Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
While some Canadian businesses may be feeling the jitters over the prospects of Britain leaving the European Union, Canadian gold mining companies and junior exploration companies are enjoying the prospect of a gold bull market.
Gold prices soared after the June 23 referendum, and gold company share prices along with it.
Gold’s rise has prompted analyst Jack Chan – among others – to declare gold is now in a bull market in a recent Streetwise report.
Gold prices spiked from US$1,260 per ounce to US $1,320 per ounce on June 24, although it has since settled to about US$1,315 per ounce.
B.C. gold miners have all been experiencing healthy spikes in their stock prices.
B2Gold Corp. (TSX:BTO) shares spiked 12.23% on June 24, and rose another 5.13% on June 27. New Gold Inc. (TSX: NGD) stock jumped 10.45% on June 24, but has since shed about 3%.
Goldcorp Inc. (TSX:G) and Eldorado Gold Corp. (TSX:ELD) stock rose by 6.37% and 6.31% respectively on June 24.
B.C.’s new darling junior gold miner, Pretium Resources Inc. (TSX:PVG), saw its stock rise 9.82% over two days.
One of the reasons some analysts are calling for a gold bull market is the political and economic uncertainty that is likely to persist in the wake of the UK’s decision to withdraw from the EU.
Gold is a safe haven investment, so as long as there is uncertainty in financial markets, it is likely to continue to be seen as a good place to park money.
“Any uncertainty of the magnitude of the Brexit announcement adds to fiscal uncertainty, and stimulates interest in traditional safe havens such as gold,” said Rick Rule, CEO of Sprott US Holdings Inc.
“Low interest rates and high aggregate debt levels lowers the appeal of sovereign bonds, a safe haven asset class which traditionally competes with gold.
“Finally, the renewed commitment of fiscal stimulus from central banks, in response to Brexit generated liquidity concerns, may also increase the attractiveness of gold.”
Mickey Fulp, who published the Mercenary Geologist, said a gold bull market would be good for the badly battered TSX Venture exchange, which is heavily weighted with junior miners with gold projects.
“It very much is gold that moves that market,” Fulp said. “The price of gold has a very strong correlation overall with the Toronto Venture exchange.
“So the fact we have a bullish sentiment on gold, we have hedge funds moving into the metals again, the trading bots are even starting to trade metals and commodity stocks. So hedge fund money is coming back in a beat-down sector, so overall that is very positive.”
Read at: Business in Vancouver
