When an analyst initiates or upgrades a stock and accompanies that recommendation with a long-term positive outlook, it usually means good things are ahead for investors. When such actions occur there's usually a significant reason why. With that said, I wanted to focus on two gold mining (GDX) stocks that were initiated with new coverage in the last 24 hours and some of the variables long-term growth investors should consider.
AuRico Gold Inc. (AUQ) had its coverage initiated by RBC Capital on Wednesday. RBC Capital rated the company a "Sector Perform" and set a $9.50/share price target on the stock. Investors should note that the Toronto-based company "engages in the exploration, development, and production of gold and silver projects and properties in Canada, Mexico, and Australia. Its principal property includes the Ocampo mine covering approximately 15,000 hectares located in Chihuahua State".
In the last 12 months, AuRico Gold has managed to demonstrate fairly good earnings with the only anomaly coming during the company's most recent quarter (June 2012) where it missed estimates by $0.03/share. Why do I think the company's last quarter was such an anomaly? If we examine third-quarter production results we'll see that the Young-Davidson mine has produced 9,903 ounces of gold in September at a cost of $639/oz., and the El Chanate has produced 19,388 ounces of gold at a cost of $434/oz.
Analysts are expecting AUQ to earn $0.05/share on $89.27 million in revenue for third quarter, and if the company can continue to demonstrate production results as it has during the September quarter, I see no reason why a long position shouldn't be established at current levels.
Brigus Gold (BRD) had its coverage initiated by Canaccord Genuity on Wednesday. Canaccord Genuity rated the company a "Sector Perform" and set a $2.10/share price target on the stock. Investors should note that the Halifax-based company "engages in the exploration, development, extraction, processing, and refining gold mineral deposits primarily in Canada. It produces gold and silver. The company primarily owns 100% interests in the Black Fox Mine that covers 1,225 hectares and is located to the east of Matheson, Ontario. It also has 100% interests in the Goldfields Project, which covers 25,685 hectares and is located near Uranium City in northwest Saskatchewan, Canada."
In my opinion, the biggest and most important variables for Brigus will be the production output of the company's Black Fox Mine. On Thursday, October 25th the company announced an update of mine functionality, "An underground exploration program at the mine has returned excellent gold grades over significant widths. The Black Fox ore body remains open at a depth and along a strike which includes gold reserves to a maximum depth of 500 metres. The ongoing underground drilling program at the Black Fox mine will drill beyond 500 meters and will continue into 2013 with the goal of expanding the underground resource". If the company can begin to yield significant results as early as the first quarter of 2013, I'd begin to establish a small- to moderate-sized position at current levels.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.