Gold prices are good for miners, including juniors; Huge profits can be made - Dan Wilton
That's according to Dan Wilton, CEO of First Mining Gold Corp. Wilton spoke with David Lin, Anchor and Producer at Kitco News.
First Mining Gold (TSE: FF) is a gold developer focused on gold mining projects in Ontario and Quebec. The company's Springpole Project is expected to have 3.8 million ounces of gold.
Wilton said that in the medium-term, gold has performed well.
"We're entering this inflationary phase and you've seen the gold price actually, you know, up from where it was in 2019 at the $1300 [per ounce] level," he said. "You know, now [gold is at] $1800 [and has] tested $2,000, $2,100, a couple of times."
Wilton mentioned that mining costs have gone up, including the costs of drill contractors, supplies, and energy. He further pointed to demographics in the mining industry.
"It's really difficult to attract young people to come to work in the industry, and getting more and more difficult to attract people who want to go and work on a two week on, two week off, rotation in a remote camp," he said.
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Despite rising costs, Wilton added that gold is unlikely to return to its 2015 low of $1,000 per ounce. Even if gold's price were to stay "flat" at $1,800 per ounce, there are still opportunities in mining, he said.
"[What] a lot of people don't appreciate now is that senior gold producers are trading at record levels of free cash flow yield," said Wilton. "They have never generated free cash flow like this ever at any point in a gold cycle… [You] see margins over the last couple of years, which are starting to be eroded by cost inflation, but those margins have been at record levels…"
Wilton added that junior mining companies, like First Mining Gold, have a lot of potential.
[Fundamentally] when you can buy these projects like ours [First Mining Gold] at $10 per ounce in the ground, and you know that when it's permitted, they usually sell to bigger companies at $100 an ounce in the ground… there's real opportunity there just in asset selection," he said. "… And listen, seniors [senior mining companies] gave up greenfields exploration a long time ago because they came to realize that, why would they commit the capital on a limited subset of opportunities, when they can watch the entire market and have project developers and explorers take all the risk. And then they, you know, they invest when they know they have something."
To find out whether First Mining Gold will go into production for itself, or intends to be acquired, watch the above video.
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