Erik Wetterling – Valuation Disconnects Continue In The PM Stocks Versus The Underlying Metals Prices As Markets Climb A Wall Of Worry

Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins me to reflect on the continued disconnect we are seeing in valuation that many of the gold and silver stocks are receiving in their market caps, compared to what the value of their ‘banked success’ of defined resources in the ground are worth; or in light of the expanding net present values of their economic studies when analyzed at today’s spot prices.

 

We review the many investors are getting worried that they’ve already missed the moves in most companies, simply because they’ve run up multiple-fold.  However, those investors are not really considering that the big moves higher on the charts are coming off incredibly oversold valuations that were not reflective of the value created even at much lower metals prices.   Now that gold and silver have run up so much higher, many of the stocks are actually just as undervalued now as they were before they put in big 3x or 5x moves to the upside.

 

“Some of the highest margin of safety I’ve ever seen in this sector is still present despite some of these juniors having gone up X multiples.”

 

At anywhere near today’s spot prices most projects should actually be fetching far higher valuations, even using conservative multipliers for resources or using the advanced economic studies in place.  We contrast this current undervaluation seen across most of the sector PM stocks against other more richly valued periods, like back at the peak of the sector surge back in 2016.   Back at that point in time, even though metals had started moving up sharply, there were many stocks that were still subeconomic and yet were pricing in future higher metals price values that far exceeded their economic studies or value of their resources.  This is why things topped and took years to consolidate afterwards, which is a very different converse situation than what we are seeing play out in today’s market. Erik points out that there seems to be a general disbelief of current metals prices and reluctance to even value companies somewhere between base case assumptions and current prices.   This disbelief is keeping the sector ripe with opportunities and climbing the proverbial “wall of worry;” which is not one one typically sees at or near market tops. 

 

 

Click here to follow Erik’s analysis over at The Hedgeless Horseman website

 

 

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