Gold, Silver And Copper Are Ripping And The Stage Is Set For The Stocks To Join The Party

Companies featured in this report are Agnico Eagle, Alamos Gold, McEwen Mining, SilverCrest Metals, Equinox Gold and i-80 Gold.

For several months, I have written many reports about why I am so bullish on gold. Of late, I even wrote about why I think gold could reach $20k in the next 10 years. I like the saying to wait for fat pitches in the stock market, gold is a fat pitch, but gold stocks are shaping up to be an even fatter pitch.

Recently, I wrote that the reason I believe we are still extremely early in a gold bull market is because silver hadn’t really joined the party and most gold stocks were still fairly weak. On Friday, along with gold closing at a new weekly high, silver popped over $31 and copper is on fire as well.

Whenever there is a gold bull market with legs, silver lags and then joins the party, finally it blasts off to significantly outperform gold. It has been lagging, while gold is at record highs, silver is still a considerable distance from its record highs. But, it has definitely joined the bullish metals party led by gold.

In every gold bull market, the gold stocks also have to join the party, that has only happened in a modest way with the big ones moving first. This is normal for gold bull markets, the household names move first, then it starts moving down the food chain. Next, I expect it to start moving down the gold stock food chain in a more significant way. 

I would point out that despite Agnico Eagle (the best performer amongst the major gold miners) being on a tear since just prior to this year’s PDAC in early March. It still hasn’t started pricing in the higher gold price they will be selling at during the second quarter of 2024. This will be an absolute windfall for them and for other gold miners.

Especially for Agnico Eagle because their costs are below the industry average. They are also increasing production (which few gold miners are able to do) and free cash flow that are at record highs. Their free cash flow will go into overdrive as they sell gold at a much higher average price than they did in the first quarter of 2024.

Copper has been on a tear since early March, in less than 3 months, it has gained tremendous strength to reach its record high at over $5.00 per pound. What got it going was when the Cobre Panama mine was shut down by the Panamanian government.

This took a couple percent of global production off the market and highlighted just how tight the supply chain is for copper, while demand is very strong and rapidly growing. Copper is heading toward a supply crunch that will take copper much higher. Double digits per pound is well within reach.

Gold, silver and copper share similar supply and demand fundamentals. For the past couple of decades not enough money has been put into exploration that leads to enough projects going into development, then being built, to ultimately replace what is being mined each year.

The old mines are getting very old and are in drastic need of being replaced. Copper is a very good example. Even before the electric vehicle revolution, there were reports out suggesting that the industry needed to find an Escondida every year to keep up with demand from the emerging economies.

That hasn’t happened, in fact, the discoveries have been in long term decline. Then the electric vehicle revolution came along, plus there has been a growing effort to increase alternative energy sources, crypto currencies also use a tremendous amount of energy and lately artificial intelligence has burst onto the scene.

All of these need a lot of copper to make them work. To make matters even better for copper bulls, the power grids in developed economies are ancient and unable to provide the energy to keep these developments growing.

States like Texas and California, as well as others, are showing how strained the power grid is with intermittent blackouts. Could you imagine how severe things would be in California if everybody switched to electric vehicles, came home after work and plugged in their electric vehicles. The power grid in California would absolutely crash.

They aren’t the only state with these issues. It is the ramifications of driving forward with innovation while depending on an ancient power grid. To update the ancient power grid is going to take a lot more copper than the copper miners can produce, now or long into the future.

Silver is already in deficit, a key reason is because solar power uses a lot of silver and that demand is growing rapidly. The price of solar panels have come down dramatically, which makes them more affordable and in places where the sun shines a lot, they are competitive for mass usage. Plus, silver like gold is considered a currency and safe haven for investors to protect their wealth and fight inflation.

Gold is going through a renaissance as governments have spent themselves into a Death Spiral of Debt. America has weaponized the US dollar since Russia invaded Ukraine. Russia and plenty of other countries saw this and collectively thought, what if America gets mad at us?

Their answer was to partially prepare because of the weaponization of the US dollar, they also saw the writing on the wall concerning the Death Spiral of Debt. Actually, the central bankers in the BRICS nations started buying gold shortly after the 2008 GFC when the Fed started the prolonged Free Money Era and have not stopped.

During the past few years they have amped it up and are buying so much gold now that they have taken the pricing of gold away from the paper markets and put it into the hands of the physical buyers of gold.

To make matters even stronger for the gold bulls, Biden and his team have recently decided to add tariffs to Chinese made goods. He made the case that he thinks that China is in the wrong, and costing American jobs, by producing what American consumers want.

Doing this while there is an inflation problem, is plain dumb as it will only cause more inflation if things made in China are made in America.

This is just more deflection by politicians that have been insanely overspending for much too long and are trying to put the blame elsewhere. Their spending habits, plus the Free Money Era are to blame for inflation, pure and simple.

I get that it is an election year and Biden is desperate because he is getting pounded in the polls. But starting a trade war, while spending like crazy, as BRICS nations see the Death Spiral of Debt and are preparing by selling US dollars and US debt, is not wise, it is actually beyond stupid.

If I was Trump, I would say nothing, I would just give Biden a longer rope and he will have his second term. The problem with Trump is that he is just as insane with his spending as he proved in his term as the president witnessed in his debt growth.

The Death Spiral of Debt is locked and loaded. It will force not only the BRICS nations to return to the Gold Standard, but the West will have to follow suit.

Gold is going to become the dominant reserve currency and be used in a big way for international trade. These are the key reasons that I see gold going to $20k over the next ten years. These events are happening in real time and will only pick up the pace, and drive gold much higher.

I don’t actually think they should stop at returning to the Gold Standard. More countries should be increasing their strategic reserves of silver, copper and other metals.

Especially to the level that meets their domestic needs of these metals. Why hold US dollars and US debt, which they don’t really need, when they do need copper and other metals. I would suggest it would be much better to not only be on the Gold Standard, but also on a Critical Metals Standard.

Gold, silver and copper are fat pitches, but the fattest pitches are in the stocks. I don’t mean just any stocks with those metals in their names. Nor do I mean the basket of stocks in the funds that package up the good, bad and ugly.

It is much more lucrative for investors to look for the top companies at various different levels, whether looking for major mining companies, small growing miners, developers and explorers.

I certainly don’t think the bargains in the gold stocks are going to be around for much longer. When the major gold miners, start reporting after the end of the second quarter, they will be selling at an average price well above that they received in the first quarter.

This will bring in a lot more generalist investors. They won’t be able to keep ignoring the gold stocks as they report blowout quarters.

At this point, even though some gold stocks have increased since just prior to the PDAC in early March, they still aren’t pricing in the higher gold price in the second quarter that will dramatically improve their quarterly reports.

I see this will be a key catalyst to drive gold stocks out of the tough market over the past couple of years and move them into a more bullish trend. As this happens, we will see the bullish money make its way down the gold stock food chain.

I put the stocks I have as current picks into two buckets, above C$500 million and below that level. In this report, I will provide insights into the above C$500 million level and my next report will have the smaller picks group.

Agnico Eagle

Agnico Eagle is the best in breed when it comes to major gold mining stocks. They are easily beating the performance of Barrick Gold and Newmont, as well as the ETFs. For investors that are looking to outperform gold and the household names in major gold miners, and aren’t interested in buying the good, bad and ugly in index funds, Agnico Eagle has been doing just that and is in the position to keep doing it.

Over the past two quarters, they are exceeding their records in production and free cash flow. In the first quarter, they sold gold at a little over $2000 per ounce. In the current quarter, the average price of gold is well above that level. I expect the analysts at brokerage houses will start increasing their projections to meet the higher price of gold.

They are only trading slightly above the price after they announced their latest quarterly report. I can see a few catalysts for a re-rating of their stock well above its current level.

One is when the brokerage house analysts increase their projections. Another is that investors will want to position themselves before their next quarterly report. Thirdly, as the price of gold increases, as I firmly believe it will, generalist investors looking to position themselves into major gold mining stocks will see the chart in Agnico Eagle is much more bullish than gold, Barrick, Newmont and the ETFs.

Alamos Gold

Alamos Gold is the mining industry's current version of Goldcorp. Back in its heyday, Goldcorp was one of the lowest cost gold miners, when they were mining the Red Lake Mine. Which made them a free cash flow making machine because not only were they a low cost producer, they were mining high-grade gold. It made them one of the best performing gold mining stocks in the business.

Kirkland Lake was a similar story when they were mining the extreme high-grade gold at the Fosterville Mine. They were also a leading low cost gold miner, and it drove their stock to being one of the best performers in the gold mining sector prior to them getting taken over.

I would prefer to see Alamos keep growing, but I don’t think they will be around for much longer. One way they could defend themselves against a hostile takeover that is opportunistic for the acquirer, is to use their warchest and free cash flow machine to become an acquirer.

Takeovers don’t usually happen when a company is in the process of taking over another company. Mainly because it makes it hard for the number crunchers to crunch the numbers until the takeover is finalized and they merge the companies.

If they don’t they are sitting prey for a larger gold miner to take them over at a modest premium. For a higher cost producer, it would bring their average cost of production down. Many companies would love to do just that in a rising gold price environment as they would get rewarded very quickly from the market.

McEwen Mining

McEwen Mining is a high cost gold miner, with a 47% interest in private company McEwen Copper, which owns the Los Azules copper project. Since many gold miners hit important lows just prior to the PDAC in early March of this year and then started to gain strength, McEwen Mining has been an exceptionally strong performer.

Based on their current valuation, and comparing their interest in Los Azules alone to peers, there is a strong argument to be made that they have plenty more blue sky. And are a relative bargain giving the gold mines a zero valuation.

Some would argue that their gold mines should be valued at zero because they are not performing well with the high cost of production. A funny thing often happens in the early days of a gold bull market.

The high cost producers can be re-rated sooner than lower cost producers. It seems counterintuitive, but the reason is that they go from losing money, or just scraping out a small profit. To seeing rapid profit growth with gold moving up because they are coming from such a low base and the higher price of gold shows exceptional rate of profit growth.

To find a marginal producer that has the potential for outperformance, I think it is important to look for those that are doing the work to increase production and bring down their cost of production. This is exactly what McEwen Mining is doing.

Plus, they have the added bonus of having a top 10 undeveloped copper project at Los Azules that is also in the lowest quartile of costs for the project on that list. Plenty of gold mining companies are trying to add copper to their portfolios of assets.

McEwen Mining is ahead of this copper curve for gold miners.

SilverCrest Metals

Like Alamos, I think SilverCrest is susceptible to being acquired at a bargain, unless they become an acquirer. In fact, it wouldn’t surprise me at all if Alamos takes a run at buying SilverCrest.

They are both low-cost producers, mining high-grade, which makes them cash making machines. I’m not sure if SilverCrest is big enough to move the needle for Alamos. But, they could definitely fit the bill of being a defensive play to stave off a buyout of Alamos at a bargain price.

Some look at SilverCrest’s mine life and think it is not long enough. I think this is incorrect due to the style of gold and silver mining they are doing. They have a cluster of epithermal veins with most of their work having been focused on only a few of the veins.

This was part of their business plan. They wanted to first become a gold and silver miner that makes a lot of money off low-cost production of high-grade. A problem with that plan, is that they won’t get an idea of their long range minelife until they do more drilling.

It is a prudent business plan during a tough market like we have seen over the past couple years. But, in a rising gold price environment it leaves them somewhat vulnerable. If they did the drilling on their cluster of veins, they would be able to increase their minelife. Which would take away an argument of the naysayers.

I absolutely believe that they have a much longer minelife ahead of them. That is the nature of epithermal vein clusters. You can put them into production, then keep replacing ore with drilling for many years, sometimes decades.

But, in a rising gold price environment they are prey to a discounted takeover price precisely because they are executing so well. They have a choice, become the hunter or be the hunted.

Equinox Gold

I recently added Equinox Gold as a new addition to the special situations picks shortly after they announced they were buying out the remaining 40% of the Greenstone Mine they didn’t own. The Greenstone Mine is going to be one of Canada’s largest gold mines and it will be in production very soon. When it is, I can see Equinox Gold perform very strongly.

They have been going through a challenging period due to building a mine in a tough market for gold mining stocks. But, with gold getting much stronger, they are primed to reap the rewards of building the Greenstone Mine that they own 100% of now.

Ross Beaty is a big shareholder and leads the team at Equinox. He is a serial mining entrepreneur and has stated that Equinox is probably his last kick at the can to build another success story.

He has also stated on many occasions that size matters and he wants to build the company into a million ounce gold producer. The Greenstone Mine gives him a leg up on that part of his plan.

One of the reasons that he mentions why he wants to get to a million ounces and more is because it makes the company big enough for the institutional investors.

Another thing it does is it makes them a mid-tier gold producer. There just aren’t enough of those in the gold mining space. There are projects out there that aren’t big enough to move the needle for the major mining companies, but they are fantastic growth engines to increase the size of a mid-tier.

A perfect example is SilverCrest, bolting that onto Equinox would be a win-win situation for both companies.

I don’t think Equinox is susceptible to a lowball takeover because it will take some time to bring Greenstone into full commercial production. The number crunchers will have to wait a year or so to be able to crunch the numbers. This gives them a bit of time to become a hunter not the hunted.

Ross Beaty is adept at buying assets to build, he has done it before and with Equinox, I think he will do it again.

i-80 Gold (sponsor, see disclosure below)

i-80 Gold is at an interesting juncture in their growth trajectory. They have a fantastic group of assets at the three key projects, McCoy-Cove, Granite Creek and Ruby Hill. Plus, they have processing facilities for their various projects.

They are simultaneously developing those three projects into near term mines. This gives them the assets to become a big player in the Nevada gold mining business.

Doing this during the tough period in the gold mining space over the past couple of years has left them vulnerable to a group of shorters of their stock. They currently have 36 million declared shorts on their stock, and probably more undeclared.

I’m no investing tycoon, but if I were, this is the kind of situation I would look for as an epic short squeeze candidate. They have tremendous assets, but are getting no joy from investors due to the pounding of their stock from the shorters.

The shorters have gotten away with it for a couple reasons, one is the challenging market gold stocks have gone through over the past couple years. The other is that they have an aggressive growth plan that takes serious money to pull off.

Some have even suggested that they should take their foot off the gas. I don’t think that is a good plan because then they would get punished for slowing down their growth plans. In a tough market, they are being denigrated for having the pedal to the metal.

As gold goes higher, I don’t think it will be long before they are being praised for their aggressive growth plans.

Especially if some investor whales run the numbers, and look at the huge short position and add up that it is a remarkable short squeeze candidate in the gold mining space. Primarily because they have such an incredible group of assets that will help them grow into a much larger company.

In Closing

I have been and remain extremely bullish on gold, as well as silver and copper. I think they are going much higher. But, now I think the fattest pitch is in the gold stocks, silver stocks and copper stocks.

The challenging situation for me is finding a lot of silver stocks and copper stocks. There just aren’t many of them out there for the picking. In reality, there really aren’t a lot of great gold stocks out there either.

This is very bullish for my above picks, and my smaller company picks in my next report, as the menu for serious investors to choose from is not a long list.

All the best,

Allan Barry Laboucan

Disclosure

i-80 Gold is a sponsor of Rocks And Stocks News, they are presented for the benefit of the company and for readers and viewers of Rocks And Stocks News reports. Allan Barry Laboucan is a shareholder of i-80 Gold’s common shares and in their tradable warrants.

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.