 Good day, fellow investors! I get a lot of comments how returns on investing in gold miners are usually negative and that is completely correct and today I will give you reasons why not to invest in gold miners ever ever ever. We're going to discuss why ETFs don't care about value, they just look at market cap, how miners are generally expensive, which leads to negative returns, book values are usually false, those are all used cars, salespeople, there are huge operating risks, junior miners don't even get me started on it and junior miners ETF is also very dangerous. So let's start by don't buy ETFs. This is just the list of the top 10 holdings of the Vanec gold miners ETF and you can see that Barrick is second with 8.44% weight and then Rengold Resources, what is that? 8th position with 4.49%. Now those two companies decided to merge and now they will make the new Barrick will make 13% of the ETF and what happened? The stock prices went up because higher weight, higher market cap means the ETF, which is the largest holders of miners, so a mindless institution is the largest holder of miners, will own more of them. There are no synergies from the merger, but the stock price went up 15%, no synergies because one is in Africa and has no debt, the other is all around the world and has 4 billion in debt, so it was better when the two companies were separated from a business perspective. But of course ETFs, miners, if you focus on the most expensive, you buy really something expensive and this is confirmed by a recent study done by SAP Global Market Intelligence that says that miners are more expensive to buy than to build. The cost of building a copper or gold mine is likely to be cheaper than buying an existing one, dampening the prospect of big merger activity in the mining sector. Companies, including BHP and Rio Tinto, which say the strategy is to build or to smart buy if they can possibly find a suitable mine for sale at the right price or acquire part of a promising prospect. So it's actually what you pay the price that determines your return. If you overpay whatever happens, your return will be underperforming or even negative or will not match other returns, so you have to be really careful here not to overpay and it's so easy to overpay in the mining sector and I made a recently video about nova gold and this is why you're overpaying or people are overpaying that are buying nova gold. They have a flagship project, it's called the Donlin project, but if we use current gold prices at a net present value, at a discount rate of 5%, the net present value is 500 million for the project. Nova gold owns 50% of the Donlin project, so their value that their market cap should be 250 million. Their market cap is 1.3 billion and they don't even have the cash which is around 3 billion for them to develop this project. So people are extremely overpaying this and nobody wants to buy that project and that is something actually right. If you overpay your returns will be very very small, so please if you must invest in miners don't overpay. Now then you will say okay but gold corp has a price to book value of 0.58 on a market capitalization of 8 billion so this should be cheap because the price to book is below 1. If you look at the balance sheet okay mining interests 20 billion so that's their value on the balance sheet but what are mining interests why don't people go okay please check the balance sheet before buying something. If I go on the note number nine for the balance sheet their 20 billion in value comes from mining properties so reserves and resources and exploration potential so gold corp puts the reserves and resources on the balance sheet. I haven't seen other miners do that oil companies some do that but that's not something you put on the balance sheet. The actual value is the fourth column property and property plant and equipment which goes to carrying amount of 3.4 billion. If I bring it back to this balance sheet and decrease 17 billion from the 20 billion in their mining interest then I would get to a negative book value of about 4-5 billion so the actual price to book value is negative for gold corp. If you just look at the normal miner you see this is IM gold property plant and equipment 2 billion on a 4 billion of assets so they are not putting their reserves into the balance sheet. So I could only say okay gold corp is trying to scam people attract them with the low price to book value because retail investors are those buying the Vanec fund retail investors are buying gold miners and that's why they just want to push the stock price higher and they would do whatever it takes to push the stock price higher because the stock price is their currency because most of their operations will never bring to healthy dividends so the only currency they have is their equity their stock prices and they do whatever they can do to push that higher. I've made a valuation of gold corp will make a video my fair valuation is 500 million the market cap is 8 billion so there is plenty of divergence there. As I said they just need their stock prices to go higher and I research endeavor mining I put it in google to get to their pages and later I was reading a local newspaper online and I see a google ad on endeavor mining promoting themselves through google ads. What kind of company needs google ad promotion? If you are a gold producer you sell gold at spot prices why do you need to pay ad money shareholder money to promote your conference call to me? It means that you just want to push your stocks higher you are not a business you are not a business that focuses on business returns you are just a scammer that tries to scam people to push your equity higher make money on options make money on selling stocks make money on getting acquired or acquiring somebody else so a very very tricky environment to invest in and all the actions that these miners are doing confirm that. There are also operational risks which are again a huge risk politic risk jurisdiction risk environmental risk this is Guyana Goldfields that looked very well in the past but then in the last quarter they said that the expected grade was 3 grams per ton of gold and it was it came in at 2 grams per ton bam the stock price was really really hammered so this is another risk if you don't understand the risk reward when investing what can happen to the ore to the grade to the mining seismic risk political risk whatever if you cannot accept this volatility please don't invest. Another point is dividends the quality of a business is shown by the cash flow it can return over time to shareholders so this is Newmont mining the top holding of Van Eck and you can see the total dividend yield was 1 0.5 0.4 0.6 1.5 and now 1.26 is the average but the payout ratio is almost 200 percent so they are doing whatever they can to sustain that dividend of 1.5 percent. Given the environment given the risks the political the operational the everything risks miners should be cash producing cows with dividends of five six ten percent not very expensive mines with no dividends or very minimal dividends that are paid out just to be showing oh we are paying a dividend because the cash production is very very low so that's something really to keep in mind when buying businesses am i buying a mining business or i'm buying a mining scammer so that's the game you have to be very careful when you're playing it. On junior miners you see this is a presentation from in metals and their net present value for the project is about 400 million but their market cap is about 40 million this is because they don't have the money they don't have the billions to develop those projects and that's also something to understand if the miner has the money to develop the project then it might be valuable and also the discount rates they usually use discount rates of five percent with the risks in the mining industry the minimum discount rate should be ten percent and respectable miners use eight percent at least better than five percent nova gold uses zero percent amazing discount rate so very crazy environment to invest in. Going on the junior miners if you look at the top 10 holdings actually the top 40 holdings are also in the normal vanec mining ETF so if you buy the junior miners you are not buying junior miners you're buying big miners but the vanec ETF has so much money that it cannot buy just junior miners so it had to add and it is owning i think 10 to 15 percent of the whole mining industry which is absolutely crazy and leads to a really risky overbought environment no matter the bad performance in the past so i think i have put you off from investing in miners however you will see a lot of videos about miners because i think that without miners we cannot live our lives they produce the copper the iron the gold the silver whatever we need to live the way we live so i'm looking for value and i don't have to buy anything that i don't like and i simply pass through all the risk are miners a scam is there too much debt are they risking too much etc etc and then if i find value that i'm happy from a business perspective only then i invest but i spent really a lot of time to have again small portfolio exposure to miners and i can then take advantage of the volatility if you can't do that please don't invest in miners and this is also a warning because i will be producing a lot of mining videos for all of those who want to invest in miners but don't have the knowledge to do that please don't do that to finish with mark twain or the detroit free press somebody came out in the 19th century with this a mine is a hole in the ground the discoverer of it is a natural liar the hole in the ground and the liar combine and issue shares and trap fools this summarizes the mining environment equity trapping fools getting the money getting the options uh getting big management bonuses if it works so a lot of betting a lot of scamming so be very very careful in the environment and then again if you don't have the time please don't invest if you want to see my research please check my stock market research platform or send me an email and then even if you don't want to invest you can have a better perspective on why you shouldn't invest and that's very valuable thank you for watching looking forward to comments and i'll see you in the next video