Expectations of higher gold prices and the belief that existing reserves will increase with further exploration mean most senior and intermediate (and some junior) gold producers are trading at a multiple to their net asset value (NAV).
Dundee Securities analyst Paul Burchell looked at the price to NAV multiple awarded to six senior and intermediate gold stocks over the past four years. He attempted to determine if any trading pattens – and hence buy and sell triggers – could be found, and came up with some encouraging results.
Most of the companies have traded within a fairly narrow P/NAV band, which he believes can be used to increase an investor’s odds of higher returns.
Barrick Gold Corp., Goldcorp Inc. and Agnico-Eagle Mines Ltd. are currently trading at the lower end of the P/NAV range and may offer better returns at this time, the analyst said in a research note. Kinross Gold Corp., IAMGOLD Corp. and Eldorado Gold Corp. are trading closer to the mid-point of their P/NAV ranges, which suggests lower, but still potentially positive, returns.