$1400 per Ounce Gold Gets Investors' Attention
USA News Group News Commentary
LOS ANGELES, October 24, 2017 /PRNewswire/ --
Fueled by fear of military action by North Korea and a ratcheting up of rhetoric by Kim Jong-Un, gold traders have set their sights on gold reaching $1400 per ounce by the end of the year.
The new price target also sent investors looking for top gold values and ways to find harbor in what they feel could be a rising storm.
The immediate effect on the value of gold miners makes them a go-to group in this unsettled climate including Barrick Gold Corporation (NYSE: ABX) (TSX: ABX), Randgold Resources (NASDAQ: GOLD), Agnico Eagle Mines Limited (NYSE: AEM), and Bullfrog Gold Corp. (OTC: BFGC).
Commenting on current market forces, Mark O'Byrne research director at GoldCore in Dublin said that, "the backdrop for gold today is as bullish as it has been in a long time," adding that he expects gold to reach $1,400 an ounce before the end of the year.
This could put gold on track for its best performance since 2010.
Major mining companies who would benefit from the strong gold economics include Barrick Gold Corporation (NYSE: ABX) (TSX: ABX.TO), Randgold Resources (NASDAQ: GOLD), and Agnico Eagle Mines Limited (NYSE: AEM), all of whom are larger, established gold mining companies.
Along with these, select junior mining firms such Bullfrog Gold Corp. (OTC: BFGC), are well positioned to take advantage of a buoyant gold market. Bullfrog Gold is developing a former Barrick operation in Nevada with existing gold in a very favorable mining region.
Based on the current mix of fear and greed that is impacting gold, investors are likely to play all sides of this gold market.
ARE GOLD STOCKS CHEAP?
Gold looks cheap compared to the stock markets that are highly overbought at the moment, according to reports by Rediff Business.
Their report shows gold prices have outperformed the markets - S&P 500 - thus far in this century (since 2000), returning 86 per cent more than the market if both asset classes were indexed at 100 levels starting December 31, 1999, suggests the latest World Gold Council's Gold Investor report for September 2017.
Over the past 17 years, the S&P 500 has undergone two major contractions. Gold, meanwhile, has held its value well, highlighting its appeal as a portfolio diversifier, the WGC report says.
Seen as a safe haven asset, gold prices have been on an upward spiral since mid-August. According to their data, gold prices have surged nearly 7%.
North Korea fears notwithstanding, major valuation averages are regularly hitting fresh all-time highs.
As such, the gold-to-S&P 500 ratio is near 10-year lows, meaning the yellow metal is extremely undervalued, the World Gold Council says.
Within the wider group of gold players, the junior exploration and mining companies could be the least expensive compared to their potential for upside as gold's price rises.
BULLFROG GOLD'S "BARRICK" PLAY
Based on the current upswing, undervalued junior mining concerns like Bullfrog Gold Corp. could be some of the best values.
Bullfrog's flagship property, the Bullfrog Gold Project, is located 120 miles northwest of Las Vegas, Nevada in a well-known gold bearing region. The project includes an ex-Barrick pit that recovered 2,300,000 ounces, and the northern third of the Bullfrog deposit.
While the region is well developed, Bullfrog Gold is currently showing the single steepest discount on gold-in-the-ground valuations.
The Bullfrog Gold Project produced gold up until Barrick Gold (NYSE: ABE)(TSX: ABE) and its partner terminated production in early 1999.
It wasn't for lack of gold, but the economics of the project were different then, with gold averaging less than $290 per ounce.
Innovations in mining have improved the economics of this play, and for Bullfrog, with the infrastructure already in place, along with the vital data that came with the property from Barrick, the project holds excellent value.
Bullfrog Gold announced estimates in its 43-101 report in June 2017 of 525,000 ounces averaging 1.02 g/t using a gold price of $1200/oz and a base case cut-off grade of 0.36 g/t. Inferred resources were estimated at 120,000 ounces of gold averaging 1.20 g/t.
With those kinds of economics and $1400 an ounce gold, Bullfrog would be a strong contender to bring gold to the production stage in short order.
And $1400 an ounce is a real possibility.
As O'Byrne reiterates, "With the political situation in the U.S. and globally more uncertain than it has been in many years, gold will almost certainly continue to see robust safe-haven demand. This should push gold higher in the coming months."
Investors seem to agree and are getting in even earlier than expected - a cycle that will play itself out into winter.
POTENTIAL COMPARABLES
Barrick Gold Corporation (NYSE: ABX) (TSX: ABX.TO)
Barrick is the gold mining leader, both in terms of size and low operating costs - its all-in sustaining costs (AISC) were down to just $730 per ounce last year. The gold miner also cranked out an impressive $1.5 billion in free cash flow in 2016, which may have contributed to a 42% dividend hike to investors last year. Analysts are predicting another huge dividend in 2017 of 47%. Second quarter 2017 earnings per share (EPS) were also up 57% over the second quarter of 2016, blowing out analysts' expectations.
Randgold Resources (NASDAQ: GOLD)
Randgold Resources Limited explores for and develops gold deposits in Sub-Saharan Africa. It holds interests in the Morila gold mine, the Loulo gold mine, and the Gounkoto gold mine, which are located in Mali, West Africa; Tongon mine situated within the Nielle exploitation permit in the north of Côte d'Ivoire; and Kibali mine located in the Democratic Republic of Congo. The company was founded in 1995 and is based in St. Helier, the Channel Islands.
Agnico Eagle Mines Limited (NYSE: AEM)
This Canadian gold producer is headquartered in Quebec and has a market cap of around CAD $13 billion ($10 billion USD). Its balance sheet shows low debt, with a debt-to-equity ratio hovering around 25%. Agnico Eagle reported second quarter 2017 EPS of $0.24, reflecting an average growth rate of roughly 140%, and second quarter revenue of $550 million was up 2.28% over the same period in 2016.
For a more in-depth look into BFGC you can view the in-depth review at USA News Group: http://usanewsgroup.com/2017/10/22/5-signs-that-bullfrog-gold-is-the-next-big-breakout-nevada-gold-play/
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USA News Group
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