As we move through more wild times in markets, it's worthwhile to go back to this classic speech from 2017 where Eric Sprott laid out some basic ideas of his approach to investing. See the future early? Yes, and don't lose sight of reality because of "professional standards" that call for conservatism. Reminds me of Ray Dalio's hyper-realism!

One of the things that I'm a believer in is to emphasize reality over conservatism. If you think something, then don't cut it by 50% just to be conservative. By the way, the 50% you cut it by is your profit -- that's your profit! You can't be cutting it by 50% from the top line. There are way too many people that want to be conservative and it's the wrong thing to do and I had an example of that recently was that Kirkland Lake.

As investors, you need to know stuff. We don't need your conservative estimates. "We estimated 140 and we did 190. Give me a bonus." That's a joke. 

I was gonna tell a little story about Kirkland/Fosterville. We announced some spectacular ore intersections. Very few people get it, but it's all out there for everyone to see. They're all published. They're crazy, off-the-charts... spectacular. Somebody put out the top ten holes for the year and we have the top hole for the year. I forget what it is -- could be four thousand grams over five meters or something. Most companies are known to put in one hole -- the best hole. I said to our IR guy, "let's put the rest of our holes in and see what we'd have here." If we put all our holes in, we would have seven of the top ten holes in the world. Seven of the top ten all in one place? Three or four months ago, probably July or August 2017, we put out a 43-101 for Fosterville with the new drilling. We added something like 526,000 ounces of 59 gram gold. That's pretty good stuff. It's almost 2 ounces. 

When I was down there the last time, I said "I know you haven't announced the reserves. What were the resources?" We don't know, they said. How much was the top-cut? We don't know, they said. Two days later, they published the 43-101 with both numbers in it. Their publication! The resources were about two hundred and seventy six thousand at like 80 grams, and the top-cut was one-third. In other words, the 2 ounce stuff was three ounces in the drilling. Three ounces -- okay?

I want to tell you I've been involved with top-cuts before with high-grade ore bodies before. One example is from Goldcorp back in 2000 for the Red Lake ore body. When they published their annual report, I read it. Nobody reads reports anymore but back in those days you had to read them because that's all you had. Luckily, Rob McEwen said the top-cut grade is 1.2 ounces per tonne at Red Lake but the un-cut grade is 2.1. Being a good chartered accountant that I am, the difference between 1.2 and 2.1 is a lifetime of investing. It's a lifetime of investing to know the difference because it's all profit. Let's imagine that his cost was 0.9 of an ounce and he produced at one point two, his profit is 0.3 ounces. Go to 2.1 and now you've got 1.2 ounces of profit -- you quadrupled your profit. It was important to know what the real grade was going to be! It was important to know. So, I go and visit Rob McEwen and his geologist -- I realized it's going to be the uncut grade. The production is going to be the uncut grade. You know what? The grade came in at 2.2, not 2.1! 

Of course, you all know what happened to Goldcorp. It was right there for everyone to deal with. Everyone in this room could have done that.

I have a history with high-grade cutting and it was relevant to the case of Fosterville in this new zone, where we had all this cutting going on. I don't know if there's any geologists here, but we had roughly three hundred 2-meter intersections that were assayed and one hundred of them were top-cut! Now, when you cut a hundred of 300, I say that's not anomalous anymore. That's statistically significant. So, I'm thinking Fosterville might be three ounces, not two -- that's just me. I'm thinking. I don't know that. Nobody down there will ever say, "Oh yeah, it's probably three ounces." because they're gonna be conservative. Good -- you be conservative, I'm an investor and I want to know what it's gonna be! I just want to give you a sense of it. Let's say the resource says 750,000 at two ounces. But what if it's actually three ounces? Well, excuse me -- we just went up by 750,000 ounces! It just went up by 50% in six months! Six! 

Remember, we were gonna produce 140 a year at the start of the year and we just found 1.5 million in six months. We found ten years of production in six months at one mine! Okay. Now, let's imagine we get in to the mine. We do 2,000 tonnes a day. Let's imagine it all comes from that zone and it's three ounces. That's 6,000 ounces a day. Times 365 days is two million ounces! Two million. Two million? At a million ounces, we make more than BARRICK. I know you'll find that surprising but we will because it costs nothing -- it's a stunning thing to think about. Oh my god, you could make more than Barrick? Nobody knows what the hell is going on down there and I haven't computed it and worked with it. 

And what if we keep finding more -- what if we find 2.4 million ounces in a part of the deposit instead of 1.2? This deposit -- I always imagine I'm down below and I've got 9 kilometers of open pits above me. All of a sudden you get down to about 4,100 feet and the grade explodes. Explodes! We used to mine 4-6 grams, now we mine 20 grams. And it starts at a particular level. Quinton Hennigh, who I sent down there in May of last year, said "Eric, you get below this level and all of a sudden it explodes" for some geologic reason that I don't have to understand. I don't know what the reason is, but he explained it -- with the weight of the earth above and the pressure from the mantle below, everything just stayed right there for a long time and all the gold precipitated there. He said, "Eric, you're gonna find a lot of that high-grade gold." Now, can you imagine if we find a lot of high-grade gold below 9 kilometers of strike length? How much gold might be there? Just imagine! 

And you don't have to pay for it all the gold above the topcut. Do you think the stock recognized any of that stuff? No, it doesn't. It doesn't recognize it for a second. Probably the cheapest stock around based on just today's cash flow and nobody pays for the exploration success. How the hell did I get on this topic? Oh, reality versus conservatism.

By the way, a big mistake of mine was to suggest that Kirkland should take over Newmarket. I would have been better off keeping 17% of Newmarket than 10% of Kirkland because Newmarket is where the action is. It was a mistake. When I think back to it there are several things. For one, the CEO, who is no longer there, didn't get it. Maybe some of the people at the mine like to be conservative. They're all reporting back to their bosses in Vancouver, who started Newmarket. They're telling me that we're gonna produce 140-145 thousand ounces this year so why don't we merge with Kirkland who's got things going on? They didn't recognize that they had things going on because nobody told them! Conservatism versus reality -- it killed them. The opportunity they gave up? Selling that thing to us was a mistake -- I can be criticized, too. I could have ended up with a higher percentage of that.

One of the things that I say to people at Fosterville, for example, is to see the future early. See it early. I don't want you to tell me three years from now, when I go down there, that we're going to produce 500 thousand ounces. I want to hear you say it today! I'm an investor I can't just keep waiting for the thing to march higher, higher, higher, and all the while I didn't know where we're gonna get to. I want to know where we're gonna get to today. Best bet -- what's the best bet? What are we gonna do? You people who are issuers here -- even though everyone wants you to be conservative, you also have to be realistic in your explanations of where you think you could be. Don't worry! I could get up here and blab all I want about saying Fosterville could have this two million ounces, but it's just a hypothetical example. It's hypothetical, but realistic nonetheless. It could happen and I want to know about this as soon as I can figure it out. It could be bigger! what if the nine kilometers all has this stuff in it? What are we gonna be producing in three years? Who knows. It'll be big. You want to see the future early. Particularly as an investor.

One of the things that I contrast is analysts and investors. Those of you who are issuers -- we hear you saying, "We've got to get some analysts to do whatever." No, you don't. You've gonna get some investors to invest. Get investors to invest -- they're the ones with the money. The analyst is the guy who's gonna lowball whatever the hell you think you're really gonna do! And he's gonna tell everybody -- if he thinks you're gonna do X, he'll use 0.6 times X and rate it BUY. It's a BUY. It's an understated BUY. What do you want to know? I want to know the whole shebang here! I don't want your stupid conservative estimate -- I'm an investor. I'm not some guy reading a goddamn research report...


Thank you, Eric Sprott! Inspiring stuff.