Gold Miners Growing Profitability and Returns
By Joe Foster, Portfolio Manager and Strategist, VanEck
The price of gold now appears to be poised to remain above the technically and psychologically important level of USD 1,200 per ounce and looks likely to trend higher in 2016.
Despite this rally in the price of gold and the higher cash flows that come with it, it is encouraging that the management teams of the gold miners with whom we have recently met remain firmly committed to growing profitability and returns rather than production.
We heard more than once in our discussions that a new ounce of production is only good, and will only be added, if it improves or maintains the existing per ounce profitability of the company. Their initiatives have slowly and cautiously started to shift from mere survival to thriving. But «caution» remains the name of the game.
Free Cash Flow with Gold at USD 1,200 to USD 1,400 – 2016 Estimates
Source: VanEck Research. Data as of March 2016
About the Author:
Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.