Tuesday, April 19, 2016

2016 To Date Has Been An Incredible Period For Precious Metals Miners

The chart below shows market capitalizations of 11 big precious metals miners: Barrick, Goldcorp, Newmont, Agnico Eagle, AngloGold, Yamana, Eldorado, Fresnillo, Gold Fields, Randgold and Kinross:

                                       source: Simple Digressions

As the chart shows, between 2011 and 2015 the total market capitalization of these 11 miners went down from $196.8 billion to $57.5 billion (a drop of 70.7%).

It was quite funny that the top eleven precious metals producers were worth just around $60 bilion at the end of 2015, in total. Please, compare this capitalization to a few tech giants:

  • Apple - market cap of around $600 billion  
  • Facebook: $325 billion
  • Amazon.com: $295 billion

Well, I realize that there is no sense in such comparizons but it tells me something. The companies controlling money (because gold is money) are worth nothing, compared to the biggest tech companies, which have no tangible assets. 
Understand me properly - I have nothing against tech companies. Apple has an excellent business but if people stop buying its smartphones the company's market value may go quickly to zero. In the case of PM miners, the gold will always carry value.

However, this year we have seen an abrupt increase in the market value of the top PM producers:

After many years of a slump in precious metals miners' stock prices, since the beginning of 2016 the top eleven companies have increased 68% in their market value. 

Last but not least. The chart below shows investment results delivered by each company (dividends excluded):

...and the winners are:

  • Fresnillo plc returning 580%
  • Randgold: 166%
  • Agnico Eagle: 13.5%

1 comment:

  1. Interesting post. There is an investment idea being trotted out by Rick Rule to invest in development companies that do not spend any money on their property now, but rather wait for the market to revalue their shares upward as a result of the gold price going up. Then they can issue fewer shares in a secondary offering, thus making their capital raise dilute shares less harshly. It makes sense, but at some point they will have to develop the mines. I hope that the companies are able to be patient and time the market appropriately.