While the major market averages have taken a beating over the last week, gold (GLD) has been one of the few asset classes to stage a sharp rally, with the metal up 2.5% for the week and over 5% since Thursday’s close.
The outperformance can be partially attributed to the belief that the Federal Reserve may have to rethink its rate-hike plans because of the fragility of the Financial Sector (XLF) with two banks already failing and several other regional banks down over 50% from their highs in a one-week span.
The sharp move higher in gold has fueled a major rally in the Gold Miners Index (GDX) which has soared 11% off its lows with the gold producers providing leverage to the metal, especially costs for the group rose materially last year.
In fact, the $110/oz move in gold has led to a temporary ~20% increase in margins for the producers, partially explaining the powerful performance of the group.
However, a couple of names were left in the dust during this rally, providing the opportunity to add exposure to miners without paying up for names that have already headed into overbought territory.
In this update, we’ll look at two names that have lagged their peers, and why they look like long-term outperformers vs. the index.
I-80 Gold (IAUX)
I-80 Gold (IAUX) was one of the best-performing gold developers in 2022, putting together a 15% return vs. 20-30% declines for many of its gold developer peers.
Unfortunately, the stock has since given up considerable ground to start 2023, down 26% for the year which has placed it near the bottom of the pack among its peers.
The disappointing performance for this junior producer with a ~$700 million market cap (assumes 350 million fully diluted shares) is partially attributed to a ~$65 million financing earlier in the year that led to an increase in its fully diluted share count and the announcement of a bought deal secondary offering by its largest shareholder because of a funding gap as it builds a massive mine in Canada, Greenstone. Continue reading "2 Gold Miners With Long-Term Potential"