Jordan Rusche: Gold Stock M&A Analysis, Plus Unloved Commodities I Like

Key Concepts

• Cyclical Investing: The strategy of buying commodities when they are "unloved" or at cyclical lows, rather than when they are at peaks.
• Royalty and Streaming Companies: Firms that provide capital to miners in exchange for a percentage of future production; favored for their high margins and low G&A (General and Administrative) expenses.
• All-In Sustaining Costs (AISC): A comprehensive metric used to measure the total cost of producing an ounce of gold, including mining, processing, and overhead.
• G&A (General and Administrative) Expenses: The overhead costs of running a company; the speaker views high G&A as a "tax on the shareholder."
• M&A (Mergers and Acquisitions): Corporate consolidation used to scale operations, reduce overhead, and divest non-core assets.
• Fiat Currency Devaluation: The long-term trend of government debt and money printing that serves as a structural tailwind for gold.

---

1. Investment Philosophy and Portfolio Strategy

Jordan, founder of Mining Stock Monkey, emphasizes a risk-averse approach focused on capital preservation.

• Downside Protection: He argues that avoiding large losses is more critical than chasing massive gains, noting that a 75% loss requires a 300% gain just to break even.
• Commodity Selection: He is currently rotating away from precious metals (gold/silver) after a 5x price increase since 2015, seeking "unloved" commodities.
• The "Low P/E" Trap: He warns against buying mining stocks simply because they have a low Price-to-Earnings ratio, as this often occurs at the peak of a commodity cycle when earnings are temporarily inflated.

2. Gold and Precious Metals Outlook

• Market Maturity: Jordan suggests the current gold bull market, which began in 2015, is "mature" compared to historical cycles (which typically last 3–10 years).
• Macro Tailwinds: Despite the maturity, he identifies two major drivers for gold:
  • Weaponization of the Dollar: Central banks are diversifying away from US Treasuries following the 2022 sanctions.
  • Fiscal Irresponsibility: Endless government spending and debt accumulation continue to devalue fiat currencies.
• Preferred Vehicles: He prefers large-cap royalty and streaming companies like Wheaton Precious Metals and Royal Gold over juniors. These companies maintain high margins even if gold prices drop, whereas producers face "margin compression" (the double whammy of lower revenue and rising costs).

3. M&A Analysis: Recent Industry Deals

• Elemental Royalty & Visla: Jordan views the acquisition of Visla Royalties as a strategic move, despite the tragic kidnapping incident at the project site. He believes the long-term growth potential justifies the current valuation.
• Equinox Gold & Orla Mining:
  • Pros: He appreciates the potential for reduced combined G&A and a stronger focus on North American assets.
  • Cons: He expresses concern that Equinox is overextending itself by adding new assets while still struggling to ramp up existing projects like Greenstone and Valentine. He also notes the departure of Ross Beaty from the chairman role as a negative signal for his personal investment thesis.

4. Inflation and Energy

• Inflationary Pressures: Jordan notes that rising costs are systemic, driven by government money creation. He highlights that higher gold prices actually increase AISC for producers because royalty payments (often a percentage of revenue) rise automatically with the gold price.
• Oil and Gas: He is currently in an "education phase" regarding energy. While he sees potential for price spikes due to supply chain instability (e.g., the Strait of Hormuz), he remains cautious, preferring to protect his downside rather than speculate on volatile energy prices.

5. Methodology for Research

Jordan outlines a rigorous process for entering new sectors:

1. Immersion: Listening to earnings calls to learn industry-specific jargon and accounting nuances.
2. Primary Source Review: Reading quarterly and annual reports to understand company fundamentals.
3. Expert Analysis: Following industry-specific publications (e.g., Oil and Gas Investor) and tracking the questions professional analysts ask during calls.

Synthesis and Conclusion

Jordan’s approach is defined by disciplined patience. He advocates for investing in high-margin, low-overhead companies (royalty/streaming) while the market is distracted by producers. His outlook is cautious regarding the current gold cycle, favoring a transition toward neglected commodities like nickel. His core takeaway for investors is to prioritize the protection of capital, as compounding small, consistent gains is more sustainable than chasing high-risk, high-reward speculative plays.