Over the past decade, there is indisputable proof with respect to Gold mining that:
- Vastly improved technology has cut mining costs to a great extent
- One of the largest operating costs, which is Oil, is priced considerably lower
- The Gold price is substantially higher and strengthening while the US Dollar, in which Gold is priced, is much weaker and weakening
- Management of the mining companies is much stronger and using more sophisticated tools and methods today
- Mergers and acquisitions have had a material accretive impact on their financial strength and operating performance
- Corporate cash levels, cash flow, and earnings and dividends are much higher
- Corporate debt levels and debt service costs are much lower
- The world at large has become more sophisticated about Gold and its value as money
In the case of the major mining companies, the ones who mine the bulk of the world’s gold production, I would argue that the intrinsic value has more than doubled in ten years. Moreover, I believe that serious investors are quite aware of the points I raise.
Yet, in ten years, despite all the metrics that investors use, the market value has halved, not doubled.
I conclude that Goldminer investors are exhibiting a classic case of cognitive dissonance.
Example: Barrick Gold chart illustrates my point