Why Are Gold Stocks So Depressed With Gold Prices Not Too Far From Record Highs?

The President and CEO of Fortuna Silver, Jorge Ganoza, discusses the latest record quarterly financial and production results which includes the first full quarter of the Séguéla Gold Mine in West Africa, which had its first gold pour in May.

Quarterly financial results were also released and we discussed the positive news for last quarter and what the strong free cash flow means for the company moving forward.

On the rising cost issues with the miners that investors just don't seem to find too appealing at the moment in the sector, Ganoza says:

I find one of the explanations in that if we look at the record over the last several quarters, who's been buying gold? It's been the central banks. So, we haven't seen the big pools of managed capital coming into this sector in any meaningful quantity right?

When those managed funds come into gold, they usually buy silver and they usually buy mining equities as well. When central banks buy gold, a bit of silver perhaps, but certainly not mining equities. Gold is being supported at $1900, close to $2000, it's likely being supported by central bank's purchases - that's not extending into silver or mining equities for sure. 

Ganoza states that back in 2011, Silver mining cost $9 and sold for $39. He continues:

Now, the costs or profit margin had been eaten by inflation. So today most silver producers are producing silver at around $19-21. You're selling for 20% margin [or] 25% margin if you're lucky. The gold space isn't different. The average sustaining cost for the mining industry hovers around $1400 and you're selling your gold at $1900. 

To learn more about Fortuna, please visit their website: FortunaSilver.com Please note, employees at GoldSeek are long-term shareholders in Fortuna Silver Mines and the company has been a supportive sponsor of both GoldSeek.com and SilverSeek.com.

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