Newsletter Watch: Mining for value
In today’s column, four noted advisors – Eric Roseman, Tom Bishop, Curtis Hesler and Nick Jones -- look at small-cap mining operations, covering gold, silver and copper. With the caveat that junior miners are dependent on the success of their developing exploration activities and, as such, offer both high risk and high reward, we offer these four favorite mining plays.
“The stage is being set for the next big rally in gold stocks,” says resources expert Eric Roseman in his Commodity Trend Alert. “I know this current market is depressing, but there is light at the end of this tunnel – bright, screaming radiant light.”
Roseman predicts that over the next several weeks, “one of the most incredible rallies will take hold in the mining sector, as the U.S. dollar comes under renewed downside pressure amid lower short-term interest rates. In hindsight, the credit crisis in the mortgage-backed securities market will be a ‘gift’ for commodity investors.”
As to specific stocks, Roseman has added a new mining buy to his portfolio: Northgate Minerals Corp. (ASE: NXG), which has a market cap of $686 million. He explains, “The stock is trading just above its low and ripe for the plucking. Northgate is a rocket, (it) mines throughout the Americas (gold and copper) and has been on my radar for months. Now is the time to kick into action and buy.”
Copper catches the attention of Tom Bishop, who notes, “Taseko Mines Ltd. (ASE: TGB), with a market cap of $619 million, is going a little bit nuts, and has doubled since I picked this as my ‘stock of the year’ in January.”
The editor of BI Research notes, “I have been asked, 'Is this takeover speculation?' Well, it is possible in this environment of cash rich mining companies looking to add to reserves the easy way.”
Taseko was a recommendation in Bishop’s portfolio in the early 1990s, when it rose from $2 to $14 for a 600% gain. And now, the fundamentals are stronger; he notes, “Taseko is no longer hand to mouth. It is now enjoying taking the ball across the goal line itself and making itself a serious mining company.”
Looking ahead, Bishop sees strong growth prospects at the firm’s Gibraltar mine, as well as its Prosperity project. The latter, he explains, is “one of the, if not the, largest undeveloped gold/copper resource in Canada.” Even at current prices, he suggests, “Investors are arguably paying nothing for Prosperity and are just finally factoring in the pending doubling of capacity. The story is getting out.”
Curtis Hesler has been forecasting a decline in gold into seasonal lows in August. Now, he sees that happening and says, “You are likely going to hear a lot of bearish brouhaha about the metals now, which is also typical as gold begins to form a bottom.”
The editor of the Professional Timing Service says, “Selling will continue in financial assets, but freed up cash will begin to find a home in tangibles once reason finally overcomes emotion. The best place to have your money during bear markets has always been precious metals. You should be looking forward to a splendid rally in gold and silver during the late summer and fall.”
Hesler has recently added a new position to his model portfolio, Endeavor Silver Corp. (ASE: EXK). He observes, “They expect to produce 2.8 million ounces of silver and 7,500 ounces of gold in 2007. Their principal activities are in Mexico, with several interesting development projects in the works.” The advisor concludes, “This is a fine speculation on a junior silver producer - something that is not all that easy to find.”
Nick Jones, in the Penny Sleuth, adds, “if you’re like me and you expect the unwinding of the carry trade among credit and subprime concerns to be the equivalent of throwing gas on an already burning equities market, then gold and gold stocks are the way to go.”
Meanwhile, he suggests, “One small-cap company with tremendous potential to profit in the coming gold bull is U.S. Gold Corp. (ASE: UXG). The company is located in Nevada with its property “sandwiched between Barrick Gold and Newmont Mining, which happen to be the number one and number two gold mining companies, respectively, in the world,” Jones notes.
U.S. Gold, he adds, has recently acquired three other juniors in this region, increasing its land holdings to 170 square miles. According to Jones, the company’s current CEO and the former CEO of Goldcorp, Rob McEwen, is a man who is greatly respected in the mining world.
He points out that McEwen raised Goldcorp from a junior to one of the “most profitable gold mining companies in the world.” Jones concludes, “U.S. Gold, under the leadership of Robert McEwen, has potential to become a major gold producer. It’s certainly something to watch.”
