67 WALL STREET, New York - January 18, 2012 - The Wall Street Transcript has just published its Gold and Precious Metals Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Investment and Central Bank Demand - Dividends Dependent on Gold Prices - Gold Producers vs. Gold ETF - Midcap and Small-Cap Consolidation Activity
Companies include: Endeavour Silver (EXK); Alacer (ASR.TO); Apogee Silver (APE.V); Barrick (ABX); Eldorado (EGO); and many more.
In the following brief excerpt from the Gold And Precious Metals Report, expert analysts discuss the outlook for the sector and for investors.
Elizabeth Collins, CFA, is the Associate Director of equity research for the basic materials team at Morningstar, Inc. Her responsibilities include oversight of coverage for companies in the following industries: agriculture, chemicals, coal, engineering and construction, metals and mining, steel, wood products and building materials. Before becoming an Associate Director, Ms. Collins was a Senior Analyst on the energy team, where she had oversight for Morningstar's coverage of oil services firms, oil and gas companies, and coal companies. She earned her MBA from DePaul University in March 2005 and holds a B.A. in psychology from Boston College.
TWST: Gold is still trading at a high price. Should it be at this point?
Ms. Collins: I think, in the current economic environment, it makes a lot of sense for gold to be at such a high price. In the third quarter of 2011, we saw a very high level of demand for gold. Jewelry demand for gold was actually down and demand from the technology sector was flat, but we saw demand from the investment community be very strong because of the strong performance of gold to date, as well as because of worries about macroeconomic uncertainty.
TWST: You mentioned jewelry demand was down. Does that reflect the general economic weakness around the world?
Ms. Collins: I think it can reflect economic weakness and it can also just be a result of some response to the high price of gold. So somebody who is going to purchase jewelry, say in India, is going into a shop and they go in with the intent to spend a certain amount of money on gold jewelry. When the price of gold goes up, it means that they'll be buying fewer ounces, but they'll be spending the same amount.
TWST: Is it because of that equation they are getting less for their investment dollar, or is it because in a weak economy people buy less jewelry?
Ms. Collins: The year-over-year decrease in gold jewelry demand, say from India, was 26% in volume terms. But in terms of the amount of money they put into jewelry, it was actually up about 2%. So they are spending more. They are spending a little bit more in money, but getting that much less in gold ounces because of the higher price.
TWST: How important is technology segment demand?
Ms. Collins: It's small. Number one is jewelry, number two is investment - those are relatively close to each other. And technology is a much smaller part of overall demand for gold on a global basis.
TWST: Has that been the pattern in the industry?
Ms. Collins: It wouldn't necessarily be different than in the past. But I guess this round we haven't seen as much M And A activity yet. We've seen a few big purchases. But Barrick (ABX), for example, their most recent purchase wasn't even a gold company - it was a copper company. I guess when people are talking about M And A activity being one candidate for closing the disconnect between gold miners and gold prices, it's probably smaller companies that are hopeful, and they are hoping to see more M And A activity.
TWST: Given your kind of cautious outlook, what are you telling investors to do?
Ms. Collins: As a group, a lot of our gold miners are fairly valued. We have one company that we think is slightly undervalued, and we think it's worth taking a closer look at, and that's Yamana Gold (AUY) ticker AUY in the U.S. and YRI in Canada. And that's a company with a portfolio of low-cost South American mines, and they have some very attractive growth projects in the pipeline. And we think that the market is not fully factoring in their future production growth when there are signs that they should be able to bring those mines on line. And we think Yamana is attractively valued. It's not a deep discount at these levels, but we do think it's attractively valued. Yamana is one of the few gold miners whose share prices have kept pace with bullion so far in 2011.
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- Elizabeth Collins
- Yamana Gold