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Gold producers' balance sheets would weaken below 1250/oz., TD says

  • Gold producers' balance sheets appear relatively stable with gold prices at ~$1,250/oz. but would weaken further on lower prices, TD Securities says in an analysis of miners' sensitivity to changes in gold prices.
  • At $1,100/oz, companies with the highest forecast ratio of net debt to total capitalization include Barrick Gold (ABX -2.5%), Newmont Mining (NEM -1.9%), Agnico Eagle Mines (AEM -2.5%) and Detour Gold (DRGDF +3.3%).
  • TD's top picks include Eldorado (EGO -3.1%), Goldcorp (GG -1.5%), B2Gold (BTG -3.7%), Primero Mining (PPP -0.6%) and Silver Wheaton (SLW -2%).
  • ETFs: GDX, GDXJ, NUGT, DUST, GLDX, GGGG, RING, PSAU, JNUG, JDST.
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Comments (9)
  • EuricoIFConsultant
    , contributor
    Comments (38) | Send Message
     
    conclusion, if it goes up, it goes up, if it goes down, it goes down...
    11 Dec 2013, 02:49 PM Reply Like
  • nautor42
    , contributor
    Comments (194) | Send Message
     
    If this round of QE didn't send gold and silver higher, the only events that will are inflation or a crisis, neither of which is desirable. I'll hold my SLW as a hedge and be glad I only paid $21 and change.
    11 Dec 2013, 03:08 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (9718) | Send Message
     
    Yeah, the miners are going to head lower.

     

    The question is how much will they be WORTH five years from now.

     

    The strong survivors will have the pick of the litter when it comes to the best properties coughed up by the weaker (bankrupt) players.

     

    By that time there should be north of $15 trillion more dollars/yen/euros/etc. in the global currency system.

     

    But the amount of gold in existence would have hardly budged.

     

    Gold is priced in dollars.
    11 Dec 2013, 03:15 PM Reply Like
  • MrMatt
    , contributor
    Comments (1372) | Send Message
     
    When a gold producer reports their all in cost is in the neighbourhood of $1200/oz isn't it obvious that prices at this level wouldn't help their balance sheet?

     

    Detour Gold, did state they expect their all in cost to continue to drop, which combined with slightly higher prices puts them in good shape. (Long DGC.to)
    11 Dec 2013, 03:17 PM Reply Like
  • Chris Lau
    , contributor
    Comments (2485) | Send Message
     
    It's going to continue to be VERY messy for miners. That GS (ABX) long call was talking the books :) All the miners went "all-in" between 2009-2012 and need to unwind their massive exploration and mining investments.

     

    Unless China steps in to call in the loans (trade in t-bills for gold), the gold drop will accelerate downwards.
    11 Dec 2013, 03:56 PM Reply Like
  • Gold Theory
    , contributor
    Comments (14) | Send Message
     
    "gold producers" broad term.... Wonder what happens if u go long low cost producers and short high cost?
    11 Dec 2013, 10:15 PM Reply Like
  • RS055
    , contributor
    Comments (3316) | Send Message
     
    That would be effectively like going short gold. because, if gold were to have a sharp rise, the high cost miners will rally much more than the low cost ones.
    12 Dec 2013, 06:43 AM Reply Like
  • sprstirl
    , contributor
    Comments (83) | Send Message
     
    more good news yesterday from BRD on their Grey Fox... I don't understand why this stock is not moving up!
    12 Dec 2013, 02:18 PM Reply Like
  • TDWelander
    , contributor
    Comments (639) | Send Message
     
    The largest and lowest cost miners will do at least adequately in this flat to slightly downward gold price trending market. So most of the recommendations of medium and small miners is erroneous or bad.

     

    In a gold market price squeeze or downward trend, the majors will not likely be sharing their gold or silver with the likes of anyone else. Meaning most of the middle men will not have access to significant, if any gold and precious metals in a long term flat or down trending gold price market.

     

    Meaning most of the medium, and small suppliers, and any kind of middle men will be mostly squeezed out of the market in the long run, barring any major market upsets; always a possibility.

     

    That leaves the large, major gold and precious metals producers as the only reasonably safe bet; contrary to TD Securities.

     

    Additionally, with governments needing to protect their currencies,
    indirect and probably hidden support of the large major gold and precious metals producers by governments is likely; further enhancing the large major gold and precious meals producers.

     

    Increasing the gold and precious metals supply as much as possible will keep the gold and precious metals prices stable and may force a downward price trend, favoring the large and major gold and precious metals companies as an instrument of currency
    and economic stability for the foreseeable future.

     

    So TD Securities has missed the big picture as presented here; making their recommendations substantially erroneous.
    14 Dec 2013, 03:54 PM Reply Like
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