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Abstract

GOLD BY THE SHARE For the unwanted title, "Most Forlorn Hope in Investing Today," Grant's confidently nominates the four little words, "Gold stocks will rally." In 2011, the gold price advanced, but the Philadelphia Stock Exchange Gold and Silver Index fell--by 20.2%. In 2012, the gold price also advanced, but the XAU again declined, by 8.3%. Now unfolding is an investigation into the persistent divergence between gold and the companies that mine it. For bullish special mention, we single out a pair of speculative exploration companies, Northern Dynasty Minerals (NAK on the New York Stock Exchange, NDM in Toronto) and Pretium Resources (PVG in both New York and Toronto). The trouble with the gold-mining business, writes former President Herbert Hoover in "Years of Adventure," the first volume of his superb three-volume memoir, is that it hasn't paid, it doesn't pay and it won't pay. A mining engineer at the turn of the 20th century (he was president for a single joyless term beginning in 1929), Hoover contended that "gold mining is an unprofitable business in any country." Especially unprofitable is gold mining in the countries that steal the mines. Fast forward now to the July 2012 appearance of Nick Holland, CEO of Gold Fields Ltd., before the Melbourne Mining Club. Gold mining, Holland declared, is "suffering from a management credibility discount." Investors in the room must have felt a strong urge to cheer. "What Do Investors Want from a Gold Mining Stock?" was the title of Holland's talk, and he ...

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