The discrepancy between mining company valuations and commodity prices is at its worst levels in decades, the Precious Metals Summit in Colorado heard this week.
“This is probably the worst disconnect I’ve seen in over 20 years,” Haytham Hodaly, senior vice-president for corporate development for streaming pioneer Wheaton Precious Metals (TSX: WPM; NYSE: WPM), told the conference.
Eaun Gray, senior vice-president for business development at Franco-Nevada (TSX: FNV; NYSE: FNV) and a 30-year veteran of the sector agreed, calling the situation “unprecedented.” “This is worse than the ‘little Bre-X thing’ when that came out and everything dropped,” Gray said.
Analysis by San Francisco-based Merk Investments, manager of the ASA Gold and Precious Metals (NYSE:ASA) fund, showed gold equities have been underperforming bullion for more than a decade and in April were near 2015 all-time lows. Toronto-based Sprott in July listed company share dilution, misallocation of funds, jurisdictional risk, low margins and longer permitting times as reasons for the discrepancy.