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From Jeffrey Saut's May 8th essay:

Speaking of gold, hedge fund manager Bill Fleckenstein intrigued us last week with his comments regarding the gold stock Newmont Mining (NEM/$56.43), which is rated Outperform by our research affiliate Credit Suisse.

His back of the envelope analysis goes like this, “By my way of looking at it, if you assume Newmont has 100 million ounces, which is fairly conservative, before today’s decline it was trading as though gold fetched $538 an ounce. Of course, that gives no credit to its (Newmont’s) Canadian oil-sands investment, which, depending on the value we ascribe to it, would mean that Newmont would be discounting gold at something less than that price. Obviously, that’s a far cry from the price that gold was trading at this morning.”

In addition to Bill’s comments, we would note that in 1987 Newmont’s shares rallied to $82 when gold was only at $435/ounce. Or as one Wall Street Wag opined, “The difference between perception and reality is where our opportunities lie.”

Source: Newmont Mining Trading as if Gold at $538 Per Ounce, Not $700 (NEM)