After running to new highs in 2011, gold has been taking a break and looks to be consolidating around the $1,600 per ounce level. This appears to be a healthy pause before a possible new leg in the long-term uptrend for this and other precious metals. Gold has been posting gains every year for the past 10 years and the factors that have supported higher gold prices still continue today. Factors that can push gold higher include rising demand from consumers for gold jewelry, and investors using gold as a hedge against inflation. Central banks around the world are continuing with loose money policies. Many believe that the European central bank will have to print euros to bail out Eurozone countries and banks in the future. These types of policies could ultimately raise the value of gold as it becomes a reserve currency for more investors.
One way to benefit from rising gold prices is to simply buy physical gold or a gold bullion exchange traded fund. However, much larger gains are possible when buying stock in gold mining companies. It is much more likely for shares in a gold mining company to double in a short time span rather than gold itself to double. With more risk comes more reward, but gold will never rise 50-100% in a single day because of a takeover offer, but some of these stocks could. Here are a number of gold stocks that are poised to benefit from the long-term uptrend in gold.
Great Basin Gold, Ltd. (GBG) is a gold exploration and mining company with operations in Nevada, and Africa. Great Basin owns the high-potential "Hollister" mine in Nevada and the "Burnstone" mine in South Africa. It is in the exploration phase for gold projects located in Mozambique and Tanzania. The stock is trading close to book value, which is 93 cents per share. This stock was trading for over $2 in September 2011, and now trades at nearly half that level. Great Basin shares appear to be very undervalued and have started trending higher. At about $1 per share now this could be a classic "buy low" opportunity for investors who don't mind owning a more volatile stock.
Here are some key points for GBG:
Current share price: $1.02
The 52-week range is 86 cents to $2.85
Earnings estimates for 2011: 3 cents per share
Earnings estimates for 2012: 21 cents per share
Golden Star Resources, Ltd. (GSS) is a Colorado-based gold mining and exploration company. This company is operating two gold mines in Ghana and has gold exploration projects in Sierra Leone, Niger, and Brazil. The high-potential Bogoso/Prestea mine is 90% owned by Golden Star and 10% owned by the Government of Ghana. Golden Star has a solid balance sheet and a number of prominent institutions and gold funds have purchased shares of this company.
The stock is deeply undervalued and trades just around book value, which is $1.67. Golden Star is likely to see increased production in 2012 and this could result in a solidly profitable year. If this stock stays below $2 for much longer, it would not be surprising to see a larger gold company make a bid to acquire Golden Star.
Here are some key points for GSS:
Current share price: $1.74
The 52-week range is $1.50 to $4.24
Earnings estimates for 2011: a loss of 6 cents per share
Earnings estimates for 2012: 27 cents per share
Goldcorp (GG) is Canadian-based gold exploration and mining company with operations in Canada, the United States, Mexico, and Central and South America. This company is focused on producing gold, silver, copper, lead, and zinc. Goldcorp pays a 54 cents per share dividend, which yields 1.2%. The book value is $25.76 and the company has a solid balance. This stock was trading for about $53 per share in December, but it has dropped to more reasonable levels. There seems to be strong support at about $43 per share, so pullbacks to that level would be prime buying opportunities.
Here are some key points for GG:
Current share price: $44.87
The 52-week range is $39.04 to $56.31
Earnings estimates for 2011: $2.24 per share
Earnings estimates for 2012: $2.65 per share
Yamana Gold (AUY) is a Canadian-based gold exploration and mining with projects in Brazil, Chile, Argentina, Mexico, and Colombia. This company has about 8 mines that are currently producing gold and 3 are in development. All are located in South America. Some investors feel that there is less geo-political risk in South American countries when compared with other places such as Africa. The book value is $9.80 per share and this company has a solid balance sheet. Yamana pays a 18 cent per share dividend, which yields 1.4%. This stock looks poised to make a new 52-week high when the gold rally resumes.
Here are some key points for AUY:
Current share price: $15.52
The 52-week range is $10.88 to $17.47
Earnings estimates for 2011: 97 cents per share
Earnings estimates for 2012: $1.23 per share
Taseko Mines Ltd. (TGB) is a gold mining and exploration company, located in Canada. This company has gold exploration projects in British Columbia and it has stakes in the Gibraltar Copper Molybdenum Mine, the New Prosperity Gold-Copper Project, the Aley Niobium Project and the Harmony Gold Project. Taseko has a very strong balance sheet with cash exceeding debt by about $100 million. The stock trades at a small premium to book value, which is $2.53. This stock has been in an uptrend since early January. Buying on any dips is likely to reward long-term investors.
Here are some key points for TGB:
Current share price: $3.39
The 52-week range is $2.30 to $6.38
Earnings estimates for 2011: 14 cents per share
Earnings estimates for 2012: 26 cents per share
Newmont Mining Corporation (NEM) is a Colorado-based gold mining and exploration company. This company has gold exploration and mining operations in United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. Newmont is one of the largest gold mining companies in the world and is a lower-risk way to invest in the long-term rise in gold. Newmont pays a dividend of $1.40, which yields 2.4%. This company has an excellent management team and a strong balance sheet. Newmont shares were trading around $67 in early December and are now trading at oversold levels. Using the temporary weakness in gold and in Newmont Mining shares as a buying opportunity makes sense right now.
Here are some key points for NEM:
Current share price: $57.48
The 52-week range is $50.05 to $72.42
Earnings estimates for 2011: $4.49 per share
Earnings estimates for 2012: $5.64 per share
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I am long GSS.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.