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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Three Must Own Gold Mining Shares

Commodities / Gold & Silver Stocks Feb 23, 2010 - 07:33 AM GMT

By: Larry_Edelson

Commodities

Best Financial Markets Analysis ArticleDespite gold’s choppy trading range …

Despite the fact that it’s entering a period of short-term weakness and may even fall to just below $1,000 an ounce …

Everyone — and I mean everyone — should consider owning at least my top three gold mining shares.


Why? Here are just a few reasons …

A. Because the financial crisis is far from over. Indeed, it’s now in a new phase — a period where governments effectively go bankrupt, either by defaulting on their debt obligations outright, or, on the sly by devaluing their currencies.

B. Because our own Federal Reserve is seemingly dead set on a weaker U.S. dollar as well, no matter what the costs to the American people.

C. Because the U.S. government is flat broke, yet it continues to spend money as if it grows on trees (or more accurately, like they can print more of it at any time).

D. Because China is beginning to do what everyone from Main Street … to Wall Street … to Pennsylvania Avenue fears most: It’s starting to dump its holdings of U.S. Treasuries, dumping more than $34 billion in American IOUs in December, slashing its holdings for a second straight month, down a total of $45 billion from last November.

And …

E. Because there’s a great crisis in confidence brewing around the globe, where investors everywhere will eventually seek safety in gold — the one asset that has always, without fail, protected one’s wealth from the mismanagement of the state by the powers-that-be.

If you look closely at gold, you’ll see that even when the price of gold is weak in U.S. dollar terms, in terms of other currencies, it is often roaring to the upside.

Case in point: Right now, gold in U.S. dollars is trading at the $1,100 level — down roughly $127, or 10%, from its record high (in dollars) …

… but in terms of the euro currency …

Gold is exploding higher, reaching new, all-time record highs of more than 813 euros per ounce!

Moreover, the price of gold in euros has almost doubled in the last five years, outperforming nearly every investment on the planet.

Gold, in euros, at record highs!

You can see the price of gold in euros in the chart to the right.

Notice how, in euros, gold rose quite sharply from the middle of 2005 through the middle of 2009, gaining more than about 50%.

But then, after some consolidation and sideways trading in the latter part of last year, gold then exploded higher again, forming an even sharper uptrend than the previous liftoff.

The important concept to understand: When looking at an asset or asset class today, it is simply not enough to look at it in terms of one currency, particularly the U.S. dollar.

You must look at market action from additional perspectives, namely, other major currencies, to determine how that asset is performing on an international basis.

In this case, the action in gold in terms of euros is very revealing. The new record highs in euros tells me — without one single shred of doubt in my mind that …

1. Gold’s international bull market is very much intact.

2. When the euro currency starts to strengthen again, and the U.S. dollar starts to weaken again — gold in U.S. dollar terms will begin to look very much like the chart above. With the yellow metal blasting off to new record highs, probably doubling, just like it did in euros, and eventually reaching my minimum target of $2,300 an ounce.

All this is why I feel compelled to remind you, that even though gold is a bit weak right now in U.S. dollar terms — given everything that’s happening in the world — gold and gold shares are just about the best investment you can have in your portfolio to ensure your financial health and that of your loved ones.

Three Must-Own Gold Mining Shares

In previous columns, and in more detail in my Real Wealth Report, I’ve often reviewed what kind of physical gold holdings one should have: Ingots and bars, and gold Exchange Traded Funds.

But today I want to review my top three gold mining shares. These are shares I believe everyone should own, and for the long haul.

Bear in mind I cannot give you precise buy prices, timing signals, risk-reducing strategies, nor instructions on when to grab profits. All those specifics are reserved for active subscribers to Real Wealth Report. I’m sure you’ll understand.

Nevertheless, here they are …

Gold Miner #1: Agnico-Eagle Mines (AEM)

One of my favorite miners and one of the best managed miners in the world. Agnico has a long, stellar reputation of not hedging its gold reserves or production, meaning it can fully participate in gold’s long-term bull market.

Agnico’s total gold reserves now stand at a record 18.4 million ounces, and its important mining operations include …

arrow black Gold and the Brewing Crisis in Confidence  LaRonde; Quebec, Canada. Undergoing new development efforts and expected to produce 340,000 ounces of gold per year by 2013.

arrow black Gold and the Brewing Crisis in Confidence  Goldex; Quebec, Canada. Based on a nine-year plan in which gold will be produced at a rate of 175,000 ounces per annum at cash costs of around $230 per ounce.

arrow black Gold and the Brewing Crisis in Confidence  Kittila; Finland. With more than 5.6 million ounces of gold.

arrow black Gold and the Brewing Crisis in Confidence  Lapa; Quebec, Canada. Producing gold at less than $300 an ounce.

arrow black Gold and the Brewing Crisis in Confidence  Meadowbank; Nunavut, Canada. Current plans call for a nine year mining life with average gold production of 360,000 ounces per year at cash costs of $300 per ounce.

arrow black Gold and the Brewing Crisis in Confidence  Pinos Altos; Chihuahua, Mexico. A fertile gold project with 73 million ounces of silver, to boot.

arrow black Gold and the Brewing Crisis in Confidence  And more!

Moreover, Agnico just reported stellar fourth-quarter 2009 results, including …

arrow black Gold and the Brewing Crisis in Confidence  Net income of $47.9 million, or $0.31 per share, compared to net income of $21.9 million, or $0.15 per share a year earlier (Q4, ‘08).

arrow black Gold and the Brewing Crisis in Confidence  Record quarterly production of 163,276 ounces, 2009 total production, a record 492,972 ounces.

arrow black Gold and the Brewing Crisis in Confidence  Cash costs per ounce of gold mined: $347, making Agnico one of the lowest cost gold producers out there.

Gold Miner #2: Goldcorp (GG)

Another one of my favorites, this blue-chip gold miner is a low-cost, debt-free, unhedged gold producer with 10 mining operations, and 22.7 million ounces of proven gold reserves.

Important mining operations include …

arrow black Gold and the Brewing Crisis in Confidence  Red Lake; Ontario, Canada. Expected to produce more than 1 million ounces of gold by 2012.

arrow black Gold and the Brewing Crisis in Confidence  Porcupine; Ontario, Canada. With a 20-year mine life and expected production over 350,000 ounces per annum.

arrow black Gold and the Brewing Crisis in Confidence  Marlin; Huehuetenango, Guatemala. A cash cow for Goldcorp, with gold production costs of less than $200 an ounce, plus loads of silver credits, to boot.

arrow black Gold and the Brewing Crisis in Confidence  Los Filos; Guerrero, Mexico. Potentially Mexico’s largest gold mining operation, Los Filos should soon be producing 300,000 ounces of gold per annum at cash costs of under $300 an ounce. A 5 million ounce gold reserve base.

arrow black Gold and the Brewing Crisis in Confidence  Alumbrera; Catamarca, Argentina. One of the largest copper/gold mines in the world with the capacity to produce 180,000 metric tonnes of copper and 650,000 ounces of gold.

arrow black Gold and the Brewing Crisis in Confidence  Peñasquito; Zacatecas, Mexico. This property was Goldcorp’s motive for acquiring Glamis Gold back in 2006.

Gold Miner #3: Kinross Gold (KGC)

Kinross entered the gold mining industry as a junior producer in 1993. Throughout the rest of the 1990s the company thrived while many of its peers fell by the wayside as the price of gold continued to fall. 

Now Kinross is a major league miner, with nearly 51 million ounces of proven and probable gold reserves.

Some highlights from the company’s fourth-quarter 2009 results, released on February 17 …

arrow black Gold and the Brewing Crisis in Confidence  Fourth-quarter record production of 613,858 gold equivalent ounces, an increase of 12% over the same period last year.

arrow black Gold and the Brewing Crisis in Confidence  Full-year 2009 gold equivalent production was 2,238,665 ounces, a 22% increase over 2008.

arrow black Gold and the Brewing Crisis in Confidence  Record revenue of $699.0 million, a 48% increase over the $484.4 million in revenue in the fourth-quarter of 2008.

arrow black Gold and the Brewing Crisis in Confidence  Full-year 2009 revenue of $2,412.1 million, a 49% increase over full-year 2008.

arrow black Gold and the Brewing Crisis in Confidence  Gross profit margin averaged $530 per ounce in 2009, an increase of 22% year-over-year, compared with a 13% year-over-year increase in the average gold price.

Kinross’s important mining operations include …

arrow black Gold and the Brewing Crisis in Confidence  Kupol; Chukotka, Russia. A high-grade gold deposit cash cow for Kinross, expected to produce more than 550,000 gold equivalent ounces per annum, over a seven-year mining life, and at a low cash cost of under $250 per ounce.

arrow black Gold and the Brewing Crisis in Confidence  Fort Knox; Alaska. Discovered in the mid-1980s, this property has been a major gold producer since it went live in 1997 and is now Alaska’s largest gold mine.

arrow black Gold and the Brewing Crisis in Confidence  Round Mountain; Nevada. Produces more than 500,000 ounces of gold per year. A 50/50 joint-venture with Barrick Gold.

arrow black Gold and the Brewing Crisis in Confidence  Cerro Casale; Atacama, Chile. An exploration property that hosts one of the largest undeveloped gold and copper deposits in the world, with potential reserves of up to 23 million ounces of gold and 2.7 million metric tonnes of copper. Kinross recently entered into an agreement with Barrick Gold to sell half of its 50% interest in this property for $475 million.

These are just my top three gold mining shares.

There are several more. Details, including how to trade them even for short-term profits can be found in my Real Wealth Report.  To subscribe, consider a one-year membership. At just $99, it’s a bargain!

Best wishes for your health and wealth,

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

JR
24 Feb 10, 12:50
Junior Gold

Given the global economic circumstances gold seems to be a strong sector over the balance of this year. There is a buzz growing around a small cap company that has recently acquired the historic Tom Gold Mine in the Northwest Territories. The Yellowknifer Newspaper interviewed company president. The Tom Gold Mine was part of a two mine operation (Tom and Ptarmigan mine that milled with the infamous Giant Mine)

Article can be found here:

http://trivello.com/Repository/Home%20Page/yellowkniferarticle.pdf


John
27 Feb 10, 19:47
HOw to begin buying gold mining shares?

Hi Larry,

I love your easy to understand reports that eliminate all the double talk and sizzle just to sell a newsletter.

You seem to be the real deal with honest to goodness research. I only have about $10,000 I can invest. I have more money but I am so scared I feel the need to protect my wife by keeping cash. I have no more stocks or mutual funds nor insurance annuities. I am relying on SS and and a few gold coins hidden away. Is this a good bet for me?

Should I go open an account with Wells Fargo Bank and use Wachovia Brokerage to buy these Gold Shares? Even amounts?

thanks,

John


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