GOLD STOCKS NEWS – Gold stocks climbed Tuesday as the Market Vectors Gold Mines ETF (GDX) advanced $0.51 to $55.95 per share. Gains in gold stocks and the GDX were fueled by new all-time highs in the yellow metal. COMEX gold futures, per the December contract, reached a record high of $1,782.50 per ounce in overnight trading. The S&P/TSX Global Gold Index, Canada’s leading gold stocks composite, rallied 1.4% in concert with the GDX.
Today’s move higher in gold stocks and the GDX followed a strong display of resiliency yesterday by the sector. Although the broader equity markets plunged amid ongoing economic concerns in the U.S. and Europe, the GDX finished fractionally higher. While the more than 600 point loss in the Dow Jones Industrial Average (DJIA) brought back shades of 2008, the stability in gold stocks stood in stark contrast to the rout the sector endured three years ago.
In a note to clients, Macquarie Equities Research analyst Tony Lesiak discussed the similarities and differences between now and 2008 facing the gold stocks sector. “During the financial crisis of 2008, gold equity sector valuations bottomed out near 0.5x NAV (net asset value) calculated at the then prevailing gold curve,” he wrote. “Equity valuations were cut in half from a valuation range of 1.0x to 1.4x during the 2008 collapse.”
As for the present day, Lesiak noted that “The sector is currently near 0.59x ANV on the current forward curve after a protracted grind lower since October 2009, when gold equities traded near 1.25x NAV at $1,000 gold. In our opinion, given the more conservative starting point for equity valuations, a potential market collapse is unlikely to exert as much damage (% downside to equity prices) this time around. A strengthening gold price (not falling like in 2008) adds to our conviction.”
Based on Lesiak’s bullish outlook for gold stocks, the firm reiterated its top picks in the sector. Among gold producers, Macquarie highlighted GDX components Barrick Gold (ABX), Yamana Gold (AUY), and Kinross Gold (KGC). ATAC Resources (ATC.TSXV) is the firm’s top pick among gold explorers.
In concert with the broader gold stocks sector, ABX, AUY, and KGC added 1.3%, 1.1%, and 1.8%, respectively. ATC.TSXV bucked the trends of higher gold stocks, as it dipped 2.3% to C$7.25 per share.
Other notable gold stocks moving higher Tuesday morning included GDX components Agnico-Eagle Mines (AEM), Goldcorp (GG), and Newmont Mining (NEM). AEM, GG, and NEM climbed 2.5%, 1.7%, and 1.9%, respectively.
Sunridge Gold Engages Endeavour to Advance Asmara
Endeavour provided advice and assistance to Nevsun Resources (NSU.TSX, AMEX: NSU) in its evaluation of the Bisha Project, a large precious and base metal rich deposit which is now in production 150 kilometers west of Asmara, Eritrea. Full Sunridge Gold Press Release.
- The feasibility study at Sunridge’s Debarwa copper-gold-zinc deposit is substantially past the halfway point of completion and the prefeasibility study on the Asmara North copper-zinc-gold projects is also well advanced.
- Endeavour’s technical and financial advice on these different development options at this stage will be critical for Sunridge.
- Upon receipt of TSX Venture Exchange acceptance, Sunridge will issue to Endeavour 1 million share purchase warrants exercisable at a price of $1.00 for three years to vest one-third every six months from the date of the TSXV approval.
