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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Thursday, April 30, 2009

UPDATE - GSSX Index© Continues to Outperform Other Indices

This is an update of the Gold Stock Strategist Index with a comparison to other gold-related asset classes and the S&P 500 index for 2009. I added the S&P 500 index at the request of my good friend Monty High.

One interpretation of the GSSX Index© performance (+40.6%) compared to the price of gold (+1.8%) is that it is fulfilling the role of a leveraged play on gold. Another interpretation--and one that makes more sense to me--is that the junior gold producers were beaten down way below fair value in 2008 as investors were either forced to liquidate equities to cover other obligations, or were fearful of a total collapse in the equity markets, sold first and asked questions later.

(click for larger chart)

Indexes Used for Comparison

Other indexes used to compare with the GSSX Index
© include the XAU index, the HUI, index, the TSX Venture Exchange index, and the price of gold index represented by the ETF symbol GLD.

The XAU is an index comprised of 10 large cap precious metals mining companies traded on the Philadelphia exchange. Companies in the index include: Agnico Eagle Mines (AEM), Anglogold Ashanti (AU), Barrick Gold (ABX), Freeport-McMoran Copper and Gold (FCX), Gold Fields(GF), Goldcorp (G
G), Harmony Gold Mining (HMY), Kinross Gold (KGC), Newmont Mining (NEM), and Pan American Silver Corp. (PAAS).

The HUI—AMEX Gold BUGS (Basket of Unhedged Gold Stocks) index is comprised of 13 major gold mining companies including Agnico Eagle Mines (AEM), Coeur D Alene Mines (CDE), Eldorado Gold (EGO), Gold Fields ((GFI), Gol
dcorp (GG), Golden Star Resources (GSS), Harmony Gold Mining (HMY), Hecla Mining (HL), Iamgold (IAG), Kinross Gold (KGC), Newmont Mining (NEM), and Randgold Resources (GOLD).

The TSX Venture Exchange index represents the 2,300 companies listed on the TSX Venture Ex
change. The TSX Venture Exchange is a public venture capital marketplace for emerging companies who have not yet met the requirements for listing on the TSX, which deals mostly with well established companies. The TSX Venture index is a much broader index than the others and includes companies other than gold miners such as junior natural gas explorers and other companies—primarily in the natural resource sector.

The S&P 500 comprises over 70 percent of the total market cap of all stocks traded in the United States and consists of leading companies from a wide variety of different economic sectors. The index includes over 100 unique sectors. Most analysts choose to use the S&P as their preferred benchmark index because of its diversified sector coverage as well as its market value weighting. Because the index is weighted by market cap, the largest firms have the greatest impact on the S&P's value.

Finally, GLD is an ETF that tracks the price of gold.

Composition of the GSSX In

As I have indicated in previous reports, the composition of the GSSX is subjective as are all indices. Nevertheless, the GSSX is a fair representation of the universe of emerging junior gold producers. The 20 stocks included in the index represent about 40% of all emerging junior gold producers and about 1
.3 million projected ounces of gold produced in 2009. Each company represents 1/20 of the total index. It is not weighted by market capitalization. The top performers so far this year in the GSSX index are Castle Gold, La Mancha, Richmont, Kinbauri, and San Gold.

Here is a list of the companies
included in the GSSX Index©, followed by a chart with their relative performance YTD.

Alamos Gold (TSX:AGI; OTC:AGIGF)
Alexis Minerals Corp. (TSX:AMC; OTC:AXSMF)
Aurizon Mines Ltd. (TSX:ARZ;
Castle Gold (TSX:CSG; OTC:CSGLF)
Capital Gold Corp. (TSX:CGC; OTC:CGLD)
Gold Resource Corp. ((OTC:
Gold-Ore Resources (TSX:GOZ; OTC:GREXF)
Jaguar Mining (TSX:JAG; NYSE:JAG)
Jinshan Gold Mines (TSX:JIN; OTC:JINFF)
Kinbauri Gold (TSX:KNB; OTC:KINBF)

La Mancha Resources (TSX:LMA; OTC:LACHF)
Metanor Resources (TSX:MTO; OTC:MEAOF)
Minefinders (TSX:MFL; AME
New Gold Inc. (TSX:NGD; AMEX:NGD)
New Guinea Gold (TSX: NGG: OTC:NGUGF)
Richmont Mining (TSX:RIC; AMEX:RIC)
San Gold Corp. (TSX:SGR; OTC:SGRCF)
Timmins Gold (TSX:TMM; OTC:TMGOF)

(click for larger chart)

With this post, I have removed Western Goldfields due to a merger with New Gold and have added Kinbauri Gold as a replacement for Western Goldfields.

I hope this is useful for readers.


Gold Stock Strategist


Haligonian said...

Might be time for you to do a new write-up on GOZ with today's news release.

The earnings and production numbers for the Bjorkdal mine in its very first quarter of full declared commercial production are stunning to say the least, and they will only get better in the coming months

Also, if you update your rankings of emerging gold producers, it appears likely that GOZ will easily surpass the rest to settle in the number one position.

Thanks for creating this site. Your efforts are appreciated.

Kristjan said...

Hello Scott,

I just found your blog thanks to a link from World of Wall Street. I was just looking for a blog like this that keeps an eye out for juniors. I'll be looking into your writings from now on.

By the way, I was going through Seeking Alpha and found an article by J.S. Kim discussing gold market manipulation by the central banks. Although I'm sure you're all familiar with it, I would still encourage you to read it.
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