Bullish report on gold stocks FWIW. I am into K/T and like there prospects.
"Larry's Gold Column — December 2002
By Larry Edelson
NEW RUSH INTO GOLD AND GOLD SHARES ON ITS WAY!
If you're new to this column and my favorite gold shares, chances are you're sitting on some losses as both gold and gold shares retreated over the past few months. But the pullback is perfectly normal. More importantly, gold and gold shares are headed much higher in the weeks and months ahead. Indeed, a new gold rush is already on its way.
In Japan, the finance minister is so desperate to rescue the Japanese economy from deflation, he has just issued an edict that the Japanese yen must be devalued. The news drove the yen into its worst tailspin in over eight months. Plus, it drove Japanese savers into gold, pushing it through the $320 level.
Millions of Japanese savers are also scared of the banking crisis. The nation's biggest banks are groaning under an estimated $1.5 trillion in bad debt. Japan's seven biggest banks lost a whopping $33.2 billion last year. This is driving both sophisticated investors and average consumers to buy gold and stick it under their beds.
In the Middle East, anyone living within striking distance of Saddam Hussein is in a state of high alert, and many are stocking up on gold.
Result: Investment demand for gold in the Gulf States is up 30% compared to last year, excluding Saudi Arabia, where demand is expected to soar by 20% in the fourth quarter.
Meanwhile, Malaysian Prime Minister Mahathir Mohamad is pushing ahead with his plan to introduce a new gold-backed currency, the "gold dinar," in trade with Islamic countries by mid-2003.
In China, authorities just launched gold trading at the new Shanghai Gold Exchange — part of a move to end the government's 50-year monopoly on the gold market, and a tacit invitation to millions of Chinese to buy gold more freely. Demand for gold in China is already large — 206 tons last year. Now, expect that to grow by leaps and bounds.
Gold Shares Ready To Take Off Again
On average, for every 1% increase in the price of gold, shares of gold mining companies go up 3% to 5%. That's nice leverage!
My advice: If you own the recommended mining shares detailed below, hold. If you do not own them, buy now at the market, using up to 10% of your assets.
Plus, all subscribers should add Anglogold Ltd. (AU) right away. Anglogold is among the world's largest gold miners, with gold reserves of over 59 million ounces, and annual production of approximately 6 million ounces. Third-quarter earnings rose 56%, or $29 million, to $81.7 million. And total cash costs per ounce of gold mined are down 2%, to a low $158 per ounce of gold extracted. With gold at $321 an ounce and rising, that makes for a very nice profit margin. Buy now at the market.
Portfolio Update
Newmont Mining (NEM-NYSE). Third-quarter revenue jumped 73% to $728.3 million — due to its acquisitions earlier this year. Newmont, a committed non-hedger, has pledged to unwind Normandy's large forward gold sales contract. Newmont shrank its forward sales by 928,000 ounces to 5.8 million ounces during the third quarter and expects a further reduction in the fourth quarter.
Glamis Gold (GLG-NYSE) reported third-quarter results of $2.4 million in earnings compared to $0.6 million in earnings a year ago — due to higher gold output and lower cash costs.
Royal Gold (RGLD-Nasdaq). Royal Gold announced that it has signed an agreement to purchase approximately 93.3% of the common stock of High Desert Mineral Resources Inc, on the heels of reporting a 282% increase in net earnings from the same quarter last year.
Agnico-Eagle Mines (AEM-NYSE). Gold production in the fourth quarter is expected to achieve record levels. And with the company's low production cost, I expect Agnico to make some very handsome profits. The share price has strong support at $10 and is getting ready for the next leg up.
Durban Roodepoort Deep (DROOY-Nasdaq). The company is pushing forward, reducing mining costs to maximize profits, while earnings are already up 47% in its recent quarter. " |
