Gold is hitting record highs now that we are seeing above $1,400.00 per ounce on COMEX. The translation to all gold producers is that production is that much more profitable. Exploration companies have that much more incentive to out and play the oil-equivalent role of a wildcatter. What is interesting is that the explosion in gold prices has still left many miners, producers, and explorers behind.
SPDR Gold Shares (NYSE: GLD) are up about 35% from their lows over the last year, but the leveraged nature of gold mining returns at higher prices has led Market Vectors Gold Miners ETF (NYSE: GDX) to be up more than 50% from yearly lows and helped Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) rise above 90% from its lows earlier in the year. We are tracking some underperformance from the likes of Yamana Gold, Inc. (NYSE: AUY), Kinross Gold Corporation (NYSE: KGC), Royal Gold, Inc. (NASDAQ: RGLD), Gammon Gold, Inc. (NYSE: GRS), Rubicon Minerals Corporation (AMEX: RBY), Northgate Minerals Corp. (AMEX: NXG), Exeter Resource Corporation (AMEX: XRA) and DRDGOLD Ltd. (NASDAQ: DROOY).
Yamana Gold, Inc. (NYSE: AUY) is one of the largest gold producers but it is an underperformer. At $11.82 its shares are up about 28% from yearly lows and still down 18% from its highs. With an $8.7 billion market cap, a September disclosure showed that the Canada-based Latin American mine operator will spend $650 million in project expansion from into early 2013 to boost production by more than 50% during high gold prices. Analysts have an average target of about $14.30 per Thomson Reuters.
Kinross Gold Corporation (NYSE: KGC) is back above $19.00 but is still lagging gold and up only 28% from its yearly lows and still is down almost 15% from its highs. The $13 billion market cap is also a larger player with a lagging share price. The stock was punished when it acquired Red Back Mining, but now production is expected to grow from 2.6 to 2.7 million gold equivalent ounces in 2010 to 4.5 to 4.9 million gold equivalent ounces in 2015 as a result. Thomson Reuters lists an average analyst price target of $22.29.
Royal Gold, Inc. (NASDAQ: RGLD) has not sold off from highs so much but its performance has been like gold. The gold royalty trust is still close to $53.00, and that translates to 28% from its lows and down less than 6% from its yearly highs. Maybe it is dilution from offerings in the past or maybe it is a perceived future earnings quality that worries investors. Our take is that it has just underperformed and its $2.8 billion market cap and only about 20 employees on last look might make investors consider it more of a fund than a hands-on operator. While both concerns are true, Royal Gold often has just as much leverage and upside over successful mining ventures. This may boil down to nothing more than that it has just not rallied as much as peers as analysts on average have an average price target of $61.00.
Gammon Gold, Inc. (NYSE: GRS) is just under $7.00 with a market cap of just under $1 billion. is trading up about 36% from its lows, but it is down nearly in half from its highs and that is a significant drop compared to almost all peers. Analysts have an average target of $8.18 for the stock. The most recent earnings may still have an overhang from a new credit facility despite its recent drill target updates. The Canadian company operates mostly in Mexico.
Rubicon Minerals Corporation (AMEX: RBY) has a market cap of just under $900 million. At $4.11 and is up 33% from its lows of the year, but the stock is still down over 21% from highs. The junior miner has made several production updates in recent weeks.
Northgate Minerals Corp. (AMEX: NXG) is just under $3.00 per share, but it only up 28% from its lows and is still down about 18% from its highs. After a big pop on Monday, its market cap is closer to $900 million.
Exeter Resource Corporation (AMEX: XRA) is also low-priced at $6.22, but the stock is up only about 18% from yearly lows and is down almost 34% from yearly highs. The company is valued around $470 million and it had a $50 million capital raise in Canada in October.
DRDGOLD Ltd. (NASDAQ: DROOY) remains another gold laggard and at $4.97, its shares are up 26% from yearly lows but down about 37% from highs. Its $190 million market cap makes it a smaller concern based in South Africa. It is thin volume and has very little analyst presence for U.S. investors. South African gold production drops in reports from earlier in the summer, as well as a June coverage initiation by Morgan Stanley at “overweight” followed by a September downgrade to “equal-weight” only added to the overhang.
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JON C. OGG