From our Morning Report:
One of the stocks we are keeping is Barrick Gold (GOLD), who are back down to $28.5Bn at $16 – even though they are net debt-free with $636M in the bank and dropping close to $2Bn to the bottom line so less than 15x earnings for the World’s largest gold miner is SILLY – especially when you consider what a great inflation hedge GOLD is.
Notice any correlations? See – trading isn’t hard – you just have to pay attention… Now HERE comes the magic trick – this is Gold priced in Euros since last August (2 years, actually):
Since last August, Gold is up from below 15 to 17.56 (17%) while for us it has seemed flat due to our very strong Dollar. That’s why, to the rest of the World, Gold is still a very hot investment – even while US traders are getting turned off to it. Not to be unpatriotic but Barrick Gold doesn’t care WHO they are selling their gold to – as long as there are buyers, they are happy.
Barrick’s cost of production is $1,200 all-in (including the cost of acquiring the Gold) and $700 AISC (All In Sustaining Costs) for their 70M ounces of proven reserves. Since they have already acquired the Gold – their acquisition costs are not your problem and new investors should care about that AISC and, at $700/ounce. Even if Gold were $1,200 (now $1,750) – they would make $35Bn pulling it out of the ground at a rate of roughly 4M ounces ($2Bn profit) per year for 17 years. THAT is what you are buying when you invest in GOLD.
Not only that but Barrick also mines Copper (it’s there with the Gold) and Copper production was up 25% to 120M pounds last quarter at about $3.40 per pound so that’s a bonus $408M in Revenues (at about 50% gross profit) – nothing to sneeze at.
