{"id":5228,"date":"2014-08-03T14:16:28","date_gmt":"2014-08-03T14:16:28","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=5228"},"modified":"2014-08-04T15:01:37","modified_gmt":"2014-08-04T15:01:37","slug":"gold-mining-stocks-are-beating-bullion","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=5228","title":{"rendered":"Gold Mining Stocks Are Beating Bullion"},"content":{"rendered":"

By Frank Holmes<\/strong>
\nU.S. Global Investors<\/em><\/a><\/p>\n

For the first time in at least a couple of years, gold mining stock returns are outpacing those of the yellow metal itself.<\/p>\n

As you can see in the chart below, the NYSE Arca Gold BUGS Index has returned 22.31 percent year-to-date (YTD), whereas gold has delivered 7.74 percent.<\/p>\n

\"Will
\nclick to enlarge<\/a><\/p>\n

This is good news for both equities and bullion. When miners are doing well, gold tends to follow suit. Indeed, since the beginning of the year, spot gold has seen steady growth following a lackluster 2013. As I noted\u00a0earlier in the month,<\/a>\u00a0it\u2019s been one of the best-performing commodities of the year so far, a mere nugget\u2019s throw behind nickel and palladium.<\/p>\n

Miners restructuring their business strategy.<\/strong><\/p>\n

Gold mining, to be sure, is a tough gig. When gold prices are between $1,000 and $1,200 an ounce, miners barely break even in terms of cash flow.<\/p>\n

Last year was particularly brutal. The metal plunged 28 percent \u2014 from $1,675 to about $1,200 \u2014 which was the largest annual drop since 1981.<\/p>\n

To reduce risk, many companies have cut costs in several ways. Some have decreased capital spending. Others have sold off assets. Others still have placed exploration on standby.<\/p>\n

Case in point: Comstock Mining Inc., a young mining company which we own in our Gold and Precious Metals Fund\u00a0(USERX),<\/a>\u00a0has managed to shrink operating expenses from $4.4 million this time last year to $3.8 million, mostly by lowering legal and advisory expenses. Other realized annual savings have come from administration and staff reductions.<\/p>\n

In a recent interview with\u00a0The Gold Report<\/a>,<\/a>\u00a0U.S. Global Investors portfolio manager Ralph Aldis addressed the company\u2019s rising success:<\/p>\n

Comstock started production over a year ago at about 10,000 ounces a year. It doubled that and now it’s targeting a 40,000-ounce run rate in H2\/14\u2026 The company has permits to reach 4 million tons per year so Comstock should be a 100,000-ounce producer by 2016. It’s a situation where people are creating value and [Chairman of the Board] John Winfield knows how to make money.<\/p><\/blockquote>\n

Time to wake up to gold-diggers.<\/strong><\/p>\n

An equity that has performed exceptionally well this year is Klondex Mines Ltd., headquartered in Nevada. Not only does it represent the largest position in both USERX and our World Precious Minerals Fund\u00a0(UNWPX),<\/a>\u00a0but we also own it in our Global Resources Fund\u00a0(PSPFX).<\/a><\/p>\n

One of the main reasons we\u2019re so fond of the stock is that in 2013, when the Market Vectors Junior Gold Miners Index was down 61 percent, Klondex was up 28 percent. It\u2019s currently up 30 percent YTD and is targeting free cash flow (FCF) by the end of the year.<\/p>\n

\u201cThis is a great story,\u201d Ralph said in the same interview. \u201cMost people haven\u2019t woken up to it yet.\u201d<\/p>\n

Royalty companies are thriving as well.<\/strong><\/p>\n

Other players in the gold space that have flourished in this climate are royalty companies, which provide upfront capital to miners in exchange for a stake in future output. Since royalty companies avoid the costly rigmaroles gold miners must deal with on a regular basis \u2014 securing permits and building infrastructure, among others \u2014 they often receive a healthy return on their investments.<\/p>\n

Two such companies are Franco-Nevada Corporation, based in Toronto, and Royal Gold, based in Denver. We own both in USERX, UNWPX and PSPFX, as well as our All American Equity Fund(GBTFX)<\/a>\u00a0and Holmes Macro Trends Fund\u00a0(MEGAX).<\/a>\u00a0Whereas Franco-Nevada has risen 42 percent YTD, Royal Gold has leaped 70 percent.<\/p>\n

\"Will
\nclick to enlarge<\/a><\/p>\n

Looking ahead.<\/strong><\/p>\n

Gold might have taken a minor hit this week, but autumn is right around the corner, when the gold jewelry industry traditionally replenishes its stock. And with unrest in Ukraine and the Middle East continuing to drive the fear trade, as unfortunate as these events are, gold prices appear buoyant.<\/p>\n

This bodes well not only for investors in bullion but also mining companies, which will likely proceed with cost-cutting initiatives to maintain or expand margins.<\/p>\n

Please consider carefully a fund\u2019s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Frank Holmes calls it a win-win: For the first time in at least a couple of years, gold mining stock returns are outpacing those of the yellow metal itself.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/5228"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5228"}],"version-history":[{"count":3,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/5228\/revisions"}],"predecessor-version":[{"id":5249,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/5228\/revisions\/5249"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5228"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5228"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5228"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}