Gold miners are on the cusp of historic margins - Metalla Royalty & Streaming's Brett Heath

Miners with a sizable ownership stake in their own companies are crucial to ensuring business decisions are aligned with shareholder interests, said Brett Heath, president and CEO of Metalla Royalty & Streaming.

Last week, Heath spoke to Kitco Mining at the Gold Forum Americas/XPL-DEV 2024 in Colorado.

Metalla Royalty & Streaming Ltd. (TSXV: MTA) is a royalty and streaming company with exposure to gold, silver, and copper. The company holds around 100 royalties and streams, with key assets including IAMGOLD’s Côté and Gosselin, G Mining Ventures’ Tocantinzinho, Equinox Gold’s Castle Mountain Mine, and First Quantum Minerals’ Taca Taca.

Heath discussed the impact of rising gold prices on the mining sector, noting that gold is reaching all-time highs. He emphasized that unlike previous gold price surges, costs have not significantly increased, meaning gold producers could experience record margins, potentially clearing over $1,000 per ounce in profit. This price increase, combined with stable or declining costs, could lead to significant profits for producers, particularly in Q4 2024.

Heath also highlighted the implications for investor interest. Despite the gold price rally, the sector has been underappreciated by generalist investors. However, he believes that as profit margins grow, institutional capital will flow back into gold, potentially driving up the share prices of major producers. Heath noted that global gold ETFs have recently seen inflows, signaling renewed interest in the sector. Some gold company shares have already appreciated 50% to 100% year-to-date, which could attract more attention from outside investors.

In terms of capital allocation, Heath expects that much of the new free cash flow from higher gold prices will be directed toward growth, including mergers and acquisitions (M&A), as companies seek to acquire strategic assets. Heath is optimistic about continued gold price increases, predicting that prices could reach between $2,600 and $3,000 per ounce by the end of 2024, driven by central bank purchases and renewed investor interest.

Metalla recently adopted a minimum share ownership policy to ensure management's alignment with shareholders. Heath explained that the policy formalized a practice already in place, signaling to investors that management has a vested interest in the company's success.

“Look, we’re aligned,” said Heath. “I’ve got the majority of my net worth in this business. It was just a formalization of something that was already there, but it was something we wanted to do as part of the company’s evolution.”

Coverage of the Gold Forum Americas/XPL-DEV 2024 is sponsored by Metalla Royalty.

Disclaimer: The views expressed in this podcast are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this podcast do not accept culpability for losses and/ or damages arising from the use of this publication.