by With gold prices reaching record highs, the September quarter is expected to post the highest average quarterly gold price ever, signaling “significant margin expansion,” according to Neil Adshead, who’s an analyst at the Commodities Discovery Fund. In a conversation with Kitco jouranlist Paul Harris on the Digging Deep podcast, Adshead expressed optimism about the outlook for gold miners.
“It will be exciting to see several gold mining companies surpass the projections of sell-side analysts. We’re likely to witness bumper profits, which will definitely draw more investors into the sector,” said Adshead. He noted that during favorable times, mining companies typically see profit margins of around 40%, but some high-grade producers could generate margins above 50%, which would be extraordinary.
Gold Equities Gaining Momentum
Investor interest in gold mining equities is growing, reflected in the 35% year-to-date rise of the GDX index fund. Despite this, many companies are still trading at less than 1x NAV (net asset value). Adshead believes there is considerable potential for further share price growth.
“When I first started as an investment analyst, some of the leading producers of the time were trading at 2.5x NAV. Seeing those multiples again would be remarkable. There’s definitely room for many producers to trade up,” he said.
Growth and Investment Opportunities in the Sector
Adshead emphasized the importance of gold mining companies allocating their increased earnings to expansion efforts, including developing new mines and acquiring projects. While there have been some significant financings recently, Adshead noted that the market remains selective. The sector has not yet reached a point where funding is being handed out indiscriminately to junior miners.
“We’re in a solid financing environment, but not every junior miner can raise as much as they want. That’s actually a good thing, as peak bull markets often lead to capital misallocation, where companies that shouldn’t be getting funding end up wasting it,” he explained.
Exploration and Regional Outlooks
Adshead also commented on key exploration regions and developments in the industry. He mentioned the growing interest in the Guyana Shield as a hot spot for gold exploration, as well as Iceberg’s shorting report on Newfound Gold’s Queensway orogenic gold deposit in Newfoundland, Canada. He also highlighted NGEx Minerals’ ambitious drilling plans at its Lunawasi copper discovery in San Juan, Argentina, and discussed the impact of a new president in Mexico on the mining sector. Additionally, Adshead touched on the outlook for uranium, signaling interest in diverse resource investments.
Digging Deep is sponsored by Revival Gold, a leading developer of gold mining projects in the United States. The company is progressing with engineering studies for the Mercur Gold Project in Utah, while advancing exploration and mine permitting at the Beartrack-Arnett Gold Project in Idaho. Revival Gold trades on the TSX Venture Exchange under the ticker symbol “RVG” and on the OTCQX Market under “RVLGF.” The company is headquartered in Toronto, Canada, with operations in Salmon, Idaho.
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