More Big Losses Coming for Miners

Larry Edelson

This morning I read yet another column from a gold analyst who claims that the price-to-earnings ratios of several mining companies are now so low that the miners must be great buys.

Well, excuse me, but mining companies should almost never be bought, or sold for that matter, based on price-to-earnings ratios!

The decision as to whether or not to buy a miner should be based on the following criteria, and its price-to-earnings ratio should almost never factor into your decision. The factors you should look at are:

 The amount of gold and/or silver reserves the company has.

 The Enterprise Value (EV) per ounce of minable metal and per resources. That’s calculated as the market capitalization of the firm plus debt, minority interest and preferred shares, minus total cash and cash equivalents, divided by minable metal and then by resources to get two different figures.

 The Total Cost of Ownership (TCO) of just the mineable reserves. That’s the EV of the firm including mineable gold and/or silver, developments and cash costs.

 The “all-in sustaining costs” to produce an ounce of gold or silver. That’s bascially everything it costs to produce an ounce of gold or silver and to maintain the mine’s life. You can see the calculation in this table.


Click image for larger view

Additional factors you should consider include:

 Determining whether or not the company can cheaply finance the huge capital expenditures that are involved in the mining process.

 The expertise of the company’s management.

 Importantly, whether or not the company hedges or plans to hedge.

 How much debt the company has and at what interest rate.

 Where its properties are located.

 And more, including the very important skill of timing your purchase of the company’s shares when it’s truly time to buy!

Obviously, there’s a lot more to investing in mining shares than simply looking at price-to-earnings ratios. This is why I repeatedly feel I have to warn you about all the misinformation that’s out there.

The simple truth is that …

A. Miners have not yet bottomed.

That’s a no-brainer really, since neither the price of gold, silver or copper, nor any other metal for that matter, has bottomed.

Sure, there will be some short-term rallies in miners, some worth playing for those who want to speculate. And sure, the losses miners have taken since their peak are incredible, with the top 10 miners in the world having lost nearly 90 percent of their value and a whopping $540 billion of shareholder equity.

But overall, the mining sector has not yet bottomed and I see as much as another 50 percent lower from current prices.

B. When they do bottom, you’re going to have to be extremely careful which mining shares you buy.

For instance, on an initial screening I did this weekend, of 150 publicly-traded mining companies, I have already crossed off 129. There are now only about 21 miners on my radar screen that are worth monitoring.

Of those 21, probably only four or five will make it on to my long-term buy list.

So of those 150 I’m looking at, less than 5 percent will make the cut-off grade for my money, and obviously for yours.

This initial screening will change, since the metals’ bear market is not yet over. I expect it to change substantially, but the bottom line is this: Now is NOT the time to buy mining companies.

Now for a quick update on the metals themselves: Expect a short-term bounce to continue, but then the downtrend will resume into a highly probable and very important low in mid-November.

And the stock market: Its bounce also will soon end, leading to new lows heading into October.

Best wishes, as always …

Larry

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

Comments 84

LarryBoo September 9, 2015

I thought you said PM bottomed last year? And then May, 2015? And then October, 2015? Now it's November and it'll go into 2016? 2017?

rob September 9, 2015

But hang on a minute,. didn't he say gold $5000 by 2017??

John A September 9, 2015

Yes he did. He said, quote" I am 100% sure the miners will bottom this year" end quote. In 2014.

John T September 9, 2015

not that they will bottom, but they did bottom. See martins three must see videos. Larry claims in one of them that the bottom is in and yes he said gold higher, but loo at his track record, nothing lately as to where gold will go. The reason is he has no idea.

Heidi September 10, 2015

It happens - things change and in the end TIME and PRICE have to come together and that is the most difficult thing . Armstrong mentions it - Larry doesn't . Yes - it changed from late Oct./Nov. to Mar./ April 2016 . Noticed that gold has NOT fallen under $ 1000 yet ? The way things are going I wouldn't be surprised if it changes 1 more time after that . Gold hits a low- any low and a bounce - do it again - drop and a bounce / drop and a bounce / drop and a bounce . Was ein Scheiss Spiel ! lol

Charles Bernold September 9, 2015

Larry Thank you very much I am 79 and don't have the cash flow to be a subscriber but your graciousness in sharing all your thought for FREE has been a great help and much more then very appreciated very sincerely Charles

rob September 9, 2015

they are free because they are worthless,. you'd be nuts if you did pay,. and at 79 you should definitely not be investing a'la Larry style!

Heidi September 10, 2015

rob you tell Charles - that is nuts what he wants to do .. Charles - Go do the slots instead - more fun - better chances to win a buck here and there lol

seymour sheroff September 9, 2015

I thought I had 2 services with you. real money and supercycle trader. Since believing that I have not had one communication from you. please explain

Riza Jaway Jimena Jr. September 9, 2015

I am honor to read your info Mr. Larry best wishes to everyone

Heidi September 9, 2015

Riza " I am honor(ed ?) to read your info " ??????????? You are honored ? It's free .

$1,000 gold September 9, 2015

such an HONOR to read your comments, heide. absolute gems of wisdom. no charge for moments of genius, is there?

were September 9, 2015

Go away $1000 - no one wants to read your abusive comments.

$1,000 gold September 9, 2015

those were complements, were. your words sound abusive.

jrj90620 September 9, 2015

Another bottom prediction?How many of those can we take,before giving up on this guy's predictions.I guess,if you keep making predictions,eventually one will come true and you can advertise that prediction forever.

Heidi September 9, 2015

jrj90620 totally correct - he will be right one of these days and I'm guessing it will be THIS time

$1,000 gold September 9, 2015

déjà vu all over again, heide. where's your buddies - were, bfd, manny, etc? do you all have the same ip address?

John A September 9, 2015

There has been four bottom predictions since 2013.

John T September 9, 2015

If you take this guys predictions seriously, then your a fool, and you will lose all your money. His predictions are so general that any one can make them.

John T September 9, 2015

If the top 10 of 150 publicly traded mining companies lost nearly 90%, how much did the remaining 140 lose ??? I sure hope that Larry is not saying the 129 he crossed off the list aren't worth investing in at all, and of the 21 remaining (or about 21???) only 4 or 5 are worth buying? Larry's track record for calling the low hasn't been very good lately. Precious metals will rise, when, I do not know and neither does Larry. All I can say is this - Buy when everyone else is selling, Sell when everyone else is buying. If you wait to long, you miss the opportunity.

John A September 9, 2015

If he only buys 4 or 5 that would be extremely undiversified and dangerous. It would be better to buy the whole index.

$1,000 gold September 9, 2015

been shorting gold and miners for a couple years, even back when all the experts said gold was going to $5,000, (which won't happen for decades). now that the experts are saying the opposite and are finally short gold, i'm going to begin to get my guard up for the opposite to happen and go long gold for a bounce at some point when the bottom is in. no rush, though.

$1,000 gold September 9, 2015

just love the original thinking of heide and friend. such an HONOR to hear useful information for free.

$1,000 gold September 9, 2015

more compliments here too, were.

rob September 9, 2015

There are now only about 21 miners on my radar screen that are worth monitoring. Of those 21, probably only four or five will make it on to my long-term buy list. So of those 150 I’m looking at, less than 5 percent will make the cut-off grade for my money, and obviously for yours. This initial screening will change, since the metals’ bear market is not yet over. I expect it to change substantially - TOTALLY CLUELESS

kc September 9, 2015

I went all in awhile ago. On one of his calls using the similar argument he is using now. ANV. I will let you look up the price now, and see how that turned out.

Heidi September 9, 2015

kc - ANV - delisted , right ? Will happen to a few more .

Manny September 9, 2015

My Lord. I'm having flashbacks of the "miners are so close to the bottom, I can taste it.." (June 2013) presentation that Larry gave almost more than years ago. Anybody who listened to Larry's "signal" has lost ALLOT of money.

$1,000 gold September 9, 2015

careful, manny. appears were has placed himself as the site moderator. déjà vu all over again.

$1,000 gold September 9, 2015

are the highs in for the year, were?

Heidi September 10, 2015

$1000gold - he ( were ) said that in July already .

JT Marlin September 9, 2015

Is IAG - IamGold on that short list of miners?

John A September 9, 2015

Because this is a Martin Armstrong copy and paste lately is he now looking for a gold bottom in November as Larry parrots?

Heidi September 9, 2015

John - MA is looking for a REAL low in early 2016 --- March - April . Nov. is outdated as per Armstrong

Tiffany September 9, 2015

What ? MA and Larry said Oct-Nov. Sit on my hands some more? Oh no... So gold must be going down under $800.00 I would think? Is that the reason larry said something about a bounce in this article Another bounce...how many more can i take When will it all end Help

Heidi September 10, 2015

Tiffany I you would look UP and read the message above yours you would know

$1,000 gold September 9, 2015

we know what gold is going to do. we know what stocks are going to do. oh, wait, i forgot about bonds! gold: still heading lower. stocks: much more up side before a recession. bonds: the top is in? are we about to see the bubble pop in bonds? has everyone forgotten about bonds? isn't that when it pops, when no one is looking. i'm an idiot, so i wouldn't dare make a call on bonds. but i would be HONORED to here what were thinks, or bdf, or manny, or heide. is the bond bubble about to pop? could a rate hike by the fed signal a top in bonds? would a top in bonds have an affect on stocks? wow, i'm so confused. it's like having diarrhea and vomit at the same time, i don't know which end to hang over the pot. help me out here guys.

John T September 9, 2015

If the FED is serious about raising interest rates, then yes, but it really isn't a bubble. As interest rates rise (yeild) the price of the bond falls. If you hold the bond to maturity, your bond pays a negative return, you lose. If you try to sell it you must sell it at a discount to attract buyers at the higher rates, again you lose. So to answer your question, yes, a lot of bond holders are about to lose a lot of money..

$1,000 gold September 10, 2015

there's a big difference between bonds and bond funds. bond (treasuries) are always worth face value if held to maturity, but bond funds are a different matter. for one thing, bond funds have never been exposed to a rising rate environment. that's because bond funds weren't invented until we were already in a declining rate environment that started in the 1980s. no one really knows for sure what will happen to bonds now that we're about to climb the interest rate mountain. this has never happened before. but let me ask you one question. wouldn't raising rates gradually push investors out of bond funds and into stocks? so long term, raising rates could actually have the opposite effect investors are expecting.

John T September 10, 2015

We do know what happens to bonds, but bond funds are a different animal. As long as you hold bonds to maturity, you have no problem. Your right, bonds are always worth face value. But the real question is would you hold a bond at say 2% if interest rates are 5% and the bond doesn't mature for several or more years down the road. The answer is you would sell, but at a discount. Remember - price up-yield down and vice versa. But the question about bond funds would probably be the same for the reason above everyone sells and the bond funds tank. A lot of money was transferred from stocks to bonds for safety when the stock market crashed in 2008. And that leads us to your other question, where the money will go, and it will most likely be put back in stocks, and could very easily push prices to new highs as everyone seeks yield, possibly creating a bubble in stocks. Remember the theory- buy low-sell high, applies whether it is stocks, bonds, land, real estate, oil, gold. what we all seek is yield, but no one knows what the yield will be tomorrow. not you, not me and certainly not Larry.

John T September 10, 2015

If gold and gold funds are so cheap right now, why do we hesitate to jump in all the way. The answer is simple, fear of losing more. We should buy low, sell high, but we usually do just he opposite.

$1,000 gold September 11, 2015

gold went down during much of the time the fed was easing. easing is thought to be good for gold, but that was proven wrong during qe3. tightening is thought to be bad for gold. if the fed tightens next week consensus seem to be, gold will take a beating. so, it appears neither tightening nor loosening is good for gold. maybe a recession would be good for gold, but didn't gold follow stocks down during the recession of 2009? i try to think of gold as a commodity, not a currency, and then it kind of makes more sense to me. in general, gold seems to wake up during secular commodity bulls, and go to sleep during secular commodity bears - the exact opposite of secular stock bulls and bears. my personal opinion is we are entering a secular stock bull and i think it's safe to say the commodities bull is over.

Heidi September 10, 2015

John - so true - " fear of losing more or greedy ? " . Have you looked at some miners lately ? It's like gold has hit $ 800 already - o.k., for now it's mainly the South African miners but who is next ? http://www.mineweb.com/news/gold/s-africa-gold-industry-fades-as-margin-squeeze-erodes-output/ Larry should tell his people about that - not me .

Mike S. September 10, 2015

Thanks for the article Larry. I'll admit, you have me interested in your top picks of mining companies.

$1,000 gold September 11, 2015

it's getting pretty obvious that heide, were, bfd, manny are all the same person.

Heidi September 13, 2015

$1000 - no idea about your ( mental ? ) problem but BFD is a diff. person than Heidi is and so is were . No idea what manny is . An alien ?

$1,000 gold September 13, 2015

maybe, maybe not. your writing styles, comradery, timing all mesh. one of you comments and the other immediately give support, or come to the other defense, yet you all disappear at the same time. mike below is an example. regards, you all act like i can't be on this website without your blessing. why is that? i'm not allow to have an opinion? your's is the only one that matters? i've been proven right more often than all of you put together. that should mean something. to tell you the truth, i would not have stayed were it not for guys like you telling me to leave. i think i'll stick around a little longer. is that ok with you?

$1,000 gold September 11, 2015

china is headed for recession. brazil and russia are already in recession. the opec and non-opec oil countries are on the ropes too. slow down in parts of europe and america. the fed desperately wants to raise the funds rate to drive investors out of bond funds and into stocks. what other alternative do they have? massive qe? if you think about it, it all looks good for stocks down the road.

$1,000 gold September 11, 2015

glad to see you've moved on were.

were September 11, 2015

This is my one and only reply to you from now on. You've made this board so unpleasant to take part in that on the weeks you make any posts, I will not comment that week. If other people think my posts are valuable then I invite them to express their displeasure with you as well. Hopefully you will show some decency and take your abusive attitude elsewhere.

$1,000 gold September 11, 2015

take your friends with you too.

mike September 11, 2015

Hi $1,000 gold, could you please get over your needs and stop insulting were and other people? I like were's interesting comments and don't like your unconstructive comments. Thank you so much.

$1,000 gold September 11, 2015

were who? never heard of him. he doesn't come to this sight anymore.

Steve September 12, 2015

1,000 gold: About 20 posts from you so far... You post from some mental hospital? Or is it just your way of compensating for your jealousy? Get out of here!

$1,000 gold September 12, 2015

people like you and were and bdf and heide and friends have been telling me to leave since the day i came to this website. i'll leave if larry tells me to. i don't see where i don't have as much right to be here as you do. in the meantime, if you're going to dish it out, you better be ready to take it. i respond in the manner that i'm treated. if you don't like, too bad.

$1,000 gold September 11, 2015

will the fed hike next week? either the fed hikes or japan will have to ease. likewise for anyone else we support by buying their products on the cheap. without a hike, we really put a burden on imports. with a hike, we help our partners overseas. a hike will help the world's economies. too bad the imf does not see a hike as a benefit too the world's economies. let's hope the fed doesn't listen to the imf.

John T September 11, 2015

The fed is between a rock and a hard place right now. The FED will probably not increase rates until inflation picks up a bit, and Japan will probably ease some more.

Mitch September 12, 2015

The Fed will NOT hike. More QE on the. horizon. How does one bring a dead economy back to life? Certainly the Fed does not know.

John T September 12, 2015

The Fed does know that what they have done does not work, Our paper currency is only as good as the faith in it, why, because people believe that our currency has value.. Our paper currency is backed by noting but thin air. At some point our monetary system will collapse and we the people will demand our currency has real value, backed by some tangible assets, not thin air. When that happens gold will skyrocket. View gold as an insurance policy. If you own a home you have fire insurance. Most have never had to use it, but it is good to have just in case your house burns down. That is why all governments should have some gold reserves, if they don't just look at what happened in the Wiemar republic (1922 Germany) or more recently Zibabwe

diarrhea September 12, 2015

the weimar republic had insane inflation. we can barely get out of deflation.

$1,000 gold September 12, 2015

i agree with you both, john and mitch. i think the fed will be forced to hike rates next week, but that doesn't mean they will do the right thing. in fact, the imf does not want the fed to raise rates, but the imf is thinking wrong. a rate hike will push us into a deeper correction (which is what larry edelson is forecasting). this would actually be a good thing. stocks would ok because they'd become a bargain and investors would see a great buying op, so no harm done. plus, the rest of the world is in recession or coming out of one. by raising rates the dollar strengthens. this is a better alternative than each and every other country around the world having to lower rates to stimulate their economies. it gets the world out of deflationary mode and into strengthening mode. if the fed doesn't raise rates asap, countries like japan, canada, europe, some of our biggest trading partners will be force to take action on their own and weaken their own currencies instead. let's hope for everyone's sake the fed see this and tightens next week with a rate hike. if they do, what appears to be a bad thing will actually be a good thing.

John T September 12, 2015

They had insane inflation because all there gold went to France in reparations for WW1. There currency was backed by nothing but paper. In 1922-23 things got so bad you needed a wheelbarrow of money just to buy bread. People where even burning the money to keep warm because it had no value. When the people realize that the FED has no clothes, the #$%^&# will hit the fan, and gold will skyrocket because people will demand it instead of worthless paper.

$1,000 gold September 13, 2015

all that is absolutely a possibility, john. no doubt about that. in fact, we're at an inflection point right now and will soon find out. a agree with you, it would be insane not to at least own some physical gold for insurance at a time like this and at any time for that matter.

Tom September 11, 2015

TIP...... Gold going to $2900 buy mid next year Gold doesn't respond to all the nonsense people say it does. Inflation, QE, China buying the stuff etc.. For pete sake, its not even money and never will be again Why is it going up. look at the charts for one 2nd Morons think it will save them, and we have plenty of those people out there we have had over 6 years of growth, but now not so much when that goes, Gold is going to the moon ........cause morons are going to get scared, and then the world will end they will say hoard gold.............make soup out of it, maybe a sandwich too. how about a dunce cap

Janglebabe September 11, 2015

$1,000 gold I think of you as a bristly personality, with the manners of a grizzly bear. Your thought process is that of someone with schizophrenia Summing it all up... I think your writings and demeanor and mental health are all in question

$1,000 gold September 11, 2015

you sound like a professional. can you get me an rx?

$1,000 gold September 11, 2015

i've been know to be a disruptor with the personality of a grizzly bear who gets results, but completely harmless and totally sane.

RUSS SMITH September 12, 2015

Hi!, Patrons Of Real Wealth Et. Al.: Doug Casey of Casey Research mentioned that when the flight from paper currencies to gold takes place anything associated with the name GOLD will rise up in price plus the action involved would simulate emptying Hoover Dam through a garden hose!! It appears that only time and patience will tell US the rest of the gold vs. paper currencies story. RUSS SMITH, CA. (One Of Our Broke, Fiat Money Corrupt States)

Mitch September 12, 2015

Still looking at your date of Oct 7 2015. Lets see how right you are.

Mitch September 12, 2015

Oct 7, 2015 the world will end as we know it according to Larry. "all hell will break loose." He is a nice person, but, To set a specific date , his credibility is at stake. Perhaps he needs to purchase another calendar and erase his USA conference. Time will tell.

diarrhea September 12, 2015

gloom & doom sells financial subscriptions, just like fire and brimstone sells bibles. just think of larry as a televangelist and it will all make sense. being right or wrong doesn't matter, it's about instilling fear so you'll need advice. corrections like this are bread & butter to a financial adviser as the herd is running scared and looking for help. you won't last long in this business if you tell the herd to just buy & hold.

fred b September 12, 2015

thanks larry, waht are the 4 or 5 gold companies you like? and what about and etf like ring? your thoughts please. thanks larry.

don d September 12, 2015

Skin in the game ? Understand technical analysis?? Guys right often....

Tom September 13, 2015

My bet is the Fed will not raise next week Gold will bounce once again Go back and look at the last FED meetings and see what GOLD has done It went up end of story does anyone know what they are talking about here

grizzly bear September 13, 2015

gold went from $1,200 all the way down to below $1.100 right after the last fed meeting in june. what chart are you looking at?

Tom September 13, 2015

This is exactly what I mean........mis-information and dumb analytical skills.. Just the basics please..."reading , writing, math..etc" The last time to meet was late July, not June...... June had a small bump up, then came down................ Jan March April June July Sept Oct Dec In each of the previous meetings Gold has gone up...After it bumped up, it reversed and came down.

grizzly bear September 13, 2015

june was a press conference meeting where the chair address the public, like september will be, and december. the july meeting was inconsequential.

grizzly bear September 13, 2015

yellen addressed the public in june, not july, and said no rate hike. gold then went from $1,200 all the way down to below $1,100. i'd say those analytics speak for themselves, whatever non importance that is. so what point are you trying to make? the fed has meeting in july, or the gold is affect when the chair doesn't hike rates, or what?

Tom September 13, 2015

My statement is what it is.............It stands on its own..........no deletions....no additions....no excuses.......No bias You are bias and have excuses Don't feel alone............That's my big complaint with the financial community When things don't go their way, they blame some external incident Take Peter S. Harry D. and even Charles N. All big names, and plenty wrong There are others of course

grizzly bear September 14, 2015

so you're not trying to make a point, just blowing hot air?

Heidi September 15, 2015

Here is a good question for everybody since Larry does not answer questions . He had a miners list with 150 names on it - but by now he crossed off 129 miners already . Why ? Is the gold boom over ( total bear market ? ) or is THIS ( soon to be here ) a new beginning of a Bull Market in gold ? If it is a new beginning ( soon when gold drops under $ 1000 ) ALL miners should run - all of them even the ones who hardly have any gold - that is a bull market . So Larry's list with 129 crossed out makes no sense and is B>S> again .

$1,000 gold September 15, 2015

it was very obvious when the bubble popped and the gold bull ended in the fall of 2011. i started shorting gold a few years ago and i've touted that since the day i came to this site. there'll be volatility when gold drops to the $800 - $900 s/r level set in 1980, but will likely continue it's journey lower to a bottom. all the weak miner will lock their gates and only the strong will survive, like is happening in the oil business right now.

$1,000 gold September 15, 2015

i never try and time the market, but (read between the lines), i doubt i cover my gold shorts for a couple more years. when the biggest gold bulls (like peter schiff, marc faber, harry dent) finally capitulate, are completely humbled and admit they were wrong is the day the gold bull is over. ironically, the day these guys throw in the towel and sell their gold at a bottom is the day i'll buy it from them.

$1,000 gold September 16, 2015

it will be a mistake on the part of the fed if it does not hike rates this week. japan resisted lower rates this week - a clear signal to the fed it is wait for them to raise rates. time to turn the corner on the world's deflationary mode. what will the bond market do?