Mining for quality shares backed by gold

Globe & Mail article from July 26

Excerpt:

Take New Gold Inc. (NGD-T10.190.484.94%) as an example. At current gold and copper prices (HG-FT4.010.051.29%), according to analysts, the company could produce cash flow of between $2.60 and $3 a share in five years. Using an average historical multiple of 15 times, for big producers, yields a stock price between $39 and $45 a share.
Where’s the stock today? About $10. Investors clearly aren’t interested in producers or they’re skeptical about the gold price. And some caution is warranted. Mining gold is a tough business, notwithstanding every yahoo who claims to have the mother lode and a mine plan.



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