With interest rates still basically at zero and governments around the world continuing to print money since the financial crisis, inflation may begin to rise and impact financial markets even moreso than we've seen to date. One group of stocks that stand to benefit from high inflation is precious metal stocks. Here are four that may serve as a good hedge in a diversified portfolio.
Agnico-Eagle Mines Limited (NYSE:AEM) is a long established, Canadian headquartered, gold producer with operations located in Canada, Finland and Mexico, and exploration and development activities in Canada, Finland, Mexico and the United States. The company has full exposure to higher gold prices, consistent with its policy of no forward gold sales, and maintains a corporate strategy based on increasing shareholders exposure to gold, on a per share basis.
The stock is interesting. The company has 100%-owned, long-life gold deposits in mining friendly regions – Canada (northwestern Quebec), northern Finland and northern Mexico. Agnico is a low-cost, efficient producer – it believes its cash costs are among the lowest quartile of gold producers. The company has a strong operating base at the LaRonde mine and it is a consistent engine of earnings and cash flow.
Silver Wheaton Corp. (NYSE: SLW),established in 2004, has quickly positioned itself as the largest metals streaming company in the world. The company currently has fourteen silver purchase agreements and two precious metals agreements where-- in exchange for an upfront payment-- it has the right to purchase all or a portion of the silver production, at a low fixed cost, from high-quality mines located in politically stable regions. By 2015, annual attributable production is anticipated to increase significantly to approximately 43 million silver equivalent ounces, including 35,000 ounces of gold. Beyond the initial upfront payment, no ongoing capital expenditures are required to generate this growth, and Silver Wheaton does not hedge its silver production.
The company has a portfolio of world-class assets, including silver streams on Goldcorp Inc. (NYSE:GG), Peñasquito mine in Mexico and Barrick Gold Corporation's (NYSE:ABX) Pascua-Lama project straddling the border of Chile and Argentina. The company’s unique business model creates significant shareholder value by providing leverage to increases in the silver price, while reducing the downside risks faced by traditional mining companies.
North Springs Resources ( NSRS.OB) is a Nevada based mineral exploration company focused on discovering and advancing precious metal properties in Nevada. The company is constantly looking to add to its asset property base, by acquiring additional leases, and entering into Joint Venture agreements and partnerships that the company feels will add to overall shareholder value.
The company has recently had some announcements that may bring investor interest. On 12/28/2011, the company outlined the proposed exploration work program for the North Springs Gold Property. The work program will focus on several untested gold targets that include disseminated mineralization, high-grade shear zones, and feeder veins similar to those that have been open-pit mined by several companies at other Mineral Ridge gold deposits in the area. On 12/27/2011, North Springs announce that it has signed a Letter Of Intent with DNP Mining to acquire an interest in a significant gold property in Arizona. The Goldstar/One Armed Joe Project consists of 900 feet of quartz veins in two zones (Goldstar: 600 feet and One Armed Joe: 300 feet) over nine (9) claim blocks totaling 180 acres.
Coeur d'Alene Mines Corporation (NYSE:CDE) is a large primary silver producer with growing gold production. It has assets located in the United States, Mexico, Bolivia, Argentina and Australia. The Palmarejo mine, San Bartolomé mine, Kensington mine, Rochester mine and Martha mine, each of which is operated by the company, and the Endeavor mine, which is operated by a non-affiliated party, constituted the company’s principal sources of mining revenues during 2010. The Kensington mine, the company’s newest operating mine, began processing ore on June 24, 2010 and began commercial production on July 3, 2010.
The company is the largest U.S.-based primary silver producer and a growing gold producer with projected 2011 production of 19.5 million ounces of silver and 220,000 ounces of gold.
Disclosure: Author has no positions in any companies covered above, but is long the gold ETF GLD.