The two large gold mining conferences in Colorado, from which I have just returned, had a more up-beat mood than in years past, not surprisingly with gold and gold stocks up strongly so far this year. Attendance was up at both the Beaver Creek conference, focusing on juniors, and in Colorado Springs, emphasizing larger companies, with 1,750 attendees (up 17% on last year) and 220 companies at the first, and 1,000 up 13%) at the second.
Anecdotally, there was still not a flood of new generalist investors, however. There were apparently a total of over 13,000 one-on-one meetings at the two shows; I must say that I did more than my fair share, with well over 50 individual meetings.
Disciplined Growth as M&A Increases
Overall, both in presentations and meetings, the message was of discipline in the face of strong cash flows. Though M&A has unquestionably picked up this year, with intermediates merging, juniors being acquired, and individual properties spun off from seniors being gobbled up, the deals have all, to a greater or lesser extent, made sense, and there is as yet no indication of overpaying for marginal assets for the sake of growth, such as we say in 2011-2012 at gold's last peak.
The massive write-offs, as well as firings of multiple CEOs, that followed that binge is well remembered. It must be said, however, that a couple of company CEOs told me that there were beginning to receive increasing pressure from some large shareholders to grow more rapidly. Notwithstanding that shareholders are the owners, I trust the CEOs can withstand such ignorant pressure.
Companies Reduce Debt First, Then Shareholders' Returns
Among larger companies, there was a focus on streamlining portfolios, with many companies — from Barrick to Fortuna — divesting smaller or marginal mines, to reduce risk and focus on key assets. Strong cash flows went first to strengthening balance sheets and after that to shareholders returns, in the form of either share buybacks or dividend increases, some companies emphasizing one, others the other.
Companies continue to focus on keeping costs under control, which, aided by a low oil price and low "commodity currency" rates, they have been able to do.
Barrick Sells a Mine, and Announces Massive New Gold Project
Barrick Mining Corp. (ABX:TSX; B:NYSE) has had plenty of news in the last couple of weeks as well as a couple of rumors swirling about the company. First, the company announced it had sold its legacy Hemlo mine to a private group for $1.09 billion. The legendary mine represents between 2-3% of Barrick's NAV and earnings, so the disposition will not have a major impact, while the price is considered a good one. The price, mostly paid in cash up front, includes a five-year gold-price linked additional payment.
It had long been indicated that the mine was for sale, so this was no surprise. There were also a couple of developments in Mali, where the government has taken over Barrick's Loulo-Gounkoto mine in a dispute over back taxes. A judge ordered the release of four Barrick employees from jail, though remain in jail pending a government appeal.
It is widely considered than the employees were taken as hostages in the dispute. Separately, the junta hired as an advisor the former general manager of another Barrick mine in the region who had been leading the company's negotiations with the government
Fourmile Has Grown Rapidly
Most importantly, at the Mining Forum Americas, Barrick showcased it just-released Preliminary Economic Assessment (PEA) on its Fourmile gold deposit in Nevada, adjacent to the Goldrush mine. Since the last report out at the end of 2024, the resource has grown from7.7 million ounces to 25 million, with higher grades; it remains open in most directions. The project now represents about 8% of Barrick's NAV, while the study as well as indications of upside were very positive.
The large, and high-grade deposit could see initial production as early as 2030, according to analysts, and full production by 2034, with output between 600,000 oz and 750,000 oz per year for 25 years, an increase on a previous study from late 2024, while the capital costs have increased to around $1.2 billion, despite not needing infrastructure. With higher grades, Fourmile has the potential to produce 60-80% more ounces than Goldrush at lower tonnage, and at a low estimated All-In Sustaining Cost of $650-$750/oz. With 16 drill rigs currently turning on the property, Barrick said it may double resources by the time it next reports at year end.
It plans an increase to 20 rigs next year. In terms of grade and size, Fourmile is the top undeveloped gold mine in the world right now, what Barrick CEO Mark Bristow called "the great gold discovery this century."
Newmont Has Option To Buy Into Project, at a Cost
At a small private lunch with Barrick, Bristow explained that Fourmile was current 100% owned by Barrick. Once a feasibility study was published, expected in 2029, Newmont Corp. (NEM:NYSE; NGT:TSX; NEM:ASX) would have the right to pay a fair market value to vend the asset into the Nevada Gold Mines (NGM) joint venture (61.5%/39.5% ABX/NEM). If it declines, Barrick could vend the asset and dilute Newmont in NGM. The timing is largely in Barrick's hands.
Given the strides made in advancing the project, and expecting growth before a FS, the price tag for Newmont could be massive. One analyst, at BMO, has projected an $18 billion value on Fourmile, or a nearly $7 billion price tag for Newmont to pay Barrick in order to vend the project. This hefty price tag has led to suggestions that Newmont might look at acquiring its competitor. The argument for such a move is enhanced by reports that the board of Barrick is searching for a new CEO to replace the 66-year-old Bristow, who has been at the helm since the merger with Randgold in 2019.
There is some frustration that Bristow has missed opportunities to acquire a large mine in Canada and thereby reduce the company's risk-profile. Although Barrick stock has matched the performance of Newmont in the last six years, it has underperformed other large companies, including Agnico, Anglo, and Goldfields. It should be noted that Barrick stock has played catch-up recently, after lagging the group for a couple of years, being the top performer among the larger miners in the last few months.
After this strong move, we are holding, even though the stock continues to trade at a discount to NAV relative to peers.
Agnico Outlined Its Low-Risk Strategy
Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) had no news, but presented a clear path to achieving its goal to grow from 3.4 million ounces of production to 4 million by 2020. It re-iterated its approach of working in a limited number of low-risk jurisdictions, emphasizing Canada, as well as its commitment to fiscal responsibility.
Its two largest mines, Detour and Malartic, are both scheduled to grow to over 1 million ounces of production, with other new mines coming on stream. The focus for growth continues to be on exploration, with 121 drill rigs active currently.
In addition to brownfields exploration around existing mines, Agnico also has a large portfolio of investments in exploration companies.
Expansion Into Critical Metals, as Well as in Finland Ahead?
In our private meeting, we discussed Agnico's interest in critical metals, which was publicly discussed three years ago. I was told that the company has investments in a dozen companies with critical metals, though only one has been publicly disclosed. It is still not certain that the company will proceed with large-scale non-gold mining, though a spin off of such operations was a possibility.
We also discussed Agnico's operations in Finland and Australia, each currently with only a single mine. The company said that it would be difficult to get additional mines in Victoria State (where it's Fosterville mine is located) due to permitting restraints, but the company is looking elsewhere in Australia, though the competition and prices are high.
In Finland, the obvious candidate would be the Ikari deposit owned by Rupert, but the company indicated it thought the market cap of Rupert was still high while adjacent land (held in a joint venture by B2Gold and Aurion) would need to be acquired. I suspect that a move may be made later this year, but that is conjecture. Agnico is the gold standard of large miners.
We are holding.
Pan American Advances Skarn, and Increases Silver Output
Pan American Silver Corp. (PAAS:TSX; PAAS:NYSE) reported new drill results of its La Colorada mine in Mexico, with several high-grade silver veins, with potential for resource expansion and a mine-life extension. It continues to seek a partner to develop the large La Colorado skarn deposit.
Separately, the company released its mid-year reserve update, showing a slight decline in both gold and silver from the year-ago reserves, despite bumping up its price assumptions ($2,120 for gold and $22 for silver reserves, with higher prices for resources).
La Colorada showed the largest increase. In our meeting, we discussed both the slow progress at getting Escobal in Guatemala operating again as well as the percentage of silver production in the portfolio; a restart at Escobal would boost silver to over 40% of total production. We like Pan American — its management, its solid balance sheet and financial discipline, and its potential.
We are holding.
More Changes at the Top of Nestlé
Nestle SA (NESN:VX; NSRGY:OTC) announced that chairman Paul Bulcke has decided to step down, earlier than planned. No reason was given, other than Bulcke saying it was "the right time," but Bulcke had come under pressure following the firing of its second CEO in just over a year for failing to disclose an inappropriate relationship with a subordinate; the previous CEO was pushed out for sluggish performance. Ex-CEO Laurent Freixe's escapades — it was a senior executive said to be his mistress who reported him for the affair — were said to have been an open secret at the company, but the board under Bulcke had failed to act.
The replacements for both the CEO and the chairman are internal promotions, whereas an outsider in one role might have been able to project a renewed culture. The recent chaos at the top suggests a lack of controls and a weak culture. Separately, the company is planning a Euro 1 billion bond issue. I would rather see them sell their stake in non-core L'Oreal to reduce debt, rather than taking on more.
Although Nestlé is selling at its lowest valuations in year, with its yield its highest this century, we will stand aside to see how the new CEO can execute.
Orogen Has New u.s. Symbol
Orogen Royalties Inc. (OGN:TSXV; OGNNF:OTC) has a new symbol for trading on the U.S. OTC-QB market, OGNNF. QB is the higher level of OTC markets.
The new symbol following the company's acquisition by Triple Flag with concurrent spin off of Orogen (ex-the Arthur royalty).
The main Toronto symbol remains the same.
Hold.
TOP BUYS this week include Midland Exploration Inc. (MD:TSX.V), Lara Exploration Ltd. (LRA:TSX.V), and Fox River Resources Corp. (FOX:CSE). Unless you are underinvested in gold and resource companies, we would hold off adding to positions at this time.
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Barrick Mng Corp., Agnico Eagle Mines Ltd., Midland Exploration Inc., Lara Exploration Ltd., Fox River Resources Corp., Pan American Silver Corp., and Orogen Royalties Inc.
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