Junior Gold Miners I Like

In this post I give you the "good stuff", the results of my fundamental analysis of Jr Producing Gold Miners. I have been keeping this list up-to-date with information from the companies as they produce it, but have not spent a lot of effort searching for new names. The ones I like are so undervalued that they should very likely produce very good returns provided my macro view is correct. That view is that the price of gold should be well-supported at current levels.

I believe that the combination of due-diligence effort summarized in these tables together with an ability to invest in these smaller companies and my hopefully on-target macro view is my "edge", what allows me to expect superior investment returns. Of anything I put on this web site, this is what I think has the most value. My entire portfolio is invested in the stocks covered in this post.

The following charts are all based on last Friday's prices and assume $1000/oz gold and $16/oz silver.

Here's the table for "mainstream", well-run, mid-tier producers that I compare my holdings (and candidates for holding) to. These are Alamos Gold, Minefinders and New Gold. As you can see, at the assumed gold and silver prices these miners have very attractive price to EBTDA (and price to operating income) ratios. The stocks I like (and hold) are all even more attractive.

The table that follows has my favorite gold miners. Each of these holdings constitutes more than 10% of my investment portfolio. As you can see, they are all undervalued relative to the reference miners above. They all can expect, if they meet their guidance, to "grow up" to the same relative size as the reference miners and eventually receive a comparable valuation.

Gold Resource Corp (GORO.OB) - my top holding. I really love the superior ore grades (which should result in a very-low cash-cost) and the stock-holder friendly management which is "targeting" one-third of operating cash-flow to dividends.

Troy Resources (TRY.TO) - I really like the stock-holder friendly management which has a record of delivering dividends to its stockholders.

Dynasty Metals And Mining (DMM.TO) - Dynasty has superior rocks (ore-grade) and a lot of it. I know there is political risk with its Ecuador location, but I think the valuation overestiamtes that risk.

Oceana Gold (OGC.TO) - While having significant debt, I like Oceana Gold purely on the basis of its valuation. Where else can you find an estimated price to EBTDA ratio of 1.5 from a mid-tier producer.

Here's the stocks that I hold, but which I have smaller holdings. I find each of them attractive, but not as attractive as my favorites above. The stocks are Minera Andes (MAI.TO), Apollo Gold (AGT, APG.TO), La Mancha Resource (LMA.TO) and Semafo (SMF.TO).

Finally, here are some other miners I like but do not hold. The three I'm watch most closely are CGA Mining (CGA.TO) which isn't quite undervalue enough, B2 Gold (BTO.TO) where I don't like the political risk associated with their exploration properties and Rusoro Mining where I don't like the political risk of Venzuela. I used to hold Capital Gold Corporation (CGC.TO) and Castle Gold (CSG.V), but I have given up on their "growing up" and getting the same kind of valuation the reference miners get.

I hope you find this post of use. I've shared my best stuff with you.

Leave me a comment if you think I left out your favorite holding and give me a profile of what you really like about your favorite.

MontyHigh, www.worldofwallstreet.us

P.S., This post does not constitute an investment recommendation. Every one should do their own due-diligence before investing, especially in relatively risky Jr mining companies like these.

Comments

[kingscorpion]

Avion gold is a junior gold company producing gold at a rate of 50000 ounces of gold in 2009 Curretly the company is about to release news on upgrading gold production capacity to 1000000 in 2010 and 200000 in 2011 and 12 as well as upgrading gold reserve and making it 43-101 compliant Cannacord Adams has a very conservative target price of $1.30 If the 43-101 gold reserves come up more than anticipated the shares will surge dramatically. It is so far the chepest stock around sitting at .64c and trading 2.6x to cash for 2010 aand 2.2x to cash for 2011 with the most upside potential It has no depth Recently 3 companies were involved in a bought deal of 50mil shares

[MFK]

Hi, this is a good overview about good companies. Could you please explain a little more the ratios which are given in the table for 2010? Could yoz explain it for one company in detail? THANKS!!!

[Irish Pat]

Have a look at Mexoro (otcbb;mxom). Going into production shortly aiming at 30,000 ozs per year at $300 per ounce. Market cap of $20 ml which should be exceeded by first year profits alone. Bad liquidity and hard to get much news on it but has plenty of exploration potential on plot and looks like a smaller version of goro.

[Alex]

Thanks for your blog - been keeping up with it for several months - great work. Like Andy, been following Avion - very interesting company - in production starting early '09 but they do not show up on hardly any of the jr producer lists that float around on the net.

[Melrune]

Take a look at Gold Wheaton. This company is just now starting to show very good cash flow with lower risk than the normal average miner.

It is also trading at a significant discount vs peer (Silver wheaton, Franco Nevada, International Royalties, etc...).

Let me know what you think.

On the other side, my favorite miner is Gold resource and I`m just wondering if the recent runnup make it now too expensive (even if it is still looking very attractive especially that they are planning to grow the production up to 177K ounce per year in 2011...).

[Andy]

Take a look at AVR (Avion Gold) and Resolute Mining (ASX)...I think you will like it :-)
Greetings from Germany Andy