Monday , 26 September 2016


These 4 Gold Mining Companies Could Double In Price

From a trading perspective, gold appears to be a buy but, unfortunately…the price of the metal PD-Gold-Nuggets8-300x199moves up or down suddenly, seemingly for no reason other than a reaction to breaking news…To minimize the risk of a downside surprise in gold…[we have identified]  four gold stocks that offer long-term investors a degree of safety, and the chance to participate in the potential bull market in gold. In the long run, assuming gold continues to rise, these stocks could double. In the short term, each stock has the potential to deliver significant gains.

The comments above and below are excerpts from an article by Manny Backus (Wealthpire.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.

1. Yamana Gold, Inc. (NYSE:AUY) pays a dividend of just $0.02 a year but trades at just an 11% premium to its book value. In the chart below, the book value per share is shown as the solid blue line. In the last bull market, the stock peaked at a 50% premium to its book value. A similar move could push the price to $7.65.

Yamana has a diversified operation with gold, silver and copper properties throughout Brazil, Argentina, Canada, Chile and Mexico. In the most recent quarter, the company reported all-in sustaining costs (or AISC, which is the most comprehensive measure of production costs) of $804 per ounce. With this cost structure, the company is expected to be profitable in each of the next three years.

Action to take: AUY is a buy at the current market price. Consider a stop at $4.15. The price target is $7.65.

2. Gold Fields Ltd. (NYSE:GFI) holds interests in eight operating mines with an annual gold production of approximately 2.16 million ounces. The company also produces copper. The stock offers a dividend yield of 1%.

GFI has a relatively high AISC of more than $1,000 an ounce but is profitable with prices at their current level. This year, analysts expect the company to report earnings per share (EPS) of $0.29 and $0.45 next year. GFI is priced at about a 45% premium to its book value and peaked at about 190% of book value in the last bull market. This implies a price target of $8.90 a share.

Action to take: GFI is a buy at the market price. The price target is $8.90. Consider a stop at $4.30.

3. Alamos Gold, Inc. (NYSE:AGI) has operations in the United States and Canada. AGI also explores for silver and other precious metals and holds interests in a portfolio of development stage projects in Mexico, Turkey, Canada, and the United States. The company expects to produce approximately 385,000 ounces of gold this year with an AISC of $975 an ounce. A small profit of $0.02 per share is expected this year. Next year, analysts expect EPS of $0.22. Based on the company’s book value, the price target is $11.35, more than 30% above the current price. The stock also pays a small dividend, yielding 0.2%.

Action to take: AGI is a buy at the market price. The price target is $11.35. Consider a stop at $7.30.

4. Goldcorp Inc. (NYSE:GG) operates the Red Lake, Porcupine, Musselwhite, and Éléonore mines in Canada, the Cerro Negro and Alumbrera mines in Argentina, the Marlin mine in Guatemala, the Peñasquito and Los Filos mines in Mexico, as well as the Pueblo Viejo mine in the Dominican Republic. The company has proven reserves of almost 20 million ounces and another 21 million ounces of reserves that could be mined if higher prices or advances in technology increase the expected profits of the projects.

GG reports an AISC of about $890 an ounce. Based on book value, the price target for GG is $23.34, a potential gain of 23%. The dividend yield of 0.5% could add to the total return of the trade.

Action to take: GFI is a buy at the market price. The price target is $8.90. Consider a stop at $4.30.

Conclusion

These four stocks provide small amounts of income and allow for participation in what could be a bull market in gold. Given the emotional nature of the gold market, these could be among the safest investments in that sector.

Disclosure: The above article has been edited ([ ]) and abridged (…) by the editorial team at munKNEE.com (Your Key to Making Money!) to provide a fast and easy read.
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