23 July 2009

Buying Gold stocks on the dips proves a winner...

Stellar performance of $45bn gold supergroup

These 100 selected gold stocks have risen by an average of 468% since late in 2008; the top runner has climbed more than 10,000%.
Author: Barry Sergeant
Posted: Wednesday , 22 Jul 2009

JOHANNESBURG -

Most of the world's bigger gold stocks look like serious plodders compared to some of the spectacular stock price increases put in by smaller gold stocks, not least Ventana Gold, which has risen by more than 10,000%. A selection of the 100 "hottest" performing listed gold stocks around the world indicates a rise of 468%, on a value-weighted basis, from stock price lows, typically seen during the closing months of 2008.

The 100 stocks, which carry an aggregate value of $45.12bn, contain a good number of names that can hardly be rated as "penny stocks". Seen as a grouping, these 100 stocks boast the highest return over the past while, among any known global subgrouping. A far broader measure of gold stocks, with an aggregate value of $292bn, have "bounced" from lows by a more modest 171%, measured on a weighted average basis.

The latter number outpaces somewhat the value-weighted 142% bounce recorded by the world's 100 most valuable miners. The broader logic from the numbers confirms that bigger gold names weigh down the average; the 14 Tier 1 gold diggers have recorded an average bounce of 145% from lows, with Barrick, the biggest by value and production, lagging with 106%.
STOCK GROUPS
Value
From
From


USD bn
high*
low*

Top 100 global miners
1417.90
-37.4%
141.9%

100 hottest gold stocks
45.12
-18.9%
467.9%

Silver stocks
21.13
-35.2%
261.4%

Oil stocks
2412.96
-29.1%
54.4%

S + P 500 Energy
1051.53
-36.8%
41.7%

Zinc stocks
30.79
-22.5%
252.1%

Copper stocks
105.21
-35.8%
249.4%

Gold stocks
292.22
-25.4%
171.4%

Gold ETFs
47.58
-16.0%
30.9%

Uranium stocks
27.76
-30.0%
159.0%

Paper stocks (60)
58.90
-41.1%
106.9%

Shipping stocks (32)
36.14
-59.0%
105.8%

World banks (80)
2837.86
-38.8%
120.4%

Dow Jones Industrial
3000.37
-28.8%
44.6%

* 12-month




Source: market data; analysis by Barry Sergeant



Looking at the "hottest" list, an immediate word of caution is that speculators (and perhaps the odd investor) which dabble in and around this subsector confirm an eternal fickleness, where loyalty is forever yesterday's jaded drumstick. Take Novagold, which owns world class deposits, including Alaska's Donlin Creek, a 50:50 joint venture with Barrick. While a decision to build this mine remains pending, the venture's current 29.3m ounce reserve base indicates a life, according to a feasibility study, of at least 20 years, with gold production for the first 12 full years averaging nearly 1.5m ounces a year, a number achieved by few gold mines anywhere.

Novagold's stock price fell to half a Canadian dollar late in 2008, 95% below its earlier high of CAD 10.00 a share, and more than that from levels of CAD 20.00 a share seen in both 2006 and 2007. While the stock price recently made CAD 6.00 a share, a 12 times multiple from recent lows, the price has now moved below CAD 5.00 a share. A number of top performing gold stocks that fall into the Novagold type category - through each has its own story -include Frontier Mining, New Dawn, Colombia Goldfields, Azteca Gold, Mano River, Appleton Exploration, Trilliant, Yukon-Nevada Gold, High River, Oroco Resource, PanAust, Luiri Gold, Elray Resources, Reunion Gold and Midway Gold.

These stocks are not for widows and orphans. There has even been some recent net selling of Ventana Gold, which this year has published a series of high grade drill intercepts from the La Mascota mineralized zone on its flagship La Bodega gold property in Colombia. At least one analyst has mentioned a price target of C$10.00 a share for Ventana, not least on the back of a projection of 550,000 ounces of gold production a year at total cash costs of just $295 an ounce.

This could turn out to be another proverbial ship in the night; Greystar, which has long proven up a resource of more than 10m ounces of gold, and more than 60m ounces of silver, at Angostura, also in Colombia, is languishing 44% below its stock price highs. Greystar carries a market value of $172m, considerably less than the $375m carried by Ventana.

Either Greystar is undervalued, or Ventana is overvalued, but not both. Ventana's market value is close to half the number alongside Novagold's name. The roving bubble-herd mentality, and sometimes what seems like temporary insanity, sometimes grips junior gold stocks and was seen classically this week, when Ventana announced that it had "not sold any common shares" in Ventana to 63X Master Fund, of Grand Cayman; 63X had earlier announced that it had bought just over 10% of the issued shares in Ventana from Ventana itself. Press pause and replay?

Top notch drilling results remain, as always, a consistent theme among the pecking order of "hottest" gold stocks; in Australia, Sandfire Resources has seen a gain of nearly 4,000% in its stock price on the back of drill results at DeGrussa prospect, part of the 100%-held Doolgunna project. DeGrussa may be primarily copper, but it has associated gold, silver, zinc and palladium. In Canada, Queenston Mining has also moved substantially on drill results, including recent news from its 100% owned Upper Beaver property in Kirkland Lake, Ontario. Shield Mining, busy in Mauritania, also fits into the great drill results category.

Another strong theme has continued to emerge with the rise of gold stocks active in Africa, after last month's bid by Red Back for Moto Goldmines was last week countered by a joint bid of nearly $500m from Randgold Resources and AngloGold Ashanti. African and Africa-related names that have put in sterling performances this year include La Mancha Resources, Pelangio, PMI Gold, Avion Resources, Shield Mining, Ampella Mining, Sunridge Gold, Keegan Resources, Cluff Gold, Gryphon Minerals, Nevsun, Helio Resource, African Queen, Adamus Resources, and Golden Star.

Names involved in potential or actual corporate activity tend to rank among top performers; beyond Moto, the likes of Klondex Mines and Paramount Gold can be mentioned; likewise, potential favourite takeover targets that have risen to the top include Seabridge, San Gold, Allied Nevada, Lake Shore Gold, Osisko, Medusa, US Gold Corp., West Timmins, and Norseman Gold, not to forget evergreen favourite Andean.

A more recent trend, supported by broad Chinese stock market indices such as the CSI 300 and Shanghai Composite riding at 12-month highs, has seen Chinese miners turning in excellent performances, in the gold arena, in the shape of the likes of Shandong Gold, Zhongjin, Zhaojin, and Canada-listed Mundoro. There have also been some stellar recoveries in prices for stocks operating in the Russian region, as seen in the case of JSC Polymetal, and Peter Hambro, and also in the Asian region, as seen in the cases of Centerra and East Asia Minerals.
100 SELECTED GOLD SUPER-PERFORMERS



Stock
From
From
Value


price
high*
low*
USD bn

Ventana Gold
CAD 5.16
-18.1%
12800.0%
0.375

Sandfire Resources
AUD 2.02
-1.0%
3940.0%
0.139

Frontier Mining
GBP 0.05
-63.3%
3500.0%
0.031

Norseman Gold
GBP 0.37
-8.7%
2350.0%
0.104

La Mancha Resources
CAD 0.78
-27.8%
1850.0%
0.100

New Dawn
CAD 0.92
-50.3%
1740.0%
0.024

Century Mining
CAD 0.16
-44.6%
1450.0%
0.024

Pelangio
CAD 0.37
-14.9%
1380.0%
0.029

Australian Solomons
CAD 0.35
-28.1%
1280.0%
0.040

West Timmins
CAD 1.67
-4.0%
1184.6%
0.202

Underworld
CAD 1.58
-40.2%
1115.4%
0.040

PMI Gold
CAD 0.11
-47.6%
1000.0%
0.012

Novagold
CAD 4.81
-51.9%
912.6%
0.795

East Asia Minerals
CAD 1.14
-13.0%
850.0%
0.052

Avion Resources
CAD 0.33
-28.3%
842.9%
0.062

Golden Odyssey
CAD 0.18
-25.0%
800.0%
0.008

Colombia Goldfields
CAD 0.09
-85.0%
800.0%
0.009

Romarco
CAD 0.80
-13.0%
788.9%
0.198

San Anton Resource
CAD 0.27
-30.3%
783.3%
0.025

Regis Resources
AUD 0.55
-14.1%
773.0%
0.110

Evolving Gold
CAD 1.17
-13.3%
735.7%
0.089

Shield Mining
AUD 0.15
-21.1%
733.3%
0.008

Moto Goldmines
CAD 5.47
-2.0%
728.8%
0.539

US Gold Corp.
USD 3.04
-0.3%
700.0%
0.319

Oceanagold
AUD 1.20
-15.5%
700.0%
0.158

Ampella Mining
AUD 0.34
-14.1%
679.1%
0.035

Azteca Gold
CAD 0.16
-72.3%
675.0%
0.025

JSC Polymetal
USD 7.60
-17.8%
660.0%
2.394

Laurentian Gold
CAD 0.19
-32.1%
660.0%
0.004

Mirasol Resources
CAD 0.30
-20.0%
650.0%
0.008

Sunridge Gold
CAD 0.45
-40.8%
650.0%
0.025

Mano River
CAD 0.08
-60.5%
650.0%
0.022

Olympus Pacific
CAD 0.30
-18.1%
637.5%
0.067

Keegan Resources
USD 2.64
-34.0%
632.7%
0.075

Appleton Exploration
CAD 0.15
-78.4%
625.0%
0.004

PC Gold
CAD 0.79
-21.0%
618.2%
0.021

Centerra
CAD 6.40
-17.5%
611.1%
1.358

Zhaojin
HKD 13.08
-11.7%
603.2%
0.738

Tanami Gold
AUD 0.04
-20.5%
600.0%
0.101

Trilliant
USD 0.35
-86.0%
600.0%
0.032

Greystar
CAD 3.61
-44.0%
581.1%
0.172

Archipelago
GBP 0.14
-49.1%
575.0%
0.068

Queenston Mining
CAD 4.98
-3.1%
555.3%
0.259

Klondex Mines
CAD 1.95
-8.0%
550.0%
0.047

Paramount Gold
USD 1.43
-25.5%
550.0%
0.119

Yukon-Nevada Gold
CAD 0.13
-88.5%
550.0%
0.037

Coral Gold
CAD 0.64
-36.0%
540.0%
0.014

Colossus Minerals
CAD 2.74
-25.5%
537.2%
0.143

Fresnillo
GBP 5.88
-20.7%
531.7%
6.906

Medusa
AUD 2.59
-6.5%
531.7%
0.355

Zhongjin
CNY 64.58
-4.2%
523.1%
7.475

St Andrew Goldfields
CAD 0.40
-31.0%
515.4%
0.117

Guyana Goldfields
CAD 3.75
-13.8%
514.8%
0.221

High River
CAD 0.25
-85.1%
512.5%
0.144

Oro Gold Resources
CAD 0.70
-33.3%
508.7%
0.038

Claude Resources
USD 0.72
-25.0%
500.5%
0.070

Carpathian Gold
CAD 0.30
-14.3%
500.0%
0.063

Brazauro
CAD 0.60
-18.9%
500.0%
0.046

Moneta Porcupine
CAD 0.15
-21.1%
500.0%
0.014

Golden Star
USD 2.32
-13.8%
480.0%
0.496

Plexmar Resources
CAD 0.15
-32.6%
480.0%
0.021

Temex Resources
CAD 0.26
-58.1%
477.8%
0.018

Catalpa Resources
AUD 0.11
-12.5%
452.6%
0.100

Cluff Gold
GBP 0.56
-12.2%
443.9%
0.107

Gryphon Minerals
AUD 0.32
-12.3%
442.4%
0.043

Mundoro
CAD 0.80
-5.9%
433.3%
0.028

Molycor Gold
CAD 0.08
-36.0%
433.3%
0.005

Nevsun
CAD 1.85
-9.3%
428.6%
0.215

Orocobre
AUD 0.72
-10.0%
421.7%
0.039

Helio Resource
CAD 0.78
-22.0%
420.0%
0.046

Silver Lake Resources
AUD 0.67
-24.7%
415.4%
0.084

Anglo Swiss Resources
CAD 0.34
-28.7%
415.4%
0.034

Anfield Ventures
CAD 1.80
-29.1%
414.3%
0.041

Osisko
CAD 7.05
-6.6%
403.6%
1.661

Oroco Resource
CAD 0.15
-63.4%
400.0%
0.004

Western Copper
CAD 1.01
-36.9%
392.7%
0.066

Iamgold
USD 10.74
-6.7%
383.8%
3.940

African Queen
CAD 0.29
-27.5%
383.3%
0.010

PanAust
AUD 0.38
-56.7%
380.8%
0.716

Lake Shore Gold
CAD 2.88
-7.1%
380.0%
0.555

Luiri Gold
CAD 0.12
-67.6%
380.0%
0.005

Shoreham Resources
CAD 0.19
-53.7%
375.0%
0.009

Chalice Gold
AUD 0.33
0.0%
371.4%
0.020

Shandong Gold
CNY 61.48
-6.3%
365.8%
6.404

Elray Resources
USD 0.23
-84.7%
360.0%
0.013

Intrepid Mines
AUD 0.37
-13.1%
356.3%
0.127

Allied Nevada
CAD 9.23
-9.1%
348.1%
0.478

Radius Gold
CAD 0.16
-44.6%
342.9%
0.008

Reunion Gold
CAD 0.11
-73.8%
340.0%
0.005

Rubicon Minerals
USD 3.06
-6.7%
337.1%
0.453

Andean
AUD 1.85
-13.6%
335.3%
0.772

Alexco Resources
CAD 2.25
-28.3%
332.7%
0.088

Seabridge
CAD 32.44
-4.6%
332.5%
1.097

Imperial Metals
CAD 4.00
-50.9%
330.1%
0.116

Adamus Resources
AUD 0.43
-10.4%
330.0%
0.059

San Gold
CAD 2.45
-4.3%
329.8%
0.570

Dragon Mining
AUD 0.06
-33.3%
328.6%
0.036

Golden Goose
CAD 0.30
-36.2%
328.6%
0.013

Midway Gold
CAD 0.77
-57.2%
327.8%
0.054

Peter Hambro
GBP 6.61
-41.4%
323.7%
1.854

Averages/total

-29.1%
791.3%
45.117

Weighted averages

-18.9%
467.9%


* 12-month





Source: market data; table compiled by Barry Sergeant





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