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New York-based Van Eck Associates is an investment firm with $35 billion in assets under management in mutual funds, hedge funds and ETFs that is focused on investments in the basic materials sector, primarily in gold and silver mining groups, and in the energy sector. Historically, it has also been a pioneer in international investing, as in 1955, when John C. Van Eck started one of the first international equity funds for U.S. investors to invest in the European and Japanese markets. Also, its flagship Van Eck International Gold Fund was the first gold equity mutual fund offered to U.S. investors.

In this article, we review Van Eck’s major picks in the gold and silver mining group, and in a separate article later we will review their picks in the energy group. Of the $20 billion in equity assets under management, per its latest 13-F filing for Q3, 60% is invested in the gold and silver mining group and 20% is invested in energy. Also, 60% of its equity investment is in large-caps, 30% is in mid-caps and the remaining 10% is in small-caps. The portfolio turnover is under 10%, implying an average holding period of ten years. Furthermore, based on the13-F filing, we also determined that Van Eck is bullish on the gold and silver mining group, as it added a net $2.26 billion in Q3 to its $9.48 billion prior quarter position in the group.

The following are the gold and silver mining companies that Van Eck is most bullish about, and that are also trading at a discount to the group: (see table):

Barrick Gold Corporation (NYSE:ABX) is a Canadian company engaged in production of gold and copper in Peru, Canada, U.S., Australia, Chile, and five other countries. This is their largest in the portfolio, holding $1.52 billion worth of shares, after adding $400 million in Q3. Furthermore, with 3.2% of the outstanding shares, Van Eck is also the fourth largest institutional holder of company shares. ABX is undervalued, trading at 8 forward P/E compared to the 13.2 average for the gold mining group, while earnings are projected to increase from $3.33 in 2010 to $6.01 in 2012, at an annualized growth rate of 34.7%.

Newmont Mining Corp. (NYSE:NEM) produces gold in the U.S., Australia, Peru, Indonesia, Canada, New Zealand, Ghana and Mexico. This is Van Eck’s third largest position in the portfolio at $1.40 billion, including adding $253 million in Q3. Furthermore, at 4.4% of the outstanding shares, Van Eck is also the second largest institutional holder of NEM shares. NEM trades at a discount forward 10-11 P/E compared to the 13.2 average for the gold mining group, while earnings are projected to increase from $3.79 in 2010 to $6.11 in 2012, at an annualized growth rate of 27.0%.

Kinross Gold Corp. (NYSE:KGC): KGC is engaged in mining and processing gold, silver, and copper in the U.S., Brazil, Ecuador, Chile and Russia. This is Van Eck’s fifth largest position at $592 million, including adding $177 million in Q3. Furthermore, Van Eck is also the second largest institutional holder in KGC, with 4.1% of the outstanding shares. KGC trades at a discount 10 forward P/E compared to the 13.2 average for the gold mining group, while earnings are projected to increase from 57c in 2010 to $1.28 in 2012, at an annualized growth rate of 49.9%.

Gold Fields Ltd. (NYSE:GFI): GFI is a South African mining company engaged in the exploration and extraction of gold in South Africa, Ghana, Australia and Peru. Van Eck added $109 million in Q3, and is also the second largest institutional holder of GFI with 3.8% of outstanding shares. GFI trades at a discount 6-7 forward P/E compared to the 13.2 average for the gold mining group, at the bottom of its historic trading range, and at a discount to the 13.2 average for the gold mining group, while earnings are projected to rocket up from 55c in 2010 to $2.33 in 2012 at an annualized growth rate of 105.8%.

Yamana Gold Inc. (NYSE:AUY): AUY is a Canadian company engaged in the exploration and development of gold properties in South America and Mexico. Van Eck added $106 million in Q3, and with 4.6% of the outstanding shares it is the largest institutional holder of AUY shares. AUY trades at a discount 12 forward P/E compared to the 13.2 average for the gold mining group, while earnings are projected to rise strongly from 59c in 2010 to $1.28 in 2012 at an annualized growth rate of 47.3%.

The following are some additional gold and silver mining companies that Van Eck is bullish about, but that are trading at a premium to the average valuation for the group:

Goldcorp Inc. (NYSE:GG): GG is a Canadian company engaged in mining and exploration of silver, copper and gold throughout North and South America. This is their second largest position in the portfolio, at $1.49 billion, after adding $319 million in Q3. Furthermore, at 3.8% of the outstanding shares, Van Eck is also the second largest institutional holder of company shares. GG trades at 15-16 forward P/E compared to the 13.2 average for the gold mining group, while earnings are projected to increase from $1.38 in 2010 to $3.16 in 2012, at an annualized growth rate of 51.3%.

Silver Wheaton Corp. (NYSE:SLW): SLW is a Canadian buyer of purchase agreements for silver and gold from mining companies operating in Mexico, Sweden and Peru. Van Eck added $89 million in Q3, and with 4.0% of the outstanding shares it is the second largest institutional holder of SLW shares. SLW trades at a 13 -14 forward P/E compared to the 13.2 average for the gold mining group, while earnings are projected to be up strongly from 42c in 2010 to $2.43 in 2012 at an annualized growth rate of 140.5%.

The only company in the gold and silver mining group holdings that Van Eck is bearish about is Silver Standard Resources (NASDAQ:SSRI), in which it cut $40 million in Q3 from its $90 million prior quarter position. SSRI trades at 10-11 forward P/E, lower than the 13.2 average for the gold mining group; however, earnings are projected to fall from $4.51 in 2010 to $1.39 in 2012.

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top Mining Picks Of Gold-Focused Van Eck Fund