Gold Making a Comeback

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Gold Making a Comeback

It looks like we have found a bottom in POG... for now.  Last week's sell off was completely technical after POG broke the $1550 level  which seemed eerily similar to the flash crash a couple years ago.  I should have waited a week to call the bottom on gold, and would now recommend cashing in your June Puts.  The tremendous force of the sell-off has likely given us our bottom in POG unless we have another liquidation event.  The stocks look like they are going through a capitulation type moment.  I have heard calls for lows of $1,000 for POG and I just don't buy it.  Gold has been in a bear market for 20 months and the stocks even longer.  POG was officially $600 off its high in 2011 which seems like a good time to buy to me.  I keep saying it.... the best place to be is in the GOLD MINING STOCKS and if you were thinking about creating a small fund of the best of the best in the gold mining sector... NOW is the time to do it.

Who would have thunk it that 2013 would be mean $1330 and not $2013...?

Going into 2013... I was sure that Gold would hit $2000 per ounce.

Why are the stocks so attractive...?  because gold at $1300 is now very cheap considering marginal producers like GCM barely make any money at this price.  AND even massive projects like DGC and OSK are having a hard time keep costs under $1000 per ounce.  If there is a concentrated effort to WASH OUT some of the marginal players in the business...  DGC and OSK are two projects that those in the know are not going to shelve.  One BIG THING also going for these stocks is that DGC, OSK, and ANV are all priced for near extinction.  It is up to you to decide if gold is truly at the end of its rope or if this is just another cycle low with a capitulation V shaped bottom in the process.   I for one do not think Gold is over.  The arguments are still intact and there is reason to believe that with a little push here and nudge there... you could bring gold into the 21st Century and make it a true alternative currency and not just a valuable asset that acts as a hedge in times of uncertainty.

I am going to run through some names... the best names to buy right now are the producers. (for the most part they don't need cash.)  The next best names are the top rated developers. They need cash so are less ideal but are attractive because this is where the majors will look for growth outside of buying other producers...  although after FDN and Tsiasist...  I think The majors are little bit more gun shy about massive gold development projects.   Ones with LOW cap cost like PVG and LYD are much more feasible than the $1B capex a project like Midas Golden Meadows rings in at.

So is my list of better than average producers... and in no particular order....


Producers...

1. Timmins Gold Corp TMM.T $2.65 / Market cap... $387M / 9.5 P/E... San Francisco Gold Mine(Open pit heap leach.)  125,000 to 130,000 ounces @ $600 to $700/oz.
2. Semafo SMF.TO $1.80 / Market Cap... $502M / 5.0 P/E & Yield @ 2.38% (back out one time impairments)... 3 mines in Burkina Faso; Mana, Samira Hill, Kiniero.  215,000 to 240,000 ounces @ $760 to $810/oz.
3. Aurico Gold AUQ.TO $4.83 / Market Cap... $1.2B / 67.7 P/E & Yield @ 3.36%... Young Davidson in Canada and El Chante in Mexico. 190,000 to 220,000 ounces @ $565 to $645/oz.
4. New Gold NGD.TO $7.37 / Market Cap... $3.5B / 16.0 P/E... New Afton, Cerro San Pedro, Mesquite, Peak Mines.  440,000 to 480,000 ounces @ $265 to $285/oz.  
5. B2 Gold Corp BTO.TO $2.44 / Market Cap... $1.6B / 15.2 P/E... Masbate Mine/Phillipines; La Libertad & Limon Mines/Nicaragua.  385,000 ounces @ $550 to $600/oz.(Nicaragua only) Another 200,000 ounces to come online in Africa.
6. Petaquilla Minerals PTQ.TO $0.39 / Market Cap... $87M / 5.1 P/E... Molejon Gold Project in Panama. 75,000 to 80,000 ounces @ $550 to $600/oz.
7. Osisko Mining OSK.TO $3.86 / Market Cap... $1.7B / 17.5 P/E... Malartic Gold Mine, Quebec is make or break in 2013... 485,000 to 510,000 ounces @ $780 to $825/oz.
8. Detour Gold Corp DGC.TO $11.11 / Market Cap... $1.3B / N.A. P/E... Detour Lake Mine, Ontario... 350,000 to 400,000 ounces @ $800 to $900 per oz.
9. Allied Nevada ANV.TO $11.23 / Market Cap... $1B / 20.7 P/E...  Hycroft Mine in Nevada. 225,000 to 250,000 ounces au and 1.5M to 1.8M ounces of ag @ $565 to $585/oz au(net credits). Expansion to 552,000 ounces au and 25M ounces of Ag... 2015 to 2024 (call option on silver).
10. Argonaut Gold AR.TO $6.00 / Market Cap... $917M / 7.9 PE... El Castillo and La Colorada Open Pit Heap Leach in Mexico. 120,000 to 140,000 ounces @ $630 to $660/oz. Magino Mine Mine in Ontario focus of growth.
11. Primero Mining P.TO $5.35 / Market Cap... $540M / 10.9 PE... San Dimas Gold Mine in Mexico. 90,000 to 100,000 ounces au & 6.0M to 6.5M ounces ag @ $280 to $300/oz au(net credits).
12. Eldorado Gold ELD.TO $7.57 / Market Cap...$5.4B / 15.1 PE & Yield @ 1.9%... 705,000 to 760,000 ounces @ $515 to $530/oz
13. Yamina Gold YRI.TO $12.08 / Market Cap... $9.2B / 19.0 PE & Yield @ 2.24%... 1.44M to 1.6M ounces @ $385 to $450/oz 
14. Kinross Gold K.TO $5.66 / Market Cap... $6.4B / NA PE & Yield @ 2.94%... 2.6M ounces @ $700/oz

Developers...

1. Pretvim Gold PVG.TO $6.50....                        11.4M ounces @ 17.0 g/t au
2. Lydian International LYD.TO $1.67...                 4.1M ounces @ ~1.00 g/t au
3. Belo Sun Mining BSX.TO $0.95...                       6.9M ounces @   1.70 g/t au
4. Atac Resources ATC.V $1.20...                         (Small resource on the Tiger Zone)
5. Seabridge Gold SEA.TO $10.86...                    64M ounces @   0.5 g/t au plus ag and cu credits
6. Sabina Gold and Silver Corp SBB.TO $1.12...    6.5M ounces @  ~6 g/t au 
7. Sandspring Resources SSP.V $0.23...                8.4M ounces @ 0.7 g/t au
8. Guyana Goldfields GUY.TO $1.64...                    8.4M oucnes @ 3.5 g/t au
9. Columbus Gold CGT.V $0.26...                           5.4M ounces @ 1.44 g/t au
10. Gabriel Resources GBU.TO $1.45...                  15.8M ounces @ 1.4 g/t au
11. Asanko Gold AKG.TO $2.62...                             9.6M ounces @ 1.8 g/t au  

I would be concentrating on the gold producers as a rebound in the price of gold will guarantee a rebound in price while a price drop in POG will mean little downside for many of these beaten up names.  At current prices... risk reward is heavily in your favor and 5 of the producers mentioned even pay a nice yield at current levels.  Some of the producers are priced like they are going to have to cash up and for most of these low cost producers... I do not see that as a problem.

AND WHEN Gold bounces up....  The producers as a whole are priced extremely cheap.  All of the above producers are great investments and will remain on target for growth as long as POG stays above $1000 per ounce.  If POG drops below that mark.  I will be re-evaluating the entire long term theme and outlook for gold.

The opportunity is now too good to pass up... unless of course you beleive this space is dead. Not me.