The performance of gold has been weak as of late, and gold miners have suffered in consequence. The Junior Gold Miners ETF (GDXJ) traded over $40 a share in spring of last year and now is in the low teens, lastly seen at about $15.50 a share. All is not lost though, as junior gold miners typically exhibit strong upside in gold uptrends and with some now calling a gold bottom, some upside for gold and gold-related stocks may be in store.
On a fundamental basis, some analysts are coming out bullish on junior gold miners. One analyst said that the fundamentals at many junior mining companies have improved, yet their stock prices continue to languish. Another analyst, Brien Lundin, CEO of Jefferson Financial, said that 2012 has in fact, put many gold mining companies on the bargain basement shelf. Here are 4 junior gold miners that look attractive from an investing perspective:
Timmins Gold (TGD) through its subsidiaries engages in the mining, acquisition, exploration, and development of mineral resource properties in Mexico. The company primarily explores for gold. It owns and operates the San Francisco gold mine located in Sonora. The company also holds an option to acquire a 100% interest in the Cocula project located west of Guadalajara, Jalisco; an interest in the El Capomo Property comprising 4 claim blocks covering 60,000 hectares located in Nayarit State; the Trincheras and Patricia property comprising 2 claims totaling approximately 20,000 hectares located in the Municipality of Trincheras, Sonora; and Timm Property, a 45,000 hectare land package located in the northern part of the state of Zacatecas, as well as an option to acquire a 100% interest in El Picacho Property comprising 703 hectares located in Sonora.
Timmins has been growing its gold production at a fast pace and in 2012 it produced a record 94,444 ounces of gold and sold a record 94,128 ounces of gold, compared to 55,487 and 56,777, respectively, during the nine months ended December 31, 2011. The growth is projected to continue in 2013 with production forecast to be between 125,000 and 130,000 ounces of gold.
In other items of note, TGD has held up surprisingly well over the past year despite the drop experienced by other gold miners. In an environment where gold miners are seeing their shares fall, Timmins Gold actually saw its shares rise 20% over the past 52 weeks. By contrast, the Junior Gold Miners ETF, mentioned above, is down over 30% over the same time period. Surprisingly, Timmins has 5 analysts covering it, a sizeable figure for a company its size. Even more so, the consensus target for the shares is $4, more than 43% higher than current prices.
Goff Corp.'s (OTCPK:GOFF) wholly owned subsidiary, Golden Glory Resources, is engaged in gold exploration with a view to developing highly prospective gold projects. The company's primary interest is the LGC15011 or "La Frontera" Gold Project in Aguadas, Dept. Of Caldas, Colombia. The leases on LGC15011 are comprised of 1227 hectares of mineral leases in the Aguadas area, Department of Caldas, located about 60 kilometers south of Medellin in Northern Colombia. Roughly 30% of the La Frontera property also straddles the Antioquia region.
Goff Corp. is one of the newer companies on the market and is picking up analyst coverage as well as institutional buyers with its stock rewarding investors quite handsomely so far. The development of the La Frontera Project has been the catalyst behind the move as the development of the property seems to be ahead of expectations. On Tuesday afternoon, the company made another announcement in relation to La Frontera. Goff said that Golden Glory Resources reported that it has planned a geological and management site expedition for its La Frontera Gold Project in Department of Caldas, Colombia. The advance ground exploration team is expected to include geological staff, consultants and management members who will be examining the site features and exploration drilling targets for its planned Phase One program.
The planned expedition being planned is sounding like the beginning of a drilling program the way it is being prepared. The ground expedition is being designed to apply sophisticated geophysical, geological and geochemical methods that will further qualify data about the property and its potential targets for bulk tonnage, low-grade gold and silver and/or a possible deeper Marmato-type gold source. The work is expected to include planning to define sectors, detailed mapping, sampling and impact assessment among other key items. All exploration work required in performing technical exploration work is also designed to be in strict compliance with environmental mining standards set by Colombian officials.
Golden Star Resources (GSS) engages in the acquisition, exploration, development, and operation of gold properties. The company primarily owns and operates the Bogoso/Prestea gold mining and processing operations that cover approximately 40 kilometers of strike along the southwest-trending Ashanti gold district in Western Ghana; and the Wassa open-pit gold mine and carbon-in-leach processing plant located to the east of Bogoso/Prestea in Southwest Ghana. It also holds interests in various gold exploration projects in Ghana and other parts of West Africa; and holds and manages exploration properties in Brazil, South America.
2012 was a transformational year for the company in which it restarted the relatively low cost Bogoso non-refractory plant, and made several significant changes to its management team and Board of Directors, in addition to commencing the move of its headquarters to Toronto. GSS expects to unlock significant value for its shareholders over the next three to four years through further lowering of its production costs by continuing to shift the majority of its production to non-refractory ores at Wassa and developing its high grade Prestea Underground mine.
Even though 2012 was transformational in nature, GSS still managed to record 2012 revenue of $550.5 million, up 17% year over year while increasing net cash provided by operations to $94.3 million versus $70.6 million in 2011. Analysts are aligning with management on this one and have a $2 price target on the shares, nearly 40% more than the current share price.
Sandstorm Gold (SAND), the only gold streamer on the list, focuses on acquiring gold and other precious metal purchase agreements from companies that have advanced stage development projects or operating mines. The company also offers upfront financing for gold mining companies that are looking for capital and in return it receives a gold streaming agreement, which gives the right to purchase a percentage of the life of mine gold produced, at a fixed price. As of February 18, 2013, it had 10 gold streams, including 6 producing gold streams; and 4 net smelter return royalty agreements. The company was formerly known as Sandstorm Resources and changed its name to Sandstorm Gold in February 2011.
Silver Wheaton (SLW) is one of the largest precious metal companies with a market cap of over $10 billion and it has one major connection with Sandstorm, giving investors the opportunity to purchase another metal streamer at a fraction of the price. The connection is management. Sandstorm was founded by Nolan Watson (President & CEO) and David Awram (Executive Vice President) who, prior to Sandstorm, were the first two employees of Silver Wheaton (which was the first metal streaming company and has grown into the largest in the world).
A successful development of Sandstorm Gold may give SAND's investors strong returns when comparing it to Silver Wheaton. Silver Wheaton began trading at about $3 a share almost 8 years ago and now is trading for 10 times as much at about $30 a share. Sandstorm began trading also at about $3 a share but is only currently trading at $9 a share. A move to $30 a share is more than 200% in return for shareholders.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.