Gold Is Headed Much Higher But Take A Look At This…
John Hathaway, Senior Portfolio Manager at Sprott Asset Management
Excerpt:
”Gold mining stock valuations are the lowest in 25 years.”
”BMO calculates an average return on capital of 14.4% for mid-capitalization producers and 25.8% for small-cap producers in a semi-liquidation scenario”
”The average annual gold price has increased over 20% since 2011. The gold price is the single most important fundamental driver of earnings and returns on capital. However, gold stocks have declined over 40% (based on GDX) since 2011...a 60% performance divergence”
”BMO Research forecasts a decline in production costs (All In Sustaining Costs or AISC) of 14%, 11% and 25% for large-, mid- and small-cap producers, respectively.”
”According to Bloomberg, the reserve life of the top 10 miners has declined 33% in the last 10 years.”
"In our opinion, the investment case for gold mining equities is clear and compelling.”
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