Wellington West Studies Eight Gold Equities, Picks Two Favorites

Gold is one of the only asset classes in the world that has maintained its value in recent months, so many investors are looking at increasing their exposure to gold equities. But which ones to buy?

Wellington West Capital Markets analysts Catherine Gignac and John Miniotis compared eight producing companies based on their production growth, reserve composition, political risk, corporate activity, and management and financial strength. The eight companies studied are Kinross Gold Corp (KGC), Agnico-Eagle Mines Ltd. (AEM), Yamana Gold Inc. (AUY), Iamgold Corp. (IAG), Aurizon Mines Ltd. (AZK), New Gold Inc. (NGD), Golden Star Resources Ltd. (GSS), and Western Goldfields Inc. (WGW).

Of those eight, the analysts determined that Yamana Gold and Western Goldfields "offer the best potential for investment outperformance" in 2009.

Yamana is favoured because it offers excellent growth potential, yet still trades at a discount to its more established peers. The analysts think that the market is still a little skeptical that the young company can meet its guidance, but there is big upside potential if it does.

Western Goldfields is considered the best "value play" as it trades at very low multiples that they believe are not justified. The company also has strong near-term production growth and little political risk, they noted.

In terms of gold bullion itself, Ms. Gignac and Mr. Miniotis maintained a very positive outlook during this period of financial market uncertainty. They predicted an average price of $850 an ounce in 2009, with plenty of volatility.

Comments

[John Polomny:]

Western Goldfields is extremely well managed and has hedged 50% of its diesel costs for this year and next. As they are operating an open pit fuel cost is 20% of overall costs. Cash flowing nicely and buying back shares. Good pick even if gold stays in a trading range.

Jan 16 09:18 AM

[Econ 101:]

At what price point does gold become so expensive the government confiscates it? $1000? $1500? $2000??? At some point the inflation (hyper-inflation??) caused by the immoral bank bailouts for the wall street thieves will happen (between Oct 09 and Mar 10??) and gold will explode. The government already has the power to steal gold from ETFs and your house and give paper money in exchange.

The only question is when?

Jan 16 10:49 AM

[GMiki1:]

GG (I own a few shares) is excellent. But also, for what will be incredible multiples, look into the juniors. Once gold finally takes off, they will give great returns. Look for advanced projects, superior drill results, experienced and pricipled management. Look at projects underwritten by the big guys (NAK, for instance, which I hold). Look at some of the silver companies or just silver itself.

Jan 16 11:29 AM

[John Polomny:]

Thats why you should hold your core gold position overseas. More likely then confiscation will be revaluation of gold by the US government.


On Jan 16 10:49 AM Econ 101 wrote:

> At what price point does gold become so expensive the government
> confiscates it? $1000? $1500? $2000??? At some point the inflation
> (hyper-inflation??) caused by the immoral bank bailouts for the wall
> street thieves will happen (between Oct 09 and Mar 10??) and gold
> will explode. The government already has the power to steal gold
> from ETFs and your house and give paper money in exchange.
>
> The only question is when?

Jan 16 12:48 PM

[silverwood:]

I have to agree with the authors on their pick of Yamana Gold (AUY). They have a very capable management with CEO, Peter Marone being quite possibly their most valuable asset. I am biased because I am long AUY and have increasing my position during weakness since my 1st acquisition in 2003.

Jan 16 12:58 PM

[BigOlDave:]

Strange that Barrick Gold (ABX) was left out of this analysis. On fundamentals and operations (including hedging fuel cost by buying an energy company) ABX is positioned to deliver for investors.

Jan 16 01:48 PM

[Anthony Alfidi:]

Juniors have potentially explosive potential. Companies that can finance further drilling from cash hordes will be in excellent shape.


On Jan 16 11:29 AM GMiki wrote:

> GG (I own a few shares) is excellent. But also, for what will be
> incredible multiples, look into the juniors. Once gold finally takes
> off, they will give great returns. Look for advanced projects, superior
> drill results, experienced and pricipled management. Look at projects
> underwritten by the big guys (NAK, for instance, which I hold). Look
> at some of the silver companies or just silver itself.

Jan 17 03:16 AM

[Diegojames:]

The point is does the incredible DEFLATION we have just experienced- or I must be the only one who owns a MacMansion in beautiful CALFORNIA and stock market losses EVER BALANCE out with INFLATION OF GOLD/PRECIOUS METALS????

I cannot live inside my gold investments and therefore do not see such explosive value growth resulting in confiscation becasue we cannot even win the WAR ON DRUGS...now you want A WAR ON GOLD....get serious.
What about CLAWBACKS of the money stolen by Wall Street inside of stealing from taxpaying gold investors.
Long GG, CAT, AA, OI, APC, COP,Norfolk Southern, DNN, HE, Sempra energy...
Thanks for insights
Diegojames
Porter Ranch, California

Jan 17 05:31 PM

[EricH:]

At what price? I say at a super LOW PRICE. They'll probably declare confiscation when hyperinflation is eminent but not yet present. Therefore, I'd expect them to manipulate the paper gold price down between $480-$550 and then WHAMO... Call the confiscation, outlaw personal holdings, and pay off existing holders a meeger amount of nearly hyperinflated bank deposits (not even cash, just data entries in your bank). That's how sheeps.

Anyhow my meeger coins already got stolen by crooks, so I don't need to worry about this anymore. But you probably need to worry about it.


On Jan 16 10:49 AM Econ 101 wrote:

> At what price point does gold become so expensive the government
> confiscates it? $1000? $1500? $2000??? At some point the inflation
> (hyper-inflation??) caused by the immoral bank bailouts for the wall
> street thieves will happen (between Oct 09 and Mar 10??) and gold
> will explode. The government already has the power to steal gold
> from ETFs and your house and give paper money in exchange.
>
> The only question is when?

Jan 19 06:34 PM

[PeteK:]

The love of Gold can be traced back thousands of years of human
history. This world can never get enough supply of Gold.

Jan 21 10:24 PM