Even I didn’t expect this. Big the gold rally has been. In fact, it’s so big it has been making me and a lot of other experienced gold bugs nervous. But junior miners remain fundamentally undervalued by long-term measures, writes Brien Lundin, executive editor of Gold Newsletter.
As you can see from the chart, the move in gold has been nothing short of breathtaking. The barriers at $3,500 for gold on a spot basis (and $40 for silver) seemed formidable for months. But the metals sliced through them like hot knives through butter.
(Editor’s Note: Brien will be speaking at the 2025 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 1-3. Click HERE to register.)
As I write, gold is taking direct aim on $3,900, with the magical $4,000 mark to soon follow...and there seems little to resist silver between current levels and the twice-hit nominal record of $50. Meanwhile, not only have the major mining stocks been outperforming gold, but the juniors have also begun to take off over the past couple of months.
As remarkable as the gains have been, with so many companies doubling and tripling from their mid-summer lows, they remain undervalued. In the majors, we see that price/earnings and price/NAV multiples remain near historically low levels. Operating margins have expanded so rapidly and earnings have risen so quickly that the market has not caught up with re-ratings.
In the juniors, the extraordinary values we saw six months ago, with exciting exploration companies trading with market caps under C$10 million, are long gone. Those companies now sport market caps of $20-$40 million. Yet old hands remember those levels as standard fare.
The junior explorer/developers with big gold resources trading for enterprise values/ounces of $10 per ounce in the ground are now trading at around $40/ounce. Yet when you realize that those kinds of resources routinely sold for $150/ounce in normal markets – much less the kind of record-setting market we now enjoy, then you understand that they are still great values.
