I read a brilliant article the other day which neatly sums up the mood among value investors in regards to the mining sector, here’s a few snippets:
Miners, after gold’s 28% price drop in 2013, went through a strict round of cost cutting in order to increase profitability
The past couple of years have seen considerable pressure on most gold equities, thanks in large part to a declining, then consolidating, gold price
Gold mining companies took to costs with a machete and slashed wherever possible, to weather the storm for an extended rout in prices…they had to downsize staff, axe projects, and even rationalize selling non-core assets. As a result, now they are much leaner, and will be much more profitable when commodities prices rise again.
I’m not convinced that the stocks the article mentioned are ones that investors should place on a watch list – they were cited as examples of gold stocks that have gone up considerably in value since the July 2013 lows in the price of gold.
But it is spot on with it’s analysis of the sector as a whole.
The thing is it’s not just the gold miners who have gone through this process – miners of all types have literally been forced to act in order to survive by cutting costs, selling assets and focusing on core operations.
We all know that AIM and TSX have their fair share of dodgy miners ranging from the badly run to the down right fraudulent.
To remedy this investors can always look to the larger cap names that are going through this period of consolidation both in price and fundamentals as I noted in yesterday’s newsletter.
You can read the article from which todays post is based on by clicking here.