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Throw caution to the wind; gold stocks not yet fully priced in - Peter Marrone

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With gold prices having breached the $1,700 an ounce level and sustained upwards momentum, investors should look to buy not only the bullion, but also gold equities, whose share prices have not yet priced in these higher gold levels, according to Peter Marrone, executive chairman of Yamana Gold.

“This is one of those situations where one should be less cautious, and one should be invested in the gold sector, but more than gold as a metal. I think one should be invested in gold equities,” Marrone told Kitco News. “While gold prices have gone to these levels, in excess of $1,700, today almost touching $1,800 per ounce, it seems to me that gold equities are not reflecting - in terms of their value and share price – they’re not reflecting that gold price.”

While energy prices have fallen in the past few months, Yamana Gold has realized cost savings in other respects.

Ensuring that employees are taking the necessary measures to stay safe during the COVID-19 pandemic has added extra costs to the company, but “there are several factors that are also providing a counterbalance to that,” Marrone said. “Clearly, fuel is one of those, although we’re not so dependent on fuel – we are, on some of our larger, open-pit operations, Malartic is an excellent example of that – but by and large, fuel represents about 5-6% of our overall costs. Where we’re seeing more improvements across is with currencies and with the devaluation of local currencies.”

Furthermore, as a result of social distancing measures taken by the company, travel costs have also been reduced.

As a result of disruptions from COVID-19, Yamana Gold has revised downwards its production guidance for 2020, from originally 857,000 ounces and 11.5 million ounces of gold and silver, respectively, to 786,000 and 10.2 million ounces of gold and silver.

“A couple of our operations, for a period of time, were on care and maintenance because of government mandated orders. This is true of the Canadian Malartic in Quebec, it’s also true of our Cerro Moro operation in Argentina, for different reasons. In the case of Argentina it was travel restrictions but the same result. Since then, we’ve been ramping up those operations; both operations have been designated as essential services,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.