14 Comments

HI Russell,

I work in a capital allocation team for a Gold miner and this post is brilliant, I learnt alot.

I wonder if low-capex-periods precede a run in equities for other commodities (e.g. Shale)?

Posting this one on Twitter is risky!

Cheers

Ben

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Typically the best lead indicator for commodities is a big increase in capex. See iron ore miners, or shale.

For most listed mining stocks these days, investors want to see growth, so the option of returning cash is frowned upon, whereas it often the best possible thing to do!

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nice one 👏👏👏

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How Gold/silver miners' capex of past few years compares relative to the history?

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Sorry for the late reply. Still elevated last time i looked. Will look again

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this is very interesting. u r death right on this

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bitcoin and bitcoin miners (exchanges) also seem true these days! You can own bitcoin - but dont own any businesses related to bitcoin!

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Nov 22, 2022·edited Nov 22, 2022

I don't know much about cryptos but my understanding is that even if you store your bitcoin in a cold storage wallet, it's worthless without the distribution network and crunching numbers farms. Gold doesn't need the miners or any distribution system or electronic plug.

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They are open ended put options on the petrodollar system (which is yet to go pop). As such they don't and won't work properly until then. Silver miners have yet more optionality with no additional premium, just more vol.

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I am not sure that is true - but I love the term "open ended put options on the petrodollar system". Let me have a think about it...

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As usual you don’t leave any doubts on your Gold Miner opinion. Poor Tavi.

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I thought I understood them cause of my background in oil and refining, but clearly i do not.

Excellent analysis, wish I had this months ago when i bought into the major dip in miners after a successful trade in and out of them during their run up.

Guess I'll hold and just accept the dividends until I can get out of the trade in the future

thanks Russ

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Another thing to consider is that the true 'gold bugs' were borne in the 70s & after '08. For those who say Gold is just a play on lower real yields, should add that yes that's correct, but the other & in my opinion, real 'value' of Gold is essentially a Call option on loss of confidence in Central Banks/fiat; which should grow significantly in value in the years to come

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Gold has been decent in sterling terms this year! To your point...

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