DT the history buff. Jack of all trades, expert of nothing. Merry Vhristmas Dick

Have seen Wilson described as “a man of high ideals and no principles.”

Good thoughts BDC, and yes inflation is a tricky one to pin down. The Fed had been not only hiking interest rates the last year and a half, but also doing QT Quantitative Tightening to reduce down their balance sheet, cancel out old debt, and minimize the amount of assets on hand. This was a contributing force to of pricing inflation numbers in assets mirroring that and coming down in tandem with some of the demand destruction they were hoping to inflict.

It wasn’t just seen in fuel prices coming down, but also pricing in cement, lumber, explosives, chemical reagents, etc… all used by mining companies. Labor was the stickier inflationary cost increase metric for most companies. The point being that metals prices rose, while many input costs came down, and yet the valuations in many companies further deteriorated. All we heard for the last 2 years was about how high costs were crimping margins, but when the opposite is true, it is crickets from the industry or talking heads in the sector. That just seems like an interesting disconnect.

As I’ve pointed out a few times, back in 2010 the average margin for gold producers (which factors in the price of the commodity versus costs) was $440, and then in 2011 (they heyday of valuations in the last cycle’s peak) margins were $620. In 2016 the average margin was still in the mid $400s.

Well in in 2020 it was a record average margin for the gold producers at $800+ and yet most producers did not come anywhere close to breaking out to new highs. Then over 2021 – 2023 the margins came back down into the $700’s, then $600’s, and this year in the $500-$550 range. That is still a higher margin than back in 2010, it is a higher margin than in the 2016 surge, and yet valuations are a fraction today of what they were then.

Sure, one has to factor in any share dilution, but then likewise, in tandem with that dilution, one would also have to factor in any mines bought, any company takeovers, any organic projects explored/developed/brought into production, any increase in reserves and resources, etc… These current valuations just make no sense at all and are still extremely low any way one slices it. The current margins are still really fat, and better than most other points in history for the last 2 decades. Sure costs came up, but so did the metals prices, and dilution came up, but so did the assets under management in terms of resources, mines, mills, infrastructure, size of companies.

I’m personally still very constructive on how the valuations in the gold and silver producers are going to run to the upside in 2024 and 2025, and see plenty of meat on the bone for investors to chew on.

Cheers!

Nice DT. Thanks for reading the substack page, and flattered it got the wheels turning on a different investment idea from your own watchlist. That is my intent, to talk about concepts that can be applied to anyone’s list of stocks. I threw a number of growth-oriented producers on there held in my portfolio only as examples. In the next few things I write, there will be additional breakdowns of some of the growth value drivers I see in those companies; but of course, there are plenty of other solid companies doing good work that fit that bill as well. Ever Upward!

Platinum has been suppressed longer than the war has been going on…… Go back to when it was well over $2000
just going by memory…. but, it has been a long time.

Thanks DT… for the min. mark… and the thought

This is one thing RR has little clue about. Typical American Putin bluster

Hi Matthew,
Around Christmas last year, you posted a youtube link to a song. That was beautiful. Can you share that link? 🙂

Brumple, do you know who Lumpy Rutherford is? DT