Gold expert on how to interpret gold sector results

Gold expert on how to interpret gold sector results

[Music]
well earnings is in full swing earnings
season we’re back with John in to see
how he evaluates a set of gold company
Financial results houses and expert
break down the uh multi-page reports the
results fromo eag minds are more than 50
pages long this morning how do you cut
through all of that information to come
up with some valuable information uh
that can tell you how a gold company is
fairing uh in what can be a very
difficult sector here’s a look at what
John ing looks at we asked John early
this morning what are four or five uh
things to look at from uh a set of
results and we’ll refer to this through
our conversation uh all in sustaining
costs often identified in Gold sector
results uh by the acronym aisc the
market cap of production which John will
explain the market cap of reserves the
exploration budget and the balance sheet
five things that this longtime expert in
the sector looks at when he sits down
with a set of Fresh Gold sector results
and he’s done so just this morning with
the numbers from ago eagle and Newmont
gold John thanks again for being with us
let’s talk about Allin sustaining costs
how how do they compare for instance
with cash cost of production which for
many years was the standard well there
are two levels of costs and it’s sort of
like your own budget is is that you get
x amount of dollars to build a home but
there’s all the ancillary cost and when
you talk about all in cost there’s
exploration cost that’s included there’s
uh depreciation included so it’s an
all-in cost so it’s a better indication
as opposed to just a cash
cost and let’s go to uh what you refer
to is the market cap of production talk
to us about that what what do you mean
by market cap well gold producers are
always optimistic and they are always
talking about increase in production and
what I look at is I want to compare that
production increase to Earth peers and
so I take the market cap and against the
production and that gives me an idea as
to which producers are better now there
are some jurisdictions which are more
riskier so you have to account for that
similarly market cap for per reserves
reserves are all important for a mining
company after all they are they are
mining it and and they have to replace
it and the problem with the mining
industry is that since
2019 production has been going down
reserves have been going down legal in
the in the latest they bumped up the
reserves through an acquisition of the
balance of Canadian malartic that’s one
of the reasons why you have all these
takeovers is that because reserves are
declining that it’s actually cheaper on
Bay Street now to buy reserves than to
go and explore because when you explore
you have to spend money but it can take
you 10 years to put a mine into
production and that’s a very long time
for somebody to wait to put all that
money so Market cap for reserves gives
you an idea as to what uh producers and
on average they’re they’re trading a a
pretty lows at this time okay very
quickly the balance sheet uh where do
you what what lines do you look at on on
the balance sheet unquestionably free
cash flow uh a Barrack had a debt
problem then you have to look at at what
their free cash flow how much debt do
they have so there’s no question that
the balance sheet is dictates as as as
to whether you should like it or avoid
it or or whatever but the key really
Paul is the gold price and a rising tide
lifts all boats and my expectation is is
in the near term Gold’s going to go to
$3,000 it’s hated by most people but
there’s unquestionably it’s a great
hedge right now and gold mines there’s
not enough gold mines there’s only 400
mines in the world there’s less than 20
odd mines that that produce half a
million ounces so there’s a shortage
that’s why I expect that there’s going
to be a lot more acquisitions

John Ing, president and chief executive officer of Maison Placements Canada, joins BNN Bloomberg to explain what he usually looks at when analyzing financial reports from gold companies.

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