Gold Mining Stocks, A Clear and Compelling Investment Case
January 11, 2024
We offer herein an investment rationale for gold mining equities that rests primarily on investment fundamentals particular to the mining sector. Speculation on the future course of the gold price takes a back seat. A tailwind from higher metal prices would, of course, be helpful but in our view would only add heft to an already powerful investment case.
1. Extreme Undervaluation
Gold mining stock valuations are the lowest in 25 years. The spread between the gold price and the discount implied to spot based on the market price of the equities is a massive $700+ per ounce. In other words, cash flow from a gold price 65% of the current spot price would return the entire market value of the group based on existing reserves. BMO calculates an average return on capital of 14.4% for mid-capitalization producers and 25.8% for small-cap producers in a semi-liquidation scenario (see Figure A2). We believe investment returns would be substantially greater in a full liquidation scenario,
which would assume the elimination of all discretionary capital spending. In essence, the theoretical returns from taking many of the mid- and small-cap producers private would be compelling from the perspective of a corporate raider. The “corporate raider” perspective is of course only a notional concept to illustrate the extreme undervaluation of the sector. The risk typically associated with extreme undervaluation is the amount of time required for the investment thesis to prove out, not loss of capital
I don’t see the point in going over this, time & time again.
I get it, that many here would like him to show solidarity with the rest of us, and put his hands in his pockets, but personally I just don’t see it happening.
GGP is not a fledgling start-up, whereby investors might ask, why should I invest, if the management won’t ?
GGP are much further down the line than that.
At any point in the future, if SD delivers us the mine we are all hoping for, then along with awarding himself a massive pay rise, he can probably also issue himself millions of performance enhancing shares to rival those of any of his co- management team.
So imo, he knows in the not to distant future, he will reap the rewards. The only thing that could scupper that, would be if GGP did sell their 30% of Havieron, in which case all he’d receive would be his salary.
So that’s another reason as to why a sale of Havieron is not on the cards, SD personally, would be the one person to lose out the most. No shares, equals no pay out.
Freddie there’s an old saying springs to mind each time I see most of your posts.
When you’re dead, you don’t know that you’re dead. All the pain is felt by others.
The same is true when you’re stupid ! 🤪
Doublehun, it might not hurt SD as you say, but it sure as hell will hurt the likes of our largest shareholders such as Wyloo, Tribeca, Five diggers etc etc.
somehow I can’t see them voting to introduce more shares. Less shares most probably, as they lose nothing percentage wise then, do they !
Not half as much as the CR-500 I used to race. It was like riding a bull on steroids most of the time.
Great memories though.
Hey Ace, no need to grant me honorary membership of the Aussie club. Back in November 1983, as a young 21 yr old, I was suppossed to be taking up a position at Royal Melbourne Golf Club, as one of the teaching professionals.
Due to injurying my right leg & foot dbecause of a motocross accident the month before, I couldn't fulfill the position.
Unfortunately I've never been able to get the time to go visit due to life & work commitments. Now retired, who know's ?
One day "Me Old Cobber" one day ! Still only 61, so plenty of time left 🤞
What a lot of you forget, is when SD took over the reins, GGP still owned 70% of Havieron too.
If your looking at reason’s why we are, where we are, I think you’ll find, that is the largest catalyst, along with 99% of mining & exploration companies being so undervalued at this particular moment in time. But obviously the likes of Freddie just turn a blind eye to the most obvious of facts.
WiiiiiiiLMaaaaaaaaa
Hey Speedie, that did make me chuckle 🤭 But use the one on your phone and turn it sideways. 🤪
All this talk about GGP selling their 30% is just poppyc0ck.
The only way that would happen, is, if Shaun recommend to us shareholders to accept whatever offer was put forward, and even then, it would be a bit of a stretch, depending on what that offer was tabled, for the majority of shareholders to agree to.
I personally don’t think the likes of 19/20p (£1Billion) would cut the mustard. But it would be nice to know what figure SD puts on it when quoting “Eye Watering”. Maybe it’s a question that someone like The Roast guys or Liam (Aim on Air) should be asking, as it was Shaun himself who coined the phrase, so shouldn’t be surprised to be asked for the answer.
If sold, where does that leave GGP and this board of galactico’s that’s been assembled ?
From day one of Shaun’s tenure, his vision for the company has always been one of copying the business model of his former employer Northern Star, and as he puts it, with a much better asset to help kick things off.
His recruitment policy as far as I can see, definitely doesn’t show he’s changed his plans, so why do many of you ?
The last thing he wants to do is sell the goose that will keep laying golden eggs each day for decades to come.
If an offer does come in, It’ll be a little like a genie granting you two wishes.
First wish, accept £1M today, or Second wish, Gives you a bag with a pound in it, then every day for a month (31 days) the price of the money in the bag magically double’s in value.
Which wish would you choose ?
Tymers 👏👏👏👏👏👏👏👏 that’s the first legible post I’ve seen from you in quite a while.
Keep it up 👍
What good is Bitcoin if the lights go out.
You won’t even be able to access it, never mind trade with it.
At least gold is a physical entity, you can’t trade fresh air as far as I know.
Freddie, have you ever heard the saying “They’re Big enuf & Daft enuf, to look after themselves” ?
I’m pretty sure that if anybody needs protecting from anyone here, then it’s you !
Who dya think you are, The Equalizer.
“He would know nothing about what newmont are going to do that was my point actually”
Did he ever say he did ?
Your mind working overtime again Freddie ?
Where’s Wilma when you need her.
Freddie, nobody was knocking Goggles.
He asked Bamps why he thought Newmont wouldn’t be putting an offer in the buy GGP’s 30%.
Bamps never even discussed that in his post. What he actually said if you’d care to read it, is that it should stop any rumours that they (Newmont) would be selling their 70% of Havieron.
How are those two statements even linked ?
So get off your high horse, and reflect what you’ve said, before once again accusing folk of saying things they didn’t.
And the other stupid thing you said about Bamps not knowing anything, just like the rest of us, then in the next sentence, accuse him to having privileged information !
Which is it ? He knows nothing or he knows everything.
Looks a bit small for a 3mtpa operation to me 😂
YNWA, look at the end of the day, I suppose anything could happen, but looking at this the way I do, which is to not get to involved in the if’s but’s & maybe’s, then as far as I can see, since the opening up of the boxcut, whether it has been Newcrest or Newmont, everything is going to plan, and I’m of the opinion that neither of our JV partners have deliberately slowed things down. If they had, we’d still be only halfway down the decline.
Like Bamps has said, the mining plan has changed since it’s original draft, and if it takes longer to build a successful decline, so be it.
I’d rather them get there safely and without incident, than go at it like a bull in a china shop, just to keep us shareholders happy.
Yes I agree with you, that once that rubber stamp has been stamped onto the official DTM document, then there’s no excuse as to why the SP shouldn’t see a significant rise, but again, I wouldn’t bet my bottom dollar on it. It all depends on the anticipated date of when production might start. The way I’m reading this, I personally think it’s going to be 2025 before I can see any meaningful uplift in the value of my holding, I hope I’m wrong, but I know at some point, it will happen, and I’ll still be here to collect.
ATB
Rashpurchase, I don’t know where you got your figures from, but they seem miles away from what we already know.
Just a couple of obvious mistakes on that list would be, Wyloo, where are they on your list. Legal & General also hold 121 million shares, not the 16.5 million on your list.
I could go on picking holes in it, but just pointing out that your list is a little outdated.
YNWA, what does it matter if, and it’s a big if, Newmont have been a bit slow at coming forward.
If your suggesting Newmont will try a cheeky little bid, to get us on the cheap, then imo, there’s not a chance of em pulling it off.
We have a BOD’s who are definitely not wet behind the ears when it comes to knowing just how much an asset is potentially worth to them.
I can just picture Shaun & Jimmy Wilson’s reaction, once they’ve opened the sealed envelope and viewed the bid, with Newmonts representative sat there with documentation in hand for them to sign.
https://youtu.be/9BAEJyuReWQ?si=Xp9_6SSXwC9syLI9
Sorry guys but I couldn’t resist saying this.
Euston we have a problem 😂