Gold Miners: Sorting out the Best

Gold is one of my favorite metals.  I have been following, researching, and successfully trading and investing in gold, gold stocks and options for many years.  The last ten years have been a traders dream.  In two out of the last four years I have more than doubled my trading account.  There are very few segments of investing that I know of that have done as well over that period of time.  In each of those ten years the price of gold has been higher at the end of the year than at the beginning of that year.  In some cases the appreciation has been over 30%, and one could have done much better than that if gold was bought on the dips.

The Big Guys (Large Caps)

I used to like GoldCorp (GG) before the merger with Glamis, but the results of combining two low production cost stocks have not been impressive.   Newmont Mining (NEM) and especially Agnico-Eagle Mines (AEM) have not performed well lately but are still good stocks if you like the large caps .   I do not like Barrack Gold (ABX).  ABX management sold forward a large portion of their gold until 2009.  In 2009 they issued 81 million shares to raise 3 billion dollars.  The estimate is they spent 1.9 billion to eliminate all of their hedges which was a waste of money and drain on the earnings of the company.  Their stock is only up 3% for the last year while gold soared.

Relatively Smaller Caps

Some of my favorites are Yamana Gold (AUY), Jaguar Mining (JAG) and New Gold (NGD).  They have performed very well lately and are relatively small compared to Barrick’s 49 billion market cap.  Most of the time the smaller cap stocks perform better than large caps.  It is much easier to double your profit when your profit is low to begin with.  A company like Barrack would have a difficult time doubling it’s bottom line.  Here is a Yahoo 1 year chart my 3 best performers.

Eldorado Gold (EGO), Kinross Gold (KGC), and Northern Dynasty Minerals (NAK) are all good stocks too.  The first 2 are companies with working mines.  The third is not in operation yet.  NAK is located in Alaska and is in the process of getting permits and putting infrastructure in place.  It is one of the largest gold (and other metals) mining sites in the world.  The estimates of metals in the ground are enormous, but it is not producing anything yet.  This is a very volatile stock which offers fantastic appreciation.  I bought this stock at $2 a few years ago and watched it go to over $20.  It has been hit extremely hard in this latest gold downturn, but I expect it to take off again.  This would be my favorite stock to try to hit a home run.

EGO, and KGC  are not buys at the moment, but I would keep my eye on them.   In my next post I will give an overview of silver stocks.