Brigus Gold: Investors Are Missing Its Upside Potential

May.29.11 | About: Primero Mining (PPP)

Markets have always been about risk assessment; that's what the price of anything really is, after all. One stock with great potential and, in my opinion, almost no downside risk is the story of Brigus Gold (BRD). Brigus Gold is an emerging mid-tier gold producer with projects in Ontario, Saskatchewan, Mexico and the Dominican Republic.

Last week, the company announced that it signed a letter of intent with Everton Resources Inc. (OTCPK:EVRRF) whereby Everton will acquire Brigus’ remaining interest in the Ampliacion Pueblo Viejo, Ponton and La Cueva concessions in the Dominican Republic.

In April the company announced that it signed a letter of intent with Cangold Limited (OTC:CGLJF) whereby Cangold can acquire a 75% interest in Brigus’ Mexican subsidiary that owns the advanced exploration stage Ixhuatan gold project in Chiapas, Mexico.

The price of this turnaround stock has done almost nothing, despite the fact that those letters of intent are positive for the company's future. Management can remain focused on expanding the Black Fox Mine and advancing the Goldfields Project, both located in Canada.

With total reserves of 2.3 million ounces of gold (two properties with approximately 2 million ounces of gold reserves, all in Canada) increased cash flow, and projects ready for development, Brigus Gold is perfectly positioned for growth. It combines strong current production with an excellent development pipeline.

The company's Black Fox mine near Timmins, Ontario is currently producing gold and is on track for increased production in the upcoming years, generating steady cash flow for expansion.

Brigus Gold will channel its resources into advancing its second flagship mine project, the Goldfields Project, near Uranium City, Saskatchewan. With documented resources, existing infrastructure and permits already in place, Goldfields is set to begin production in 2013.

Big commodity investors such as Wellington Management Company, LLP; Sprott Asset Management, LP; Baker Steel Capital Managers, RBC Precious Metals BlackRock, and some others have already made their choice for Brigus.

Personally, I think investors have a great opportunity to buy something that has had its problems in the past (before June 2010), but is going to harvest in the future. This year, the company expects to be cash flow positive and profitable. Despite the good news, the stock price went from $2,10 (December 31) to $1.55 (May 27).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BRD over the next 72 hours.