Gold Stocks Need To Join The Age Of Digital Marketing
When I look at a mining company, there are three key factors I look at as my most important filters. The screens are their projects, the people and marketing.
It always starts with the projects because without that nothing else matters. Now there are several variables that go into the project's analysis, starting with drill results for explorers. Jurisdiction is also crucial and of course funding to do more drilling and catalysts such as pending drill results. Plus, where they are on climbing the left side of the Lassonde Curve.
When looking at developers it is a combination of internal rate of return (IRR) capital costs (Capex) to build the mine and how quickly the project pays back the Capex. Of course, where they are in the development window of the Lassonde Curve is crucial, especially how close they are to the sweet spot of the development window when they transition from development to mining.
With miners, it is all about their free cash flow, ability to replace what they mine, grow production, and of course keep their costs of production under control. Both of my top mining picks (Agnico Eagle and Alamos Gold) are excellent examples of what to look for. They both are excellent operators with low costs of mining relative to the industry average, plus they mine gold with a healthy margin between costs of production and grade of production. So they have exceptional free cash flow.
For their long-term viability they need to replace what they mine and to be valued higher than their peers, grow production and reduce costs of production is ideal. They are firing on all cylinders on all of these metrics.
Whether I’m looking at an explorer, developer or miner, the people are also an important factor. With explorers, they tend to get great projects and advance them in an impressive way. Great developers have the people that can get the funding to build the mine and then operate it to make it shine. Miners that are great operators are the ones I focus on based on the metrics mentioned earlier.
In a general sense, the people and projects go hand in hand. Great projects tend to attract great people that want to work on them.
After a company passes through the projects and people filters, then their efforts to market their story is a huge factor.
I find all too often that people in the mining space don’t appreciate the value creation from marketing, even more alarming is that they look down on it. In fact, many even promote that they spend very little on marketing, which is a major turnoff for me, and it should be for investors as well.
When I see companies that don’t want to market themselves, it tells me that they don’t have a lot of confidence in their projects. Secondly, it says to me that they aren’t truly interested in maximizing shareholder value.
In this day and age, digital marketing is crucial. Investors constantly have their attention pulled in many directions. If a company is not effectively using digital marketing tools, they won’t stay at the top of mind amongst investors.
I follow many companies, and a common theme I see play out is that those with great projects that also are consistently and effectively using digital marketing tools get better valuations.
I can find several great projects that are undiscovered gems. The reason they are undiscovered gems is because they drop the ball on marketing using digital marketing tools. In reality, there are more undiscovered gems in the mining space than there are great projects doing great marketing. If they are an undiscovered gem with no plans to increase their marketing then I tend not to get too excited about them as I know they are likely to stay an undiscovered gem until they embrace the importance of marketing.
The mining industry has to change. Not nearly enough generalist investors understand how important mining is to our daily lives in the modern world. Without mining, nothing gets built and nothing works.
Generalist investors don’t understand how broken the supply chains are for gold, silver, copper and other metals which is extremely bullish for the prices of those metals. To some degree they get the demand side of things, but without clearly understanding the supply and demand fundamentals, they won’t get the entire bullish picture.
That is on the mining industry, including the miners, developers and explorers to get out there and tell their individual companies merits as well as the metals supply and demand dynamics and how important mining is to the modern world.
The digital marketing tools are readily available and they are relatively inexpensive, plus there is a massive audience of investors that want content to help them understand the incredibly bullish arguments there are for metals, companies and mining.
It is tremendously troublesome how the mining sector as a whole is underperforming when it comes to digital marketing. A perfect example of how to do it right is staring the mining sector right in the face with Bitcoin.
I have little good things to say about Bitcoin and other crypto currencies as they look like nothing more than digital Ponzi schemes to me. What is undeniable is that promoters of them are handing the mining sector their lunch when it comes to digital marketing.
Bitcoin passes itself off as digital gold and promotes that investors should be wary of fiat currencies and look for alternatives to protect against the devastating destruction of purchasing power. Gold is the soundest form of money, much better than every fiat currency, yet Bitcoin is pulling investor’s money away from gold and gold stocks.
Promoters of Bitcoin repeat three key themes that then get broadcast far and wide. They pump up that Bitcoin is digital gold, that investors need to buy with the fear of missing out (FOMO) and hold on for dear life (HODL) and if they do they will become rich beyond their wildest dreams.
These themes are promoted so often to a vast audience that investors think of Bitcoin as digital gold, with FOMO and HODL synonymous with Bitcoin.
Meanwhile gold has remarkably bullish supply and demand fundamentals, that are benefitting from the world heading back to the Gold Standard due to the Death Spiral of Debt.
The bullish arguments for gold going higher by multiples of its current price are way stronger than Bitcoin going up multiples from its current price.
Gold is in a powerful bull market making higher highs and higher lows with each new high reaching new record highs. While Bitcoin has got its bounce from the ETFs coming out and looks likely to see lower lows and lower highs. Yet, what do investors hear more about, Bitcoin or gold?
We all know the answer, Bitcoin is promoted much more effectively than gold and gold stocks using digital marketing tools.
The miners are stuck in the Fax Machine Era and need to jump into the digital marketing space in a big way or will continue to be underappreciated. Not all miners are dropping the ball, but many more are compared to those that are embracing digital marketing. This applies to miners, developers and explorers.
It takes more than a great project, if the team running the company isn’t also working hard to tell their stories and for the metals they are involved in, and for the importance of mining in the modern world, then they will continue to not get the investor’s love they deserve.
It is beyond the time that mining companies drop out of the Fax Machine Era and join the modern world of digital marketing.
All the best,
Allan Barry Laboucan
