The Gold Report: Brock, your research suggests that the production margins of gold companies are near all-time highs. Why has that not translated to share price appreciation?
Brock Salier: The weak equity markets play a role in the disconnect between gold prices and gold equities, but a lot has to do with maturing gold assets.
A lot of gold mines were funded between 2007 and 2009 and commissioned between 2008 and 2010. Most companies typically mine above their reserve grade for the first one to three years to speed capital and debt repayments. But, if they have not found an expansion and completed a feasibility study, or if they lack a new mine to develop, that grade has to fall. As production falls, cost rises and share prices legitimately fall along with profits.
TGR: Can you go into a bit more detail about that concept, which is known as "high grading?" Continue reading "Brock Salier Unlocks the Secrets of Gold Miner Valuations"