The gold sector is scorching. Since the summertime lows, miners and explorers of the precious metal have soared 20 per cent on average.
But while the rising tide has lifted all boats, there are some major discrepancies between the winners and losers within the sector. And when you examine the 67 miners that comprise the Toronto Stock Exchange’s global gold index, it’s not the big gold names that stand out.
It’s the junior developers.
Over the past three months, the five big name gold miners – Kinross Gold, Goldcorp, Barrick Gold, Newmont Mining and Yamana Gold – are up an average of 21 per cent, or basically on par with the entire index.
Eight of the top 10 performers, on the other hand, have market values less than $1-billion, and the two that are over this level – Centerra Gold and China Gold – are minuscule relative to Kinross’s market value around $11-billion, which is the smallest of the big names. The top 10 performers posted gains ranging from 93 per cent to 46 per cent over the past three months.
There are two major implications from this trend. First, when the market goes on a run, there is always chatter that acquisitions could heat up. But if the junior names are already hot, it means their valuations may be less attractive to the intermediate-to-bigger players.
Second, this market is much harder to navigate if you’re an unsophisticated investor. Mom and pop might know Centerra, but are they going to know OceanaGold Corp. or Romarco Minerals? Probably not.
This isn’t necessarily a bad thing. But it just goes to show that the old-school philosophy of relying on the big names can’t be trusted right now.