2020 Mining Rush, page-2

Gold is only valuable to the extent that people perceive it as being valuable. Even though it's a 'hard' asset, I would be surprised if in 50 years people still view the 'intrinsic' value of gold in the same way given the amount of resources and energy that go into producing it, especially for it just to sit in safes and vaults. At some point in time I don't see why the financial reserves of gold wouldn't start to be sold for industrial uses - at which the market will shift to a more traditional one of industrial activity driving demand and price. For the short term though probably the gold price will be supported, but I just don't think we should assume that will hold indefinitely.

If growth for the broader commodity market (copper, iron ore, nickel, etc.) flatlines or drops, then we may see mines for other commodities put on care and maintenance, and new projects deferred - which would have a double whammy for a company like PRN. Their ability to bid on new projects and sure up their pipeline would drop, which impacts revenues more over a medium time horizon. And at the same time, it frees up a lot of mining equipment in the sector to compete for the same projects, which will drive down margins. If the stimulus manages to prompt growing commodity demand and prices, then the opposite would be true, although I think some healthy skepticism of how quickly that could happen is warranted. In my view the 'intrinsic' value of the company has probably decreased from 3 months ago. They do have a good revenue moat though to withstand a lot of turmoil, so PRN in my view is undervalued at current prices. Particularly if you are comfortably willing to hold for 5+ years, because I think if they ever pay off their debt they will be a powerhouse and it will drastically change the nature of their exposure to the AUD/USD exchange rate.