Lustre may be set to return to gold mining stocks after long decline – by David Dias (Financial Post – June 19, 2018)

After a five-year decline, beaten-down Canadian gold miners may be setting themselves up for a turnaround in 2019, analysts say, as healthier cash flows lead to more spending on exploration and development, and more attractive dividends.

The price of gold has only recently come off its bottom. From 2011 to 2013, prices peaked at around US$1,800 an ounce, before the precious metal commenced its plunge to US$1,050, ending in late 2015.

Since then, prices have come back up to around US$1,300, but those higher prices have not benefited Canadian gold mining stocks, according to analyst Andrew Kaip at BMO Capital Markets.

“Gold equities are cheap in a relative, historic context,” he said. “We’re looking at mid-cycle pricing, but the valuations are at trough levels.”

The disconnect, says Kaip, can be attributed to negative sentiment — ranging from apathy to resentment — that has kept investors away, especially if they got burned by the ruinous management policies and cost overruns that destroyed shareholder value in the wake of collapsing gold prices.

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