Once a bear, always a bear, right?
I mean, I’m the first to point out Australia’s shaky economy…
And last week we looked at how the coronavirus is shuttering the labour capital of the world…
Then you’ve got Aussie indices sitting at all-time highs…
…in spite of the uncertainty building all around.
So when you spend a career talking up gold, people often think that automatically means you’re talking down everything else.
But that’s simply not true.
Because you know what’s getting ready to move higher?
Gold stocks.
Economy RESET 2020
‘So, what are Jim’s thoughts on the coronavirus?’
‘Hey, yeah, what are Jim’s thoughts on gold this year?’
‘Stocks are pretty high right? What’s Jim got to say about that, Shae?’
These are just some of the questions I get once people find out I work alongside Jim.
Given that I’ve worked alongside Jim for the better part of years now, it goes with the territory.
However, there’s been something different about the questions I’ve been getting over the last couple of months.
One is the frequency.
It’s gone from the odd question maybe once a month…to two or three people a week asking a variation of the above.
But here’s what surprised me most.
These aren’t financial novices asking me what Jim thinks.
They’re coming from people who work in the industry.
Financial advisers. Stockbrokers. Hedge fund managers.
All are looking for a peek into what one of the world’s most eminent contrarian economists thinks.
They know something is up, but can’t quite put their finger on it. So how are they supposed to guide their clients?
And I know why. Some sort of reckoning is coming.
But it’s not the warning of another market crash…
…or some media dude doing his best effort to describe a future black swan (hint: black swans are unpredictable, but easy to see with hindsight).
Oh no. Instead what Jim is talking about, in his words, is predictable. But many aren’t prepared for this wealth-altering shift.
Instead, Jim’s talking about some sort of reset to the monetary system.
Sounds impossible? Click here to see why Jim says it’s more likely than not…
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The multibillion-dollar gold rush
Late last year — as all analysts like to do — I put my ‘here’s what to look for in 2020’ prediction out there.
But really, this year’s trend actually began in the middle of 2019.
It all began with Barrick Gold.
Barrick made a US$6.5 billion (AU$9.5 billion) bid for Randgold Mining back in September 2018. Suddenly, the world’s largest gold miner (at the time and based on ounces mined) was making a play for the 15th largest gold miner.
There was one thing driving the merge: For Barrick to get bigger.
Less than four months later — after the Barrick-Randgold merge was announced — another big merge became public.
Newmont wanted Goldcorp. Again, the world’s second largest gold miner was going after the world’s fifth largest gold miner.
Cleary Newmont’s decision to buy other gold miners has paid off.
Last week Newmont announced they now have a whopping 100 million ounces in gold reserves, thanks to their Goldcorp acquisition.
Not only that, but CEO Tom Palmer reckons the company will produce more than ‘six million ounces a year…for decades to come’.1
In other words, a large secure gold supply could see even more investors rush into their shares.
But what all these northern hemisphere mergers really did was just kick off a bigger trend…
Cashed up and ready to pounce
Right now, the Aussie dollar gold price has been kind to Australian gold miners.
The difference between the cost of mining gold, has been significantly lower than what they are selling it for.
Meaning Aussie gold miners have been banking serious cash.
And it appears they’ve been using that wisely.
For most of last year, Aussie gold miners went and bought international assets on the cheap.
The pot stock boom in the US and Canada meant that investors ditched risky mining stocks and chased potential gains from pot companies.
Leaving a whole bunch of international mines with almost no cash and no investor interest.
So many Aussie-listed companies bought up those unloved mines, with the hopes of turning them around.
Our own Newcrest Mining paid AU$1.1 billion for a 70% copper-gold mine based in British Columbia.
Then, just a few short weeks later, Australian gold miner St Barbara paid $795 million for Vancouver-based Atlantic Gold Corporation.
At a similar time, Northern Star Resources waded in and bought the Pogo site in Alaska for a cool AU$376 million.
Then towards the end of last year, the action begun closer to home.
We saw Saracen buy a 50% stake in the Kalgoorlie Super Pit.
Mere weeks later, Northern Star, was back at it again and bought the other 50% of the super pit.
It’s worth noting here, that both Saracen and Northern Star are considered mid-tier gold miners.
Yet combined they scraped together nearly two billion dollars to buy Australia’s biggest hole.2
And just when you think all the mergers are over, another mid-tier miner waded in.
Just last week, Ramelius Resources made a $200 million bid for explorer Spectrum Metals.3
How to ride the trend – Look at ASX Gold Stocks
What can we take away from this?
The biggest thing for investors to note here, is that the big gold miners are out to get even bigger.
Every ounce of gold out of the ground, is an ounce of gold, out of the ground.
And securing a supply of gold is the most crucial thing for a gold miner.
Meaning, years of slashing exploration budgets means today’s gold miners have no choice but to buy each other out — or buy older assets and try to get more out of them.
The trend of gold miner mergers wasn’t just a flash in the pan.
I’d suggest we get used to this.
The big guys are done fighting over each other.
However now the middle tier producers are cashed up and looking to expand.
Going into 2020, there are going to be more gold miners merging…and more miners buying old assets.
And the biggest winner from this trend is looking to be gold stocks.
| Until next time, |
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| Shae Russell, PS: In a brand-new report titled ‘The Looming Aussie Recession and How to Survive It’, Nick Hubble reveals why a recession in Australia is inevitable and three steps to recession-proof your wealth. Click here to receive your free report |
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