Gold Miners Look Cheap Here

That's the conclusion of a report by Steven Butler, a senior analyst at Canaccord Genuity Corp. He looked at the relationship between senior gold stocks and gold itself, and found that many of them were trading at a discount by that criterion.

Mr. Butler... looked at the price-to-net-asset-value per share of various producers. Based on average multiples, he determined the spot gold prices implied by the price of each gold stock today. On this basis, senior and intermediate gold producers are priced at an average multiple that discounts gold by $95 an ounce, he said.

Goldcorp Inc. valuation appeared to discount the price of gold by $174 an ounce, Randgold Resources’ stock price suggested a $225 discount and Aura Minerals a discount of $243.

“We continue to believe that equities are inexpensive relative to the gold price and to historical trading multiples,” Mr. Butler wrote in a recent report.

There are two ways of looking at this discount: either gold has gone too far, too fast or the stocks have yet to catch up with the metal itself. Rising costs for the producers remain the big question mark.