When it comes to such commodities as gold, there are so many ancillary variables such as political unrest, national consumption and the level by which certain nations allow these companies to drill potential investors should consider. In this article, I'm going to focus on the recent progress of two gold companies in particular, Crocodile Gold (CROCF.PK) and Barrick Gold (ABX).
Crocodile Gold closed trading at $0.35/share on Thursday in Toronto, after it was reported on that the company generated revenues of $56.8 million and sold 35,665 ounces of gold. One of the most attractive variables for CROCF.PK is clearly the company's most recent quarterly results, which came in at $0.03/share, surpassing analyst estimates by $0.02/share (a 200% surprise). Some of the quarterly highlights included but were not limited to the completion of the company's acquisition of Northgate Australian Ventures Corp., which included the Stawell and Fosterville Mines and the drawdown on an existing $75 million gold swap currently facilitated by Credit Suisse in an effort to assist with existing expenditures. If the company can continue to demonstrate strong earnings through the second half of the year and ramp up its production, we could see significant growth during the both the third and fourth quarters. It should also be noted that the company was upgraded by both Raymond James and Canaccord Adams to an "Outperform" on August 16.
Barrick Gold opened trading at $36.23/share on Thursday, after it was announced that the company may be an acquisition interest of China National Gold. Due to the recent shortfall in the country's gold supply, this may just be another move to offset those numbers. China's production (360 tons annually)-to-consumption (800 tons annually) ratio of 0.45 is very weak, and in my opinion, the acquisition of a company such as Barrick Gold could be a great asset in the long term. From an investment standpoint, I think ABX is a great company for two reasons. First and foremost, the company has been paying a very decent dividend and yield of 2.3% ($0.80), which was recently increased between the February 27 and the May 29 dividend distribution dates. The second variable to consider is the company's margins over the last 12 months, which in my opinion are very good. ABX demonstrated a profit margin of 27.85% and operating margin of 42.04%, which is much better than the margins of IAMGOLD (IAG), which only managed to demonstrate a profit margin of 20.05% and an operating margin of 35.24%.
I think both companies possess excellent long-term potential for various reasons. In the case of ABX, I think shareholders should see a short-term pop if the acquisition comes at a decent enough premium to the current trading price per share of $36.23. Potential investors should consider a small to moderate position at current levels and add to that position if acquisition talk begins to heat up even further. In terms of CROCF.PK, all eyes are going to be on the continued sale of the company's gold and subsequent earnings. Potential investors should initiate a small position at current levels and keep an eye out for an increase in sales or continued earnings strength before adding additional shares to their position.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.