via Financial Post -

There aught to be a very big enoconomic flop coming in the gold mining sector. Gold mines made absolutely terrible investments due to weak share prices which had eventually become fixed at par value by the brokerages after the '29 stock crash. What made them a brilliant investment strategy was they paid out dividends far above their weight during the depression. The devaluation that followed boosted their cash flow to pay out astronomical dividends.

Something very similar is happening now, though I would attribute stock declines to abolishing the 'no down-tick' rule in 2011. It's entirely legal to sell a company you first down own, in order to raise cash to buy treasuries. You would not buy gold futures in lieu of treasury futures. Thus they are involved in wholesale share price fixing.

In the Black-Scholes model, a company that does not pay dividends has its share value determined by the formula. But if the company pays dividends, then this forces the algos to take this in as a factor. Gold companies during the depression had the added luxury of a fixed gold price to determine payouts.

Gold mines have been sucessful at raising money by issuing debentures at usurious interest rates, far above credit market benchmark rates.

They also have been successful at mining the markets to every extent possible, screwing their shareholders with every abandon, much like the banking sector. Is the whole sector about to collapse?

http://business.financialpost.com/2012/11/14/canadian-miners-find-welcome-mat-in-u-s-high-yield-market/

via The Globe

Rising costs are probably borrowing forward against earnings, and in some cases, borrow forward without any specific use for the money. Cost of capital is primarily borne by the grovelling shareholder.

Globe

As equities, gold mining stocks will likely see the rout along with the markets should that occur, and we have seen that since recent topping action in the S&P, or oil markets, etc.