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Capital Gold - A Capital Idea

Most of the gold and silver mining stock watchers seem to think that it is time for the very small cap juniors to shine. Comparing the CDNX to the GDX, you see they were savaged during the credit turbulence much more than about any index - still down 58% from their 2007 high compared to the larger cap gold miners, which have climbed back to their 2007 level.  As gold likely goes into an intensified climb, the juniors may become a fast climbing group. 

But the problem with juniors is they almost always are all talk and no dough - no fundamentals because all their gold is in the ground with the if-and-but method of valuation. I just hate that.  I buy them in that condition anyway, but when I find an under-the-radar small fry with some actual valuation numbers, I give them preference other things being equal.

One such company is Capital Gold (OTCPK:CGLD) with a good producing mine in Mexico.
They are based in New York and used to be called Leadville Mining and Milling. I can see why they changed their name.  Capital Gold sounds so much more exciting.  They certainly have turned their stock from lead into gold recently as this chart shows:

They aren't drowning in debt ($8.2 mil. on a $178 mil. market cap) with a current ratio around 3.  Insider interest is a high 42% ownership of the shares.

Gammon Gold put forth a merger offer back in mid-March valued at about $.76 a share.  It took Capital Gold just two weeks to return an answer of "no thank you" and the stock has climbed to over $1.00 since. I like the way this stock has behaved over the course of the credit crisis - more like the larger cap miners with decent cash flow.  But it is a tiny, fast mover just now breaking up a long term resistance level in place since the early stage of the gold bull.  It was valued by the market at higher levels in the gold bear years of 1999 and 2000 when it had no financial results whatsoever.  It stands to reason that it could return to those prices in the heat of the gold bull market with sharply growing fundamental value.

Disclosure: long CGLD