Unfavorable risk-reward for major gold producers
The guest argued that large gold producers like Newmont and Agnico Eagle present an asymmetric downside risk at current valuations.
The argument
At 12x and 16x forward free cash flow, these stocks risk a 70% drop if gold prices fall by $2,000/oz due to margin collapse and multiple compression, compared to only a potential double if gold rises by $2,000/oz. Additionally, management guidance of rising costs further dampens the near-term outlook.
The thesis, stress-tested
✓ What validates it
- ✓Agnico Eagle or Newmont reporting margin expansion despite cost guidance
- ✓Gold price stabilizing above $5,000/oz
▸ Risks discussed
- ▸Gold price correction
- ▸Rising operational costs
- ▸Multiple compression
Hear it yourself
"And what else? So so I see that over the longer term that it's probably going much, much higher. But considering this ten and a half year bull rung we've been in, I also wouldn't be surprised at all to see several years of sideways movement consolidation, maybe down a bit. And it also wouldn't surprise me at all to see a quick run to $10,000 with a blow off top like we had back in late nineteen seventy nine and into January 1980. So, that that's just a overall way to say, Jesse, I have no earthly idea where where gold is going to go next. But I I would like to say that where where I've made the real money in my life is is not trying to predict where a commodity goes next."
03:10
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE