Gold Producers Need to Arrest Dilution to Recover Valuations

22 February 2013 | by Tim Wood

DENVER (MineFund.com) — Investors in gold equities have lately been fretting about the lead-footed response of stocks to gold prices, especially when bullion was rising. For nearly a decade now, gold equities have been losing their leverage to the gold price, and it has accelerated since the advent of exchange traded gold. Whilst recognizing the competition from exchange traded gold, the reality is that most of the damage has been self-inflicted; the charts below make that all too clear.

The solution for companies and investors is all too clear – the decline in valuation multiples can be reversed by arresting the dilution via excessive issuance and/or increasing production and reserves organically.

wpid-SeniorProducerAggregates100-2013-02-22-13-38.jpg

wpid-MktCapvsProduction100-2013-02-22-13-38.jpg

Note – second graph is indexed: Q1 2005 = 100. So all data points below and to the left of 100 have performed negatively.

wpid-favicon-2013-02-22-13-38.ico © 2013, MineFund.com > Independent Natural Resources Investment Analysis

Leave a Reply