in Mongolia? Certainly not. You know, am I think they're steering down the barrel of a gun in terms of a financial economic crisis? Certainly not. So those risks are certainly more present than a developed kind of first world nation where gold mining takes place but not at the extreme risky end of the spectrum when it comes to a global perspective on it. I would agree.

57:08 One thing we've noticed recently is Argentina has really been getting after the gold companies and putting in capital controls. And There are a lot of places in the world that are riskier than Mongolia. Obviously Mongolia sounds exotic and out there and people worry about it, but everything I've seen would indicate that it's a pretty stable place to be doing business. Great, thank you very much. Since we only have a few minutes left, let's wrap up with this last question from Alexander. Alexander asks, assuming that you would agree we're now in the gold-silver price correction stage, he's got a couple questions. How long do you expect the correction to last and how low or how high do you expect gold and silver to go by the end of 2021?

57:57 I'll go first. I think the correction is over. It's been slow coming out of it, but I think we saw the low a couple weeks ago, or whatever that last spike down day was, and we're climbing up slowly. That climb will get faster once we break through a few technical levels, which I expect to happen this month or early in January. I believe the next run will probably take us well through obviously the 2050, all the August highs and probably a good bit higher, maybe $2,500 on gold, $2,600 on gold, and probably $35, $38 on silver. I could see that happening by summer of next year and then maybe another correction sets in after that. It could it could be even larger than that. I don't know. We're at the stage now where it's really hard to predict. If you look at those monetary aggregates they are literally going straight up.

58:48 And so, you know, I know credible technical and financial analysts who think we could see, you know, $3,000, $4,000 gold next year, and the surprises are likely to be on the upside. I have no idea if that's what will happen, but I, you know, I let me say I would be I would be much more surprised if gold doesn't make $2,500 next year than if gold, you know, I think there's a higher chance of gold going over $4,000 than there is of gold not making it to $2,500. I would tend to agree that I think we saw that spike down, kind of signalling a bottom, and that was where some of the Gold shook out of weak hands for those who are maybe a little bit better informed on the short to medium to even long-term drivers behind it.

59:45 At Stiefel, we conservatively use an 1850 Gold price. That's not to say that's necessarily where we see it going in the short term. I do think that January has always been a historically very strong month for Gold. I think an incoming new president in the US is going to be a catalyst and people are going to wake up to what that means for a lot of these fundamental drivers. I wouldn't be surprised, I'm going to be a little more conservative than Lawrence, but I wouldn't be surprised if we see new all-time highs in the first half of the year. Maybe not straight up, but definitely we would expect to see a correction upward. We've had this long period of consolidation around the 1860, 1830 level right now, and that's forming a great base from which the gold price will shift upwards.

1:00:42 I would put in 2 cents on silver, too, that we've seen silver kind of lag on all financial metrics. Silver is a bit of a weird one with a foot in both worlds, is both a precious metal and an industrial metal with silver consumption kind of split 50-50. It has lagged by any of those traditional as a financial element. And then as you see a global recovery over the next couple of years, there's going to be more industrial demand. It's going to drive a second leg for silver. So I think there's definitely some catch up to see in silver. Again, we conservatively at Steve Lee's $24 long term silver price, but would not be surprised if we're adjusting that upward inside the next 12 months. And Anil, any thoughts? Listen, I won't use any pricing. We're obviously set up for a strong pricing in both precious metals, gold and silver.

1:01:37 We as a company are set up to have a very strong margin, whether we're at today's pricing or any increment higher, whether it's $100 higher or $500 higher, that means our margin goes from 1000 to 1100 or $1500. So we just want to be set up for whatever the case is going to be and obviously maximize our cashflow and our profitability so we can continue to self fund and expand our operations. But certainly everything is looking very strong for us in the new year. The seasonality, as Stephen mentioned, in January, February, is obviously the probability is very strong and being a very strong start to the new year with adding the election and everything else to the mix. And all we wanna do is be prepared for it. And I think that's what we're set up for finally. So that's looking forward to the 2021.

1:02:27 Awesome, well, thank you everyone, Lauren, Steven, and Neil for sharing your thoughts with us today and taking the time out. And thank you all of our members in the live audience that submitted questions. I know, unfortunately, we weren't able to answer everyone's questions, but feel free to reach out to any of our panelists directly and they'll be, I'm sure, happy to respond to you. And now, Anil, I'd like to pass it back over to you for any final closing thoughts. Yeah, no, thanks, Jane. And thank you, everyone, again, for joining this fireside chat, something new and unique. And I really want to thank Stephen and Lawrence, who obviously, I would say smarter than I am in many aspects of precious metals. They cover it.

1:03:13 We just try to mine it, but you guys are the money guys and you cover it from that level and you brought a lot of insight and I think really good responses to our audience. I really appreciate you guys joining the panel here because I would not be able to handle those questions by myself. And as I just want to reiterate again, thanks everyone, Stepgold for your support here from the Stepgold team. And we're really looking to knock it out of the park in 2021. So I think everyone knows where we're heading and what's next. So Thank you again. Thank you everyone. Until next time. Bye now.