Vista Gold Is Irresistibly Priced

Aug.17.11 | About: Vista Gold (VGZ)

Coming from the viewpoint that gold is going to be officially re-monetized, via agreements between central banking authorities of non-state networks and nation-states, I believe that gold demand will escalate significantly in the years to come -- and that mining stocks are thus a grossly undervalued opportunity. One of my favorite stocks here is Vista Gold (NYSEMKT:VGZ). Here's the rationale:

1. The stock is cheap -- it closed Tuesday at $3.12. Its cheapness is its primary selling point; as the mania around gold escalates, I think money will flood into anything gold, taking a "spray and pay" approach to investing. I suspect cheap mining stocks will be propped up by speculative money for a while as well.

2. VGZ is incorporated into Van Eck Gold Mining ETF (NYSEARCA:GDX). As money enters the gold market and looks to play the whole sector via ETFs, stocks incorporated into those ETFs may be especially fortunate. This sets the stage for more money going into VGZ.

3. Sprott Inc. is a key stakeholder in Vista Gold. I am comfortable with Sprott's ability to analyze the market and his interest in doing so here, and happy to invest in him here. I suspect others will increasingly do the same.

As the boom escalates, I believe some of these companies will be able to generate 100X return on their current share price, particularly if mining stocks go through a sustained bull market before having a parabolic blow-off. VGZ is a company I consider to be in the running for such a move in price.

Disclosure: I am long VGZ.