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Background

A slight tumble in share value coupled with new drilling prospects, indicating stronger gold reserves than previously listed, may make Brigus Gold Corp (BRD) a compelling play for investors. Based in Halifax, Canada, Brigus' primary focus is the extraction, processing, and refining of gold deposits. The Brigus Gold Website bills the company as an "emerging Canadian mid tier gold producer" with "increasing gold production and cash flow." Often claims of this nature require some investigation and in the case of Brigus these claims appear to hold true.

Value for Investors

  • Following a compelling earnings release on the 27th of March where Brigus was trading at around $0.86, shares dropped to $0.79 on Monday 4/1 and then again to as low as $0.77 on Tuesday 4/2. Shares are trading pretty significantly off of the 52 week high of $1.09. Data released in the earnings report and balance sheet is as follows:

Date

Revenues

Profits

Operating Income

Net Income

Dec. 2011

$71,855.00*

$26,695.00*

-$4,010.00*

$15,769.00*

Dec. 2012

$117,681.00*

$61,512.00*

$10,810.00*

$18,929.00

*Numbers in Thousands

  • The company demonstrated significant increases in revenues and profits. These increases helped Brigus to strengthen its cash position by over $11 million.

  • Brigus recently completed a round of exploratory drilling. This drilling has demonstrated additional gold intercepts of 5.2 grams per ton at the Grey Fox Mine. These numbers supplement the company's original findings from September. As a result of the new findings Howard Bird, the Senior Vice President of Exploration stated "It is clear that the Grey Fox resource is more significant than initially reported." Initial reports show the quantity of this new finding to be 572,000 ounces of gold. Production at Grey Fox is expected to begin in 2015.

  • The company has a sizeable institutional ownership of 10.03% or 7,955,330 shares.

  • Brigus is reported as trading at 2.6x 2013 cash flow estimates while many industry peers are trading at 6.5x 2013 cash flow estimates.

  • Brigus CEO Wade Dawe was quoted as saying:"By early 2015, we'll have two mines in production: Black Fox and Grey Fox producing tonnage with a throughput rate 70% to 75% higher than what we have today."

Conclusion

It appears as though investors have been overly critical of Brigus Gold Corp following the company's earnings release. Initial research suggests that the company is in sound financial condition, better than expected gold reserves, and is trading well below the 52 week high at a price to earnings ratio of 8.95. Many younger mining firms burn cash even while harvesting deposits, as the drilling process can be time consuming and costly. Brigus has demonstrated that it can maintain its revenue streams while completing exploratory digging through increased production, thus providing shareholder value.

Additionally, Brigus is expected to increase tonnage processed by 70 to 75 percent over the next two years. Prices are respectable for investors to consider adding to their positions. BMO Capital Markets initiated coverage on Brigus in late December 2012 and ranked the company Market Perform.

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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Investors should always complete their own due diligence before making investment decisions.

Source: Is Brigus Gold A Golden Opportunity?