For much of September, gold has been trading at its highest price in years, and yet gold mining companies, large, small and in-between, find themselves under attack from their largest investors.
On Thursday, the day gold stood at US$1,502 per ounce — a high-point not seen since 2013 — a coalition of investors released a report that bashed gold mining executives for spending too much money on general expenses.
The Shareholders Gold Council, founded in 2018 by U.S. billionaire John Paulson, and backed by a half-dozen institutional investors, acknowledged that gold equities have outperformed the price of gold during the past year — with one exchange traded fund rising 53 per cent compared to bullion’s 26 per cent climb this year as of Aug. 20. But the report notes gold equities have underperformed over any longer time horizon up to 10 years.
The report points to “cost control” as the number one problem that mining companies must prioritize. “The inescapable conclusion of our analysis is that gold producers are significantly mismanaged from a G&A (general and administrative expenses) perspective,” it states.
Specifically it looks at 47 companies, of varying size, and ranks their expenses as a percentage of cashflow, or EBITDA. Expenses include general and administrative as listed on income statements, and stock-based compensation.