Gold Hedge Amid the Tariff War

The recent implementation of tariffs by the Trump administration has reshaped global trade dynamics, with significant implications for various sectors. However, gold stands in a unique position, benefiting from its status as an exempt commodity under the new tariff regime. This exemption, coupled with gold's traditional role as a safe-haven asset during economic uncertainty, has contributed to its price appreciation and created favorable conditions for gold producers.

The Tariff Landscape & Implications for Gold

The Trump administration's recent tariff policy, described as reciprocal tariffs" has established a baseline 10% tariff on imports, with higher rates for specific countries. According to recent documents, approximately 60 countries face elevated tariffs, with some rates reaching as high as 50%. The implementation follows a two-phase approach, with the baseline tariff taking effect on April 5, 2025, and higher tariffs for "worst offenders" beginning on April 9.

Critically for gold investors, the White House has exempted certain commodities from these tariffs, including semiconductors, lumber, copper, gold, and pharmaceuticals. This exemption positions gold producers, particularly North American operations, favorably within the current trade environment.

Agnico Gold addressed the tariff situation in a recent statement, noting:

"The company [Agnico Eagle] believes its revenue structure will be largely unaffected by the tariffs as its gold production is mostly refined in Canada, Australia or Europe. The company is reviewing its exposure to the potential tariffs and alternatives to inputs sourced from suppliers that may be subject to the tariffs, if implemented. However, approximately 60% of the company's cost structure relates to labour, contractors, energy and royalties, which are not expected to be directly affectedby any of the tariffs."

The company further explained that approximately 60% of its cost structure relates to labor, contractors, energy, and royalties, which are not expected to be directly affected by the tariffs. This relatively insulated position extends to many North American gold producers, creating an environment where operational excellence and production efficiency can translate more directly to bottom-line results.

Price Drivers & Outlook

Gold's price surge to around $3,000 per ounce has transformed project economics across the industry. Major investor Eric Sprott, who owns 20% of Americas Gold & Silver, provided a bullish perspective on precious metals prices: "I think the silver price will go to $50. Whenever I think of any silver investment, I already think to myself, 'Okay, what's this going to be worth at $50?'"

Sprott's outlook extends to gold as well, noting that historically, silver traded at a 15:1 ratio to gold and is mined at an 8:1 ratio, though it currently trades at a 90:1 ratio. With gold at $3,000, he suggests silver could eventually reach $200, indicating his confidence in the broader precious metals complex.

The fundamentals supporting gold's strength include persistent physical supply deficits, growing industrial applications, including in renewable energy and technology, limited investment allocation to precious metals relative to other asset classes, central bank purchasing activity, and inflation concerns and currency devaluation risks

North American Gold Producers' Strategic Positioning

Though Canada and Mexico, the United States' largest trading partners, weren't included in the new tariff announcements, they continue to face existing 25% tariffs on many goods and separate auto import duties. These existing 25% duties remain in effect for exports that don't comply with the United States-Mexico-Canada Agreement (USMCA), with Canadian energy and potash being the exceptions as they face a reduced 10% tax rate.

Several North American gold producers are implementing operational enhancements to capitalize on the favorable price environment while positioning themselves for long-term success.

Turnaround Story with Significant Upside

Americas Gold & Silver, under new CEO Paul Huet, is executing a turnaround strategy focusing on operational improvements at its Galena mine in Idaho and Cosala operation in Mexico. The company is implementing several key initiatives:

• Introducing long-hole mining methods to replace inefficient conventional approaches
• Improving mill utilization from three days per week to seven days
• Increasing shaft capacity from 42 tons per hour to a target of 110 tons per hour
• Adding recovery circuits to capture valuable by-products including gold, copper, and antimony

The company has already cleaned up approximately $43 million in liabilities and is seeking debt financing to fund operational improvements without dilution.

Huet articulated the opportunity,

"We're keeping this simple. It's about repeating the success we had at Klondex and Karora, just repeating that same model [....] Even (silver] at $30 an ounce, I'm not complaining. At 30 bucks an ounce, we get there, and we make some really good money."

Integra Resources submitted its updated Mine Plan of Operations for the DeLamar gold-silver project in Idaho, representing a crucial moment for Integra and the future of the DeLamar gold-silver project according to CEO George Salamis. The company recently appointed retired U.S. Air Force Lieutenant General Leonard Kosinski as a strategic Board Advisor to support federal engagement. Integra is particularly well-positioned within the current landscape due to the recent Executive Order titled Immediate Measures to Increase American Mineral Production which calls for streamlined permitting and strategic investment in domestic mineral supply chains.

As a U.S.-focused gold producer and developers, Americas Gold and Silver, and Integra stand to benefit from both domestic policy support and gold's exemption from the recent tariff wave.

Innovative Approaches to Reduce Capital Requirements

Scottie Resources is pursuing an innovative approach to gold production through ore sorting technology that could significantly reduce capital requirements and environmental impacts.

Key attributes of their approach include proximity to shipping infrastructure, positioning the operation as one of the world's closest gold projects to a deep-sea shipping terminal. Their recent study supports establishing a high-margin direct ship ore (DSO) operation to deliver gold concentrate to Asian smelters.

The unique characteristics of Scottie Gold Mine Project make it ideally positioned to take advantage of the advancements in ore sorting. The company's study confirms that the mineralogy of the project's deposits makes excellent candidates for ore sorting. This approach could allow Scottie to produce between 80,000 to 100,000 ounces of gold annually while maintaining low capital requirements and operating costs.

Revival Gold announced promising results from their Preliminary Economic Assessment (PEA) for the Mercur gold project in Utah. The assessment demonstrates robust economics with projected annual gold production of 95,000 to 105,000 ounces over a 10-year mine life. As Revival Gold noted in their recent economic assessment, gold price increases dramatically impact project economics.

The project benefits from location just one hour from Salt Lake City, providing easy access to infrastructure and skilled labor, positioning on private patented claims, simplifying the permitting process, modest upfront capital costs of $208 million, and competitive operating costs with cash costs of $1,205 per ounce. The company anticipates a streamlined permitting timeline of approximately two years through state processes rather than federal review, potentially allowing construction to begin within 2-2.5 years.

Focus on High-Return Projects

Alamos Gold recently announced the sale of its non-core Quartz Mountain Gold Project in Oregon for total consideration of up to $21 million and a 9.9% equity interest in the acquiring company. This move aligns with the company's strategy of focusing on higher-return growth opportunities.

John A. McCluskey, President and CEO of Alamos, stated: "The sale of Quartz Mountain is consistent with our strategy of monetizing non-core assets as we develop our portfolio of high-return growth projects including the Phase 3+ Expansion at Island Gold, Lynn Lake, and PDA."

The transaction demonstrates the industry's focus on portfolio optimization, with companies divesting non-core assets to concentrate resources on projects offering superior returns in the current gold price environment.

West Red Lake Gold is progressing toward producer status with its Madsen Mine in Ontario's prolific Red Lake district. The company recently achieved a significant milestone with the successful restart of the Madsen Mill in March 2025. The high-grade drill results (including 10.5m @ 12.43 g/t Au) position the company to capitalize on strong gold prices as operations commence.

CEO Shane Williams highlighted the fortuitous timing:

"With gold prices trading at record levels, it is an exciting and fortuitous time to be making the transition from developer to producer."

As a Canadian producer, West Red Lake benefits from gold's exemption from recent U.S. tariffs and could see enhanced margins at current $3,000/oz gold prices. The company's domestic supply chain also shields it from many tariff-related disruptions affecting other sectors.

Stable Insulation

First Mining continues advancing its flagship Springpole Gold Project in northwestern Ontario, recently submitting its Final Environmental Impact Statement. The company maintains a solid financial position with $13.7 million in cash and a $21.5 million equity interest in PC Gold Inc.

As a Canadian developer with projects in mining-friendly jurisdictions, First Mining faces minimal tariff exposure while benefiting from gold's exempt status. The company's diversified portfolio across multiple Canadian mining districts provides additional insulation from specific regional regulatory risks while positioning it to benefit from gold's strong price performance.

How Tariffs & Economic Policies Impact Gold Mining Companies

The tariff environment has several important implications for gold producers:

Supply Chain Considerations

While gold itself is exempt from the new tariffs, mining companies must navigate the impact on their supply chains. Equipment, components, and materials used in mining operations may be subject to tariffs depending on their country of origin.

Agnico Gold noted they are "reviewing its exposure to the potential tariffs and alternatives to inputs sourced from suppliers that may be subject to the tariffs, if implemented." Companies with established North American supply chains may have advantages in this environment.

Regional Advantages

North American gold producers benefit from operating in regions with established mining infrastructure, skilled labor pools, and proximity to refineries. Revival Gold highlighted the advantage of their project being located an hour's drive from Salt Lake City, where many of the dealers have offices based, for example, Caterpillar, we can get equipment and people very efficiently.

This regional positioning becomes increasingly valuable as global supply chains face tariff-related disruptions.

Currency Implications

Tariffs can influence currency valuations, potentially benefiting gold producers who incur costs in currencies that weaken relative to the US dollar. However, companies must also manage the risks of currency volatility.

As noted in Alamos Gold's forward-looking statements, the company considers changes in foreign exchange rates (particularly the Canadian dollar, U.S. dollar, Mexican peso and Turkish Lira) among the factors that could impact their financial performance.

The Investment Thesis for Gold

• Favorable Price Environment: Gold at $3,000/oz creates exceptional margins for producers with all-in sustaining costs typically ranging from $1,200-$1,600/oz, providing significant cash flow potential.
• Tariff Exemption Advantage: Gold's exemption from recent tariffs positions the commodity and North American producers favorably compared to other sectors facing trade restrictions.
• Portfolio Diversification: Gold continues to serve as an effective portfolio diversifier, potentially reducing overall volatility while offering appreciation potential in the current economic climate.
• Operational Improvements: Companies implementing efficiency enhancements (like Americas Gold & Silver and Scottie Resources) offer leveraged exposure to gold prices through expanding margins.
• Valuation Opportunity: Many gold producers trade at discounts to NAV (Americas Gold & Silver at 0.4-0.5x NAV, Revival Gold at 0.1x NAV) compared to recent M&A transactions at 1.0-1.9x NAV.
• Balance Sheet Strength: Rising gold prices have allowed companies to strengthen balance sheets, with many producers now in net cash positions or with significantly reduced debt levels.
• Optionality in Development Pipeline: Companies with permitted or near-permitted projects (like Revival Gold's Mercur project) offer near-term production growth potential with dramatically improved economics at current gold prices.
• Consider a Basket Approach: Investors might benefit from exposure to both established producers with current cash flow and developers with near-term production potential to balance risk and reward.

Gold's exemption from the recent wave of tariffs, combined with its traditional role as a safe-haven asset during economic uncertainty, creates a compelling investment case. The dramatic improvement in project economics at current gold prices has transformed the outlook for both producing companies and developers with near-term production potential.

As companies implement operational improvements, advance development projects, and optimize portfolios, investors have opportunities to gain exposure to the sector through companies trading at discounts to both intrinsic value and recent transaction multiples. With ongoing global economic concerns, inflationary pressures, and supply constraints, gold's fundamental outlook remains positive for the foreseeable future.

While individual company performance will vary based on operational execution, jurisdictional advantages, and balance sheet strength, the sector as a whole appears well-positioned to benefit from the current macro environment. For investors seeking both defensive attributes and growth potential, gold producers and developers merit serious consideration as core portfolio holdings in 2025 and beyond.