Lessons from the last gold bubble: How to capitalise on better-run miners

Only five months ago, the world looked on with bated breath as gold, silver and platinum-group elements (PGE) gained momentum and almost went vertical.

Gold surpassed US$5,500 an ounce, silver touched US$120, while platinum approached US$2,800 by the end of January.

Then the rally snapped. Speculators who had chased the top saw the selling pressure overwhelm the buyers. Within a fortnight, gold was down by 15%, silver plunged 40%, while PGEs pulled back by around 35%.

The turmoil in the precious metals market also affected gold stocks. Even the largest gold producers have entered a bear market, falling by more than 20% from their highs during the gold bull market. Smaller companies saw drops of more than 50%.

The speed at which precious metals assets fell in such a short time has brought this question to the forefront:

Is this the end of the precious metals bull market?

To answer this question requires us to look at two issues –

1. Whether monetary policy trends suggest that gold is out and the US dollar is in, and
2. Are gold mining companies overvalued and due for a correction?

Now I’ve addressed the first issue two weeks ago, you can read it here. Let’s focus today on the risk that the current situation is setting up for the end of the gold bull market.

The 2009-2011 bull market vs 2024-26 bull
market – The difference is in discipline

Let’s compare the secular bull market in gold from 2002-11 with the current one, which began in 2015.

While this bull market has run longer than the last, it’s important to note that the liquidity flowed much more in the last decade. This fuelled the rally in precious metals and the broader markets.

However, let’s look closer at the gold mining companies space, particularly mergers and acquisitions in 2010-12 as this space heated up.

In that bull market top, we saw companies acquire each other while paying a substantial premium for the ownership. Notable examples included:

Australia’s largest gold miner, Newcrest Mining, acquired a mid-tier gold producer, Lihir Gold for around 35% premium in May 2010,

Mid-tier producer, St Barbara Mines [ASX:SBM], acquired London-listed Allied Gold in September 2012 for a whopping 90% premium, and

Junior gold producer, Kingsgate Consolidated [ASX:KCN], took over Dominion Mining in late October 2010 for a 33% premium.

A 30-40% premium is within a reasonable range for most acquisitions. The acquiring company must provide sufficient incentives for the target company’s management to agree to the deal.

It’s worth noting that gold bottomed at around US$250 in 2002, and peaked at US$1,921 in 2011, or almost 800% increase. Therefore these deals occurred near the end of the bull market for gold, when valuations were already excessive. Paying a substantial premium was setting up for some eye-watering writedowns when the bull market ended.

And this is what happened when gold entered a brutal bear market in 2013-15. These companies, along with others that merged or acquired others in the bull market, wrote down substantial amounts on their acquired assets.

For Newcrest Mining, the Lihir mine saw a loss of over $6 billion from writedowns in the 2013 and 2014 financial years. The company paid $9.5 billion to purchase Lihir Gold. The mine had a carrying value of less than $3 billion four years later.

St Barbara Mines and Kingsgate Consolidated suffered similar fates, writing down hundreds of millions of dollars on their acquired assets.

Several top executives were forced to step down in the bear market when their companies suffered massive losses, all driven by their decisions to overpay for acquisitions. Shareholders saw their investments crater, and those who recouped these severe losses waited years, if they were lucky.

While we saw the bull market push precious metals to stratospheric highs this year, I have noticed there are fewer acquisitions at a premium. The largest mergers took place with a share-offer at or near market values, namely:

Newmont Mining [ASX:NEM] acquired Newcrest Mining in October 2023 to create the world’s largest gold producer worth over US$60 billion,

Mid-tier producers, Red 5 Mining merged with Silver Lake Resources in June 2024 to form Vault Minerals,

Mid-tier producers, Westgold Resources [ASX:WGX] and Karora Resources merged in August 2024 to create a combined entity worth $2.5 billion at the time,

Junior producer, Alkane Resources [ASX:ALK], acquired Mandalay Resources in a merger of equals in April 2025,

Mid-tier producer Ramelius Resources [ASX:RMS] acquired high-grade developer, Spartan Resources, in July 2025 to form a $2.4 billion company, and

Regis Resources [ASX:RRL] will merge with Vault Minerals [ASX:VAU] in the next three months, making the combined entity the fourth-largest gold producer on the ASX.

The bull market that began in 2023 helped many gold producers deliver successive quarters of surplus cashflow. Management would have found it tempting to spend their war chest on expensive takeovers. However, they refrained from that. Many reinvested in their operations or built their reserves, occasionally buying smaller companies at low prices to expand their portfolio.

With such discipline, these companies are well-positioned for a downturn. The most recent test was the disruption in oil supplies from the US-Iranian conflict. Most companies handled the threat of a fuel shortage and rising prices without too much drama, having secured their supplies.

Despite that, share prices have retreated substantially, but their valuation is sound. A few have reported hiccups in their operations, but none serious enough to cause distress.

Use this dip to identify opportunities

I hope that you can see how the recent pullback in gold, silver and precious metals assets doesn’t point to weakness. The macroeconomic case for them remains strong, once you look beyond the US-Iranian conflict. Just because we’ve seen a flash crash at the start of this year doesn’t mean that this is the end of the bull market.

The best thing is that this bull market differs from the last. The excesses from speculators chasing the top for precious metals and management spending unwisely are behind us. They saw the horrific consequences on their company and bore the brunt of shareholder wrath. Since then, we have seen management exercise better strategy and discipline. As a result, there are more companies with profitable mine operations and solid balance sheets to choose from. They are more robust to the volatility we’re experiencing now. A further correction could make them even more attractive as an investment.

That’s why now is the right time to examine which ones provide the best potential. While you don’t need to rush now to buy, learn about how to read the markets, identify opportunities, and select the right companies.

To help you with this, my colleague, Murray Dawes, is hosting a LIVE webinar today on how to get good at picking and timing your investments.

If you quickly sign up, you might just make it to his session happening at 1PM. Check it out here!

That’s it from me for this week. Stay warm and enjoy the weekend!