radix
Oct 22, 3:51 PM
$TRX
The credit tier is a mine supply mechanism
CCC-rated paper pays 13.07% over Treasuries. The broad high-yield index pays 3.27%. A ratio of 4.00 against a normal 2.5 to 3.
The part nobody connects: undeveloped copper, gold and silver projects are not funded from cash flow. They are funded with convertibles, streaming deals and sub-investment-grade paper.
Price the bottom tier at 13% and final investment decisions move to the right. Projects that pencil at 8% do not pencil at 13%.
That tightens physical supply four to six years out while compressing the equity of the companies holding those projects today.
Of course, our favorite junior gold miner is fully self-funded which is the main reason we love her. But other competing firms are going to struggle at these rate levels to get production deals moved forward. Less competition and less mine supply over the long term is bullish for the metal and TRX.
1 replies
