Nov. 20, 2014, 6:54 PM
- "You can’t find a sector that is more out of favor right now than gold,” says former geologist and gold fund manager Joe Foster, who expects volatility to continue but with seemingly every headwind already pushing on the price of gold, it might not take much to spark a rally.
- Foster prefers junior miners to larger companies, as "the large caps have really gotten too big for their own good,” singling out Rio Alto Mining (NYSE:RIOM), thanks in past to its success with lower-cost heap leaching; RIOM recently acquired another heap leach operation in Peru.
- He also prefers regional miners, because geographic focus allows companies to better handle the local regulatory and political situation; Foster likes Randgold (NASDAQ:GOLD), which operates mostly in west Africa and has one of the most successful discovery track records in the industry.
- Rounding out Foster's five favorites: B2Gold (NYSEMKT:BTG), Eldorado Gold (NYSE:EGO) and Torex Gold Resources (OTCPK:TORXF).
Jan. 8, 2014, 1:21 PM
- With the gold mining sector at its cheapest relative value in at least two decades (according to Bloomberg), investment bankers are sniffing around in hope of a rebound in M&A deals. There were just $10.1B in gold producer deals last year, 4.4% less than 2012, and the lowest total since 2004. A pickup in activity, however, was seen in December, with both Goldcorp (GG -0.9%) and Newmont Mining (NEM -1.7%) saying they're looking to add low-cost operations.
- “Majors who have done portfolio optimization will look at some of the juniors and say, ‘Here’s a chance for us to acquire a potentially better asset than we’ve sold and to mitigate the loss of production,’” says Barclays' Paul Knight.
- Possible targets might include single-project developers like Pretium Resources (PVG) and Torex Gold (TORXF +5.3%).
- Thanks to a regime of cost cuts, the 10 largest producers - led by Barrick Gold (ABX -1.7%) - should have some firepower, maybe generating $4.17B of free cash flow this year vs. a negative $1.74B in 2013, says Bloomberg. At the same time, exploration and development companies - who rely on regular financings - have good incentive to sell. “Darwinism is alive and well in the gold industry right now,” says Fidelity's Joe Wickwire. "While ultimately there will be fewer companies producing less gold, “the profitability of the industry is going to go up.”
- ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, GGGG, JNUG, PSAU, JDST
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