Newmont Stumbles And McEwen Copper Gets Biggest Investment Yet From Rio Tinto's Nuton
Gold stock investors aren’t very forgiving these days, despite gold being in a powerful bull market. Which is a clear indicator that we are still very early in the gold bull market.
When Newmont announced that their costs were rising, their stock got smacked down, even though their free cash flow was higher than the second quarter. The trend for them in costs to produce gold was up for three consecutive quarters this year. They are certainly growing their free cash flow, but the market didn’t like the rising costs. They didn’t meet analysts' expectations and the market was unforgiving as it dropped a little over 14%.
Barrick is on a similar path, with rising costs while production was flat compared to the second quarter when they reported preliminary production numbers last week. They also reported that their costs are up in the third quarter.
The Newmont selloff, spread out amongst several gold miners, even to the extremely well run Agnico Eagle, although it was pretty mild. I’m sure glad that I have picked Agnico Eagle as my top gold miner. When it comes to the top 3 gold miners, Agnico Eagle is outperforming Newmont and Barrick on all the important metrics for gold miners.
Agnico Eagle had three consecutive quarters of record free cash flow over the past three quarters. They are also making moves to increase production and bring down costs while also replacing what they mine. The most important metric for investors is the stock performance and they are beating Newmnt and Barrick on that front as well. While Newmont and Barrick are well below their record high stock prices, Agnico Eagle is setting new record highs.
I’m looking forward to the Agnico Eagle quarterly report next week as I think it will be a blockbuster quarter. They are a peer leader when it comes to containing their costs. In the second quarter they had their best quarter ever generating a half billion dollars in free cash flow. The third quarter had a significantly higher average price than the second quarter. So everything is shaping up for them to hit it out of the park in the third quarter.
Our other favourite big miner, Alamos Gold was unscathed from the Newmont stumble as it was only down a penny yesterday. They are much like Agnico Eagle, in that they are also creating new records in free cash flow. In addition, they are an excellent gold miner at containing their costs. In fact, they are making moves to increase their production and bring their costs of producing gold down to around $1000 per ounce in the near-term.
Much like Agnico Eagle, they are rewarding their shareholders with a stock chart going from the lower left of the 52-week chart to the upper right, and reaching new record highs. With the way they are bringing down their costs, I can make the argument that they can outperform Agnico Eagle.
During the powerful gold bull market this year, Agnico Eagle and Alamos Gold have been stellar performers and if gold goes much higher like I think it will, their excellence in execution should continue handsomely rewarding their shareholders.
McEwen Mining’s subsidiary McEwen Copper had excellent news on Thursday when they announced that Nuton, a Rio Tinto venture, has invested $35 million into McEwen Copper. In August 2022, Nuton invested $25 million into McEwen Copper. Then in February 2023, they invested $30 million into McEwen Copper. Also in 2023, they put another $10 million into McEwen Copper.
The $35 million purchase on Thursday of this week, is Nuton’s largest investment yet into McEwen Copper. Their total investment into McEwen Mining and McEwen Copper now stands at $100 million.
Nuton is an interesting company, they are a Rio Tinto venture that was founded on 30 years of research and development to optimize copper recoveries while reducing the environmental footprint from mining copper.
McEwen Copper’s plans for their Los Azules copper development project include goals that I hope other miners use as an example. They will use 100% renewable resources, and only use ¼ of the water that a conventional copper mine uses. They will produce copper cathode so there will be no need to ship concentrate out of Argentina for smelting.
The copper can be used right in Argentina to add value in the country. Plus, they will build a modern facility to house their workers that is being designed by the architect known as the Steve Jobs of the green building industry. It will be one of the most sought after mines to work in for Argentinian miners for generations.
Nuton and McEwen Copper’s visions are perfectly aligned on what they want the future of copper mining to be.
Los Azules promises to be a standout copper mine of the future. It is a top 10 undeveloped copper project that is also in the lowest cost quartile for copper projects in development. It is the ideal project to turn into an example of what future copper mines should strive to become.
In Closing
I’m very bullish on gold and copper but don’t think generalist investors clearly understand the bullish supply and demand fundamentals for both metals. They are starting to come around but they still have a long way to go to catch up.
As Paul Tudor Jones stressed in a recent interview on CNBC, he thinks that “commodities are ridiculously under-owned.”
I would add that the miners are even more ridiculously under-owned.
All the best,
Allan Barry Laboucan
Disclosure
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.
