I believe diluting shareholder capital has been a major cause of underperformance compared to bullion. Based on U.S. Global’s independent research of 80 gold companies, production among global gold producers over the past four years has increased 14 percent on a cumulative basis. However, on a per share basis, gold production actually decreased more than 9 percent.
-Frank Holmes, CEO and CIO, U.S. Global Investors
It may be time for certain gold stocks to shine, writes Bryan Borzykowski in a Canadian Business article this week. He highlights many of the issues that have come to the surface over the past few years, including the bad decisions made by management, capital cost increases, and the birth of the gold bullion exchange traded fund.
But there’s a sea change occurring, as the industry has had executive turnover and many write downs in an effort to right the wrongs. “If gold companies continue to reinvent themselves … investors could see even better returns on stock than on bullion,” he writes.
We’ve talked about these issues several times, and many were confirmed when Jorge Beristain from Deutsche Bank visited our offices lately. Beristain talked about multiple changes gold companies are expected to make this year to draw investors, including reporting true industry production costs, reining in excessive capital expenditures and ceasing the dilution of shareholders via equity issuance for deals.