Gold Stocks Are Coiled Springs Ready For Release

Last year was a great year for gold and we are seeing more of the same as gold is building a 2-year gold chart going from the bottom left to the top right.

The gold miners we reported on multiple times since early 2024 included Agnico Eagle, Alamos Gold and Silvercrest Metals which all did their job of significantly outperforming gold.

Agnico Eagle and Alamos Gold continue to be top-notch performers on the fundamentals of gold mining as they have been free cash flow machines. Silvercrest Metals is no longer with us because they were taken over. I expect to see Agnico Eagle and Alamos Gold to be fantastic miners that have low-cost mines and are increasing their production and replacing what they mine with new deposits.

Recently, I added Newmont to the picks because I see them as having gone through a transition year in 2024. They have now completely digested their Newcrest acquisition and also sold non-core gold mines. Now, they are focused on their Tier-1 mines at an ideal time with gold at, or near, record highs against every fiat currency and primed to go much higher. Newmont’s transition period will enable them to focus on optimizing their gold mines and also pay down debt.

Another reason that I picked Newmont is they are a barometer that generalist investors focus on when they consider gold miners. In addition, they are 12% of the GDX (another barometer for generalist investors considering investing in gold miners) so if they are performing it has a way of shifting sentiment for generalist investors that look at Newmont and the GDX to assess the health of gold miners.

I call it the Newmont Effect and think it will bring more generalist investors into the gold stocks. As they see major gold mining stocks going up, it will add to their confidence and then they will look down the gold stock food chain.

I’m seeing tremendous opportunities in the junior gold miners that can grow their production and bring down their costs of mining gold. Plenty of them are still not getting enough love in the market and trading at bargain valuations based on historical metrics.

I’m also very bullish on gold mine developers with high-quality projects, partially because they are also trading at bargain valuations. And also due to the gold mining industry needing a lot more gold mine development projects.

Majors and mid-tier gold miners are piling cash onto their balance sheets, but several are struggling to increase their production and replace their production with new deposits. It is very impressive that while gold is trading at, or near, record prices against every fiat currency, global gold production is pretty much flat and likely to decline.

With the powerful demand from central bankers, Eastern retail investors, retail and institutional investors in the West joining the party, plus the softness in the current and long-term supply chain, it is a perfect storm for gold and the gold stocks to go much higher.

The fundamental driver of the central bankers buying is due to the Death Spiral of Debt in America and worldwide, plus the alarming growth in the cost of servicing the debt is a problem that is going to be around for many years into the future.

As the gold miners are loading up their balance sheets with cash, they need to increase their production and also replace their current production with new deposits. Which puts them in an exceptional position to make mergers and acquisitions.

When looking at the mergers and acquisition landscape for the major gold miners, to move the needle they really have to focus on the mid-tiers. But, there just aren’t many for them to choose from.

Not all major gold miners are created equal, which is why I focus on Agnico Eagle as they are a free cash flow machine that is having no problems increasing their production, while also having strong controls on their costs of production. Which puts them in a terrific position to keep outperforming gold and many of their peers.

When it comes to the mid-tier level, I continue to be focused on Alamos Gold because they have many of the same characteristics as Agnico Eagle. They are also a free cash flow machine that is having no problems replacing their current production with new deposits and increasing their production. Another factor that sets them apart from their peers is that they have an amazing pipeline that will enable them to bring their costs down to several hundred dollars below the average cost of production amongst the majors and mid-tiers.

If I were running a major gold miner, Alamos Gold would be on the top of my list for a takeover target. But, even they might not be big enough to move the needle for the biggest major gold miners. Not only are they an exceptional gold miner, they have also been adept in mergers and acquisitions. I see them being a candidate for a merger of equals or taking over a junior gold miner or two.

Further down the gold stock food chain are the junior gold miners and the gold mine developers. There aren’t many of those and plenty of them are trading for less than the cost of finding new gold ounces when you consider their market values and ounces in the ground.

The junior gold miners and gold mine developers are also ripe for takeovers. Consolidation in this portion of the gold mining sector would allow gold mine developers to get the funding to build their mines and also enable the junior gold miners to grow into mid-tiers.

The gold explorers with important discoveries are also being priced in many cases for less than the cost of finding new ounces. Bigger companies can pick these companies up for less than it costs them to find ounces in the ground at their own projects.

Considering the need for gold miners to increase their production or at a minimum replace what they mine with new deposits in their pipelines, mergers and acquisitions are primed to continue and the prices being paid to increase.

There has never been a better time to be a bull on gold and gold stocks. I see some impressive opportunities all along the gold stock food chain.

I am working on a series of reports to mention gold stocks that fit into the various categories along the gold stock food chain. Especially junior gold miners, gold mine developers with high-quality projects and explorers with important discoveries or the potential to make new discoveries or advance new discoveries. Stay tuned.

All the best,

Allan Barry Laboucan