Goldbugs that are a bit superstitious will have their interest aroused when they learn that there is a gold mining company with the symbol GOLD, whose stocks can be bought on the Toronto Stock Exchange (TSX). Superstition and emotions are, however, not good reasons for buying a stock. Recently Barrick Gold started trading in New York with the symbol GOLD and not ABX after its merger with Rand Gold. Barrick Gold has a capitalization of over $20 billion and is the gold mining company with the largest capitalization.
Gold Mining Incorporated, which has the GOLD symbol in Toronto, is very interesting since there is great potential on the upside. There are several good reasons for buying this stock. The management team is made up of seasoned professionals with many years of experience in the business, and the advisory board is also made up of experts who know what they are doing.
The company is financially healthy and has about $9.5 million in cash on hand. The company has no debt. Key shareholders are KCR Fund, Brasilinvest, IAMGOLD Corporation, Ruffer Gold, Sprott Global, Extract Capital and Marin Katusa. More information is available on the company website: www.goldmining.com. The company is covered by H.C. Wainwright and ROTH Capital.
The company has projects in Brazil, the United States, Canada, Columbia and Peru. See the company website for detailed figures on each project. There is also a project with uranium. The amount of indicated and referred gold resources is about 23 million ounces, and that is a lot of gold. Measured and indicated resources are 10.5M, and inferred resources are 12.3M ounces. What is particularly interesting about Gold Mining Incorporated is the way that such a large resource holding has been assembled. Acquisitions were made near the bottom of the gold cycle.
Gold exploration companies are a highly risky business as exploration is expensive and need not produce results. The cost of exploration (discovery cost) has risen from $34 an ounce to $70 to $80 an ounce as gold discoveries are decreasing. Even if gold is found, exploration companies often run out of cash and have no possibility of finding financing to continue operations. They then often are sold to other companies at a discount price. This is how Gold Mining has operated in a very successful way. In fact Gold Mining has acquired resources at a discount that is about 90% of the funds previously invested in exploration. For about $80 million Gold Mining has acquired over $800 million of invested capital.
The current market capitalization of the company is about $133 million with a share price of $ 0.93. How Gold Mining accomplished this feat is due to timely purchases with stock and a bit of cash. Investors that now buy into the company can reap the benefits of what has previously been done.
AS it costs about $1,110 - $1,200 to produce an ounce of gfold, to which one has to add the exploration costs, when one reckons the all-in costs, the valuation of Gold Mining Inc. is ridiculously low. Add to that the fact that the reserves and resources of the big gold producers are running low, it is probable that there is going to be a rush to buy gold in the ground. Gold Mining Inc. will be there to cash in.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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