How the U.S. Just Made Gold Mining a Strategic Priority

We’ve been harping on about gold for a couple of years now.

(it’s our job to try and identify where market interest will move to next)

And for even longer about “de-globalisation” and “localisation” of critical metals supply...

A process where countries try to reduce the security risk of relying on foreign countries for imports of critical resources by developing domestic resources supplies and supply chains.

~30 hours ago US President Trump signed an Executive Order invoking “war-time powers” taking immediate measures to increase US domestic mineral production.

This means more funding, faster permits and more support for critical mineral projects in the US.

(glorious news for small ASX stocks with US based resource projects - a few examples shortly)

This new Executive Order includes a broad definition of “critical minerals” that are needed for “transportation, infrastructure, defense capabilities, and the next generation of technology”...

But the first page SPECIFICALLY calls out uranium, copper, potash and... gold?

(You can read the entire Executive Order here)

(if you can spare five or so minutes - it’s a few pages long and definitely worth a full read to fully appreciate the urgency of this initiative, including specific short time frames required for things to happen)

On the very first page:

The Financial Times responded quickly with a big piece on Trump’s Executive Order too:

(Source)

And the news continued spread across major outlets:

(Source - Google Search)

The specific mention of gold in this Executive Order comes after a few clues we’d seen in mainstream and social media over the last month.

A few weeks ago we noticed a sudden increase in mentions of gold by ultra high profile figures with hundreds of millions of social media followers - the likes of Donald Trump, Elon Musk, Tucker Carlson.

But yesterday was the first time that “increasing gold mining in the USA” has been declared of strategic importance to the US national interest to the extent an Executive Order has been signed by the President.

(this is certainly more “real” than the casual mentions of “auditing the gold in Fort Knox” from the last few weeks that we suspected was a prelude to something big happening for US gold - read our commentary here)

We still don’t know why the US is suddenly making noise about gold...

OR why they just signed an executive order for more funding, faster permits and more support for US gold.

(it makes obvious sense for critical metals that have important military, energy and technology uses... but why the monetary metal gold?)

What we DO know is that the gold price spent the entire week well above US $3,000/oz, yet ANOTHER all-time record high.

A lot of macro themes are aligning for a handful of ASX small cap stocks.

It increasingly looks like gold might be the thematic that finally breathes life back into the small end of the market...

Last week we also wrote about the enormous US capital markets starting to take an increasing interest in small ASX resource companies - read that weekend edition here.

We are hoping this new Executive Order is the official “firing of the starting gun” for new US interest and capital flows into ASX listed resource projects.

We can think of a few of our Portfolio companies that should really benefit from this new move by the US...

First up is James Bay Minerals (ASX:JBY), which already has +1Moz of gold in gold-rich state Nevada, USA - and surrounded on three sides by Newmont and Barrick’s Phoenix Mine Complex which is currently producing gold.

Drilling is about to kick off for JBY as they seek to add even more ounces of gold in the ground... (read about it here)

Our uranium Investment Haranga Resources (ASX:HAR) went into a trading halt yesterday pre-market for “the acquisition of an advanced USA gold project and proposed capital raising”. Source)

Off the back of gold in the USA being designated to be of strategic importance to the US, HAR couldn’t have better timed this new USA gold project acquisition.

HAR is coming out of halt on Tuesday morning this week on what should be a pretty big opening given the events around US gold over the last 24 hours.

Our 2024 Small Cap Pick of the Year Sun Silver (ASX:SS1) has a giant 423M ounce silver equivalent resource located in Nevada USA, with more drilling just about to start.

The key relevance of the new USA Executive Order to SS1 is the critical defence material - antimony.

Based on antimony grades discovered in its maiden drilling campaign, SS1 suspects antimony could ALSO be present throughout its giant silver resource, in which the ~200 historic drill holes that make up the giant silver resource were NOT tested for antimony.

SS1 put out a detailed announcement on it’s antimony strategy earlier this month which you can see here.

SS1 also recently attracted a major US fund to its register as cornerstone investor too - Nokomis Capital - so US funds have already started flowing into SS1.

Along with Copper, potash and gold - uranium was also singled out with a specific mention in Trump’s new Executive Order.

Our Investment Global Uranium and Enrichment (ASX:GUE) recently acquired a project in Wyoming, USA.

Partnered 50-50 with NASDAQ listed Snow Lake Resources.

9 days ago, Snow Lake resources also invested $5.8M in GUE and now owns 19.9% of the company.

GUE owns a cornerstone stake in a unique uranium enrichment company which could be of strategic importance to Western countries like the US.

A key part of Trump’s Executive Order was to encourage not only the rapid increase in mining of critical minerals, but the PROCESSING of raw critical minerals into final, usable products.

(aside from raw critical mineral supply, its the lack of processing abilities where the US and most countries also have a serious strategic and security weak point)

Mineral processing... like uranium enrichment.

That deal between GUE and NASDAQ listed Snow Lake is the first of what we think will be many US companies moving into partnerships with small ASX resource companies. (read more here)

Coming back to gold....

Watch this Stock on Monday morning: KAU

The gold price is the highest it has ever been, it feels like it is going higher.

We Invested in Kaiser Reef (ASX:KAU) back in October because they already have a gold processing plant and are on the cusp of ramping up gold production...

And at the time we thought the gold price would keep going up.

And it did - the gold price is at new record highs...

And it looks like KAU has some pretty big news coming out on Monday Morning...

On Thursday, KAU requested a trading halt pending an announcement of a transformational project acquisition and capital raising.

The AFR reckons KAU is going to acquire a PRODUCING gold mine in Tasmania that mined 25,000 ounces last FY, at an all-in sustaining cost of A$2,876 per ounce.

Gold is currently at A$4,821 per ounce.

25,000 ounces in the last FY would be $120M revenue at the current gold price... not bad for KAU.

The AFR published an article that said KAU has agreed to terms to buy the Henty gold mine in Tasmania from the $1BN capped Catalyst Minerals. You can read the full AFR article here.

(Source)

KAU is scheduling a webinar for Monday 12PM AEDT with Managing Director Jonathan Downes and Executive Director of Operations Brad Valiukas regarding the ‘transformational acquisition and capital raising’.

Anyone can register to watch the KAU webinar via this link.

We intend to cover our full take on this news once it has been released to the ASX, which is likely Monday morning.

Watch this stock on Tuesday Morning: HAR

As mentioned earlier, HAR went into a trading halt yesterday pre-market for “the acquisition of an advanced USA gold project and proposed capital raising”. (Source)

Off the back of gold in the USA being designated to be of strategic importance to the USA, HAR couldn’t have better timed this new project acquisition.

HAR is coming out of halt on Tuesday morning this week on what should be a pretty big opening given the events around US gold over the last 24 hours.

What did the trading halt announcement say?

(Source)

HAR requested a trading halt pending an announcement of an acquisition of an advanced USA gold project and capital raising.

Scheduled to come out of halt: Tuesday 25th March

What is the deal?

There are no public details of HAR’s new acquisition, other than it is “advanced stage” and it is a “gold project” in the USA.

Given the Executive Orders published by Trump yesterday we think that it is very good timing for HAR to pick up an advanced stage gold project in the US.

Again, we intend to cover our full take on this news once it has been released to the ASX, which is likely on Tuesday morning.

Both of these HAR and KAU’s acquisitions appear to be for later stage gold assets.

Why we think the gold mining market is just heating up

When it comes to gold, we think global markets have been caught wrong-footed, especially in the small/mid cap end of the market.

We think most investors are still very underweight gold equities, and most of the institutional money is extremely underweight...

This could be changing soon.

This week we saw two new institutional investors launch gold funds - L1 Capital and Collins Street Asset Management.

Looks like the institutional investors are starting to wake up.

The pitch from them both centres around the dislocation in the mid/small cap valuations relative to the gold price.

Both funds appear to see an opportunity to deploy capital and make a return at this end of the market...

This could be just the start of it.

Right now, we think there is still a big wave of institutional and retail capital still to come into the precious metals space.

(and potentially some government funding as well for US-based gold projects with the new Executive Order by Trump)

Between 2022 and 2024 it was one of the worst market environments we have seen for the small/mid cap gold space.

There was no on-screen buying, and raising capital was like panning for gold in a puddle.

Then out of nowhere, the gold price spiked ~40% and the market wasn’t positioned for that type of move.

We think valuations in the junior/mid end of the market are still relatively low given how much the gold price has run.

And investors are still yet to adjust their valuations to the gold price today.

This is why we are seeing a wave of M&A from the majors.

The big producers are buying ‘ounces in the ground’ with the cash printed from their existing production.

Scrip based M&A is usually a signal for a coming boom in any sector.

Established companies with big balance sheets see real value in underappreciated stocks where the market is mispricing value.

The Lion Selection Group’s market “clock” visualises it nicely:

(Source)

M&A in today’s gold environment makes a lot of sense...

Explorers and developers are exponentially leveraged to higher gold prices.

The impact on project economics isn't 1:1, it’s often 1:2, 1:3 and sometimes even more (depending on the quality of the project).

A project’s Net Present Value (NPV) at US$3,000 per ounce could be 2-3x what it is at US$2,000/oz.

(US$2,000/oz is the price where a lot of the feasibility studies and JORC resource cut-off grades are measured from studies conducted just two years ago).

We think there is still a lot of catching up to do in terms of valuations for the small/mid caps.

AND we think that there are no clear signs of an overheated gold market YET...

There haven't been any major new gold floats (IPO’s) come to market, and exploration hasn’t quite hit its stride.

Anyone who remembers the top of the lithium market back in 2022 will remember that just about any explorer could have raised $3-4M very quickly to drill out any lithium project with a pulse.

Gold explorers are still doing it pretty hard at the moment, but there are some seeds of interest now driving the market forward.

Our take is that there is still a dislocation in stock valuations and the gold price around the $20-100M market cap.

The value hasn’t quite trickled down to juniors just yet, and there are still many more chapters before we reach the peak of the gold boom.

The small-mid cap gold market is still yet to catch up to the current price of gold, and that is where we think the best value is right now.

What happens when gold keeps rising?

New highs for gold will mean many new projects come to market.

A lot more capital will chase gold stocks and the market will respond and make more paper (shares) in gold companies available for that capital to invest in.

(new floats, capital raises, new project acquisitions etc)

Just like every other sector in which capital flows in and out of, there will be real companies born out of all that capital invested.

We saw this play out in the lithium space over the last ~6-7 years.

Lithium market cycle

In 2017-2018 - The initial lithium bull run brought a few old lithium mines back into production, fresh capital also led to new discoveries but very few of them made it into production before the capital raising window closed for lithium developers.

In 2020-22 - This was when the real capital came into the lithium sector. New discoveries were put into production (think Liontown’s Kathleen Valley & Sigma Lithium’s project in Brazil). New discoveries were also taken over in billion dollar deals... think SQM’s takeover of Azure Minerals for $4.2BN.

In that second run we had two companies in our Portfolio execute, deliver big milestones and turn into highly valued companies:

1. Vulcan Energy Resources (ASX:VUL) - went from a <$10M market cap to almost $2BN. It now trades at a market cap of ~$1BN. VUL has managed to attract over $1.5BN in funding to get phase one of its project developed this year.
2. Latin Resources (ASX:LRS) - made a material new hard rock lithium discovery in Brazil’s “Lithium Valley”. LRS was eventually taken over by the $5.6BN WA producer, Pilbara Minerals.

Gold market cycle

We think the gold sector could be about to go through something similar...

In 2020-2021 - There was an initial run in gold stocks as the gold price went from US$1,500 to US$2,000/oz. Then interest quickly dissipated. What was a ~6 month window to raise cash was open and shut before many had a chance to capitalise on investor interest. Some old mines did come back into production though.

2024-2026 - Gold price has gone from ~US$2,000 to US$3,000/oz. and is still running.

Is this the start of the second wave of capital into the sector, where the mega deals are inked and a few juniors get the opportunity to become majors?

We think there is a strong possibility that this happens.

Whatever happens, with the gold at all time highs, it will be an interesting year ahead.

As small cap investors, we look forward to seeing companies have a crack at delivering a step change in their fortunes.

Most will fail, but a few make it out of the other side and end up as highly valuable bigger companies.

It’s part of the reason why juniors exist - because they can pivot quickly into opportunities they see. Much quicker than a major.

We are hoping a few of our Investments come out of the other side of this cycle as much bigger companies and balance out the ones who are unlucky and don't make it out the other side.

By that time, lithium might be back in vogue...

What else caught our eye this week

Changing tack from the gold commentary for a bit...

This week there was an article in the Herald Sun about mental health:

Herald Sun: Medibank to invest an extra $50M into mental health, including MDMA trial

(Source)

Our takeaways:

• Kek quote: “Medibank has allocated $10M to a psychotherapy program for eligible customers with acute mental health conditions such as PTSD, collaborating with the Australian National University to look at clinical outcomes as well as broader economic impacts.”
• Medibank is putting a focus on the need for preventive care and better communication to address the growing mental health crisis. (“Nip it in the bud” is the name of the game we think).
• This funding is part of a broader initiative by Medibank to become a leader in preventative mental health initiatives.

The Medibank initiative also made it into the the paper copy of the masthead we noticed, while we were at a local cafe:

We are Invested in Emyria (ASX:EMD) - which is currently delivering psychedelic assisted therapies for people with mental health issues.

In particular, MDMA-assisted therapy for Post Traumatic Stress Disorder (PTSD).

EMD has two clinics in Perth which we have visited twice now, and we think that it has the potential to be THE franchise for psychedelic assisted therapies.

The big catalyst that EMD is working on is a “payer agreement” with a major health insurance company or an industry body (think veterans organisations or first responder support organisations)

A “payer agreement” would see these important therapies funded by the insurance companies for its members.

We think a major ‘payer agreement’ where insurance companies or another industry body covers patient costs would drive significant business to EMD and its clinics.

We also saw the ABC run a powerful story this week on military veterans who are seeking the kind of care EMD offers:

ABC: Psychedelic therapy may soon be funded for veterans with PTSD, depression

(Source)

Our takeaways:

• Some military veterans are turning to psychedelics like psilocybin to help manage PTSD and depression, reporting significant improvements.
• Psychedelic-assisted therapy, when combined with psychotherapy, has shown promising results in helping patients process trauma.
• Many who undergo these treatments experience long-term relief from symptoms, leading to better mental health and overall well-being.

With an Australian federal election coming soon (it has to be on or before 17th May 2025), we think that mental health will be put on the agenda and key decisions that have been months in the works will start to come to a head.

There are an estimated 1.5M Australians who suffer from PTSD and the mental health crisis in Australia has become so severe, that last month roughly one third of NSW psychiatric doctors resigned due to being under-resourced relative to the state-wide demand for care. (Source) (Source)

We see EMD as part of the solution here, particularly for those Australians suffering from severe PTSD.

It is a big “watch this space” on EMD to see if it can deliver one or multiple payer agreements and scale up its assisted therapy offering.

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New Sunday email coming tomorrow...

Hey by the way, where did all those Quick Takes and key media links go?

Well, they’re not gone - they’re coming tomorrow.

We’re launching a new Sunday Quick Take rundown that includes all the articles we’ve been reading and videos we’ve been watching during the week.

It’ll be an easy to read summary of what’s been happening across our Portfolio - and the headlines and videos explaining the big shifts in macro themes that we watch closely.

It will be in your inbox tomorrow morning.

In the meantime, be sure to bookmark our Quick Takes page where they appear everyday as we give our takes to company announcements and macro events as they happen.

Have a great weekend,

Next Investors