Colorado Conference Takeaways

This past month we spent time at both the Precious Metals Summit in Beaver Creek, Colorado and the 37th Annual Gold Forum Americas in Colorado Springs. While the mood was certainly more joyful compared to a few years ago, it would still be a stretch to label the conferences as euphoric.   We were able to meet with management teams from 40 plus precious metal producers, developers, and exploration companies as well as sit in on dozens of presentations. Below are our four observations and final synopsis from a week in the Rocky Mountains.

What Are We to Do With All of This Cash?

A common topic was free cash flow. Expanding margins in late 2024-2025 has resulted in record amounts of cash flow for producing companies. As OCM has noted, the errors or management in previous cycles was the mis-allocation of capital once margins and thus balance sheets expanded. Many management teams iterated that it was their intention to reward shareholders with disciplined buybacks, which several have been doing throughout the year, as well as maintaining or increasing dividends. Those with debt have been able to strategically pay off expensive debt and buy off hedges that were from lower gold prices. 

A theme in a rising gold market is how previously fledgling junior producers can become growth stories. The sudden increase in cash flow has provided smaller, single asset producers the opportunity to use their own cash flow to support exploration targets or secondary projects that they’ve wanted to pursue without diluting shareholders or having to take on significant debt.

While many are building a war chest of cash from operations, only one company that OCM spoke to was holding a certain percentage of its production from the market to hold on its balance sheet. If gold companies believe in the product they are producing, it is our opinion that holding physical gold is an excellent way to trade at a premium as the dollar depreciates. Of course, the discussion of free cash flow and what to do with it brings up the M&A topic.

M&A

Whether it was a 1:1 meeting, a presentation, or an impromptu meet-up, M&A was a hot topic at the conference. We will paraphrase the standard response to the answer: “We are currently looking at everything but are not going to overpay. We believe our growth projects are undervalued in our portfolio.” 

The counter response of the exploration developer goes as follows: “We plan to move our project through the study and permitting timeline to build. However, if we were to receive an offer, we will have to bring it to our shareholders.” There were only a handful of companies who gave us candid answers that we could take home. 

Despite the Hemlo deal being announced during the week, M&A talk did not reach a fever pitch. Coming away from the conference, we are of the belief that companies are wary of issuing stock and take on debt, simply for the sake of growth, which is different than previous precious metal bull markets. They also value the incoming cash flow and would prefer to redistribute to shareholders and into the drill bit of existing companies, if no value can be found. Of course, as several cash flow generating quarters build up, the M&A market may get more active as we get closer to 2026.https://www.reuters.com/world/africa/barrick-exits-canadian-gold-mining-with-over-1-bln-hemlo-sale-2025-09-11/

Cut-Off Grades

An question often asked of producing companies was about their strategy toward their cut-off grades in relation to a steadily rising physical spot price. In past cycles, many companies have used rising gold prices as an excuse to lower their cut-off grades and in consequence, increasing their all-in sustaining costs. The strategy of reducing cut-off grades is that it reduces the margin expansion that gold producers are expected to create when the gold price rises.

Fortunately, it appears that many companies have learned from previous cycles as many told us they do not see the reason or opportunity to reduce their cut-off grades. The feedback from several meetings was that gold producers plan to mine what they currently have as reserve to simply stockpile their lower grade ounces for late mine life ounces. Obviously, exceptions do occur as a sustained stagflation environment, which we believe we are in the midst of today, creates a fantastic opportunity for gold miners to find more economic ounces that may not have previously been worthwhile. 

Permits & Jurisdiction Risk

It’s common for investors to think of jurisdictional risk in gold mining as gold is not necessarily deposited in the most hospitable places. Highly unstable governments such as Papa New Guinea or countries in West Africa, risk can also pertain to obtaining the permits necessary for production. Companies of all sizes are waiting for permits from the Mexican government and of course, all of them told us that they are near certain that Claudia Scheinbaum’s Mexican administration will be giving them the green light. To the north, there are several highly intriguing exploration assets with large deposits.

However, the amount of permitting hurdles to see one of said assets into production may be over a decade from now. When compared to the much quicker permitting timelines in African countries such as Cote d’Ivoire or Ethiopia, the tradeoff can be significant. While several projects are of the belief Canada’s Prime Minister, Mark Carney, and his administration are planning to fast track several projects, we are weary to fully trust these management teams as appeals to the fast track permits are prone to delay the approvals just as long.

Final Thoughts

Beaver Creek, where the exploration companies and smaller companies (below one billion U.S. market cap) were, the mood was markedly more upbeat than recent years as most companies felt renewed vigor with full treasuries. The presence of the principals from stable coin Tether was an interesting twist as Tether looks to deploy more funds into gold assets. The hope is financings will help yield more discoveries that will excite the market over the next year.

In Colorado Springs where larger market capitalized companies were, there definitely were more generalists than in past years, but not meaningfully so. Presentation rooms for producing companies were not standing-room only, if anything they were quite the opposite (Perhaps caffeine and alcohol were of higher priority for attendees). While the lack of euphoria was a pleasant surprise, it does not mean that we go straight up and to the right for all precious metal equities for the foreseeable future. 

Many management teams were eager to point out their cash flows and NPVs using current spot prices. While the physical price has not had ample time to consolidate its current rise, at OCM, we prefer to analyze projects using a different gold price analysis than spot or “analyst consensus.” Several previously defunct or uneconomic projects have come out of the woodwork to attempt to attract investor attention due to the quick spot price appreciation. Thus, in our opinion, disciplined capital allocation will continue to be rewarded in this sector as many projects will have to overcome physical gold price moves, permitting, development, and operational risk. 

If you have any questions about our time at the conferences or your investment with OCM, please feel free to write to us: info@ocmgoldfund.com