Gold rocket with a safety net? Formation Metals, Gold Fields, Newmont

Formation Metals scores with historical deposits and full coffers

When investors bet on gold today, they typically buy an ETC or an ETF on major producers. Direct investments in gold producers such as Newmont or Gold Fields are also popular. Smaller exploration companies are often considered more speculative and, according to some observers, are reserved for experienced investors. But there are "white flags." The Canadian gold company Formation Metals stands out with a whole range of these risk-reducing characteristics. The Company's flagship asset is the advanced N2 Gold Project in the Québec district of Canada, which hosts historical resources of approximately 870,000 ounces of gold. The aim now is to confirm this deposit through its own exploration work and, if possible, to expand it. Formation Metals is therefore not starting from scratch.

The Company recently completed a CAD 8.26 million financing to fund a comprehensive 20,000-meter drill program. Deepak Varshney, CEO of Formation, stated: "With nearly CAD 13 million in the bank, Formation is financed through 2027 to drill 20,000 meters at the N2 project." The Company can therefore focus fully on exploration in the coming months. Other exploration companies need to raise capital sooner. As capital increases always lead to dilution for existing shareholders, even less experienced investors can take comfort in knowing that dilution risk at Formation Metals is unlikely before 2027. Combined with its promising historical project, this creates a compelling investment case to benefit from the ongoing gold bull market.

Gold Fields and Newmont impress with substantial cash flows

Since companies like Formation Metals are generally valued significantly lower than producers, there is also much more room for growth once it becomes apparent that a project can achieve producer status in the medium term. Drill programs, such as the recently announced 20,000-meter campaign, typically provide the first indications of such potential. Gold Fields illustrates how valuable strong liquidity can be. The Company is a global gold producer with mines in South Africa, Ghana, Peru, Chile, and Australia and currently produces around 2.3 to 2.4 million ounces of gold per year. With all-in sustaining costs below USD 2,000 per ounce, Gold Fields enjoys a healthy margin. This puts the Company in a position to pay its shareholders a generous dividend: after ZAR 3 in the first half of the previous year, the payout more than doubled to ZAR 7 by the end of June 2025. Gold Fields' strong cash flow also enables it to acquire new projects. By contrast, exploration companies that are less forward-looking than Formation Metals may be forced to relinquish their independence at discounted valuations during weaker market phases.

Industry leader Newmont offers even better key figures than Gold Fields. The world's largest gold producer has mines in the US, Ghana, Peru, Suriname, Australia, Papua New Guinea, and other regions. **All-in sustaining costs range between USD 1,200 and USD 1,600, but have recently been reduced even further. This is paying off: in October 2025, CEO Tom Palmer reported a new record free cash flow of USD 1.6 billion for the quarter. Newmont also treats its shareholders generously, paying an attractive dividend of USD 1 per year. In addition, there is a share buyback program.

Mini-valuation as a strong starting point for Formation Metals

In a phase of record gold prices and persistently strong demand for precious metals, robust balance sheets are particularly valuable. Exploration companies with ample liquidity, such as Formation Metals, are benefiting from the market tailwinds, while competitors may soon face financial headwinds. Gold Fields and Newmont are good examples of how companies with full coffers can consistently execute their strategies. Formation Metals' advantage is equally clear: the Company can advance its N2 Gold Project with focus and establish tangible results through its drill program. Investors should not expect any additional capital measures in the short to medium term.

With Formation Metals currently valued at only around CAD 26.6 million, the Company offers attractive conditions for investors. If the cash position from the recent capital increase is deducted from the market capitalization, the implied valuation of the project itself becomes even more compelling. Given the ongoing gold rally, the existing historical deposits, and the strong cash position, Formation Metals presents an appealing opportunity for investors seeking exposure to a dynamic small-cap in the gold sector while reducing the typical risks associated with exploration companies. The stock has fallen by just under 23% over the past six months, but the first signs of stabilization have recently emerged.