$SPTGD vs $GOLD Weekly

Several years ago, you would not have said that gold mining companies, being an equity asset will drastically underperform the gold price. In fact, in comparison with gold as a whole, gold mining equities are in a brutal long term bear market compared with the underlying commodity.

This should not be unusual, because gold mining companies mostly based in Canada are seeing declines in their Net Present Value all the while that short term interest rates remained above 2%. But the crossover from negative to positive has already occurred with interest rates declining below 0.5%. That would indicate a major advance of Net Present Value and gold miners are beginning to show positive benefit and will demonstrate positive returns.

There is evidence dating back to the aftermath of the internet bubble blowout that this has been the case since 2002. The initial rush into gold equities was therefore shortlived, as they are now a discarded asset. But not all gold companies are falling short of the mark. Some are benefitting from the massive inflationary credit bubble in derivatives following the collapse of the Nasdaq.

As a whole, the long-dated treasury market price has been in a long term up trend by comparison. Some companies, such as GBN.V have been strongly inversely correlated with this market. Depending on equity price gains has been at best a "pie-in-the-sky" pipe dream.

The solution is to provide a dividend, up to 33-1/3% of total revenue in the eventuality that gold achieves its 40-year inflation-adjusted average, and continues to maintain it. This level of payout is commensurate with gold mining operations during the depression era.

It must be mentioned that central bank interventions in the gold price are at best short-lived and any attempt at price fixing results in reduced purchasing power of the common currency in the gold markets, thus the gold price rises. Any addition of physical gold to the market, such as central bank sales or dishoarding, or increases in production re-liquifies a chronically illiquid market in gold.

For now GBN.V can provide 1¢ per share for Q3 fiscal 2012,(which is basically the result from Q2) and possibly 3¢ per share for Q4 fiscal 2012, depending on total revenue and net and comprehensive earnings for Q3.

The financial report for Q3 is overdue, considering that you could at one time mostly depend on financials coming out on Jan 31 in prior years.

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-F6