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.
Major gold miners are bouncing back from 28-year lows against the precious metal via cost reductions and improved cash flows.
Bloomberg reports that shares in miners are beginning to outpace gold prices after lagging behind the very bullion they produce for the past two years, and that the industry is undergoing a turnaround with fatter cash flows and tighter operations.
The S&P/TSX Global Gold Index gained 12% from the period from June 30 to October 30, beating the 6.7% gain in New York gold futures over the same period.
The Philadelphia Stock Exchange’s Gold and Silver Index is approaching a 28-year low relative to gold, which according to Bloomberg analyst Kenneth Hoffman presages an inflection point in the stock cycle.
Hoffman says the worst is over and gold equities are about to clamber back.
“They have underperformed for so long, it really begs the question, How bad can it get? Standard-deviation wise, this is historically about as bad as it gets.”
Leading figure in the gold mining industry have made calls in recent months for miners to reduce operating costs as yields decrease, with Gold Fields (NYSE:GFI) CEO Nick Holland highlighting the exorbitant expense of gold mining operations and their low profits in September at the Denver Gold Forum.
