Exclusive Interview With Luciano Duque, Chief Investment Officer (CIO) Of c3 Bullion

Photo Credit: C3 Bullion / Amsterdam Group Public Relations

In this exclusive interview, Chief Investment Officer (CIO) of C3 Bullion, Luciano Duque, outlines his enterprise’s pioneering approach to gold investment, one of history’s few proven Real World Assets (RWA) below with Haute Living.

HL: What is the mission and vision of c3 Bullion?

Luciano: The vision is to be able to provide a gold investment allocation generating revenue; and making a gold allocation profitable for a portfolio when gold itself is not doing anything.

Usually, you put gold in a portfolio because when the stock market is unstable or moving around, gold prices increase. So, in short, you only see an increase in your gold allocation when you have a lot of volatility.

But, if you don’t have much volatility, the gold just sits there.

So, the vision that C3 Bullion has is to be able to provide a goal allocation with revenue – Our mission is to enable our investors to gain value from their gold investments, even when the stock market is not in a favorable position for traditional gold investments.

HL: What have been the historic challenges impeding interest from cross-sector demographics in investing in gold? Why isn’t investing in gold as ‘popular,’ if you will, as it was in years past?

Luciano: Mainly because no revenue was coming from it [gold].

From the investor’s perspective, the US has enjoyed many years of relatively low inflation – really since the mid-’80s.

During that time, you had gold increase in price, but not at the same rate as the stock market, so investors took a look at other areas that could generate revenue; again, investing in the stock market, where investors have enjoyed more revenue than in gold.

That’s one of the main reasons why the US market has not moved to gold – But, interestingly when you go out of the US market, and you go to other countries that do not use the US dollar as the local circulating currency, they pretty much know what gold is, or what it does in their respective portfolios because it has protected them against inflation.

From the traditional gold sellers and gold distributors’ perspective, and given that as I mentioned there’s no revenue coming from holding it, the approach they have used in the past years to commercialize gold is to stay resilient against the financial doom and gloom story, for example.

Who hasn’t seen commercials in the middle of the night urging you to buy gold?

I believe this is not the right kind of thinking, however.

I think the main reasons gold has not been popular in the past years are: first, we have low inflation and mostly no revenue from the traditional gold allocation; and second, gold sellers, in their urge to commercialize it, have turned gold into, not a taboo, but a “you must be one of those gold fanatics that is waiting for the financial world to come to an end” scenario.

I think those two concepts together, have greatly diminished the interest of investors in gold.

We at C3 Bullion firmly believe gold should be a small part of the portfolio, but the approach is not a doom and gloom story – The correct approach is to create a gold product with revenue suitable for investors’ portfolios when the gold price is flat.

This is pretty much what we have done – And our product captures this revenue from the gold mines in a very clever way.

HL: Let’s talk about how C3 can help make gold investment not just a symbol of wealth, but a strategic move, if you will, and a profitable component of diverse investment portfolios.

Luciano: Explaining to people what gold does in a portfolio is easy, but there always comes the same question and train of thought:

If nothing is happening in the stock market, and the gold price sits flat, not doing much, but you are offering investors revenue-producing physical gold access, how is your product going to generate that revenue? What are you doing? Are you involved in mining exploration? Mining shares are depressed, and mining is risky…These are all valid points.

Regarding mining operations and mining-oriented investors with direct access to the mine’s gold coming out of the ground, they are almost always on the venture side of investments.

Traditional mining investors are very specialized and risk-takers – they operate much like a small club. These investors need to know extensively about mining to get in and get involved in a mine operation.

Minimum investments are big, to the point where that investment is not a mere small gold allocation of the portfolio but a big venture side of it. And then you have the probability of not taking gold out of the ground, or not enough, investing in a gold mine without knowing what you are doing, and this can make you win or lose a lot of money.

This predicament has subsequently created a small group of mining investors who are tightly knit and with substantial minimum-size investments.

We at C3 wanted to create a product for broad audiences, giving investors direct access to the physical gold produced in the mines, and able to receive this gold at a discount from market price; simply speaking, turning this “discount” into the revenue from gold we have been talking about, this way of giving access to a broad audience at a lower minimum to the physical gold coming from the mines.

Before C3, only traditional mine investors had access to the gold produced.

HL: So, in short, how does C3 generate revenue from gold?

C3 loans capital and know-how to a portfolio of carefully-chosen producing gold mines; loans are then used to increase production, meaning no exploration.

Additionally, risk is now diversified in several mines and not in just one single mine.

Loans are guaranteed by the mine’s assets. Then C3’s expert mining team gets fully involved with the mine operation during the duration of the loan, making sure the mine operates efficiently and at a maximum capacity.

During the duration of the loan, mines pay a production royalty (meaning a constantly increasing gold quantity) and pay back the loan, all in physical gold and at a substantial discount from the market price. Physical gold is stored at a reputable international gold custodian; then we wrap this business model inside a closed-end fund with relatively lower minimums, we cap it with a 5-year term (the usual loan length), and finally, upon fund liquidation at the 5-year mark, the gold paid by the mines now in the vaults is then sent to the investors who choose to receive the physical gold, while other investors might choose to sell it and receive fiat.

Generally speaking, in the market, there are currently three groups of gold investments:

1. Investors that can buy and hold physical gold (wherein the gold quantity stays the same and the investor pays a full market price plus a premium for the gold),
2. Investors that buy mine shares or a mine ETF, where the investor only receives revenue in the form of dividends (and not physical gold),
3. Or “collective” gold ownership inside trusts and the like, where the only revenue comes from gold price appreciation (if any), the quantity of gold stays constant, and delivery of physical gold is cumbersome and not warrantied.

C3 Fund is a product that works to merge the best features of the options currently available in the market but wrapped inside a single product, with a novel approach to an ancient and proven investment like gold.

HL: Tell us about the types of investors, and the investor classes that you are targeting with this fund….

Luciano: C3 Fund is pretty much for anybody who wants to have a revenue-producing gold allocation in their portfolio.

Usually, the average an investor needs to put into a gold allocation is between 2.5% and 5% of their portfolio; there are even investors allocating up to 10%.

The fact the allocation will be inside a fund with a relatively lower minimum makes it very simple and straightforward to add it to your portfolio.

So now investing for receiving physical gold from a mine is not a complex investment, part of the venture side of the investor’s portfolio, it will be only their gold allocation (2.5% to 5%) with revenue.

Every investor with a portfolio can now have their gold-producing allocation.

HL: In a sense, you could say that you’re democratizing access to gold for any intrepid investor.

Luciano: Yes. And it doesn’t have to be an intrepid investor, even conservative investors can have their revenue producing gold allocation. 

Photo Credit: C3 Bullion / Amsterdam Group Public Relations

HL: Where do you see C3’s fund in the next few years? Where do you see it in the future?

Luciano: We are going to be issuing several funds, and each fund is limited in time, and each with its own portfolio of mines.

We’re not like other funds that operate for 20 years. Each C3 Fund is limited to around five years, depending on when we deploy capital on mines, and each fund is liquidated at the end of the period, and physical gold produced will be sent to all the investors in the fund.

So, where do we see next year’s fund? Fund one will ideally close by the end of 2024. That money will be deployed into the gold mines, mine operational improvements will be executed, and by 2025, the portfolio of gold mines will start sending physical gold to the vaults.

By year five, we will liquidate and deliver physical gold.

For the investors attracted to the digital concept, we are also issuing a digital security that represents the investor’s participation in the fund; it is important to note that this is only for the investor who chooses that path. In broad terms, we can tokenize part of the fund. The token will be the digital representation of a security. So, each fund will have the option for investors to tokenize.

The interesting concept that comes into this token is that we have instilled a ‘secondary’ possibility in the process, so that means that if you have a token, and right now it’s five ounces of gold backing that token plus one additional ounce of gold coming every month from the mines, you can pretty much say, “Now every month that is being added brings one extra ounce.”

So now you have a premium.

If you sell that token, let’s say today, you can say that in the next 90 days, for example, there will be three ounces extra of all gold in the token. So now you have an easy to calculate incremental future price or premium, that in theory the investors can profit from.

So that turns our offering into something very unique.

And right now, with the price of gold increasing, and as inflation doesn’t look like it’s going to go down anytime soon, you have a very good play in investing with C3 Bullion to get into the gold market with versatility on a limited-time basis.

HL: So, tell us a little bit about the team behind C3.

Luciano: The team is very interesting and very experienced.

Our CEO, Chris Werner, has taken two gold mines public. He has been involved in the gold business for a long time.

Our Chief Operating Officer (COO), Martin Gallon, is a former miner with easily over 30 years of experience.

On the other side, which is the capital market side, my team and I have been involved in investment banking and wealth management for international clients for many years. We also have a Chief economist with a PhD in economics on board.

So, the team behind C3 is very interesting because we took sides or worlds – a mining side and a capital markets side – and we merged those two teams into this product.

Something very interesting that people ask is, well, “why don’t mines look for capital from banks”? And the reality is that for a bank to give a loan to a mine, the bank needs a mining team inside, and not many people have that kind of expertise.

And that’s what we have here in C3 Bullion.

We have an expert mining team that will help operate the mines, and that’s one of the most important points – our team has deep mining knowledge.

Something very important to mention here again is that we don’t get involved in mines in the exploration stage. We get involved in producing mines that need capital to increase production. So, nothing related to C3 is related to exploration.

We just go into mines that already have proven resources on the ground, but they just need help to increase production, and that’s where we come in.