Paul's Notes #10
The Poison or the Remedy?
“Gold miners run the world’s strangest business: they dig up the antidote and immediately swap it for the poison.”
This July 7th tweet by Ronnie Stöferle of Incrementum, the publisher of the In Gold We Trust report, struck a chord with me as it is something I have been asking mining CEOs for a number of years: if you are bullish on gold and believe the price is going higher, why not hold gold on your balance sheet? I am not alone in this, and many voices in the metals investing space think gold companies should hold gold. Here is Brien Lundin, editor of The Gold Report:
“Goldcos should hold at least a portion of their cash in bullion, as they should eat their own cooking. If Goldco CEOs are going to talk the talk about why people should buy gold, they ought to walk it as well. Major producers are making so much money that there is no excuse for not believing in their product.”
Rick Rule agrees:
“Many gold companies sell the fact that gold would do well relative to the US dollar, then they store their working capital dollars. That is cynical at best and stupid at worst. To the extent that the industry is generating surplus cash, it should absolutely store that in precious metals.”
Here is Rule Symposium keynote speaker Grant Williams:
“Well, of course, they should, and they should have done for a long time. They are in the business of pulling stuff out of the ground and selling it for a turn.”
Dominic Frisby, author of The Secret History of Gold is also in favour of companies holding gold:
“A lot of investors like companies that keep their treasury in gold because it shows they believe in the final product. Playing Devil’s Advocate, I think people would be more inclined to invest in companies that hold their treasury in gold. Companies are losing 7% every year to money supply growth, and they may only get 3% back if they hold short-term treasuries.”
There are practical, beneficial reasons for storing bullion rather than cash, particularly since facilities exist for companies to store their wealth and metal and access liquidity, which they spend in US dollars. Institutions such as Battle Bank, which Rick helped found, can provide gold-backed financing on the balance sheet. Here is Rick again:
“Many companies, with their credit lines, are paying prime plus 4%. They store their surplus cash in a medium that costs them 8% of their purchasing power annually. CPI is one thing, but the mining industry has demonstrated that the deterioration in the purchasing power of the US dollar relative to consumables for mine operation and capital expenditures is declining in value by 8-10% a year compounded. Storing your capital in a depreciating asset, particularly at the expense of what it is you do for a living, seems to be counterproductive.”
The investors I sounded out were categorical in their belief that goldcos should hold bullion on their balance sheets. They invest for exposure to the gold price, certainly not for a 1-3% dividend yield. CEO’s say it is not for companies to hold gold, but to run their businesses efficiently and return cash to their shareholders, who can then decide if they want to buy and hold gold. This sounds reasonable at first blush until you see the role of gold company CEO, or any CEO for that matter, as being to increase the value of their business.
Over dinner after a site visit in 2025, David Steel, an investor who was formerly the Baker of Baker Steel, said he has pressed for goldcos to pay out dividends in gold. In the past, the logistics of doing that were cumbersome, but as efforts to tokenise gold advance, this is becoming more feasible, with companies able to distribute tokens that can be held in brokerage accounts and redeemed into physical gold when desired. Some companies are getting the memo. In February 2026, when Elemental Royalty (TSX:ELE) launched a dividend payment, it offered shareholders the option to receive it in Tether Gold tokens rather than cash. Truth be told, this may have been prompted by Tether, its major shareholder, pushing the idea.
For those of you reading this who think you missed the 2026 Rule Symposium, think again, because the entire event was filmed and the recordings will be available until the end of the year. This means you can still register to see the content by clicking the link below:
Balance Sheet Strength
What difference could holding gold bullion make to a balance sheet? As an example, let’s look at Barrick Mining (NYSE:B). At the end of 1Q22, B held US$5.9B in cash. With the gold price at $1,863/oz, that would have bought about 3,160oz of gold. B has held a broadly similar amount of cash since 1Q22, so for the sake of this illustration, let’s assume B held 3,160oz of gold since that date. With the increase in the gold price, at the end of 4Q25, that $5.9B would now show as more than $13B on its balance sheet.
Many gold company CEOs talk about net debt to distract the market from the actual debt they hold. B’s cash and debt essentially cancelled each other out for much of the period we are looking at, with the company only posting a positive net cash position in recent quarters due to the increase in the gold price. However, B would have achieved a net cash position much earlier, in late 2022, if it had held its cash as bullion, and its net cash position would have grown to more than $8B by the end of it.
The potential benefit of bullion is even greater, however, when we remember that one of the main reasons for holding gold is to protect purchasing power. The impact of inflation on the $5B B held in 2022 means it has lost more than $600M in purchasing power. To put this another way, B would need about $5.7B today to enjoy the purchasing power of the $5B it held in 2022. Here is Stöferle again:
“The gold industry says investors should hold 5–10% of their assets in gold, yet it doesn’t heed its own advice, as goldcos hold ~100% fiat. They exchange the remedy for the poison.”
A balance sheet holding bullion in the rising gold price environment of recent years would have increased the value of the company holding it, raised its share price, and perhaps provided greater strategic flexibility. Many commentators reflect on the sector's underinvestment in exploration, which means that, for many companies to sustain production, they will increasingly have to turn to M&A. Undertaking M&A at higher stock prices would mean less dilution. The performance of B has stagnated, and the company under former CEO Mark Bristow refused to engage in M&A because it would not pay premiums. With bullion on its balance sheet, Barrick could have paid for transactions with stock with less shareholder dilution, it could have paid in bullion and given the sellers the option to hold or sell that, and it could have paid in cash without clearing out its treasury.
Those that do
Holding your commodity is not without precedent. Uranium producer and 2026 Rule Symposium participant Uranium Energy Corp (NYSE:UEC) has withheld some physical uranium inventory from the spot market because it believes uranium prices will rise and it wants to benefit from that future rise.
in the gold space, one gold company that does hold gold is 2026 Rule Symposium participant Mineros (TSX:MSA), which reported it held $20M of bullion at the end of 1Q26, under a policy to hold 15% of cash in bullion, about 45koz as it builds direct exposure to the asset that drives its business. The company’s largest shareholder, Sun Valley Investments, also owns a gold refinery. Here is president & CEO Daniel Henao:
“We have a clear use of proceeds, which includes investment, dividends, and share buybacks. After that, we are left with a significant amount of gold we produce, so why are we rushing to exchange that hard work for fiat paper? We are meeting our financial requirements, and with whatever is left, we are building a 40,000oz bullion position as we view fiat as not being the best way to preserve our capital. Gold is the definition of liquidity, and we think it is a much better way to preserve our liquidity.”
Incrementum argues that there is a need for a Corporate Gold Standard under which gold producers would 5–10% of their output as bullion. Incrementum enters into considerable detail to state the case for a Corporate Gold Standard, which you can read by clicking the link. It says:
“Mining companies are the only industry on earth that systematically converts the very asset their investors bought them for into the currency that asset is meant to hedge against.”
Holding bullion is not without its paperwork complications, which may be the real reason why more companies do not do it: they do not want the administrative headache. The headache arises because accounting principles such as IFRS are not designed to account for holding bullion, which is not considered cash for accounting purposes but is treated as inventory. Holding bullion makes certain financial metrics appear less attractive. For example, a producer withholding output as bullion shows lower revenue, lower reported FCF, and potentially higher AISC per ounce sold.
To better communicate to the market what it is doing, MSA created specific metrics and gives additional financial disclosure so shareholders can assess recurring cash generation independently of period-specific treasury allocation decisions. MSA presents operating cash flows before strategic gold purchases, has introduced a strategic liquidity position (cash and cash equivalents plus physical gold bullion) in its accounting information, and has updated its definition of net free cash flow to reconcile operating cash flows before strategic gold purchases.
Will more companies turn to bullion?