Silver & Gold Extremes w/ Eric Sprott – Keith Neumeyer



(00:33) Daniel: Greetings, and thank you for joining us at Today’s show is a precious metal investor’s dream come true. I have two of the top guys of the sector here to answer the top questions of the day. Are we near or at a bottom? What’s next for the precious metals, the U.S. dollar, and where they are investing right now. My first guest is a legendary investor and billionaire, who has helped thousands of investors through the education and asset management his company provides. By financing small companies in the junior resource sector, he’s become one of the wealthiest men in all of Canada. He is the founder of Sprott Asset Management, Eric Sprott. Eric, thank you so much for joining us today.

Eric: Hey Daniel, it’s my pleasure.

(01:26) Daniel: Our second guest has has built not one, but two billion-dollar mining companies and he's just launched his third. He’s currently the CEO of one of the world’s most primary silver producers. And more recently, he’s the chairman of a new resource acquisition company, First Mining Finance. Keith Neumeyer, thank you so much for joining us on the show today.

(01:48) Keith: Thanks, Daniel.

(01:51) Daniel: Well, gentlemen, I want to get right into this, and really focus on the question that’s on everyone’s mind… the resource stocks have been in a bear market, the precious metals have been pretty much letting people down, going down the last few years, even though the fundamentals seem to be better than ever. So I wanted to start with physical silver supply and demand. Eric, as the founder of Sprott Asset Management, which now boasts some of the world’s most premiere precious metal funds, you know the physical market like no one else. So let me ask you, do you foresee a time where someone demands delivery from the COMEX and the COMEX is unable to deliver that silver to them, and is instead forced to settle in cash?

(02:33) Eric: Well, Daniel, to be brutally honest, I mean, that’s what I dream of. But I don’t dream without any background information, and everything I’ve looked at, I mean, I’ve written articles years ago suggesting that demand for physical gold was in excess of the supply by a factor of as much as 2,000 tons a year. To put it into perspective, the gold market’s a 4,000-ton-a-year market, so that’s a serious under-supply, which I believe that the central banks of the west have been making up the difference year after year. And even as we move into the end of 2015 here, we see quite interesting developments in the gold markets where, you know, China’s finally come out and said now for four months in a row, they’ve bought roughly 15 tons a month, which, of course, was neve6r in the data before, because they never announced it before. Well, that amounts to 180 tons a year, it’s almost 5% of the gold market that no one had ever included in their data. So here we have 5% new buy and the price of gold’s right at its low, versus them not being reported. And I’m being very critical, the world gold council’s drastically understating Chinese demand. We see deliveries on the Shanghai Gold Exchange of something like 2,200 tons a year. We see India is probably going to be pushing/buying close to 1,000 tons this year. There’s your first 3,200 tons. And now with the roughly 200 tons a year that the People's Bank of China are buying – which they don’t buy off the Shanghai Gold Exchange – I can get pretty quickly to 3,400 tons. And I’ve no doubt what the other 180 countries around the world that are… with Russian demand, which has been very strong recently. Everything says to me that the demand for gold is in excess of the supply. And, of course, you wonder why the price would go down, but people look at the COMEX which stays manipulated, which is so obvious to me what’s going on. We have 5 tons of physical gold. We have something like 1500 tons of claims against that 5 tons. So to be quite direct about your question, yes, I kind of wonder any day, sis somebody going to snatch those 5 tons of gold, and we end up with some kind of cash settlement. But then you have to think, if we would have a cash settlement, having taken gold from 1900 down to 1100, all under the threat of a rate increase for the last 5 years, which has never happened and may not ever happen, and then all of a sudden they’re like “well, really there is no gold here, we’ll just cash settle it at $1,100.” Meanwhile, we’ve lost $800 on a false claim. And perhaps maybe people in the know know about this, they keep the price of precious metals suppressed because they are the canary in the coal mines.

(05:52) Daniel: Keith, same question. Are you seeing market extremes in the precious metals sector, Eric just eluded to the ounces in the ground that you had just acquired. If you could please share with us what you’re doing with your own money or your own businesses in order to take advantage of the extremes.

(06:10) Keith: Well, as Eric said, the valuations now are quite laughable. As well as many people know, I’ve been in this market for a while. I'm not sure if Eric has seen these valuations before but in my 32 years of being in it, I don't recall ever being able to buy a drilled ounce of gold in the ground for less than $10 an ounce. The last three times I had actually done it for Majestic, they had all been under $10 an ounce. And just to take a step back into history a bit, one thing I think your listeners should know is when I put together First Quantum, or a decade later, First Majestic, I was buying assets when no one wanted them, and prices were very cheap. It even surprised me that I could get gold and silver projects in Mexico for so cheap. You know, an interesting thing is 4 of the 6 silver mines we currently are operating, I purchased from January 2004 to June of 2006, and no one wanted them. We then became the 5th largest silver producer Mexico after 10 years, and remain in that position today. I mean, it's a nice accomplishment. To continue in my strategy so far in 2015, I bought four companies. I bought SilverCrest for First Majestic. Here's a mine that was producing -- or is producing -- 5 million ounces of silver a year, spinning off $3-5 million of free cash flow a quarter, and had $30 million in the bank. They spent $90 million on the mill and mine, and we paid $105 million for it. Quite a good value, obviously. And then with First Mining, we then bought Coastal Gold, PC Gold andGold Canyon... those transactions are closing next week. And that totals 8 million ounces of gold between those three projects, each of which we purchased, as I said, for under $10 an ounce. Not one of these transactions could have occurred in a normal market -- the costs would have been just much, much higher and just unaffordable. And then on a personal note, as I've said a couple of times to some good friends, I've just recently sold my last piece real estate and I'm putting all that money into this sector. I'm going all-in, I think this is "back up the truck" time, this is a once-in-a-decade opportunity, and I'm putting my money where my mouth is.

(08:28) Daniel: Keith, you said First Mining had purchased gold for less than $10 an ounce, and you said it was much higher, typically, in a normal market. Just to give the audience and myself a good idea, what would be normal? Is it $50, $100, $150? You're buying it for less than $10 an ounce in the ground now, what would it have been, let's say 4-5 years ago, or even last year?

(08:52) Keith: Well, I think the question would be, you know you could ask Eric as well, but I think if you go back over the last 30 years, there's been a number of bull markets. And even when gold was down in the $200 range and $500 range, gold ounces generally sold for around $50 an ounce. And, of course, not every ounce is the same, so it's kind of a general statement, so you have to be a little bit careful, because an ounce of gold with a PA, or feasibility study, or permitted may be higher than an ounce of gold in the ground in a low-grade, in a non-permitted, a difficult jurisdiction obviously would be less value. So these numbers are just for generalization purposes, but during the bull market, there were transactions going on for over $100, over 150 an ounce. And now we’re buying ounces for less than $10, so we think the assets we’re buying are good assets, and we think that we’re going to make a substantial amount of money off buying assets in the ground today.

(09:53) Daniel: Gentlemen, Rick Rule has stated a few weeks ago when I was talking to him that $2 billion in 2011 could have taken out the entire silver market. I’m a regular reader of the work by Bill Murphy and Chris Powell of GATA. They’ve made the public aware of the manipulation to suppress the prices of precious metals. Eric, when it comes to the manipulation of precious metals, what is the one thing you can point to for investors who either don’t see it, haven’t looked into it, where you believe it’s outright obvious that these things are being suppressed and manipulated?

(10:33) Eric: Well, I mean, the best example I can give you, the most recent example where… in early October, prices of gold were rising on the COMEX. And every week, we get a report of who are the buyers and who are the sellers. And the buyers were hedge funds, normal investors, and they all bought all this gold and silver. And basically, every ounce they bought was shorted to them by what are called the commercials, which is a group of about ten commercial traders; mostly the commercial banks by the way. And we could say every week, “oh, my God, the commercial shortage is going higher and higher and higher,” and so much so that their short position was something like $50 billion, and they’d short $5 billion a week, and the price would rise, and sure enough, starting around, I guess October 15th, I’m not sure what the exact start date was, all of a sudden silver and gold started going down. And what did we see happening? Even in this latest administrator’s report as of Tuesday of last week, commercials bought back 50,000 contracts, or $5 billion assets of gold, and of course who sold it? The speculators and the hedge funds sold it. So we get this rinse and repeat cycle where everybody goes in and buys it, and the commercials can in essence change the tape, and make it look like it’s breaking down – technically, everyone then has to sell and it breaks down, and they’re there to buy it as it’s going down. And I’m sure we get this following week’s report, which will be Tuesday of this week, since there was lots of action last week, we’ll find out that commercials probably turned around 100,000 contracts of gold, which is 10 million ounces, of which we only produce 80 million a year, by the way, and this all happened in probably two weeks, and they’ll have covered their entire 10 million short position, and it just goes on all the time. And it’s just rinse, wash, and repeat, you know, and it’s so obvious it’s sickening. And, of course, the regular investors [inaudible]. I was even shocked. And I was like all these guys must be way beyond their position limits, which should be enforceable by the CME or the CFTC, but you know, somehow it’s just an unlimited supply, and when you have the deep pockets of the FED that’ll fund any bank that wants money, you can have any size of short position – there’s no regulator. And that seems to be the issue, but no one wants to take on these people, and yet can you imagine what would have happened had there been no shorting by banks? Where would the price of gold and silver have gone, left to their own devices. So it’s ongoing, there’s a fellow named Ted Butler that writes about it very well. So everybody else is with the rest of the world, and you can just see it’s the same old recipe, and hopefully, as you and I speak today, most of this shorting has been done, and [inaudible]with the regular purchases of gold and silver, and we can head back up again. But it just seems blatantly obvious to most people who are students of this market exactly what’s going on.

(13:54) Daniel: Eric, is this something that’s very profitable for them, or is this something that they do on behalf of other entities, like governments and central banks?

(14:04) Eric: Well, all I can say is it’s incredibly profitable. I mean, just think of, you know, the 10 million ounces times $100 – the $100 change in gold – you’re talking $1 billion here that somebody made in a matter of a few weeks, which gets repeated all the time, and God knows what happens in the options markets, because the options markets probably follow the same kind of trend with people buying COMEX contracts, so they all get beat up in their options contracts as well, most of it from the central bankers. So there’s a huge payday every month or six weeks – going both ways, by the way – that these commercials partake in. So, you know, of course it’s profitable, and going back to my other example, where they took it from 1,900, with those huge raids in 2013, the net, somebody picked up $800 on the price of gold that they probably never should have got down… except it was coordinated, and with enough money being on one side of something, you could sell 5,000-10,000 contracts in a second or a nanosecond, you can set the price. And that’s exactly what goes on. So yes, it’s very, very profitable for them.

(15:24) Daniel: Eric, the whole market seems to be manipulated. You know, the Dow Jones obviously being manipulated up. Many other markets people have cited manipulation. Is there anything that separates the precious metal manipulation that makes it more sinister?

(15:41) Eric: Well, as I eluded to earlier, I believe the reason the precious metals went down is because 1) there was a physical shortage. If you just went back to ’13, for example, that’s when the Indians put all these new rules on that preventing Indians from buying gold, which dampened the Indian demand for a time, where I think they were shut down from 100 tons a month to around 7 tons at the low, and I think the central bank of India was in on it, because there was a shortage of gold. And at that time, they smashed, the various ETFs and trust funds, so much so that I think they freed themselves of 700 or 800 tons of physical gold, which I think they needed to get into the market. And, of course, by negating Indian demand, which would have been running at, say 1,000 tons, and getting it down to an average of 100 tons a year, there’s 900 tons there, 800 tons out of the GLD, and they have their solution for that moment in time. In the meantime, they smashed the price, dampened investment interest, then, as you saw this year, the investment interest was starting to come back… I think it was in August that the U.S. Mint sales of Gold Eagles went up something like 455% year-over-year. You never see those headlines in the paper, by the way. But they’re up just some huge amount, and gold is coming back to life, and as it does, all of a sudden, in come all the shorts again. And if we ever get to that cash settlement you were talking about, wouldn’t it be wonderful to get to short something, and then when they run out, you just cash settle at $1,100. That can do wonders. And now we’ve got cash, which is money anyway, gold can do what it wants after that – we’re out of here.

(17:33) Daniel: Keith, you wrote a letter to the CFTC this year, made a lot of headlines. What made you do something so publicly- it seems like you’d be public enemy number-one with these Mafia-type commercial banks Eric just described.

(17:49) Keith: Well, let’s hope it doesn’t get that crazy, and let’s hope for some of the things Eric stated do actually happen. You know, my primary reason was to voice my concerns and frustrations, frustrations and the anger from our shareholders that I hear from almost every day. It frustrates me that other mining executives don’t come out and say something – or do something. In an interview last November, of 2014, I actually made a call to other silver miners to suspend production. I said any month, but I chose June because June is normally a low period – June is the lowest price for gold and silver, generally speaking. And I figured June would be a good month, and I was expecting to get calls. Unfortunately, I didn’t get a single call.

(18:36) Daniel: Gold in the economy… does the economy in the U.S. have to fall for gold to rise? Is it just the U.S. dollar vs. gold, or can physical demand alone take gold and silver higher? Eric.

(18:50) Eric: There’s no doubt that the physical demand for gold away from the United States has been dramatic. And I might point out, Daniel, most people, even at today’s price, in their local currencies, are doing very well on gold. And I’m a Canadian; the Canadian dollar’s been weak, and, of course, we price it in U.S. dollars. So the Canadian crisis is [inaudible]. The euro as I sit here is getting pounded, someone in Europe who owns gold is making money. If you’re in Russia and invested, you’ve avoided terrible catastrophe. Many other countries currencies are down – whatever the currency is, 30-35% -- they’ve done well. We’ve been so U.S.-focused on what the price of gold is that we forget that gold has acted very well in places like Mexico, Australia, Canada, all those various countries that have been under the pressure of, theoretically, a stronger U.S. dollar. And so when we look at the data of how much gold Russia buys a month and how much gold China buys, and the Indians are buying, the turnaround in gold will not be a U.S. phenomena. And there’s lots of data to indicate that the U.S. government has been a seller of gold here, because the gold keeps leaving the New York FED, gold is going to London, from the U.K. to Switzerland, Switzerland over to China. I mean, the flood of gold going from east to west is quite stunning, and I don’t think it would take- I think we’re almost at that point where we might very well have a shortage of gold and silver by a product of this last raid here, so much so that we’ll take those 5 tons from the COMEX because we have lots of people buying silver and gold. Not necessarily American people, but lots of people throughout the world who actually profit quite nicely. The other part of your question, though… of course, it does help when the market starts to break, because it’s the one place that people can go to survive. And laterally, we’ve seen the bond market take a serious haircut here recently, so bonds haven’t acted so well. We’ve had junk bonds weak, corporate bonds are weak, now we’ve got government bonds are weak… okay, well, how are we going to make money this year? I think we have the DOW and S&P are almost unchanged on the year, with bonds being weak, so nobody’s making any money at all. I’m sure the last thing that the powers that be want to see is gold going up in an environment where everything else is either in stasis or is acting poorly. But if the market starts to bank here, I think it would bring a lot of the interest in the U.S. back into gold. But we already have that interest worldwide at the present time.

(21:55) Daniel: It’s very interesting… the bull market, everything but the dollar. Keith, Jim Rogers said that even in the face of weak demand, commodities can rise if there’s supply disruptions due to weak prices. Do we have supply disruptions on the horizon, are we seeing mines close or exploration projects cancelled?

(22:18) Keith: Well, I think it’s already happening, and just to touch on something Eric said about the shortages, I think the whole tank down in the silver prices are the result of investment demand in silver, because the commercials were getting so concerned that this new demand all of a sudden showed up, because the supply demand for the metal is pretty tight. The industry has been consuming vast quantities of metal, and it’s growing each year, and as we electrify ourselves as a human race, we need more and more silver, and this investment demand is really causing destabilization so they did whatever they could to scare away the investment demand, which has worked so far. But, you know, going to the other side of the equation, to the silver miners, the silver miners are really having a hard time – particularly the ones with only one or two mines. And the treasuries is being burned away in the hope that the metals will go higher. The financial markets have shut… you know, they can’t raise money. Management teams are crossing their fingers that they’ll be saved when the metal prices go higher. But it looks really grim, and I’m expecting to see more closures. On the exploration front, billions of dollars have been halted from being spent worldwide, and that’s going to cause problems in the future. The benefits, of course, on the other side of the story is First Mining will continue to be an aggressive buyer and get cheap assets that can just grow bigger. And, of course, the lack of exploration will result in an even greater supply squeeze moving forward, which will likely cause the next bull market.

(23:55) Daniel: Let’s move on to what will probably be everybody’s favorite part of the show: where are the best investments right now for this sector? Eric, do you like the physical ownership here in the precious metals, are you going for high-quality mining shares – you just mentioned Nevada – can you share with us what Sprott’s management is focusing on right now?

(24:15) Eric: Well, I can only speak for myself, but before I even go to it, I want to make two comments on things that I’m certain of. One is that I’m certain the U.S. is broke because of their own data, I mean, they announced that they’re running on a gap basis, something like $70 trillion in presently funded obligations and future employment obligations of $220 trillion. They have an $18 trillion GDP engine that loses a trillion a year. So I will guarantee you that the U.S. is broke. It may not file bankruptcy, but they’re broke. And the other thing that I feel pretty certain about is as you look down the line here at ‘16, ‘17, ‘18, the gold and silver production is going to go down. We’ve already had Keith refer to some of these zinc mines that are closing, and silver is a big byproduct. I don’t know exactly how many ounces are coming out, but it’s not insignificant. And as we see these demand levels take off with a decreasing supply of gold and silver, there’s no way in my logical mind that these prices can continue to go down, and knowing that something has to happen in the U.S. Not just the U.S., Japan’s broke, many of the countries in Europe are broke, it just goes all over the world and shoves into oblivion here that something has to happen. If I was a stock investor, I’d be worried significantly today seeing these interest rates going up on the Treasuries, on the long bonds, the 10-year, the 5-year, because the market is speaking. Forget the FED, the market’s speaking. And when you look at the U.S. Treasury market and you realize that who used to be the biggest buyer is now the biggest seller of bonds, I mean China and the Middle East has to be a seller of bonds, the various pension funds around the world [inaudible]don’t have any oil royalties coming in, and they have to liquidate are going to be a seller of bonds, they used to be a buyer of bonds, well, say the FED thing… who’s going to buy all these bonds? Maybe the market’s actually talking – the real market – the bonds, the yield has gone up, it has nothing to do with inflation, the GDP, or anything like that. It’s simply there’s too much supply of bonds, and no buyers. And if this bond market starts to break here, and I suggest to you that it looks like it is breaking as we speak, all of a sudden you’ve got an interest rate increase, but is the FED doing anything? It may be if the FED announces in December a 25 basis point increase that short-term rates have already risen by 25 points, so it’ll be after the fact, because the market has spoken. But to answer your question on what do I think the opportunities are… I mean, I’m a punter, obviously. I’m a huge gold and silver holder. But when I think of investing new money, I want to be in mining companies, where the leverage on a gain of the price of gold and silver could be incredibly rewarding, where I could easily imagine, you know, gold goes to $1,600, there's stocks out there where we can make 1,000% or 500%... that would be a bit of a slam-dunk, considering how cheap everything is right now. So that’s kind of where I’m focused. As I mentioned, I already bought a mine in Nevada, I increased my interest, I watched over a mine here in Canada that [inaudible]for me, but those are the sort of things that I’m sticking with. The new money goes into stocks.

(28:10) Daniel: Keith, for your recent venture, First Mining Finance, it trades on the TSX Venture under 'FF', a mineral bank that is acquiring assets from distressed sellers, I’ve seen that the top shareholders like Rick Rule, Doug Casey, and Marin Katusa; their fund is your top shareholder . I see through public filings that you are a huge buyer of your own shares. You’ve been public with this company for about six months and have had some early victories. So my question to you is: how is your plan going so far? Are the sellers of these precious metal properties and companies that you’re targeting interested in selling? Because, you know, from the get-go, you said you were looking for distressed projects anddistressed sellers to make win-win deals… are these companies ready to sell?

(28:58) Keith: Well, I would say reluctant, but they understand it’s really the only way going forward. These companies also need to protect their shareholders, and their boards of directors understand that and they’re willing to talk to us. Some of their reluctance comes from the fact that many of these companies have actually spent tens of millions of dollars in their projects to drill out the ounces that they have to find today. They also have had market caps of 10x or even more in a volatile market, so it’s really tough in some cases for these management teams to scrap pennies on the dollar for projects they really like, they fall in love with and hoped one day to develop, and they’re not happy to have to sell. But, you know, it’s being done out of necessity. They realize that joining a bigger company with a broader asset base, with an experienced management team, is actually better for their shareholders. But in some cases, you know, we do run into entrenched management, as in the case of our first transaction for Coastal Gold, the other we did earlier in the year. Our first transaction we did we ended up going hostile on that, which we ultimately won. Fortunately, though, our next two deals were friendly. We remained aggressive, however, in our discussions with a number of other targets. Some may not happen, some will be friendly, but I do expect that some will have to be hostile deals.

(30:25) Daniel: Switching to the U.S. dollar, gentlemen. Eric, you just mentioned it in the last question, so let me just ask you straight out: do you think there’s going to be a major currency event in the next few years here?

(30:38) Eric: Well, it’s sort of an interesting and funny question because as I sit here and look at these other horrible currencies, I mean, we are comparing horrible currencies against each other, and for some reason, the dollar seems to be favored… probably because the Chairman of the Federal Reserve suggests we might have a rate increase, even though they’ve been saying this for six years. I think that the way to measure currencies is not necessarily, you know, the Japanese yen against the U.S. dollar, the euro against the dollar… the way to measure it should really be against gold and silver, but especially gold. And, of course, I think it’s being suppressed because it would make all the currencies look sick, which they are. They’re all sick. I mean, the debt vs. the GDP, the borrowing that’s going on, is staggeringly large. God forbid we ever normalize interest rates, which we’ll never do. We will never normalize interest rates. Everyone would go broke instantaneously overnight if we normalized interest rates. So the worst we’re going to get is maybe somebody will give it a faint 25 basis point hike, only to be reduced shortly thereafter, particularly if the stock market went down or reacted to it. So the currencies are all, in my mind, garbage. It’s just that luckily, they get to compare one piece of garbage to another piece of garbage, which looks a little better when they’re threatening to raise rates, whereas every central bank in the world is talking about cutting rates. Well, you can imagine if- and even Yellen saying well, we might have to consider negative interest rates, I would be surprised if gold went down that day. But they might have to consider negative interest rates, because everyone else is going to go negative here, and you can still look like the best horse in the glue factory of negative interest rates if other currencies have even negative-er interest rates, if that’s a proper word. So I just don’t believe in the currency, I don’t believe in a banking system, and that’s why I’m so focused on precious metals.

(32:44) Daniel: Eric, you know, China and Russia… China, you’ve said, is buying a lot of gold, literally by the truckload. They’re both now pretty much dumping Treasuries at an alarming rate – especially China. This morning, China announced that it’s allowing direct conversion between the yuan and the Swiss franc. Do you think that China and Russia are literally actively preparing for a post-dollar world?

(33:11) Eric: Absolutely. Russia stated that quite categorically, that they don’t like the dollar. And I remember when Geithner was over in China many years ago. He said we have a strong dollar, and the whole audience started to laugh. And it’s- obviously, they were thinking something differently than Geithner was thinking, and I think anybody who looks through the numbers… just look at the numbers. There’s no way we should have a strong dollar here. We haven’t even begun to deal with the issues that are facing the U.S. public, i.e., Social Security, Medicare, everything so far is a lie. I mean, I can’t believe inflation’s 2% when pretty well every individual in the U.S. just on their healthcare policy, just on that policy alone, their cost went up 2% a year. On everything. Just on healthcare, because it’s probably 20% in healthcare, you get a 10% increase, that’s a 2% increase. So whether or not anything else goes up, there’s a 2% increase. And they don’t throw in grants and education and all those other things that are going up. Inflation numbers are massively understated, everything’s a lie. I don’t believe the jobs report from last Friday, the ADP number, it’s all a lie. And I sort of ask why do they have to lie about everything? Well, you know why they have to lie about everything? Because we don’t have an economic recovery happening, and they’ve got to pretend there is one. And so when you get these funny numbers that come out that suggest we have strength when deep down you know there’s no strength. Look at the truckloads, the rail car load increase, the cost of chartering a ship, the Baltic rate, they’re all going to new lows here. The world trade data just came out, that Chinese imports are down 18%, their exports were down 6, we’re almost in a damned depression here but no one wants to make us think that. But the world’s trade is shrinking. And once you have that negative start, it’s a bit of a domino effect that one man’s weakness becomes another man’s weakness. I mean, if the U.S. is hoping to ship stuff to China and their imports are down 18%, well, you know, it’s going to be pretty tough. It gets tougher. So I just think that things are not going to come together here, and all of that reflects on the banking system, by the way. We keep bailing out the banks all the time, wherever it is. And sooner or later, the lies will all have to stop. Something will fold. Some domino will fall that just takes verything where it should be. And we're approaching that time.

(36:03) Daniel: Keith, every time I talk to you, you’re on a different continent. Do you hear of currency concerns from hedge fund managers or from government officials that you speak with, and then the follow-up to that question, when it comes to Asian money out there, when you’re shopping for deals either for First Majestic or First Mining Finance, just out of curiosity, are you seeing competitive buyers, specifically coming from Asia or Asian money?

(36:30) Keith: Well, on the currency side, you know, I quite honestly hear probably the opposite from what Eric hears. I hear a lot of concerns about the Canadian dollar, about the Mexican peso, and my views of those two currencies… I think that most of the institutions that I meet worldwide are all long U.S. dollar and they’re all long U.S. stocks and U.S. assets, and they’re curious of my view, and they don’t own much else. So the traders there, the traders are long U.S. and short everything else, and unfortunately, if the U.S. dollar goes up, it’s very deflationary around the world. So emerging markets get killed, commodities get killed, so the strong U.S. dollar is killing everything, and is actually openly going to kill U.S. industry. So it’s going to be interesting to see how all that unwinds, but to go over some of the investors in Asia, I just came back from Hong Kong just a couple of weeks ago. They are talking about making investments in Canadian miners. There’s been a couple interested investors take position so far, and Eric can speak to this: they have a large Asian investor invest in their fund, and so it is happening, but it is unusual for them to go in and buy stocks in a Canadian market. They usually do it through financing. It's early days, so on the competition front, I don’t really see a lot. There are a couple of mining entrepreneurs who are similar to my style – not too many. There’s three or four that are more active, putting things together, but it’s not the norm by any stretch of the imagination.

(38:09) Daniel: Can either of you foresee a world that has a precious metal backing it, either from government-backed or a free-market-backed currency like a BitGold? Eric?

(38:20) Eric: Well, I certainly can imagine that. I mean, when the banking system fails, which it always [inaudible]. But this time, of course, the proportions are much larger when it fails. Yes, there will be a currency that’s going to be backed by something other than a government promise. Because a government promise… I don’t know why people would even trust governments. Most promises are broken. So yeah, that day’s going to come. When it comes, I’m not sure, Daniel, but I know it’s coming.

(38:49) Daniel: Gentlemen, I just want to close up with a question for people who are out there investing early on or are starting a business. You’ve both made some very successful investments, built some great businesses, you’ve made yourself rich, a lot of other people rich along the way. Eric, what is the Sprott advantage both today and what was it originally that really helped the Sprott company become what it is today.

(39:13) Eric: Well, I think today, it’s experience and style. The style is… I can only describe my style as I want to steal value. Just like Keith is now doing, okay? You just don’t go in and buy an index, you have to find something where it’s particularly undervalued vis-a-vis the rest of the rest. And those things present themselves all the time, as Keith has explained with some of his purchases of these various mining companies. There’s times when you can steal value, and that’s always been my mantra. You’ve got to go in there and sort of go into the theoretical garbage dump and find a diamond that’s littered with crud, and brush it off and see it’s really a diamond. It was really a diamond all along, just the market didn’t appreciate it, than all of a sudden it gets re-valued, so between that and having some foresight about what ultimately should happen, I think those should be the key ingredients.

(40:12) Daniel: Keith, same question. What went through your hear or what goes through your head when you’re building these billion-dollar giants that somebody who’s trying to do the same thing, or build a small mom-and-pop company down the street… what are some key things that you can share with us that helped you that could help other people become successful?

(40:32) Keith: Well, first off, you know, I’m a serial entrepreneur. I love hard work, I love building companies, I take great pride in seeing others make money in companies I build. I’ve had two great successes so far in my career, and I’m committed to building First Mining Finance into my third big success. But it’s not easy. You know, sometimes things get really tough. There’s always setbacks. It always takes longer than you think. I owe my success to setting goals, which I think is extremely important, focusing on those goals, perseverance, honesty, stubbornness, surrounding myself with good people, and I don’t let negative people affect my drive. I think that’s very important. Actually, they often even motivate me more to succeed.

(41:21) Daniel: Keith Neumeyer, of First Majestic Silver and First Mining Finance, Eric Sprott, of Sprott Global and Sprott Asset Management, thank you so much for being so generous with your time, gentlemen.

(41:34) Eric: Okay, Thank yourself

(41:37) Keith: Thanks Daniel, thanks Eric.

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