dwot

Gold vs. Gold Stocks: Commodity Outpacing the Sector

I wrote a piece on my blog titled "How I Discovered the Gold Bubble" in which I outlined many of the problems facing mature gold producers. Most of my analysis was from only looking at Goldcorp, which is compounded by the fact they were getting most of their profitability from copper and not gold, so that specific problem would not apply to a pure gold producer. But I think the rest of the problems facing Goldcorp are industry wide.

I just discovered Newmont has had all of its copper hedged at $1.54, which comes off later this year so although I still think mature gold producers are overvalued, Newmont should show better performance relative to peers in the second half of 2007. They have about 230 million pounds of copper production. To me that looks like about an extra 50c per share in pre-tax earnings for the second half of the year.

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