May 24, 2018

Centerra: From Gold to Money



The stock markets are looking increasingly expensive, with the result that my focus shifts to security. However, hedging with options is too expensive, Swiss bonds are in negative yield territory because of negative interest rates, and cash stays flat by definition. So the blog of this season was about gold, and we bought Gold Fields from South Africa.

A reader correctly wrote me that the ranks of Gold Fields are not all that good, unlike those of Centerra of Canada. So why did I choose Gold Fields?

In fact, the ranks of Centerra are sensational, almost too good to be true: a value rank of 74, growth of 100, and combined a 100 top performance, finally also good security. However, the balance sheet of a gold mine does not have much meaning, as all of its assets are still hidden in the ground. That's why they are valued on the basis of what is expected to be excavated. So the value ranks also play a less important role. It's the same with biotech companies. Their values are not visible in the balance sheets now, they are all in the future, in products that are still being developed.

So how can I check if Centerra is a good buy? By looking at what lies in the ground. 16.3 million ounces of gold, says the expertise.

Centerra valuation

But because the gold still has to be dug up and that costs a lot of money. So you can not simply multiply the estimated amount of gold with the current gold price. So I did a little trick to see how much gold was raised this year and how much profit it made: 785,000 ounces were excavated and the profit was $ 250 million. So, with twenty times as much gold in the mine, you can expect to get & 250 million out of it twenty times, or & 5 billion.

Since Centerra has a market capitalization of & 2.5 billion Dollar there is a safety margin of 50 percent, which confirms the good Obermatt value ranks - and leads to a purchase of 880 Centerra shares for my portfolio.


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