Coffee With Catt ☕ | Record Gold Miner Profits & A Surprise Fed Pivot?
Oil Price and FX To Tax Gold Profits and Tier One 300% Production Growth
Gold miners are quietly generating the strongest cash flows in their history. What affect have higher oil prices and weak USD?
Oil prices say hike, jobs data say cut, which will prevail?
What Tier One producer has fully funded sight or 300% production growth to 1M ounces of gold production by 2030?
Heard Down the Alley
Some interesting conversations I had this week:
“Goldman Sachs’ real view is that gold is going to $10,000 an ounce — but they can’t say that out loud for fear of spooking the horses.”
“Trump’s characterisation of the motivation for war in Iran sounds like Putin’s propaganda when he invaded Ukraine.”
“These oil prices are starting to hurt our [crayfishing] profits.”
US Voters Will Decide
US voters demand that Trump withdraw from the war in Iran sooner rather than later.
This is why.
What American Voters Care About (Not War)
On a recent trip to Idaho, an American friend explained:
“Most American voters don’t really understand the different economic policies of Republicans or Democrats. They know what a bag of groceries, a tank of gasoline and their mortgage costs each month.”
The cost to fill up your car in America has risen roughly 20% since America and Israel invaded Iran.
Meanwhile, my mum reports from her yoga class in Perth that farmers are worried about fuel rationing. She has already filled up her car and stocked a few spare jerry cans in the garage.
Australia imports 90% of its fuel supplies, and as at March 12th had only:
36 days of petrol
32 days of diesel
29 days of jet fuel
Just Like President George W Bush
President Trump’s Iran War “Mission Accomplished” declaration echoing ex President George W Bush’s Iraq War ceasefire proclamation in May 2003 could come soon.
George W Bush “Mission Accomplished” on board the USS Abraham Lincoln May 2003
Looking at the S&P 500 and the US bond market, one could speculate that Trump may declare victory even sooner than the six-week US Iraq war duration.
Trump And Bibi’s Mess
Presumably Iran and Israel — both of whom view the 2026 conflict as existential — will not put down their weapons when America sails away.
The implications could include:
• prolonged disruption to oil exports through the Straits of Hormuz, sustaining $100 oil
• ongoing attacks on Middle East oil, water and US Allied economic assets.
• heightened risk of Iranian attacks on US embassies, military bases, or perhaps even a repeat of the 1979 hostage crisis
Interest Rate Cut Surprise?
Financial markets have largely priced out the chance of interest rate cuts in 2026.
The American economy is weaker than it looks. US job growth was revised down every month in 2025, resulting in roughly 70% fewer jobs created than were first reported.
Non-farm payroll jobs fell by 92,000 in Februarybefore the impact of higher oil prices as AI caused job destruction gathers pace.
Hence Powell’s parting shot may be a surprise interest rate cut in April before Trump’s appointee Warsh arrives to take on the Fed Chair job in May.
Weak employment data will justify the rate cut considering the Fed has a dual mandate of managing inflation AND full employment.
Look for Japanese-style yield curve control to push down longer term US Treasury yields and mortgage costs as the Fed cuts overnight rates. This will trigger renewed US dollar weakness and commodity price strength.
Discovery: A Tier One Producer With 300% Production Growth
I attended the Discovery (DSV – C$8 billion market cap) investor day in Toronto on March 2nd.
This coincided with Discovery announcing the acquisition of Glencore’s Kidd Creek mine and processing capacity, which neighbours Discovery’s Porcupine Mine complex in Ontario, purchased from Newmont a year ago.
The next leg of Discovery’s growth from 250,000 ounces today to 500,000–750,000 ounces of annual gold production by 2028 - is now visible thanks to Kidd Creek’s processing capacity unlocking Discovery’s gold inventory.
The Kidd Creek mine, opened by Falconbridge in 1966, is one of the world’s most significant copper and nickel deposits, having produced over:
772 million pounds of copper
2.1 billion pounds of zinc
400 million ounces of silver
Discovery CEO Tony Makuch explained:
“Mining at Kidd Creek is safer than working at Walmart.”
Reflecting on Discovery’s culture, he added:
“We want to be the mining company people invite to build a mine in their backyard.”
Discovery Has A Big Silver Mine
As well as a tripling of its Canadian gold production to 750,000 ounces a year by 2028-30 Discovery’s currently unpermitted Cordero silver project in Mexico is the world’s largest undeveloped silver mine with over 300 million ounces of reserves.
I visited Cordero myself in June 2025: WATCH HERE
Perhaps Mexican President Claudia Sheinbaum is making room for the approval of new mines — including Cordero — following the recent cancellation of unused Mexican mineral concessions.
Cordero’s approval would also create new fresh water supplies for the nearby storied Mexican gold and silver mining town of Parral. Discovery’s new Cordero Mine will fund the recycling of Parral’s wastewater to supply both the future silver mine and the surrounding community in line with Mexican President Sheinbaum’s Manifesto goals.
Gold Miners: The Cheapest Sector in the Market
Thanks to my former employer Royal Bank of Canada for the chart below illustrating gold miners’ Free Cash Flow to Enterprise Value compared with other sectors.
What about higher energy costs and weaker US Dollar?
The analysis shows that at current $5,000 gold prices,gold miners offer roughly an 8% free-cash-flow yield, compared with about 3% for the S&P 500.
If RBC’s forecast of $6,500 gold by 2027 proves correct, free-cash-flow yields for miners could reach 12–13%.
Diesel costs particularly for remote mines are the most important variable cost for miners. A recent Bank of Montreal study of miners concluded a $10 increase in oil prices increased costs by 2%. Hence a $40/barrel increase in oil from $60 to $100 a barrel increases miners costs by about 8%.
US rate cuts and yield curve control would trigger a sharp devaluation in the US dollar versus commodity currencies like the Aussie, Canadian dollar and South African Rand. This will tend to favour domestic US miners.
Catt Call 🐾
Gold miners today are generating some of the strongest cash flows of any sector in global markets. Higher oil prices and stronger local currencies will erode record margins but gold miners are currently pricing fallinggold prices.
If gold continues to make new highs while the Federal Reserve cuts interest rates to support a weakening US economy, the implications for gold mining equities could be dramatic.
Rising metal prices combined with record free cash flow and has historically been the recipe for powerful moves in mining equities.
We may be approaching that moment again.