Gold Roundup: Don't Ignore These 11 Stocks

by: Stock Croc

Transparency/Disclaimer: I was compensated modestly by Pershing Gold Corporation to write this article. While I have vetted each company, researched it thoroughly and I've done my own due diligence, my due diligence is not a substitute for your own.

Couer d'Alene Mines (NYSE:CDE) has decided to buy back up to $100 million of its stock. The company's board of directors sent out a press release on June 7 that stated it planned to try and buy back at least 6% of the company's stock, or 5.3 million shares. CBS estimated that this figures comes out to around $100 million worth of stock.

This indicates that Couer d'Alene has a very healthy cash flow. It also led to a boost in the gold and silver miner's stock value. Couer d'Alene's executive team obviously has confidence in its stock and continued ability to maintain high cash flow. The company has been very successful with a number of its mining ventures in recent years.

Couer d'Alene's properties include the highly-successful Rochester Mine in Pershing County, Nev., which has produced a million pieces of silver a year in recent years. Some experts regard the Rochester as one of the most successful silver mines in the world.

Pharmaceutical billionaire enters gold field

One person who seems to have noticed Couer d'Lane's success is billionaire Phillip Frost, who made his fortune in the pharmaceutical field. Frost has invested $9.3 million in Pershing Gold (NASDAQ:PGLC). Pershing (formerly called Sagebrush Gold) owns the Relief Canyon mine, a 1,000-acre silver and gold property in the same geologic formation as the Rochester.

Frost's involvement in Pershing convinced Steve Alfers, the head of Franco-Nevada Mining's (NYSE:FNV) operations in the United States, to jump ship and join the company. Alfers, a mining industry lawyer, founded the successful New West Gold, which later merged into Fronteer Gold. In 2007, Newmont Mining (NYSE:NEM) purchased Fronteer Gold for $2.3 billion in Canadian dollars.

If Pershing can have the type of success at Relief Canyon that Couer d'Lane has had at the Rochester, it would certainly be a major moneymaker. That could make Pershing a growth stock and an acquisition target for companies such as Newmont and GoldCorp (NYSE:GG).

Barrick Gold developing new project in Pershing County, Nevada

Pershing is not the only company taking a risk on a new gold project in Pershing County. Barrick Gold (NYSE:ABX) and Midway Gold (NYSEMKT:MDW) are conducing exploratory drilling at the Spring Valley Project. Spring Valley is located in the Humboldt Mountains near Lovelock, Nev., which is not far from Relief Valley.

Barrick has budgeted $11.5 million for work at Spring Valley this year. That means the company thinks there's a good chance that there is gold on the property. A press release indicates that the company found at least some high grade gold on the property.

The Spring Valley property consists of 17 miles of mineral rights. Data on Midway's website indicates that Barrick hit gold in 75% of the holes that it drilled on the Spring Valley property in 2008. The Spring Valley property contains easily liberated coarse gold and could contain a gold deposit that is 3,500 feet wide and 1,400 feet deep.

The results at Spring Valley should definitely boost Midway Gold's stock, and the shares for all the companies are developing gold projects in Pershing County. These results prove that Pershing County could be one of the richest gold areas in the United States. Midway's experts think that the Spring Valley project could be one of the largest gold discoveries in Nevada in recent years.

The presence of Barrick Gold, which reported record earnings last year in Pershing County, indicates that Phillip Frost's gamble on Pershing Gold makes a lot of sense. Nor is Barrick, the only mining giant interested in Pershing County's gold and silver deposits.

Newmont Mining, Renaissance Gold (OTC:RNSGF), Allied Nevada Gold (NYSEMKT:ANV), Franco Nevada, Couer d'Lane, and Silver Standard Resources (NASDAQ:SSRI) are all active there. Allied Nevada took 32,473 ounces of gold and 166,156 ounces of silver out of its Hycroft mine in Pershing County in the first quarter of 2012. Allied Nevada is planning to ramp up production there, so its stock values should go up in the coming months.

Gold production up at Russia's Petropavlovsk

Allied Nevada is not the only gold miner having a good year. Russia's Petropavlovsk (OTC:PPLKF) is doing so well that it has raised its production targets for 2012 by 3%. The company even wants to increase its 2012 production target to 700,000 ounces from 680,000 ounces. This would be 11% more gold than it produced in 2012.

The increase in production is driven by new processing lines that the company is adding to its deep rock mines located in Russia's Far East. A second processing line has been added to the Albyn mine, while a fourth processing line has opened up at the Pioneer. Petropavlovsk's profits from the added production could be hurt by increased costs. It expects cash costs to increase by 15% to 20% in 2012. This is down from an earlier estimate that expected costs to increase by 30% to 45% in 2012.

Not surprisingly, Petropavlovsk's stock value increased on this news. Its shares went by 8% on London's FTSE exchange. This company's shares should keep going up throughout 2012, along with the price of gold.

Expect to see a strong performance and increases in share value from gold miners that operate in relatively stable countries, such as the United States, Canada, Australia, and Russia. These companies benefit from increases in production, rising gold prices, and increasing volatility in gold producing regions, such as South America and Indonesia.

Peru, in particular, has been wracked by violence and political strife that has put Newmont Mining's $4.8 billion Conga mine on hold. Freeport-McMoRan's (NYSE:FCX) giant Grasberg mine in Indonesia has been plagued by strikes and could be threatened by violence in the region.

Expect to see investment in miners that operate in stable or democratic countries to increase if this strife continues. Investors will seek out stable miners with a prospect of high yields and low costs.

Gold mining CEOs among Canada's best paid

CEOs at Gold Miners are among Canada's best paid, according to Bloomberg. Goldcorp paid its boss $10.93 million in 2011, while Yamana Gold (NYSE:AUY) CEO Peter Marrone made $11.45 million in the same period. That made Marrone the highest paid CEO in Canada. Even Barrick's Aaron Regent, who was fired last week, received $8.71 million for his troubles.

These executives appear to have been earning their money, despite criticism on low stock values. Bloomberg estimated that Barrick earned $514.98 for every dollar it paid Regent. Yamana made $47.88 in profit for every dollar it paid to Marrone. Goldcorp made $172.09 in income for each dollar paid to its CEO, Chuck Jeannes.

These profits indicate that gold miners are still making a lot of money, despite rising energy and labor costs. Even with average production costs going up by 14% in 2011, the companies are still earning a profit.

The reports of high CEO pay at gold miners will probably not affect the share price that much. Today's investors seem to be used to high CEO compensation, even if they don't necessarily like it. Instead, what investors seem to be critical of is high CEO pay, coupled with low stock values.

If stock values at gold miners remain low, expect to see some stockholder grumbling about high executive pay and a few results. Part of the reason why Barrick gave Regent the boot last week was because of complaints about poor stock performance. If stock prices don't match the new gold prices, expect to see a few more mining CEOs looking for new jobs. Such shakeups could drive down the stock value of the companies affected.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here