Home Discount rate Equinox Gold Stock: Current Price and Significant Wrong Price (NYSEAMERICAN:EQX)

Equinox Gold Stock: Current Price and Significant Wrong Price (NYSEAMERICAN:EQX)

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Antonio Solano

The following segment is taken from this fund letter.


Golden Equinox (NYSE: EQX)

As a first-order effect, gold has performed poorly in an environment of rising real rates and a strong dollar (although it is at all-time highs in other currencies). gold the adjustment of prices to real rates seems contemporary.

Historically, for every 1% increase in real 10-year rates, there is a reasonably foreseeable 10% decline in the price of USD-denominated gold, all other things being equal. If this historical relationship holds, the current rise in real rates implies a 26% decline in gold prices, matching the 22% fall from the March highs of this year. However, there is a growing gap between the sell and sentiment of the precious metal versus the value of a call option on a total loss of confidence in central banks.

Equinox Gold has been the most painful position in our portfolio, down about 50% since March. The fall in share price implies that this fast-growing gold producer has fared far worse than it has. According to our models, the current stock price indicates a long-term gold price of approximately $1,050 at a 10% discount rate. This appears as a significant pricing error.

Political risk has undoubtedly been an issue, with operations at the Los Filos mine interrupted on several occasions and permit issues at the RDM mine in Brazil. EQX is a development story and is in the high growth phase of its business lifecycle, with more construction underway at any given time than most mining companies will experience in their entire lifetime. of life.

We believe Equinox will be a strong midstream producer by the middle of this decade, doubling the size of its business over the next three years. We are comfortable holding this position through a price cycle and the ensuing volatility as the business matures.

We will be going down to Brazil to visit several Equinox mines in October, so expect a full review of the firm in Q4.


The views expressed herein by Massif Capital, LLC (Massif Capital) do not constitute investment advice and should not be relied upon in making investment decisions. The opinions of Massif Capital expressed here relate only to certain aspects of a potential investment in the securities of the companies mentioned and cannot replace a complete investment analysis. Any analysis presented here is limited in scope, is based on an incomplete set of information, and has limitations as to its accuracy. Massif Capital recommends that potential and existing investors conduct their own thorough investment research, including a detailed review of regulatory documents, public statements and company competitors. Consulting a qualified investment advisor can be prudent. The information on which this material is based has been obtained from sources believed to be reliable but has not been independently verified. Consequently, Massif Capital cannot guarantee its accuracy. Any opinion or estimate constitutes Massif Capital’s best judgment at the date of publication and may be modified without notice. Massif Capital expressly disclaims any liability that may arise from the use of this material; reliance on the information contained in this publication is at the sole discretion of the reader. Further, this posting does not constitute an offer to sell or a solicitation to buy any of the securities or services discussed herein.


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