Paul's Notes #7 — 1Q26 results to fuel goldco M&A?
Rick Rule is a veteran natural-resource investor who began in 1974, built Global Resource Investments (sold to Sprott in 2011), and led Sprott U.S. Holdings until retiring in 2021 to found Rule Investment Media. His free Substack covers contrarian speculation in mining, energy and critical minerals — gold, silver, copper, nickel, royalty and streaming companies — framed by geopolitical risk.
In plain words
Gold prices are high, and miners are making record profits. But production isn't growing, so big companies like Newmont and Barrick are using their cash to buy smaller firms. The report shows these giants have strong cash flows and pay big dividends, while some mid-tier miners are also jumping into deals. However, a new IPO (Sunshine Silver) looks overpriced compared to peers. For everyday investors, this M&A wave could be interesting—stick with profitable leaders, but be careful with expensive new stocks.
Rick Rule’s research note focuses on the financial performance and M&A outlook of the gold industry in Q1 2026, and previews the Rule Symposium scheduled for July 6–10, where multiple potential M&A target companies will participate. Key conclusions: Industry leader Newmont (NEM) posted a record net
Theme & Background
This chapter focuses on the gold industry's financial performance in the first quarter of 2026, cost trends, and M&A prospects, while previewing the Rule Symposium scheduled for July 6-10, where multiple potential M&A target companies will participate. The core backdrop is that rising gold prices have driven industry profits to record highs, but production growth has stalled, forcing companies to replenish reserves through M&A.
Core Thesis
The author argues that the gold industry is entering an active M&A phase. Major gold miners have doubled their cash reserves to nearly $30 billion, while production remains flat, necessitating M&A to replace resource depletion; mid-tier gold miners, also flush with cash, are attempting to achieve breakthroughs through M&A (e.g., Equinox Gold's acquisition of Orla Mining). The counterintuitive judgment is that despite persistently rising costs, profit margins remain high, and companies prioritize share buybacks and dividends over early debt repayment.
Key Arguments & Data
- Profit & Cash Flow: Newmont (NEM) net profit of $3.3 billion (+74%), Agnico Eagle (AEM) $1.7 billion (+108%), Barrick (B) $1.6 billion (+238%). NEM free cash flow of $3.1 billion (42% of revenue), AEM free cash flow of $732 million (18% of revenue), B free cash flow of $1.2 billion (23% of revenue).
- Shareholder Returns: Total quarterly shareholder returns across the industry reached $7.3 billion ($4.5 billion in dividends + $2.8 billion in buybacks), on track to surpass the full-year 2025 total of $13.6 billion. NEM returned $2.2 billion (70% of FCF), B returned $697 million (58%), AEM returned $371 million (51%), AngloGold Ashanti (AU) returned $1.0 billion (88%), and Gold Fields (GFI) returned $1.2 billion.
- Costs & Profit Margins:
- Average AISC for major gold miners was $1,788/oz (up 22% YoY), with an average profit margin of 63% (approximately $2,994/oz).
- Average AISC for mid-tier gold miners rose to $1,868/oz (up 27% YoY), with an average profit margin of 62% ($2,843/oz).
- The most significant margin improvement among major miners was Kinross (up 15% QoQ to 64.5%), and among mid-tier miners was Mineros (up 36% QoQ to 53.3%).
- Production & Cash: Major miners' Q1 2026 production fell 8% QoQ to 5.6 million gold-equivalent ounces, but was up 14% YoY; mid-tier miners' production rose 9% YoY to 2.0 million ounces. Major miners' cash holdings doubled over two years to nearly $30 billion, with stable and easily serviceable debt levels.
- M&A Case Study: Equinox Gold (EQX) recently announced the acquisition of Orla Mining (NYSE:ORLA), reflecting the M&A trend among mid-tier gold miners.
Companies/Assets Covered
- Newmont (NEM): Industry leader, net profit of $3.3 billion, free cash flow of $3.1 billion, shareholder returns of $2.2 billion (70% used for buybacks). Bullish.
- Agnico Eagle (AEM): Lowest AISC ($1,483/oz), profit margin of 69.5%, free cash flow of $732 million. Bullish.
- Barrick (B): Net profit of $1.6 billion, free cash flow of $1.2 billion, AISC of $1,708/oz. Bullish.
- AngloGold Ashanti (AU): Shareholder returns of $1.0 billion (88% of FCF), profit margin up 134% YoY. Bullish.
- Gold Fields (GFI): Shareholder returns of $1.2 billion. Bullish.
- Kinross Gold (K): Profit margin up 15% QoQ to 64.5%. Bullish.
- Mineros (MSA): Profit margin up 36% QoQ to 53.3%. Bullish.
- Iamgold (IMG): Profit margin up 232% YoY. Bullish.
- Equinox Gold (EQX): Profit margin up 230% YoY, acquiring Orla Mining. Bullish.
- Alamos Gold (AGI): Profit margin up 198% YoY. Bullish.
- Sunshine Silver Mining & Refining (SSMR): Planned IPO, issuing 20 million shares, priced at a maximum of $16.50, raising $330 million, with a valuation of $2.32 billion (equivalent to $7.50/oz), significantly higher than peers (Honey Badger Silver $1.45/oz, BMC Minerals $1.68/oz, Vizsla Silver $3.60/oz, Blackrock Silver $3/oz). The author suggests the valuation is high.
Investment Implications
- Go Long on Major Gold Miners: Leaders with ample cash flow, high shareholder returns, and strong M&A capabilities (NEM, AEM, B) benefit from rising gold prices and industry consolidation.
- Watch Mid-Tier M&A Targets: Companies with significant margin improvements (e.g., Kinross, Mineros) or those that have initiated M&A (e.g., EQX) may see valuation re-ratings.
- Beware of IPO Valuation Bubbles: SSMR's IPO valuation ($7.50/oz) is significantly higher than peers, warranting cautious participation.