Sean Boyd, president and CEO of Agnico Eagle Mines, believes when the gold companies and gold miners start reporting third-quarter results in a few weeks, the industry as a whole will have its best performance in decades.
During a recent interview with Kitco, Boyd said he was bullish on gold in 2019. “In over my 30-plus years in the industry I was as bullish as I ever was in 2019,” he said. Also, he thinks the monetary and fiscal response to the coronavirus pandemic “has only made a stronger case for gold.”
He said in 2015 with gold around $1050 an ounce, many in the industry thought it would take the world coming to an end or a total collapse of the financial system for gold to climb to $2,000 an ounce.
Now, with that hurdle cleared, he, and many others, have changed their view.
“So if we look from $2000 (an ounce) now and look at $2500 or at $3000, the world doesn’t have to be ending to be at $2500, to be at $3000.”
Dealing With Debt
To deal with the rising debt levels, Boyd said countries have two choices, neither of which is palatable.
“Here we are at $2000 on the basis of rising debt levels, rising a lot faster than anyone expected, and economies not keeping up to the growth in debt, which we would ascribe to what Martin Murenbeeld says, which is there are two ways to go: austerity, which politicians don’t have the courage for, the general public doesn’t have the appetite for. So it’s going to be spend more, print more, try to create inflation, which is perfect for gold.”
Most importantly, the rise in gold prices means gold companies can start to “flex their muscles.”
“Here we are at $2,000 and it’s not unreasonable to assume $2500 or higher, and $2000 is going to have a substantial positive impact on earnings and cash flow and free cash flow, and the industry has not yet been able to flex its muscles in terms of what does it look like at these higher gold prices.”
What to Expect
Companies will start to report earnings in a few weeks. With this, he expects them to post record cash flow and free cash flow numbers, awakening investor interest.
“Q3 coming up very soon in a few weeks, companies are going to be posting earnings, posting cash flow per share, posting free cash flow, that’s when investors are going to start to pay attention, going to conclude, “Boy, this is how we get leverage.” This is an industry that’s not just going to have some of its best historical performance in decades, it’s going to post probably its best performance relative to a lot of other investment opportunities given the cash flow that comes at $2000 gold, with the prospect that we could be in a higher gold price environment.”
Tomorrow we will bring you part two of Sean Boyd’s interview. In it, he discusses why this gold bull market will be different than 12 years ago. He also explains what companies can do to win investor trust.