Yup watched BAT closely this morning not a trade for over an hour... hopefully we are getting close to where the the pendulum swings the other way... More articles like this appearing lately .... from Canaccord today
Stop the Madness. The crazy divergence between the performance of bullion prices and equities maybe coming to an end. In his
September Markets at a Glance piece, "Gold Stocks: Ready, Set,...", Eric Sprott chimes in on the divergence between gold and
gold stocks by saying, "we may be entering a new phase where the [gold] stocks react less harshly on gold down days, and
outperform gold on days of strength." Sprott, who has recently transitioned out of gold bullion and into gold equities, believes
gold stocks represent a bona fide growth sector in an otherwise terrible equity market. Can gold really be a growth sector?
Sprott highlights that, "the average cost of producing an ounce of gold today, all in, is now around $800. At $1,200 gold, these
companies can capture roughly $400 in EBITDA. At $1,800 gold, however, they’re now capturing $1,000 per ounce in
EBITDA - representing an increase of 150% in profit margin. That is significantly far above what any other equity sector has
been able to generate over the past year." In closing, Sprott says the market is only beginning to realize profit potential that gold
equities offer at today’s prices. Canaccord Genuity Precious Metals team continues to believe that equities are inexpensive
relative to the gold price and to historical trading multiples. Prior to yesterday's sell-off in gold, Senior and Intermediate gold
equities were trading at P/NAV of 0.88x at $1,826, the sector discounting $1,666/oz or $189/oz lower gold price on average. |
