2 Miners That Will Mint Investors Money In 2012 And Beyond

Includes: AUY, SWC
by: Bret Jensen

Market sentiment has definitely improved over the last two months. Although investors need to keep an eye on Europe, industrial demand seems to be picking up in North America.

One area I am putting new money into are the metal miners as they performed much worse than underlying metal prices in 2011 and I believe they are due for a rebound barring any major credit or geopolitical event. Here are two stocks I like at current price levels.

Stillwater Mining (NYSE:SWC): "Stillwater Mining Company engages in the development, extraction, processing, refining, and marketing of palladium, platinum, and associated metals in south central Montana, the United States". (Business description from Yahoo Finance)

Here are 4 reasons SWC has value at $12 a share:

  1. The stock has been cut in half from 2011's highs due to platinum and palladium prices that did not match gold's rise, and poor investor reception to what it paid for a copper and gold project in Argentina. It now has a minuscule five-year projected PEG of just .23.
  2. It is selling near the bottom of its five-year valuation range based on P/E, P/B and P/CF.
  3. The company has increased earnings at an annual rate north of 30% over the past five years, yet sells for just a little over 9 times earnings currently.
  4. The mean analysts' price target on SWC is $17 and Credit Suisse has an "outperform" rating and a price target of $15 on the stock.

Yamana Gold (NYSE:AUY): "Yamana Gold Inc. engages in gold and other precious metals mining, and related activities, including exploration, extraction, processing, and reclamation. It also explores for copper, molybdenum, zinc, and silver metals. The company's portfolio includes 7 operating gold mines namely Chapada; El Penón; Jacobina; Gualcamayo; Minera Florida; Fazenda Brasileiro; and a 12.5% indirect interest in the Alumbrera mine, as well as various advanced and near development stage projects and exploration properties in Brazil, Chile, Argentina, Mexico, and Colombia". (Business description from Yahoo Finance)

Here are 4 reasons Yamana Gold is a buy at under $16 a share:

  1. Credit Suisse has an "outperform" rating and a price target of $20 on Yamana. The mean analysts' price target on AUY is $19.70.
  2. The company is showing rapid earnings growth. It made $0.61 a share in FY2010 and should make $0.97 a share in FY2011 and analysts project $1.26 in earnings during FY2012.
  3. The company is rapidly growing production. It expects to produce 1.2mm to 1.3mm ounces of gold in 2012, 1.5mm to 1.7mm ounces in 2013 and over 1.75mm ounces in 2014.
  4. The stock is selling near the bottom of its historical valuation range based on P/E, P/CF and P/S. Analysts expect revenue growth of over 20% in FY2012 after producing over 30% growth in FY2011.

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