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December 19, 2011 Dear Friend,
Gold prices, gold shares and the general
stock market have fallen considerably in recent weeks. AngloGold
Ashanti also has fallen.
It trades at nearly a 40% discount to major North American gold producers owing to its risk exposures in South Africa, Congo, other emerging African nations, Colombia, etc. However, mines in such regions earn profits and generate cash flows today, and may fund dividend payouts. Alternatively, there is a reasonable chance the company makes a sound or high return acquisition in the recent environment where emerging gold shares have been so deeply discounted. We question the "knee jerk" reaction of traders towards dollar appreciation, and we believe the Euro Zone difficulties benefit he gold price outlook. Even if AngloGold pays down debt, it would benefit earnings and reduce risks. AngloGold trades at 5 times earnings at $2,000 and 10 times earnings at $1,500 or 20 times earnings at $1,250 gold in view of its near $1,000 gold breakeven point. We consider it a good risk after its recent sell off. Other metals or gold stocks are cheap too, and AngloGold is not alone. Faithfully, John C. Tumazos, CFA |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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