Gold Stocks Outperformed Bullion During Gold Bull Runs Over Past 20 Years – Junior Miners Like Austin Gold Offer Leveraged Bet On Gold Price

April 30, 2024 at 09:00 AM EDT

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By Austin DeNoce, Benzinga

The allure of gold has once again captured the market's imagination, hinting at the onset of a potential bull run that could see prices soaring to unprecedented heights. In the midst of this financial fervor, gold exploration companies like Austin Gold (AMEX: AUST) could be positioned to reap significant benefits. The company is forecasting a wide range for gold prices this decade, but its upper bound is $35,000, largely based on the precious metal’s historic relationship to the monetary base. With that in mind, historical patterns have shown the tendency for gold mining stocks to significantly outperform bullion in bull markets over the past twenty years – setting the stage for a potentially lucrative era for miners and investors alike.

Miners: The High Beta Beneficiaries

In the world of gold investment, miners hold a unique position, offering what can be described as a leveraged bet on the price of gold. This leverage comes from their operational efficiencies and the ability to sell gold at higher margins during price surges, which can translate into substantial profit expansions. This capacity for increased cash flow not only enhances shareholder value through a higher stock price, dividends and a stronger balance sheet, but it also helps fund future exploration and development activities crucial for sustained growth. Despite their volatility and inherent risks, mining stocks present an attractive opportunity for those seeking outsized returns, especially in a climate where gold's role as a financial safe haven is increasingly relevant and a potential bull market sits on the horizon.

The Lassonde Curve

Austin Gold says it stands out in the exploration sector due to its high reward/risk position on the Lassonde Curve, which is central to the company’s approach, guiding it through the exploration lifecycle and toward discovery. The Lassonde Curve was conceptualized by mining expert Pierre Lassonde and charts the growth phases of junior mining companies from their start to potential acquisition. Lassonde is known for his leadership at Newmont Corporation (NYSE: NEM) and for co-founding Franco-Nevada, as well as his successful application of a royalty model to gold mining that helped deliver substantial returns.

The curve highlights the following key stages:

Exploration: Initial geological assessments and drilling to identify potential deposits.
Discovery: Positive assay results that confirm the presence of valuable minerals, generating market excitement.
Feasibility: Conducting engineering assessments and studies on economic viability to determine if mining is financially feasible.
Construction: Mobilizing significant capital to develop the mine and prepare for extraction.
Ramping Up: Operations begin, gradually reaching full capacity and operational efficiency.
Reserve Depletion: The mine's value decreases over time as resources are extracted and reserves diminish.

In essence, the curve points out investment hotspots at discovery, post-feasibility and after construction before mines operate at full scale. This model aids in understanding junior miners' development while offering insights into potential strategic and high-return investments.

The model has underscored the high return potential during the early stages of exploration, particularly for its properties like Austin Gold’s Stockade Mountain and Lone Mountain.

Austin Gold says these projects exhibit untapped potential, with previous explorations by industry majors not fully exploring the depth or extent of these sites. At Stockade Mountain, Austin Gold's targeted exploration aims to uncover the high-grade veins that lie beneath, with preliminary drilling results already showing promise.

Austin Gold’s Unique Position

As Austin Gold marches forward in its promising exploration endeavors, it has likened its efforts to the pharmaceutical industry's R&D model, systematically pursuing high-value targets with the potential for "multibagger" returns upon discovery. By employing modern exploration techniques and adhering to a disciplined exploration strategy, Austin Gold says it is investing in the future with the hope of securing significant discovery results that can buoy it to new heights in its early stages along the Lassonde Curve.

In other words, Austin Gold sits at the early stages of this curve where it holds the most potential for returns. As one of the few listed gold exploration companies on the NYSE American, the company is figuratively and literally looking to strike gold that could return significant multiples on its investment, especially if gold prices continue to rise much higher.

Gold On The Horizon

As the gold market teeters on the brink of a possible new bull run, the spotlight turns to exploration companies like Austin Gold. With the potential for gold prices to reach new heights, the company's strategic position, experienced team and promising projects potentially place it at the forefront of the industry's next wave of success.

In a world increasingly attuned to the value of gold as a hedge against uncertainty, Austin Gold's exploration efforts offer a vivid illustration of the sector's growth possibilities and the lucrative opportunities that lie ahead. The journey of gold exploration is fraught with challenges, but for those like Austin Gold, it's a path paved with golden opportunities.

Featured photo by Zlaťáky.cz on Unsplash.

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