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DG365FD46564GFH654FU898 With gold shares on pace to finish the year firmly in negative territory – despite a near 10% rise in the price of gold – the latest firm to discuss the sector’s outlook for 2012 was Rodman & Renshaw. In a note to clients published this week, Senior Metals and Mining Analyst Wayne Atwell attributed the underperformance of gold stocks to six key factors: “1) gold ETFs provide a viable alternative to the gold shares, 2) it has become difficult to identify new attractive gold deposits, 3) Barrick Gold (ABX) spooked the market by buying a copper company earlier this year, 4) several foreign governments are raising taxes on mining profits, 5) a reversal of a strong outperformance by the shares last year, and 6) some investors believed the gold price has peaked." Atwell went on to discuss small-cap gold stocks in particular, stating that “The junior gold shares have materially underperformed so far this year. Investors turned nervous about the outlook for the group and it has been very difficult to raise capital for junior gold companies. This has made it quite difficult for the juniors to sustain their business model, as they have to return to the equity market frequently to continue to finance their drilling programs as most have no cash flow.” However, going forward the Rodman & Renshaw analyst had a much more upbeat forecast.
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