In a recent interview, Mark Cutifani, CEO of AngloGold Ashanti, noted that his group “can bring a new project on at about $2,500/production ounce, against our major competitors in North America, who are doing the same sort of thing for $4,000/production ounce. “If you look at the new acquisitions that are being made, this is Kinross’s bid [in Canada] for Red Back, and Newcrest’s bid [in Australia] for Lihir; they're buying gold at around $7,000/ production ounce”. Indeed. All the names mentioned so far are global Tier I gold stocks, with the exception of Red Back, a Toronto-listed African miner, which currently carries a market value of just over USD 7bn. Applying the metric referred to by AngloGold Ashanti, Kinross and Newcrest are paying premiums of more than 100% for their latest acquisitions. More generally, gold stock valuations, relative to any other kind of miner (with the possible exception of primary silver, a very small global subsector) can be politely said to be over the top. For bigger gold miners, however, premium valuations are relative. The Kinross-Red Back merger involves paper, new Kinross shares, and no cash. 

“Pure gold” miners such as Red Back and Lihir are in special demand, given the increasing tilt seen among bigger gold miners to polymetallic mines, as pure gold deposits become increasingly difficult to find, and dear to buy. Copper already constitutes important parts of some big names such as Barrick and Newmont, the world’s No 1 and 2 gold producers, by output. Kinross-Red Back will rank as a pure gold miner; Newcrest’s increasing tilt into copper will be tamed a little by its taking over Lihir. Red Back’s stock price has risen nearly 20 fold in the past five years. It has been a wonderful ride for any number of investors, who are now looking elsewhere, for the next long, rising wave with a gold lining. Red Back’s evolution has drawn attention to listed gold stocks active in Africa, of which about 100 can be counted. Those currently drawing strong attention as possible acquisition targets include Adamus Resources, Semafo, Golden Star, Nevsun Resources, Perseus Mining, Tanzanian Royalty, Centamin Egypt, Great Basin, High River, Oromin, and a number of smaller names such as Azumah Resources

Some gold stocks in and…

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