Earlie from Earlie:
Recent piece from Mineweb reiterates my point of view re GSL/VEN valuations. Below are a few quotes from the article.
GOLD ANALYSIS
WORLD'S 100 HOTTEST GOLD STOCKS
Stellar performance of $45bn gold supergroup
These 100 selected gold stocks have risen by an average of 468% since late in 2008; the top runner has climbed more than 10,000%.
Author: Barry Sergeant
Posted: Wednesday , 22 Jul 2009
JOHANNESBURG -
Most of the world's bigger gold stocks look like serious plodders compared to some of the spectacular stock price increases put in by smaller gold stocks, not least Ventana Gold, which has risen by more than 10,000%. A selection of the 100 "hottest" performing listed gold stocks around the world indicates a rise of 468%, on a value-weighted basis, from stock price lows, typically seen during the closing months of 2008.
The 100 stocks, which carry an aggregate value of $45.12bn, contain a good number of names that can hardly be rated as "penny stocks". Seen as a grouping, these 100 stocks boast the highest return over the past while, among any known global subgrouping. A far broader measure of gold stocks, with an aggregate value of $292bn, have "bounced" from lows by a more modest 171%, measured on a weighted average basis.
The latter number outpaces somewhat the value-weighted 142% bounce recorded by the world's 100 most valuable miners. The broader logic from the numbers confirms that bigger gold names weigh down the average; the 14 Tier 1 gold diggers have recorded an average bounce of 145% from lows, with Barrick, the biggest by value and production, lagging with 106%.
Looking at the "hottest" list, an immediate word of caution is that speculators (and perhaps the odd investor) which dabble in and around this subsector confirm an eternal fickleness, where loyalty is forever yesterday's jaded drumstick. Take Novagold, which owns world class deposits, including Alaska's Donlin Creek, a 50:50 joint venture with Barrick. While a decision to build this mine remains pending, the venture's current 29.3m ounce reserve base indicates a life, according to a feasibility study, of at least 20 years, with gold production for the first 12 full years averaging nearly 1.5m ounces a year, a number achieved by few gold mines anywhere.
Novagold's stock price fell to half a Canadian dollar late in 2008, 95% below its earlier high of CAD 10.00 a share, and more than that from levels of CAD 20.00 a share seen in both 2006 and 2007. While the stock price recently made CAD 6.00 a share, a 12 times multiple from recent lows, the price has now moved below CAD 5.00 a share. A number of top performing gold stocks that fall into the Novagold type category - through each has its own story -include Frontier Mining, New Dawn, Colombia Goldfields, Azteca Gold, Mano River, Appleton Exploration, Trilliant, Yukon-Nevada Gold, High River, Oroco Resource, PanAust, Luiri Gold, Elray Resources, Reunion Gold and Midway Gold.
These stocks are not for widows and orphans. There has even been some recent net selling of Ventana Gold, which this year has published a series of high grade drill intercepts from the La Mascota mineralized zone on its flagship La Bodega gold property in Colombia. At least one analyst has mentioned a price target of C$10.00 a share for Ventana, not least on the back of a projection of 550,000 ounces of gold production a year at total cash costs of just $295 an ounce.
This could turn out to be another proverbial ship in the night; Greystar, which has long proven up a resource of more than 10m ounces of gold, and more than 60m ounces of silver, at Angostura, also in Colombia, is languishing 44% below its stock price highs. Greystar carries a market value of $172m, considerably less than the $375m carried by Ventana.
Either Greystar is undervalued, or Ventana is overvalued, but not both. Ventana's market value is close to half the number alongside Novagold's name. The roving bubble-herd mentality, and sometimes what seems like temporary insanity, sometimes grips junior gold stocks and was seen classically this week, when Ventana announced that it had "not sold any common shares" in Ventana to 63X Master Fund, of Grand Cayman; 63X had earlier announced that it had bought just over 10% of the issued shares in Ventana from Ventana itself. Press pause and replay?
Top notch drilling results remain, as always, a consistent theme among the pecking order of "hottest" gold stocks; ....
Enjoy
Best,
Earlie
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