Gold mine stocks attractive in turbulent times
Thu Feb 19, 2009 5:22pm EST
By Steve James and Euan Rocha - Analysis
NEW YORK (Reuters) - The prospects for equity markets and numerous sector indexes have dimmed during the global recession, but gold and the companies that mine it have not lost their luster.
With gold prices nudging their all-time high and energy and other costs falling, mining company profit margins are widening, making their shares attractive, analysts said on Thursday.
"Within the next year, we will see the gold stocks sell at significant premiums to traditional earnings measures or net asset value measures," said Robert Lutts, chief investment officer of Cabot Money Management in Salem, Massachusetts, which manages $400 million of client assets.
"I have owned Barrick Gold for one reason only -- because it has the biggest pile of gold in the ground," Lutts said of the world's biggest gold producer, Canada's Barrick Gold (ABX.N)(ABX.TO).
"New interest continues in this increasingly attractive sector," JPMorgan analyst John Bridges wrote in a note. "We feel all funds should have a core long position in the metal or the equities."
Moreover, analysts expect acquisitions in the gold sector to accelerate, as larger players pounce on their cash-strapped smaller colleagues, in a bid to grow their asset base.
"I believe in investing in both bullion and stocks," said Jeffrey Nichols, managing director of American Precious Metals Advisors. "Large companies with strong cash positions are in a good position to take advantage" of a higher gold price.
Lower fuel, raw materials and equipment costs, combined with weaker Canadian and Australian dollars and a flight to gold as a safe haven, have spurred gold miners' stocks recently.
The gold and silver index .XAU, which comprises major U.S. and Canadian gold mining stocks, has more than doubled over the last four months. Spot gold was selling for $978.80 per ounce in New York on Thursday, closing in on its all-time high of $1,030.80 from last March 17.
"At these levels, we'd encourage new investors to begin by buying a little Newmont," Bridges wrote, after Newmont Mining Corp (NEM.N), the world's No. 2 gold producer, reported better- than-expected fourth quarter results.
Since most major gold players no longer hedge production, they stand to gain from the recent run-up in gold prices.
***The above post constitutes a buy or sell recommendation dependent upon my stated position. I am not a licensed broker but,several people have told me that I look good in a suit. If its entertainment you want, I suggest watching CNBC and/or hiring a licensed broker.
***The above figure displays a ~5 nanometer colloidal particle of Indium Tin Oxide (ITO). You are likely looking through a thin-film layer form of this material right now if using a flat panel display. I developed a process to synthesize the material in this colloidal nanoparticle form in our labs here at Georgia Tech. The lines in the particle are rows of atoms (ie, atomic planes). The image was taken for us at the Oak Ridge National Lab on a Scanning Transmission Electron Microscope equipped with a nion aberration corrector.
