ince gold topped out in 2011, the precious metals mining sector has been where investor capital goes to die.
Mining stocks have performed miserably over the past seven years, missing out completely on the central bank-created liquidity-fest that has raised nearly every other equity sector to record highs.
But the long winter of abuse is over, claims highly-respected mining analyst John Hathaway, co-manager of the Toqueville Gold Fund. To John’s veteran eye, the conditions in this beleaguered industry have improved substantially. Mining supply is tightening while demand is rising, and the surviving companies have achieved positive cash flows at today’s depressed prices.
Claiming that we are now past “peak gold”, Hathaway expects gold prices to move higher vigorously, propelling the shares of mining companies multiples higher from where they are today:
The industry hasn’t been able to issue equity to any substantial degree for five or six years. And, so they’ve gone more and more to streaming royalties, that sort of thing. But the industry is capital constrained and they always seem to be able to get capital, but what we see is a shrinking industry, shrinking gold production on a global basis and a wave of mergers and acquisitions. We’ve seen quite a few recently, the combination of Barrick and Randgold would be the first. We recently saw Pan American Silver take over Tahoe, and that wasn’t as big a deal, but certainly it was significant. And then there have a been a lot of little private deals you don’t hear about.
The Case for Gold: A M…
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The industry is running out of reserves. The reserve to production ratio is the lowest it has been in 30 years. We’ve seen peak gold. And…