Newmont Mining Corp, (NEM), Barrick Gold Corporation (USA), (ABX): Just Give Me Flat Gold Demand as Supply Falters

For example, Allied Nevada Gold Corp. (NYSEMKT:ANV) is tripling production by 2015 and the Company has 47.3 million gold equivalent ounces of reserves and resources at its Hycroft mine alone. Upon achieving a run-rate of up to 1 million gold equivalent ounces by the end of 2015, Allied will be comfortably in the bottom quartile on the global cost curve.

Allied Nevada is trading at just a 1x multiple of expected run-rate revenues at the end of 2015. I recognize that I’m referring to a period that’s 2.5 years years from now. However, the majors are trading at an average of about 3.5x revenues. Either Allied Nevada will see a substantial improvement in valuation or it will be taken out. I think it’s one of the best takeout candidates in the sector.

Conclusion

Even just flat demand for gold in coming years will support gold prices. If demand climbs due to the combined impact of population growth and urbanization, supply will almost certainly fall behind. Near term swings need not be over analyzed. Over the longer-term, gold prices are going higher. Existing producers like Allied Nevada Gold Corp. (NYSEMKT:ANV) are very well positioned for a robust rebound.

Peter Epstein has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.