Barrick Mining (ABX.TO)

He doesn’t own any gold stocks. When there are big down days like this, and people are looking for liquidity, everything goes down. Gold is a very difficult product to value, because its marginal costs shift around a lot. This company’s balance sheet is in pretty bad shape.

People keep asking how gold can be up and this company is just a disaster. The enterprise value was $15 billion and is now $30 billion. However, debt has gone from no debt to $10-$12 billion. In effect the debt owns the gold and you don’t.

One of his concerns is that there is a lack of growth. Even in a poor market like this, there are still opportunities for companies adding production and cash flow and earnings-per-share. They are in the process of shrinking a bit, looking at asset sales and trying to fix the balance sheet. He prefers Agnico-Eagle (AEM-T) and Goldcorp (G-T).

Stock vs. Stock. G-T vs. ABX-T. G-T is better run than ABX. ABX-T will have more leverage if you see an immediate increase in gold price, however.

One of the largest gold producers globally. It has not been a particular favourite. If you believe in gold generally, the big gold producers should do very, very well. As an alternative to this company, he would suggest Yamana Gold (YRI-T) which has an interest in the old Osisko property in Québec, one of the best in the world right now.

Caller is a big short seller. ABX-T have not done well. If he was going to be short on this one he would offset it with DGC-T or G-T.

Gold stocks are moving ‘today’. ABX-T has some problems with their mines. Zambian royalties have increased and so they are mothballing the mine. They kept costs down. But he would be looking at bullion or possibly FNV-T or SSL-T. The increase today won’t last in gold.

Of all of the gold stocks that he follows, this one has the most upside potential. Stock is very cheap. Trading at a slight discount to its BV, and historically that has been a pretty good time to buy it. Right now it has its issues with Pascua Lama, but they have a nice spread of mines and it is earning money, which many gold companies are not. This is a good time to buy. Dividend yield of 1.75%.

It is incredible how this keeps going down. You keep thinking there is a bottom on this and it just keeps going down and down. Has been disappointing this last few years. He doesn’t think you want to be without gold in your portfolio, given where the US$ is and given the amount of monetary stimulation on a global basis. This is probably not a bad anchor name. He prefers others.

This is one that he does not follow, but his company has a target of $17. His issue with the company is that it is big and they are having to shut down at the same time that the price of gold has been down, since the cost of production is so much higher. His strategy is to own companies that can produce at the lowest cost of production. (See Top Picks.)

Very hard to value. He had bought it at the height of the 2008 recession figuring that he would find some protection in gold. Exited his position and he wouldn’t touch any gold company.

There are concerns for real economic growth in Europe. Japan may do some more quantitative easing. Central banks are giving us a very clear message that QE will have to continue in Europe. Cost efficiencies with ABX-T will not make a significant difference in this environment.

To own this, it has to be based on your view of gold, which is at around $1200. They may have topped off down here, but she doesn’t see a lot of upside in gold over the next year. There is no rush to buy gold stocks. She prefers Goldcorp (G-T) which has a much clearer production growth profile in low risk political regions than this one.

They will be able to turn around, but the question is how long does it take. Have made a lot of changes in upper management. Have also disposed of a number of mines, but thinks there are more sales to go. Also, have a very high level of debt. (See Top Picks.)

Gold has come back from last year’s death. She still thinks it is probably bottoming here and you are not going to see a huge amount of movement. There has been so much geopolitical turmoil and yet gold hasn’t really responded much. This company is not her favourite. It is large and has been restructuring and will probably spend another year restructuring. If you need to own gold, she would go into something smaller.