Tavi Costa of Azuria Capital spoke with Kitco News at the New Orleans Investment Conference and called the current pullback in gold one of the most compelling windows of opportunity he has seen this cycle. Gold has fallen about 30 percent, a decline comparable to the global financial crisis period, yet Costa does not expect a 50 percent crash. “I think we are close to the bottom. Of course getting to the bottom is a long process. I think we are much closer to the bottom than the opposite situation,” he said. He remains firmly in a long term bull market for gold and is excited about deploying capital into the mining sector after a long stretch of caution.
Costa highlighted the exceptional fundamentals of the mining companies themselves. If gold miners were treated as a single sector they would have the cleanest balance sheets in the stock market, with debt equal to only about 8 percent of assets compared with roughly 14 percent for technology. Free cash flow yields sit near 10 percent and margins are among the strongest of any industry. “This is an industry whose balance sheet is much healthier than any other sector. Their valuation is very good,” he explained. Bank models still price gold at 3000 to 3500 dollars. Substituting a higher long term price assumption into those same models would re rate the entire industry higher. He is particularly drawn to silver miners, where some companies hold 10 to 15 percent of their market capitalization in cash and could easily repurchase shares at current depressed levels. Costa noted that his newly launched fund has about 65 percent of its capital allocated to silver mining companies.
He also addressed the broader macro environment. AI spending by large technology firms resembles wartime expenditure in a race with China rather than a classic internet bubble. Free cash flow has contracted as companies spend more than they earn, and leverage is beginning to appear. Costa expects a rotation out of technology similar to the one that followed the 2000 peak. Higher borrowing costs will eventually force the Federal Reserve to lower rates again once credit problems emerge. In an AI driven world he views physical resources as the new moat and mining as the best AI trade available. Looking further ahead he noted that if Treasuries were ever backed by gold at historical ratios the metal could reach multiples of today’s price. The main risk for investors, he warned, is their own discipline once the next major leg higher finally begins.
