Gold stocks were one of the most disappointing sectors for 2011 with production numbers falling short of guidance and mine openings delayed by weather and other factors. Throughout the cacophony of bad news there are three gold stocks which are primed to do well in 2012.
1. Yamana Gold (AUY) - Yamana provided 2011 operating results printing 1.1 gold equivalent ounces (GEO) of production at cash cost, net of byproducts, of $50 per geo.
2012 production is expected to be in the range of 1.2 to 1.3 million geo as Mercedes ramps up production and the Minera Florida expansion is completed this quarter.
Yamana remains on track to deliver 1.75 geo of production by 2014 and raised the dividend twice in 2011 to five cents per share giving the stock a respectable yield of 1.2%.
2. Eldorado Gold (EGO) - Eldorado Gold recently made headlines by acquiring European Goldfields in a transaction valued at C$2.5 billion dollars creating the top Balkan gold producer with operations stretching from Romania through Greece to Turkey in addition to an Iron Ore mine in Brazil and operations in China.
2011 Operating Results showed 659,314 ounces of gold production at a solid cash cost of $405 per ounce. According to the new dividend schedule from last year, Eldorado will be paying a dividend of nine Canadian cents per share.
The European Goldfields acquisition will allow for production growth enabling Eldorado to produce 1.5 million ounces of gold by 2015.
3. Newmont Mining (NEM) - Newmont Mining set the trend for dividends in 2011 by linking their dividend to the price of gold, essentially putting a floor under the price of Newmont's stock. Since the announcement other gold miners such as Eldorado Gold (listed above) have copied Newmont's approach to building value by returning capital to shareholders.
The market sold off Newmont's stock as the 2012 operating forecast signaled a drop in copper production but at current levels Newmont sports a 2.3% annualized dividend yield putting a floor under the price at current levels.
Gold production for 2012 is expected to come in flat with 2011 as costs move up pinching margins. Even without the growth profile of a Yamana or Eldorado, Newmont provides significant value as the gold-price linked dividend puts a floor under the stock price.