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Precious Metal Miners Worth Considering Based on Valuations

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Gold’s run in 2017

Gold prices have been on a roller coaster rise, given the on and off situation with North Korea. A missile test and gold’s safe-haven appeal have propelled prices higher, and then they’ve fallen back again. After breaching the key level of $1,300 per ounce, gold fell below that mark on September 20, 2017. It’s the first time in September that the price of gold has settled below $1,300 per ounce. That came after the Fed hinted at a rate hike in December 2017. The market was giving a 50.0% chance of a rate hike before the September 19–20, 2017, Fed meeting.

For more on gold’s performance and outlook, read Will Gold Breach $1,400 in 2017?

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Miners’ performances

In 2017, the gains in precious metal miner ETFs have been rather muted. Usually, gold miners act as a leveraged play on gold prices, but the situation in 2017 is slightly different. Until September 19, 2017, the VanEck Vectors Gold Miners ETF (GDX) had risen 13.4%, and the SPDR Gold Shares (GLD) had risen 13.5%. In 2016, when GLD rose 8.0%, GDX rose 54.0%. The company-specific factors are playing a larger part in driving stock prices in 2017 compared to the underlying metal prices.

According to the above graph, Iamgold (IAG), Gold Fields (GFI), Franco-Nevada (FNV), Kinross Gold (KGC), and Royal Gold (RGLD) have been the best performers in 2017 YTD (year-to-date).

Series preview

In this series, we’ll categorize precious metal miners into the following five categories based on their key characteristics:

  • senior gold miners
  • intermediate gold miners
  • South African gold miners
  • royalty and streaming companies
  • silver miners

Then we’ll look at the valuations of miners from each of these categories with respect to their close peers. We’ll see how their valuations compare to their peers and to the historical averages. We’ll also evaluate, based on the catalysts, how the valuations could move going forward.

In the next part of this series, let’s look at the valuations for senior gold miners.

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