Only last night I wrote that the fear of missing out on significant gains in Gold equities would have to trump the fear of them following the rest of the market down to see a significant appreciation in price.
There are several environmental factors which could assist the sentiment in this way, for example a stabilisation in the rest of the stock market or the continued rise in spot Gold price could do it. Another driving factor could be coverage of the undervalued Gold stocks in main stream media, who have more often than not spun negative stories on Gold rather than positive, pointing to it being ‘bubble like’.
It doesn’t help when even the most respected main stream financial commentators are Gold bears, such as Michael Pascoe who has been talking down the price of Gold for years (but is once again mysteriously quiet during the current strong rally).
It seems though that at least one Australian MSM outlet has seen the light on the potential in Gold equities, publishing an article this morning. Here is an excerpt:
INVESTORS clearly are still not convinced there's big money in gold shares. We know this because, overall, stocks have not risen in line with the metal's price.
But eventually we must follow the pattern after the 1980 gold surge to the then record of $US850 an ounce - which, actually, is still the record high in real terms because if you adjust that price for inflation, then gold would have to reach $US2466/oz to form a new high.
But what was surprising back then was that gold shares barely ticked upwards even at the height of the gold frenzy. Looking at the main gold equity index of that time - the Johannesburg Stock Exchange's - that share price take-off happened several months later when companies began publishing their profit results and the (gold) penny dropped. Investors suddenly saw the effect of the high gold price on bottom lines.
Even though the gold price faded in the following three years, sinking below $US400/oz, the South African stocks maintained a lot of their gains. The Australian
The story even goes on to mention several of the stocks held in the Bullion Baron Fantasy Portfolio, including:
Kalgoorlie Mining Co (ASX: KMC)
"Last week, emerging junior producer Kalgoorlie Mining Co (ASX code: KMC) sold the first shipment of ore from its Bullant goldmine to be treated at Barrick Gold's Kanowna Belle plant near Kalgoorlie.
The 10,507 tonnes of ore contained 1241oz of gold. This yielded the company $2.1 million, which is equivalent to nearly 10 per cent of its then market capitalisation of $25m.
KMC's sales to Barrick are expected to occur monthly, yielding regular cashflow, until the junior commissions its own treatment plant able to treat 500,000 tonnes a year of ore. Yet this is a stock that on the day of the announcement of the first sale was trading at just 9.7c."
Silver Lake Resources (ASX: SLR)
In the case of Silver Lake, its 2012 after-tax profit would be $49.6m (27.7c earnings per share); at $US1800/oz, that profit would be $81.1m (45.3c EPS) and at $US2000/oz Silver Lake would be banking $102.1m.
Bassari Resources (ASX: BSR) – Note: BSROA in BB Fantasy Portfolio
Last week we had further reminders of the gold riches in that region. Bassari Resources (BSR), which is drilling a zone in Senegal where the resource now stands at 240,000oz, reported an extraordinary intersection of 7m at 54.3 grams/tonne gold.
This is a promising start to coverage of this undervalued sector and I look forward to more!