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speedybure (< 20)

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June 17, 2009 – Comments (3) | RELATED TICKERS: AEM , AUY , EGO


Unfortunately for mining giants like Barrick, Newmont, Anglo, Goldfields and a few others, they hit peak prodcution when gold prices were in the doldrums. The must layout relatively large capital to replace old mines via searching for new mines or the more practical method of aquiring those already in production. Don't get me wrong, I think there is money to made here, but I like the next generation of miners a whole lot more.

1) Yamana Gold recently became much better capitalized by divesting 3 high cost mines with production numbers that were nothing to write home about. They can now develop some of their mines that hold much higher and in one case blockbuster potential. Along with their ramp up with the Gualcamayo and Jacobina mine, which will propel them to nearly 2m ounces by 2012, will likely dramatically increase reserves in 2009, 2010+. Instead of waiting for their most proflific mines to reach peak production, this financing allows them two either make an aquisition, ramp up production ahead of schedule or develop mines in their pipeline ahead of time. Either way I expect Yamana to be a 3moz producer by 2015-2016.

2) Agnico- Yamana's canadian couterpart, who like Yamana, will be ramping up prodcution at a grueling pace nearing 2m oz in 2012 as well. They, however, have been increaing reserves at a faster pace and are located in one the most mindly friendly jurisdictions. I expect them to increase reserves as well, but at a great magnitude in addition to reaching 3m oz year first. They recently raised 900million, leading me to belive they are in the hunt to make an aquisition. It could also be to move ahead of schedule regarding other mines, but only time will tell.

3) Newmont Mining - Although a slow consistent grower, they are nearing 2m oz per year with potential catalysts in some high quality mines. I dont expect them to reach 3m oz, but 2.5m oz is very reasonable. They like Agnico operate in a very friendly mining environment.

4) Lihir Gold - I like this stock more and more and positive news contues to flow out in press releases. They have 6 positive quarters of increasing production after a few years of operating troubles. Their Lihir mine alone which has reserves of 23m oz proven, and im sure another 7-10 coming, is worth the 4 billion market cap Lihir currently sports. Lihir Island will produce 1.1m oz of gold this year, 1.2 m/oz next year and I believe over the next 3-4 year it will produce 1.5+ by itself!. Unlike a lot of miners, Lihir mines over 90% gold with little bi-product.  The Mid-Tier Group is perhaps the most lucrative in terms of risk/reward - and These are my favorite emerging Juniors/Mid-tier producers 

5) Jaguar- As you might have guess. 2008 saw them produce 280k oz, but that will soon change. By 2012, Jaguar projects production to ramp up to over 200% to a figure in the nieghborhood of 600-700k oz by 2012-2013. I think that may be an undershoot as they only hold 40m in debt and nearly that much in cash with untapped credit facilities.  

6) Redback- Recently aquired Moto Mines Congo operation which if successful will begin production late 2011. Redback already would have increased production from 200k a year to 700-750k a year by 2012-2013. Assuming this recent aquisition comes along as planned, Red back will produce 1m oz in 2012-2013 and 1.2-1.4m by 2015. They of course operate in africa thus justifying a higher dicount rate. 3)

7) El-Dordao gold - not a favorite of mine but does possess some attractive features. They are a low cost producer, in fact one of the lowest in the industry, at least for 2010. They also have some growth potential, reachin 600k oz around 2012, but from what I have read, barring any aquisition, the upside is rather limited in terms pf prodcution. 8

8) Some speculative picks that have gathered my attention are Centerra, Centamin, and Samafo. They operate is questionable areas, but my guess is one of them will come out shining. 

9) Kinross Gold- This is in betweener as they will surpass 2m oz this if everything goes according to plan.

10)Aurizon - I consider this a small mid-tier, but the valuation on this producing miner is enticing when coupled with the fact there lies plenty of upside potential.

11) Some others, although not my favorite are Gammon, Randgold, Alamos, IamGold. 

I have buy ratings on Auy, Aem, Jag, Auz 

3 Comments – Post Your Own

#1) On June 18, 2009 at 9:03 AM, RaceCoach (< 20) wrote:

Doesn`t the 226x PE of Aurizon concern you, or do you believe there is that much potential there.

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#2) On June 18, 2009 at 2:11 PM, speedybure (< 20) wrote:

where did you get 226 from? If it was from yahoo or google, its likely wrong as it is with almost every company. You need to take out such things as 1 times items, gains/losses on sale of assets and other extraordinary items. I adjust every companies earninigs as they often need adjusting. I never rely on those ratios, but if you do, using price to Enterprise value is a much better multiple as it takes debt into account. I just adjusted the earninigs for the TTM and it was 22m.(which includes one quarter of a non recurring item), but that aside 530m (current market cap)/ 22m = P/E ration of 25. 

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#3) On June 18, 2009 at 8:26 PM, RaceCoach (< 20) wrote:

With the 7.8% drop today, Google Finance has the P/E pegged at 208.  I agree that this is likely not corrected for any extraordinary items. I agree - debt and cash flow are critical components to the valuation. I will take a closer look. With today's drop, perhaps it's even more attractive.

http://www.google.com/finance?client=ig&q=TSE:ARZ

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