You wouldn’t know it yet by charting these broadly abandoned stocks, but a major sea change is under way in the gold mining industry that I believe is setting the stage for a rally of legendary proportion.
Given their disastrous trailing track record of amateurish value destruction and mind-boggling failure to project or adapt to escalating cost structures, the gold miners at large are entirely deserving of the cold shoulder they continue to receive from investors large and small. As Barrick Gold Corporation (USA) (NYSE:ABX) CEO Jamie Sokalsky conceded this week in his company’s year-end earnings release: “Rising costs, poor capital allocation and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector. The message is clear: the industry must chart a new path forward.”
Of course, we’re well beyond mere words at this point. That’s why I’m pleased to report that the major miners of gold worldwide are finally leading a concerted charge to mend their broken ways by fundamentally altering the way they conduct their business. These overdue adaptations will carve out some much-needed breathing room between the prevailing price of gold and an all-in cost structure for the industry that — once mine construction costs are factored in — leaves precious little meat left on the proverbial bone.
Why 99% of you will miss the bottom by a mile
I will dive into the specific changes they’re making in just a moment, but first I would like to pause and offer a Foolish prediction. When the history of this ongoing secular bull market is ultimately written with the clarity of hindsight, one standout feature of standout rally in gold stocks that will begin during 2013 will be the minuscule segment of the retail investor demographic that enjoys the full measure of the move. It’s lonely here in the gold market at the moment.
That will soon change as gold finally breaks out of this prolonged consolidation, and fresh eyes fall upon a much-reformed mining industry that has sunk into a deep depression of distressed asset valuations. The smart money will again be chasing these gold stocks before long, but only after substantial momentum has been maintained. Retail investors will again clamor into the fold as they have before, but not before those in position today have enjoyed the memorable gains that can accrue quite quickly during the initial phase of a major gold rally.
I suspect that plenty of folks will regret having permitted gold stocks to fall off their radar during the present period, and I don’t want you to count among them. If you ask me, the opportune time to pick up shares of Sabina Gold & Silver Corporation — my top gold stock recommendation for 2013 — is not once it has promptly reclaimed the $2.80 mark last touched just a few weeks ago but rather near the current mark of $2.08 . I’ve offered what I think are 5 good reasons to leap into Goldcorp Inc. (USA) (NYSE:GG), but odds are that few will jump into action before the stock reclaims the $40 mark.