Mining Profits Surge, But Stocks Aren’t Following | Feneck

John Feneck, Founder & CEO of The Feneck Commodities Report, joins Kitco Mining’s Digging Deep as gold and mining equities pull back amid ongoing geopolitical tension in the Middle East. Speaking with Paul Harris, Feneck said the recent weakness does not signal a breakdown in the trend, but a buying opportunity within a broader bull market. “This is a buying opportunity,” he said.

Feneck highlighted a growing disconnect across the sector, with major producers like Newmont and Kinross generating record free cash flow, while many junior gold stocks are down 25% to 40% since early March. He said that gap, combined with constrained global gold production, could drive increased M&A activity as majors look to secure new ounces. At the same time, some major banks continue to forecast gold in the $5,300 to $6,000 range over the next 9 to 12 months, while larger-scale deposits are increasingly required to attract serious interest.

The discussion also covers silver supply deficits, China’s growing role in critical minerals, and the return of capital to the sector through major financings and IPOs.

Don’t forget to subscribe to the Kitco Mining & Kitco News YouTube channels to stay up to date on the latest industry news and interviews.

00:23 - Geopolitics and Gold Pullback
01:48 - Record Producer Cash Flow Surge
03:54 - Flat Supply and Rising M&A Pressure
05:15 - Yukon Turnaround and Undervalued Juniors
07:52 - Why 5Moz Is the New Benchmark
09:09 - Permitting Risks and PEA Pitfalls
12:14 - Ross Beaty IPO and Capital Return
15:04 - Nickel Market Rebound and Supply Shifts
17:56 - Rare Earth Deal and Strategic Demand
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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.

Transcript

SPEAKER_01 0:00

Kitco Mining, Digging Deep with Paul Harris.

SPEAKER_00 0:05

Hello and welcome back to Kitco Mining's Digging Deep with me, Paul Harris, in which we take a closer look at some of the most interesting news items in the mining space. Today is Thursday, April the 30th, and joining me is John Fenneck of Fennec Consulting. John, welcome back to Kitco.

SPEAKER_02 0:20

Thanks for having me, Paul. Always a pleasure.

SPEAKER_00 0:23

Well, let's start with the big, big picture. The Iran conflict continues to hang over metals commodities space, with the Strait of Holmuz still closed and a negotiated solution looking still distant. The estimated to the cost of the conflict so far is at 25 billion US dollars. John, it has been a tough week or two for gold. Why is that, do you think?

SPEAKER_02 0:46

So it's been pretty tough for gold, really, in my view, since the war was announced. We had that one good day March 2nd, which was uh PDAC. Uh and then March 3rd was really bad, and it's gotten really bad for gold, for silver, for a lot of precious metal-related stuff since then. If you look at charts, a lot of your favorite juniors peaked on March 2nd, and this is um a buying opportunity, uh, whether it's gold or gold stocks. I mean, you have to buy dips like this in a bull market, in my opinion. What one thing to point out, Paul, and this is this is really important for your listeners, is that I think City is the only big bank in the U.S. that has wavered on their gold estimates for 2026 despite the war and the price action. So a lot of banks out there are still at 5,300 to 6,000 gold within the next nine to 12 months.

SPEAKER_00 1:43

PDEC seems a long time ago today, John. It's only, well, about two months ago, not even that. Um, we're getting into the first quarter financial results reporting season. Newmont was the first big Gold Co to report, and they reported an all-time record of$3.1 billion in free cash flow in the first quarter, double the size of its share repurchase program, with an additional six billion dollated to that, having already bought back$2.4 billion of shares this uh in the in the in the near term. Um Kim Ross has also reported today that they reported a fourth consecutive quarter of record free cash flow. John, the gold price bonanza appears to be hitting the companies. Is it hitting share prices and is it attracting investors?

SPEAKER_02 2:32

So we're starting to see more evidence of this in earnings like you're talking about, or you know, production reports uh before earnings, and we're gonna see more and more of this, Paul. As long as diesel fuel remains under control, I think that is a concern for a lot of the producers moving forward is that you know diesel doesn't go off the tracks because it is a major cost for producers of gold, silver, copper, whatever. But looking at Newmont and Kinross, I mean, these are just two of many that are gonna report very good earnings uh in in May here, I think, this quarter. Um, and the free cash flow is just amazing. I would also point out that silver-related producers are gonna look even better, Paul, because if you remember the silver run that we saw was really through December into January and February, peaking at about 121 an ounce. A lot of those silver producers in February weren't able to really talk too much to that because the rise was so sudden, right? So they didn't clip that nice margin between their all-in sustaining cost of probably roughly around 20 to 22 an ounce and what the silver price realized was. Um, and I think you're gonna see some really good numbers from some of the big boys in silver coming up here in May.

SPEAKER_00 3:49

Okay. Kimros Gold also has$2 billion of cash on its balance sheet now. Um, John, while all this is going on and the high prices are good news for the gold producers, uh, taking a step back, gold production is actually flat. The World Gold Council put out a report on the first quarter. Production is flat, if not dipping. To what extent is that a concern or not?

SPEAKER_02 4:11

Um, I don't see it as a concern. Um, I think there's going to be a lot of MA activity this year, Paul, into next year, um as companies are looking to you know help replenish reserves. Uh, there's plenty of development companies out there. Uh, we won't go through them, but there's a lot of things on on uh the radar of producing gold companies, I'm sure. And a lot of them are looking at some juicy opportunities here given the sell-off. I mean, the average gold stock junior, whether it's an Explore Co. or a developer, by my math, is down 25 to 40 percent uh since March 2nd, right? Like, I mean, that's a that's a huge haircut. So if you're a major kind of circling one of these companies, you're in their data room, you must be pretty thrilled right now that you get an opportunity to make some low low ball offers. Uh I coach CEOs in those roles, however, that you want to hold on to your project with both hands right now. We're not even close to done on this run, and you want to make those majors pay up.

SPEAKER_00 5:14

Okay. One company that is buying is Singapore's Baru private company, which entered into an exclusivity agreement ahead of a possible purchase of the Eagle Gold Mine in Yukon, which experienced a heat leach pad slip in 2024. That resulted in its former operator being placed into liquidation. John, Borough has a thing for picking up unloved assets and turning them around. This would seem to be good news for Yukon, uh, the communities there, etc., if a deal can be concluded. Uh, Borough's entered a 90-day exclusivity agreement uh in order to get to that point of making an offer and hopefully getting that offer accepted by the liquidator Price Waterhouse Coopers.

SPEAKER_02 5:57

Yeah, um we've talked about this on your show last year that we thought the UConn was undervalued because of what happened at Victoria Gold um, gosh, I guess about 16 months ago now. And it really put uh a negative, overly negative um uh canopy, if you will, on a lot of stocks operating up there. Uh my partner Don Durett had talked about Banyan around 15 cents US as being one. That stock has just rocketed higher since um he talked about it last spring as a really undervalued stock. You know, um another one was Triumph Gold, uh T I G C F in the States and TIG in Canada. They've got about 2 million ounces of gold in the UConn uh really got sold off, you know, as a result of that news. And now you're starting to see some really exciting things happen there again. Uh, I think there's going to be a lot of MA activity up there this year.

SPEAKER_00 6:51

Now, interesting that you mentioned Banyan Gold, John, because Banyan Gold's Ormac project is right next door to the Eagle mine. Um, does this perhaps suggest to you that um Buru has its eyes set on uh the possibility of a bigger consolidation play in that particular district?

SPEAKER_02 7:09

Yeah, I really can't speak to that. I don't know Tara, the CEO. Um I'm just saying that you know Banyan was really undervalued last year, and um I think Triumph right now is really undervalued as we speak. I mean, I just looked it up uh for a client this morning on a call, and it's trading at a 30 RSI. So, you know, some of these stocks, Paul, tend to get really bombed out, as you know. And um I always encourage uh, as you know, people to look at a number of metrics, but one is RSI relative strength index. When something gets really low like that, like Banyan crossed 30 to the downside last year, Triumph is trading at 30 right now. You buy these opportunities because they're gonna bounce in a hot gold market.

SPEAKER_00 7:51

Okay, presumably also looking for a consolidation deal at some point in the future is Maple Gold, who announced this week an updated resource estimate at its Douai and Jutel gold projects in Quebec's Abatibi region in Canada, with global resources now of more than 5 million ounces. John, 5 million ounces seems to be the new 1 million ounces in terms of attracting uh MA bids. Uh, do you think there's some credence to that statement?

SPEAKER_02 8:19

Yeah, um I think I think everyone is asking more of these juniors, and um in a market where people in the junior community can raise more money, I think you're gonna see a lot of projects go from 2 million to 3 million or 3 million to 5 million um and and really get the attention of some majors. Uh one that comes to mind is upside gold, uh that's UG ODF in the States. They just got a U.S. ticker and a UG in Canada. Um, this is at 3.3 million ounces of gold right now. Um we interviewed them a few weeks ago, but the CEO is adamant that they're gonna get to four and a half to five million ounces later this year. And that puts you know a junior in a really elite class. When you can knock on the door of five million ounces, you're gonna get a lot more attention.

SPEAKER_00 9:08

What do you think buyers want to see when they're evaluating an MA transaction, John? It does seem you know from what we've just been discussing that uh they want juniors to go much further, much deeper in the exploration, putting more ounces on the books. But what else other than ounces? Permitting early works? What are your thoughts there?

SPEAKER_02 9:29

Yeah, that's a great question. I think permitting is key. Um, even something like the U.S., you know, the U.S. is not built the same state by state. California, super difficult, right? Uh Nevada, not so much at all. Uh Idaho is up and coming, Wyoming is up and coming, Montana is up and coming. You can go through a list of these things. Even Paramount and Oregon got, you know, uh that that project advanced, PZG. Um, and um, you know, I I really believe that permitting will increase under Trump in terms of quickness. I don't know about you know other countries, however. You know, it's really a crapshoot. You have to do your homework and really, you know, as an investor, say to yourself, do I really want to put three to five years into this investment thesis? Because sometimes it'll take that long to get a permit, you know, from a project that's been out there for years already.

SPEAKER_00 10:23

Now, advancing a project can be a double-edged sword and you know, getting to that next study. And we saw a good example of that this week with Arizona Metals, who put out a PEA with a negative base case net present value. Um, that was this morning. Their stock is down 45% today. John, um, why would a company do that? Why would a company pick a base case that is best very marginal? And if the result is you know not very good at all, why would they go ahead and publish that?

SPEAKER_02 10:54

That's a great question. I I don't know the company very well. Um, I did meet with a representative last year, probably about 13 months ago, but um you know I know they had some short interest in the stock at that point. Uh those shorts are probably doing a victory lap today. Um 45% is is not a haircut. That's a that's a that's a fishing line down, right? So you have to be careful in mining. There's a lot of downside risk in these stocks. We've said that on your show for as long as I can remember, right? I mean, we're not uh arm waivers and saying five bag or that and ten bag or that. There's very few instances where people have those opportunities. You have to be consistent with your investment process. And consistency means, you know, um really understand like the risks leading up to a PEA like this, right, Paul? Or leading up to a PFS, which is a more advanced report where companies are then going to disclose hey, this is our CapEx, right? The CapEx could go up massively on a project. We've seen that going back, I don't know, five years now, it seems. Ever since COVID, the prices of everything have gone up. And so you have to be careful as an investor leading up to these major reports. A lot of times the companies will kind of telegraph that in interviews like this.

SPEAKER_00 12:13

Okay, let's uh have some good news now, John. Uh, Ross Beattie saw his Luminar Metals Polish Copper Silver Exploration Play IPO on the Toronto Stock Exchange today, with an initial market capitalization of more than 1.3 billion Canadian dollars. The company did an upsize public offering uh that brought in about$460 million there. Um, the main asset there is the NOAA Salt Project, uh sediment-hosted Kupa Sheefa tile type deposit, which the company believes has the potential to produce 290,000 tons per year of copper and a whopping 28 million ounces per year of silver during the first 10 years of a more than 20-year mine life, following a$6.4 billion initial capital investment there. Um, John, lots of talk about here. Uh, first off, the man himself, Ross Beattie, he does it again, launching what looks like it's going to be another important and successful company. What a great track record Ross has had.

SPEAKER_02 13:14

Yeah, absolutely. Um there's there's a handful of names in mining that you uh can can really point to that has you know serial success, and Ross has has one of those track records.

SPEAKER_00 13:28

Now,$6.4 billion for the initial phase of development there. That that's quite a big project, but um it will probably have a bigger market, a bigger impact in the silver market than the copper market, given that uh uh 290,000 tons per year of soap of copper is you know mid-size, but 28 million ounces of silver that would make it the third or fourth largest silver producer in the world. Um, that's massive for the silver market, isn't it?

SPEAKER_02 13:55

It is. I mean, we need more silver. There's another deficit again this year. You know, I I think the Chinese um and what they've done with silver over the last number of months is very important to understand. Like the silver, you you and I talk, Paula, uh, a lot on and off camera about critical minerals and how much China has a dominant position in critical minerals. We won't get into that. We'll just say it's dominant, right? Silver, they're dominating as well. And this is important to note because this is not something that we've seen a number of years ago. This is a newer development. Also, silver is now on the critical minerals list. That is going to get more attention, right? So, all of these things, a supply deficit on the critical minerals list, China and the U.S. butting heads, and China's just, you know, hand over fist accumulating silver, it's it's interesting. And so, like, you know, the reports of like what you're talking about here will put a dent in that, but it's it's it there's a lot more silver needed, and you can't flip a switch.

SPEAKER_00 14:56

Well, congratulations to Ross and the team there. I think they're looking to get to a feasibility and perhaps a financing decision in 2030. Now, while we're talking about critical minerals, John, let's bring in nickel, as the nickel market is increasingly showing signs of life and improvement as Indonesia's government um ramps up or sorry cuts back on production quotas and other measures to provide price support. John, you follow a number of nickel names, and indeed some of them will be participating in your conferences in Washington, DC and for Lauderdale next month. What's your view of what's happening in the nickel space at the moment?

SPEAKER_02 15:34

Yeah, it's it's very clear. Um, in February of 2022, Russia and Ukraine went at it, right? And it hasn't stopped. It's been four years and two months, and the nickel market has been all over the place ever since. We saw a huge run-up in 2022 on the idea that, hey, there's not going to be a lot of nickel coming out of Russia now. Um, but that trade quickly got reversed. And um the reason for that is that Russia has been funding their war efforts with selling things into the market like nickel, platinum, palladium, in my view. So um nickel uh is one of those metals that is just used in so many things. It's a major industrial metal, right? So we've been buying juniors to um get exposure to that space because we think that there's tremendous value there. Um two names that are attending my conference in full disclosure, and and also that we own. Uh Stillwater Critical is one, uh PGE Z F in the States and PGE in Canada. They're in Montana, attached to Savanye Stillwater, which is another huge player, SBSW in in the space. Um, you know, everything that I can see there, they're 15% owned by Glencore, they're attached to a major, they're cashed up, they're drilling right now. They have a huge history of success in hitting holes. If you look at their hit ratio over the last few years, it's been outstanding. So, you know, a lot of times, Paul, these companies just need cash to develop more of a following, right? To like prove out their resource. And they haven't been able to raise that kind of money until last year into this year. So that's one. And then Power Metallic is another. I mean, Terry Lynch to me is one of the badasses out there in the sector, uh, PNPNF in the States and PNPN in Canada. He and uh Eric Sprot and myself and a bunch of people have been supportive of his initiative called Safe Canadian Mining.com, where we you know talk about the uh other side of uh trading where there's naked shorts and there's down ticking all the time in our sector. And you know, Terry's a real advocate for the sector, but that's not the only reason to buy the stock, of course. He has been hitting some massive holes. Um, that stock is mostly nickel, copper, platinum forward. It's a polymetallic stock, so there's a lot of upside there as well.

SPEAKER_00 17:55

Okay. Now, given your focus on critical minerals, John, I want to get your thoughts on the recent transaction in the rare earth space, although this was a week ago. Uh Cerro Verdi and its$2.8 billion combination with USA Rare Earth to create a geographically diversified and integrated mine to magnet producer of rare earth products outside of China. Um, USA Rare Earth is using its massively overvalued paper to buy Brazil's currently only operating rare earth element mine. John, uh what did you make of this transaction? What do you think it will do to the valuations of other rare earth projects in Brazil and and indeed elsewhere?

SPEAKER_02 18:35

Well, it's going to raise awareness. Obviously, that's a huge number, 2.8 billion. Um, and the more we see deals like this, the better, because um, you know, the US is so far behind China in rare earths. I personally, as you know, Paul, went out on a limb in November of last year when uh I call it the Trump high-five, when he high-fived uh China on this rare earth deal, which I think is completely ridiculous. Um, and US, uh, well, a lot of stocks, not just uh the ones we're talking about, a lot of rare earth stocks got cratered in November into December during tax loss season. That's a buying opportunity because a lot of those stocks have already bounced back. You know, you can tell you can tell from a deal of this size that there's going to be a lot of interested parties in rare earths as we move forward. One of our favorite names is Eastport Critical, um, which is EVI in Canada and E V I I F in the States. They just launched a U.S. ticker um probably about a month ago. So, you know, they they have rare earths in Africa at surface. You know, it's it's like not a matter of well, we will we find it, it's how much of this are we going to find. And that's that particular stock also has a massive copper deposit. It's got nickel since we just talked about that, and it's got uranium, and it's got gold. So, I mean, we like stocks like Esport where we can win in a number of different ways, right? If we're wrong about rare earths at a particular time and we see supply come on the market, well, hey, they've got energy with uranium. They've got gold, which is in an uptrend, et cetera, right? So we look for stocks like this that don't just have one project where we've got to cross our fingers and make sure that the execution is perfect.

SPEAKER_00 20:20

Okay. John, let's close by another sort of talk about your your conferences coming up next month. Um, what are you most excited about? And which companies do you think will be attracting most attention at your conferences?

SPEAKER_02 20:35

Oh, you're putting me on the spot, Paul. Um, but I think I think uh the conferences are going to be really great. The U.S. needs more good conferences. There's a lot of bad ones here. Um and and I've always endeavored to put ones on that don't just help one party, meaning they're not just investor-centric and they're not just company-centric. We want companies and investors to be in an environment where they can interact with each other. So I know this is unusual, Paul, and you attend more conferences than pretty much anyone I know, but we don't allow speakers during meals and happy hours and different things because we want people to interact with the CEOs, right? This is, you know, get your questions answered as an investor. That's the beef that I have with a lot of conferences is that you know, you get maybe five minutes with someone, you don't get your questions answered, you walk away from the conference, not really feeling better or worse about the stock you own because you still didn't have your questions answered, right? So we we foster a boutique kind of environment for both where people can interact and ask questions and build relationships. It's important. And um, you know, the the part about me putting on the spot here, I'd say, you know, I'm, as you mentioned, very heavy in critical minerals. So we run broad commodities conferences. We're gonna have a lot of tungsten companies here, which the tungsten spot price has just gone off the charts this year. Uh, we're gonna have tellurium companies, antimony companies, niobium companies. We want investors to really understand this stuff now because it's still early innings for a lot of these companies. So I hope that helps, you know, give your listeners a better idea. It's May 17 through 19 in Washington, D.C., and May 20 through 22 in Fort Lauderdale, Florida. And uh my email is John.fenneck at yahoo.com if anyone wants to hit me up for more information.

SPEAKER_00 22:24

Excellent. Well, thank you very much, John. Uh, I'll be there. I look forward to seeing you in person. That's it for this week, unfortunately. John Fenneck, thank you very much for joining me today.

SPEAKER_02 22:33

Likewise, Paul, thanks.

SPEAKER_00 22:35

And of course, if you like what you see, don't forget to hit that subscribe button. I'm Paul Harris, digging deep for Kitco Mining.

SPEAKER_01 22:42

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