Loading ...Ultimately, what determines the profitability for miners is the price of gold. Look back at the margins for these miners now, compare them to the bottom. At the end of 2015, they were only making $225 net of all in sustaining costs, so the price of gold versus their all in sustaining costs. And now, it’s double that. It’s $460; yet, the miners haven’t rallied. It’s amazing. This is the same level, almost, that $460 was $490 in 2012 when the GDX was not 21 but 45.
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So, we have this huge disconnect between the price of gold and the margins of the miners — which are doing very well because they had to keep their costs low — and the price of the stocks. Now, ultimately, that will get corrected. We saw the huge run in 2015, where gold went up 30% in the beginning of 2016 and the miners went up 180%. And we saw that in 2000, when gold went up quite a bit, and the miners went up 1600%. That’s 17 times the average. We saw that in the 1970s coming out of the bear market there. We saw that on the big net buyers went up at least 10 times, and some of them went up as much as 30 times. So, this happens regularly when the miners get depressed. They get out of whack with the price of gold and margins, and then they slingshot higher. And that’s what I think we’re about to see.
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We’re right there. I think there’s going to be enormous amounts of money entering this sector once again, just as we saw in early 2000s, just like we did coming out of 2015, the bottom, just as we did coming out of the 1970s mid-cycle correction. So, I’m pretty excited about it.
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