Gold shares advanced Monday morning on the back of modest gains in COMEX gold futures and the broader equity markets. The AMEX Gold Bugs Index (HUI) – comprised of the world’s largest gold producers – rose 0.8% to 521.96, the yellow metal inched higher by $3.30 to $1,620.10 per ounce, and the S&P 500 Index added 0.3% to 1,281.30.
Despite today’s rally in gold stocks, the sector has continued to lag the price of gold by a wide margin in recent years. CIBC analyst Barry Cooper noted in a report to clients this morning that due to the sector’s substantial underperformance, “valuations are approaching all-time lows on both a P/NAV (price to net asset value) and P/CF (price to cash flow) basis. Multiples have declined as much as 50% over the past three years alone.”
“We continue to believe that gold prices are headed higher,” Cooper added, “sticking with our forecast for $2,000/oz gold and $50/oz silver in 2012, and $2,200/oz and $52/oz respectively in 2013, and would expect rising prices to become one of the drivers for equities in 2012.”
The CIBC analyst also provided his list of “Top Picks” among gold shares for 2012 – which included a myriad of lage-cap producers and mid-cap producers, and small-cap exploration companies: IAMGOLD (IAG), Centerra Gold (CG.TSX), Kirkland Lake Gold (KGI.TSX), Detour Gold (DGC.TSX), Osisko Mining (OSK.TSX), CGA Mining (CGA.TSX), Goldcorp (GG), Banro Corp (BAA.TSX), SEMAFO (SMF.TSX), and Belo Sun Mining (BSX.TSXV).
In addition, Cooper noted that Barrick Gold (ABX) and three precious metals royalty companies – Franco-Nevada (FNV), Royal Gold (RGLD), and Silver Wheaton (SLW) – are “attractive risk reward plays” at the present time.
Extorre Files Updated Resource for Cerro Moro
The new resources will form the basis of an updated mining and economic study for the project, which is scheduled for release during the first quarter of 2012. Extorre will evaluate the potential for a mine development at a larger scale (1,000-1500 tonnes per day). The study will be at a confidence level sufficient for the Board to make a financing and mine development decision. Full Extorre Gold Mines Press Release.
- The new resource estimate is based on all drilling data available as of October 10, 2011 and includes maiden contributions from four new mineralized zones: Zoe, Martina, Carla, and Nini
- Indicated and Inferred resources increased by 46% and 166%, respectively, compared to the previous resource estimate
- Considerable potential for additional mineralization remains at the majority of the veins included in the resource, both along strike and at depth
- Following the year end break, exploration utilizing four rigs is scheduled to continue at Cerro Moro