Golden Minerals Corporation (AUMN) shares appear ripe for a rebound in 2013. This gold mining stock was hit hard in 2012, just like many in this sector. The stock has been volatile but seems to have bottomed out around $4 per share. This stock was trading over $10 in the past year and investors who bought at the right time over the past few months have enjoyed some serious profits. For example, in June the stock was trading around $4 and it shot up to nearly $6. In early August, the stock was again trading near $4 and it surged and nearly doubled to around $7 in September. The shares got knocked down again when the company announced a secondary offering and since then, it appears that this stock has suffered from year-end tax loss selling.
By looking at a number of valuation metrics, this stock looks undervalued. The balance sheet is strong with about $54 million in cash and no debt. The current market capitalization is just around $179 million, but when you factor in the cash, the enterprise value is just about $125 million, and that appears to be way too cheap. The shares are trading well below book value which is $6.92 per share and that is yet another sign that it is undervalued.
Golden Minerals has a solid management team led by CEO Jeffrey G. Clevenger. It has producing mine operations in Durango State, Mexico which contains high-grade silver and gold. It also has exploration properties in Mexico, Peru and Argentina. This portfolio of assets offers some diversification which reduces risks for investors. However, as with most mining stocks, risks like production problems, strikes, geopolitics and other issues can impact the value of this investment.
After a rough 2012, these shares have been trending higher in the first weeks of 2013, but there was a recent pullback after the company announced fourth quarter production. Production for the fourth quarter 2012 totaled a record of approximately 134,000 ounces of silver, an increase of about 13% over third quarter 2012 production and 72% greater than the fourth quarter 2011. However, gold production during the fourth quarter 2012 was about 1,300 ounces, which is about 33% less than the third quarter 2012 production and an increase of about 8% above the fourth quarter 2011. The gold production in Q4 is seen as a short-term negative which was due to various factors including a shortage of miners. However, the company is focused on increasing gold production in 2013. That is why this could be just a short-term opportunity to buy the shares in a pullback, before the recent uptrend resumes.
Here are some key points for AUMN:
Current share price: $4.20
The 52 week range is $3.24 to $10.60
Earnings estimates for fiscal year 2012: a loss of 69 cents per share
Earnings estimates for fiscal year 2013: breakeven results
Annual dividend: none
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.