BLS Decides To Keep The Artificial Jobs Numbers Coming - It Won't Change The Fed Being In A Rate Cutting Cycle That Will Drive The USD Down And Gold Up

Since gold hit $2700 recently, it has been in a tight range as it looks to be coiling for another rally. The US dollar (USD) seems to believe the Goldilocks economic pitch coming from the Fed, but something doesn’t add up. If everything is just right with the economy, why did they cut a half-point at the September meeting? 

Instead of the BLS taking into consideration that the Fed called their jobs numbers artificial, they decided to go with even more artificial ones. The Fed also said that their members are adjusting the BLS reports due to all the revisions that have dramatically overstated the reality.

Now they want people to believe that after all the full-time jobs lost over the past year and part-time jobs increased, that there has been a miraculous change in the trend of the weakening jobs market. Don’t be surprised when the latest jobs report has massive revisions. The jobs market doesn’t magically change like the BLS jobs reports are artificially suggesting. 

The employment numbers have been so inaccurate that the Fed members are taking them with a grain of salt. Their actions to cut by a half-point is a clear indication that they are concerned about the trends in the jobs numbers and by extension that it is indicating troubled waters ahead for the economy. Otherwise they wouldn’t have gone with what is considered an emergency cut.

Regardless of the Goldilocks spin by the Fed and the BLS numbers that they consider artificial, the Fed is in a rate cutting cycle. They are trying to defend against a hard landing and will likely be cutting rates back toward the Free Money Era and increasing their balance sheet. This will prove to be bearish for the USD.

Meanwhile, all signals are green for gold. The Death Spiral of Debt is getting poorer by the day and the next president will be a massive spender that will make it worse. The level of debt, the government spending and the costs to service the debt have the Death Spiral of Debt on autopilot.

Gold is in a perfect storm to head multiples higher from its current price.

Gold Stocks Are Primed For Success

Until the middle of February, 2024, the gold stocks had been in a prolonged bear market and were reluctant to join the gold bull market.

Since then, the gold miners have come off the canvas, but still have a lot of catching up to do just to better reflect the gold bull market. They were coming from such low bases, that although some, like our top picks Agnico Eagle and Alamos Gold broken out, they still are behind the curve for the current price of gold, and haven’t even begun to factor in a much higher price of gold in the near-term and long-term.

The second quarter of 2024, had the highest average price of gold ever, and the third quarter surpassed that by around a couple hundred dollars per ounce. When you consider that the current price of gold is trading well over $1000 per ounce above the average cost of mining gold throughout the industry, it is spectacular for the free cash flow growth of the gold miners.

While many sectors are struggling with earnings growth, gold miners are becoming the cream of the crop. This has caught the attention of some generalist investors but it still hasn’t caused a groundswell of generalist investors moving into gold stocks.

Whether looking at the fundamentals of physical supply and demand, or the technical trends, gold is showing all the hallmarks of a bull market that is in the earliest days and well positioned to be in a long-term bull market that will take it multiples higher from its current price. It is a phenomenal time to be a gold miner that only looks to get better.

Especially for remarkable gold miners like our two top picks. They have low costs of production relative to their peers and are mining high-margin ounces.

When it comes to the gold mine developers, they haven’t really even dusted themselves off to join the gold bull market. The market is not trading like it clearly understands key bullish factors for this group.

One of those factors is that there just aren’t enough gold mine developers, so the menu for generalist investors to choose from is very small. Yet, the gold miners need many more projects in the development phases. The gold miners are struggling to increase their production and replace what they mine.

The gold mine developers are the farm teams that the gold miners rely on to help them replace their old mines with new mines. But, the gold miners need many more farm teams just to tread water when it comes to replacing the ounces that they mine from their old mines.

With the dearth of gold mine developers and the valuations near record lows for this group, it is clear that they are very attractive for investors and for gold miners to consider them as takeover targets. 

Currently, the supply chain of gold is weak compared to the demand and with the lack of enough gold mine developers, it is going to stay that way for a very long time. 

To understand why there aren’t enough gold mine developers, you have to look down the gold stock food chain to the gold explorers. For much too long, the funding of exploration and success at finding projects that can move into the development stages has been lacking. 

If the explorers don’t have success, then there can’t be enough that advance to the development stages. The explorers are the Rodney Dangerfields of the mining sector as they have chronically not gotten enough respect.

I argue that the explorers are the most important part of the physical gold supply chain. As we all know, a chain is only as strong as its weakest link. When it comes to the gold mining sector, the weakest link has too much pressure on it.

Which means that the entire gold supply chain is broken and can’t be fixed for decades into the future.

When I think of the gold supply chain it reminds me of the old muffler commercial. When the driver comes into the muffler repair shop with his muffler dragging along the pavement. The muffler repair man shakes his head and says, “pay me now, or pay me later.”

As the world heads back toward the Gold Standard due to the broken debt and fiat currency system, more are going to realize that gold is the soundest form of money. And the best way to protect wealth and purchasing power. 

If the muffler man was a gold miner, gold mine developer and gold explorer, he would be shaking his head and looking at his cash register knowing the buyers of physical gold are paying now and will be paying higher later.

Gold Explorers In The News

Goliath Resources is my highest conviction gold explorer due to the important gold discovery they are advancing in the Golden Triangle of British Columbia. While many explorers are seeing their stocks trading near their lows and are struggling to raise funding for exploration, Goliath is bucking those trends.

Yesterday, they announced that they have completed a C$16.1 million financing. Highlighted by investments from strategic institutional investors and wealthy mining investors. Crescat Capital (an early mover into Goliath) increased their position, as did the recent new institutional investor based in Singapore. 

Rob McEwen made his third investment into Goliath in this recent private placement. He recognized the potential of Goliath nearly a year ago when he made his first investment into Goliath when the stock was trading at its yearly low. He is a legend in the gold mining sector due to the incredible success he had building Goldcorp from a small junior into a powerhouse in the gold mining sector. The gamechanger for Goldcorp was when they drilled deep into the Red Lake Mine to hit the bonanza-grade portion of the mine and the rest was history. In addition to his success with Goldcorp, he has also made a good portion of his wealth investing in mining stocks, with a great eye for quality.

Larry Childress is also a well-known wealthy mining stock investor who has made his initial investment into Goliath Resources. He also has a reputation for having a great eye for quality in juniors so it was a welcome event to see him join the shareholder registry in this recent private placement.

At the beginning of the drilling season, Goliath Resources had planned a 15,000 metre drill program. Due to the early success, which was highlighted by them seeing visible gold in 66% of the holes, they had strong demand to finance the drilling which enabled them to increase the campaign to 36,000 metres.

At the peak of the drilling campaign, they had 8 drill rigs pounding away. This has kept their geologists extremely busy, with overseeing the drilling, cutting core, logging core and shipping it off for assaying. They have a ton of pending assays building up which should see them reporting assay results starting soon and continuing over the coming months.

The key focus of the drilling has been on advancing the Surebet discovery, where they have multiple stacked zones with widespread gold mineralization. In addition, they were able to get regional exploration done on other targets. 

One of those new targets is called Jackpot which is a bit over 1000 metres from Surebet. While preparing to drill this target, the geologists found a beautiful sample of visible gold. I’m eager to see what the drilling at the Jackpot target comes up with. Have a look at the beautiful visible gold from the Jackpot target from a surface sample.

It is impressive that the strategic investors mentioned earlier have recognized that Goliath’s Surebet project has an important gold discovery in a prolific mining camp. The Golden Triangle is one of the great Canadian mining camps, recently Newmont’s CEO has mentioned that it is an important part of their mining efforts.

Stay tuned, Goliath is having their best drilling season at the Surebet project and they should have plenty of news flow.

Borealis Mining (sponsor, see disclosure below)

Borealis Mining is a newcomer to the junior gold mining space as they only started publicly trading in early August, 2024. They acquired their project during a bear market for gold stocks and came public while gold is in a tremendous long-term gold bull market.  

Borealis Mining started with three guys coming together, with a dream to build a gold mining company based in Nevada. They all cut their teeth at one of Canada’s biggest gold mines, which gave them the skills needed to reach their goals. 

CEO, Kelly Malcolm, is an exploration geologist who has been involved with finding millions of ounces of gold during his career. Andreas Steckenborn is the COO, he was Senior Engineer in operations at the Detour Lake mine from startup through to the sale of the mine to Kirkland Lake Gold. Then he went on to be senior advisor to Iamgold on the Cote Lake autonomous mining startup. Iain Campbell was the Senior Resource Geologist at the Detour Lake Mine, and was part of the team that created the current grade control model which increased mine revenue by more than $100M over 4 years.

Collectively, they are the key management team that complement each other very well with all the expertise to lead the company in exploration and mining operations. 

Once they came together, they were able to secure the Borealis Mine from Waterton. Their timing was ideal during a challenging point in the mining sector a couple years ago, and they were able to buy the project for $100k in cash and $5 million worth of stock. 

The project had historical production, and a historical resource, plus was fully permitted with key mining infrastructure. In addition, it had a loaded leach pad that had material for residual leaching and a portion that had never been leached. With a stockpile ready to be loaded on the leach pad.

The leach pad has enabled them to produce gold from residual leaching, including the news yesterday that they poured 229 troy ounces of gold in the second pour of 2024. With their two gold pours in 2024, they have poured a little over 300 ounces of gold. Compared to big money companies, that is a relatively small amount of gold. But considering that it was left over from previous operators, it is a nice revenue bonus that brings in an amount of money equal to what many explorers are struggling to raise through share issuances.

I’m a big fan of the business plan of the company, as they are looking at two paths to success. One is from mining and the other is from exploration. Recovering gold from the leach pad and the stockpile will give them near term revenue. Then they want to focus exploration on finding new deposits that they can mine.

Most of the historical drilling on the project was focused on the pits that were in historical production. There is a very large alteration zone, approximately 20 square miles that has only seen around 10% of it explored with drilling. In addition there are several oxide gold targets, and they also have sulphide targets below the oxide pits and oxide targets.

In addition to the oxide potential being wide open, the same can be said for the sulphide targets. One of the historical holes into the sulphides hit 67m of 16.2 g/t gold. This is a remarkably high-grade thick intersection and I’m excited to see more drilling around it and expanding into other parts of the sulphides. 

The bottom line is that the Borealis Mine is a very exciting project which is why they were able to attract a who’s who of mining executives to their board while they were private. Including Tony Makuch of Kirkland Lake Gold fame as the Chairman. Bob Buchan is also a director, he was the founder of Kinross that grew from a small gold miner to the well known name in the gold mining industry they are today. They also have other very talented mining company executives on the board that collectively are something that much larger mining companies would be proud to have on their team.

As a private company, they were also able to attract two mining legends as key shareholders in Eric Sprott and Rob McEwen. Both have made most of their wealth in the mining sector and are well known for spotting mining opportunities well before the crowd. 

If you consider the people involved in management, on the board, and as key strategic investors, plus the quality of the project that attracted all of them to Borealis Mining, it is clear why I consider them the best built for success private company that transitioned to a newly minted public junior that I have come across during my career.

I love the image below which I clipped from Google Earth as it gives a great bird’s eye view of the project. You can see the historical pits that were mined and the area where the mining infrastructure is with the leach pad and stockpile right beside it. Along the ridge you can see the extremely big alteration zone that has mostly been untouched by drilling. To the south of the ridge is an alluvial covered area that is also highly prospective because the same rocks on the ridge extend out into the covered area.

Of particular note is the largest and highest grade pit is out in the covered area and the sulphide zone is right beside that pit. Whether you look at this from the exploration perspective or mining perspective, this is an impressive project and to make it even better is that it is in Nevada which is one of the best mining jurisdictions worldwide. 

Drilling is ongoing and other mining related activities, so they are set up to have plenty of news flow coming out soon and into the foreseeable future. 

All the best,

Allan Barry Laboucan

Disclosure

Borealis Mining is a sponsor of Rocks And Stocks News, content creation about them is for the benefit of the company. Sponsors also benefit readers of the reports as it makes content creation possible for no charge to readers. Allan Barry Laboucan is a shareholder of Borealis Mining and is a consultant to the company. Allan Barry Laboucan is a shareholder of Goliath Resources and also owns warrants to buy additional shares.

Rocks And Stocks News does not make buying or selling recommendations. The reports are for information purposes only. Sponsors pay a fee to Rocks And Stocks News for content creation. The business model of Rocks And Stocks News is to fund research and reporting on the sector, picks and sponsors through corporate sponsorship. We are thankful to sponsors for enabling commentary free of charge to readers and viewers of the reports. When reporting on sponsors it is on behalf of the sponsors discussed in the portion of the report mentioning the sponsor. Before making any investment decision it is important for you to speak with your financial advisors to consider your risk profile. It is also important to do your homework. To help in that process, Rocks And Stocks News means to be a gateway by doing reports and interviews of management of sponsors and picks. The reports and interviews should not be considered investment advice. Allan Barry Laboucan is the founder and owner of Rocks And Stocks News, he has worked in the mining sector since 1993 and has been reporting on the sector since 2005. He has worked with and been mentored by very talented geoscientists in geology, geochemistry and geophysics. He uses the skills he has picked up during his career to assess sponsors and picks in the reports. Whether a company is a pick or a sponsor they go through the same filter and are reported on when important news is made that Allan Barry Laboucan wants to discuss on the Rocks And Stocks News platform. He may own shares in sponsors and picks for investment purposes which he discloses when discussing them in the reports.