“Markets are never wrong ... only opinions are.” – Jesse Livermore

If you want to make real money, go where nobody else is looking. If you want to make life-changing money, go where nobody else dares to go ... and wait.

For years, gold miners have been the pariahs of capital markets. Forgotten, unloved, ignored. And that’s precisely what makes them interesting.

Because beneath that thick crust of disinterest lies a trove of value so asymmetrical, it makes the tech crowd look like a Vegas roulette table.

While the herd froths over AI chips and meme stocks, we’ve been quietly positioning in a sector trading at multi-decade lows ... on a free cash flow basis.

Gold is at $3,350ish. And the miners? Still on the discount rack.

Gold (US$/oz)

And the miners? They’ve moved some ... but still on the discount rack.

Gold Miner ETF: GDX

Let’s crack open the vault.

 

Miners Aren’t Metals ... and That’s the Opportunity

First, a little housekeeping. When we talk about gold miners, we’re not talking about gold. We’re talking about businesses.

Businesses with fixed cost structures. Businesses that sweat assets buried in the dirt, convert them to cash, and throw off earnings ... sometimes absurd amounts ... when the price of gold ticks even modestly higher.

And yet, relative to gold's strong move ( cup and handle breakout from way back in March 2024), miners are still trading like they’ve committed some unspeakable crime.

Maybe that crime was being boring. Maybe it was operating in places Wall Street can’t pronounce.

Or maybe ... and this is our bet ... it was simply being early.

In commodity investing, being early feels a lot like being wrong. Until you’re not.

So why do we like them now?

The market feels like it has forgotten these mining businesses exist. Sure miners are up. But compared to gold ... they haven’t moved very much (yet).

But if you understand how operating leverage works, you know this isn't just some value trap ... it's a coiled spring. And when the market realizes what they are missing?

These miners won’t ask permission to reprice.

Let’s dig in.

 

 

Fixed Costs, Rising Profits, and Asymmetry on Steroids

Imagine you run a gold mine with all-in costs of $2,900/oz. At $3,000 gold, you’re making $100 per ounce. Not great, not terrible.

Now imagine gold ticks to $3,100. That’s a 3.3% increase in the price of gold ... but your margin just doubled.

This is the magic of operating leverage.

When your costs are largely fixed, every extra dollar the market gives you drops almost entirely to the bottom line. When prices move, miners don’t just benefit ... they detonate.

This isn’t just theoretical. It’s mechanical.

But here’s the kicker: the market still doesn’t care. And that’s where the fun begins.

Because eventually ... inevitably ... that disconnect will close. The question isn’t if. It’s when.

This kind of leverage is hiding in plain sight ... and yet, almost no one is pricing it in.

Which begs the question: What happens when the crowd finally catches on?

 

 

Strategy 1: Cultivate Patience ... Your Greatest Edge

Patience in commodities isn’t optional. It’s survival.

Gold miners move in violent cycles—years of soul-crushing underperformance followed by sudden, vertical liftoffs that leave doubters choking on dust.

We’ve been there. Stillwater Mining ... now Sibanye Stillwater (SBSW) ... was down 40% before it went vertical. It felt awful. Then it didn’t.

The same setup is brewing in gold miners today. The GDX ETF is consolidating even as gold spikes. That’s not a signal to run. That’s the starting gun.

But only for those willing to wait.

Cycles don’t send invitations. They just snap violently when no one’s watching. So ask yourself: when this thing rips, will you be chasing ... or already in position?

 

Strategy 2: Follow the Free Cash

This one’s simple.

Ignore the noise. Ignore the gold price headlines. Ignore the hype.

Look at free cash flow.

Gold miners are printing it.

Many are trading at multi-decade lows relative to that cash flow. Not earnings projections. Not future dreams. Real, spendable, deployable cash.

That’s the kind of stuff that gets used to pay down debt, buy back stock, issue dividends, or expand reserves.

In a world starved for yield, this is catnip. Just not yet. And that’s the gift.

Wall Street's still pretending this sector is a wasteland. But the numbers tell a different story ... and those who know where to look are quietly loading up.

The next step? Knowing what to buy.

 

 

Strategy 3: Buy the Orphans—Not the Rockstars

When everyone is piling into Nvidia, what’s happening in gold mining ETFs?

Shares outstanding are falling.

The sector is getting smaller. That means capital is flowing out. That means nobody’s paying attention.

“You go and look at the gold mining ETFs like GDX and what have you, the amount of shares in issue have been decreasing, they haven’t been increasing.“ - Brad McFadden

That means opportunity.

We’re not advocating for shotgun approaches here. Don’t buy the entire sector and hope. Do your homework.

Look for companies with:

• High-quality reserves in safe jurisdictions.

• Low all-in sustaining costs (AISC).

• Clean balance sheets.

• Competent, aligned management teams.

This isn’t gambling. It’s buying dollars for quarters ... in the dark ... before anyone remembers to turn the lights on.

This is where the serious money starts leaning in ... when there's dust on the floor and everyone else has left the room. The trick is separating the duds from the dynamos.

 

Strategy 4: Understand the Asymmetry ... Or Miss the Whole Point

Let’s say you find a miner with a cost base of $1,200/oz and gold is at $3,300.

That’s $2,100 in profit per ounce.

Now bump gold to $3,630 ... a 10% increase.

Your profit per ounce? $2,430.

That’s a 15.7% increase in profits for a 10% move in the underlying.

This is what makes gold miners so powerful in a bull market. You get torque. You get leverage. You get exponential upside with linear moves.

It’s not magic. It’s math.

And it works both ways, which is why discipline matters.

The torque is real. And when gold moves, these miners won’t just go up ... they’ll go parabolic.

But there's one rule you need to understand before you play this game.

 

 

Strategy 5: Don’t Marry Your Miners

Here’s something we’ve learned the hard way:

GOLD MINERS ARE NOT your forever stocks. These are shorter term trades in multi-year clothing.

They exist to be bought when hated, held while undervalued, and sold when everyone on YouTube starts whispering “10-bagger.”

Gold miners will break your heart if you fall in love.

So don’t. Set rules. Use checklists. Track valuations. Know your exit before you enter.

This is a dance ... not a wedding.

Emotional attachment is the death of discipline. If you’re not ready to treat this like a trade ... with rules, timing, and precision ... you’ll get crushed before the payoff. But for those who play it smart? There’s still one more lever to pull.

 

 

Strategy 6: Zoom Out

Everyone’s busy watching the Nasdaq.

Meanwhile, capital allocated to gold and precious metals? Roughly 2%.

That’s not a typo.

If capital rotates back ... even modestly ... the impact on gold miners will be nuclear. They’re simply too small to absorb meaningful flows without explosive repricing.

And with gold already sniffing new highs, the setup is ripe.

This is a bet on human behavior. A bet that fear will return. That inflation will persist. That monetary policy will buckle. And when it does, capital will go looking for protection.

Miners will be waiting.

Gold doesn’t need to double for miners to explode. It just needs attention. And when even 1% of global capital remembers this sector exists ... it’s game on. But what about risk?

 

 

Strategy 7: Diversify or Die

Let’s be clear: mining is a brutal business.

Things go wrong. Rocks don’t cooperate. Permits get revoked. Governments get greedy.

That’s why you diversify.

Own a basket ... large caps for stability, mid and small caps for torque. Own different jurisdictions. Own companies with different production profiles. Spread the risk.

Or, if you're lazy (no judgment), own GDX or a similar ETF. It’s not perfect, but it’s a good start.

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Just don’t bet the farm on one name because a guy on Twitter called it “the next Franco-Nevada.”

You can’t eliminate risk ... but you can dilute it intelligently. This is how smart capital plays the sector. And the ones who get this right? They don’t just survive the chaos ... they print money from it.

 

Value Isn’t the Story ... It’s the Setup

This isn’t about calling tops or timing breakouts. This is about seeing the world as it is.

The miners are hated. Cash flows are real. Gold is strong. Capital is asleep.

If that doesn’t make your eyebrows raise, check your pulse.

And if it does ... then do your homework. Build your list. Start scaling in.

Because when the lights come on—and they will—you don’t want to be the guy asking, “Is it too late?”

You want to be the guy quietly smiling, waiting for the next rotation.

Every portfolio needs an anchor. Something that holds when other things break. Something you bought not because it was easy ... but because it was right.

Gold miners aren’t glamorous. But neither was oil at $30. Or uranium in 2017.

We like inevitabilities. And in our view, the revaluation of gold miners is just that.

The only question is ... are you early enough?

You’ll want to be.

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