Fund manager sees mining as cheap AI play

Otavio (Tavi) Costa, founder and CEO of Azuria Capital, argued that mining can be the least expensive way to invest in artificial intelligence as the sector gains more attention from sovereign institutions, governments and investors.

“Institutions turn from ‘we don’t care about mining’ to ‘oh wow this is a critical industry that we need to make sure we take care of,’” Costa told MINING.COM anchor Devan Murugan on Top of Mine.  

He argued that mining has shrunk from a meaningful part of global equity markets to little more than a rounding error, leaving considerable room for the sector to regain prominence.

“This is a better way to implement the idea of investing in AI than actually technology companies,” said the fund manager, who this this year left Denver-based Crescat Capital, which has $536 million in assets under management, to form his own company. 

Juniors

For Costa, now is also the time to invest in junior companies.

“As investors, we want to be paying attention to two things: the mid-tiers that are going to be making those strategic reserves and become the next majors and the high quality assets that are going to be in high demand by these guys that will likely become mines in the near future,” he said.

“The same way it happened with the technology space, it’s happening in the mining industry in terms of the passive investments coming into those areas.”

Costa said that today we have the same levels of debt we did during World War II, the only difference being that at that time, 50% of the treasury market was backed by gold. Today it is only 3%. 

“We’re seeing global money supply continuing to rise and gold has been recently diverging from that line. I believe that gap is just in the process of closing,” he said.

“The real driver of what’s been happening is the dilution of money and also on top of it is the demand and the supply aspect when it comes to the production of the mining industry the depletion of reserves, the lack of discoveries, all that is is sort of exacerbating this trend on top of it all.”

Debt driver

When talking about China buying more gold and relating it to its debt, Costa argues that both the U.S. and China have issues coming up that can be fixed by buying gold.

“This is why I think it’s really a global monetary race towards gold that we’re seeing and that is likely to end with gold prices much higher.”

Spot gold was at $4,665.47 an oz. on Tuesday afternoon, its highest level since mid-May.