Gold And Precious Metals Miners Set To Explode

There are at least a dozen reasons why both Gold and the precious metals mining companies ought to correct, as outlined in this recent blog:  http://markostake.blogspot.com/2010/10/die-hard-markets.html.  But, at the end of the day, only market action itself matters, not "Marko's Take". (Gulp!)

In this morning's trading, the Gold Bugs Index (HUI) appears to have decisively broken the 525 zone that we outlined as the trigger point to begin its long awaited parabolic rise.  The situation reminds me of late 1999 when the Nasdaq was severely overbought and overvalued and yet doubled in a period of just a couple of months.  The difference, in this case, is that the mining sector is NOT OVERVALUED!

The kind of technical indicators discussed only handicap the race.  None of them is flawless.  It's important, therefore, to issue a mea culpa, accept reality as it is, not as we think it should be.

Given the increasing likelihood of an imminent upside explosion, what should investors do?  Fortunately, a whole slew of junior miners are still at incredibly attractive levels.  Among them are some favorites that we've written about in the past, such as ECU Silver Mining (ECUXF), Explor Resources (EXS.V), Seabridge Gold (SA), Hecla Mining Company (HL) and Avalon Rare Earth Metals (AVARF).  We will update research on these firms, however, their merits can be reviewed by clicking the links, below:

http://markostake.blogspot.com/2010/06/avalon-rare-metals-inc-rare-opportunity.html.
http://markostake.blogspot.com/2010/05/ecu-silver-mining-update-it-keeps.html.
http://markostake.blogspot.com/2010/04/exploring-explor-resources.html.
http://markostake.blogspot.com/2010/03/hecla-mining-at-119-years-old-producing.html.
http://markostake.blogspot.com/2010/03/seabridge-gold-how-to-buy-gold-for.html.

If you wish to do your own research, you may wish to review this piece, which outlines some of the key risk factors to consider in selecting any mining company:  http://markostake.blogspot.com/2010/06/some-considerations-for-selecting.html.

In terms of resources, you may wish to review this piece, which outlines all the places that are available to access http://markostake.blogspot.com/2010/09/information-is-more-than-power-its-gold.html.

Honestly, there are times when one prefers to be wrong, and this is one of them.

Time to make a ton of money!

Marko's Take

Newmont Mining Earnings Kick Off Great Season For Miners

Virtually every precious metals miner reported outstanding earnings for the 4th quarter (http://markostake.blogspot.com/2010/03/major-gold-producers-deliver-stellar.html).

As earnings season resumes, Newmont Mining Corp. (NEM) has given confirmation that exploding earnings are NO fluke.  In fact, the precious metals mining sector, on a fundamental basis, is looking downright cheap!

Tuesday morning, NEM said net income attributable to shareholders nearly tripled in the first quarter to $546 million, against $189 million in the year ago period.  On a per share basis, the company earned $1.11 in the period against 40 cents a year ago.

The company's adjusted profit was 83 cents per share.  A survey of analysts at FactSet Research was estimating earnings of 79 cents a share in the quarter.  The company said its average realized gold price rose 22%.  The company is maintaing its previously announced 2010 outlook for equity gold production of 5.3 million to 5.5 million ounces and costs applicable to sales of between $450 and $480 an ounce. 

The highlights of Newmont's first quarter report included gold production of 1.3 million ounces and copper production of 90 million pounds.  Revenues increased to $2.2 billion, up 46% from the similar quarter last year.

According to the company's press release, "With a 22% increase in our average realized gold price, our net gold operating margin expanded by 32% to $626 per ounce, further demonstrating our ability to provide significant gold price leverage through expanding cash operating margins," said Richard O'Brien, President and Chief Executive Officer. "We also recently secured the mining lease for our Akyem project in Ghana and continue our dialogue with local communities and Ghanaian authorities. In addition, we are advancing our development plans at Conga in Peru following a successful public meeting with local stakeholders. The strength of our balance sheet coupled with the progress being made on our advanced development assets, Newmont is well positioned to invest in our project pipeline while maintaining our financial strength and flexibility."

A missing element in prior rallies in the precious metals sector has been earnings growth, despite the large increase in Gold prices.  In large part this was the result of skyrocketing oil prices - a major cost element.  With energy prices hovering in the $80 per barrel range, while GOLD tests its all time highs, costs of production are easier to keep under control while revenues are shooting up with higher realized commodity prices.

Another important factor has been the unwinding of hedge books - something that nearly every major producer has either completed or is in the process of completing.  Poorly implemented hedges had reduced the major Gold Producer's benefit from rising metal prices and created significant derivative losses.  Now that the hedges are no longer putting a drag on revenues realized, the sector is poised to continue rapid earnings growth.

The technicals for the sector also look fantastic.  The dollar has been sputtering after a blistering rally early in the year.  In addition, the Federal Reserve's desperate attempts to keep the economy liquid are showing up in increasing inflation (http://markostake.blogspot.com/2010/04/producer-prices-producing-signs-of.html).

All systems are go.  The time for the hyperbolic growth phase is here.  Recently, we have written up some suggestions for some excellent junior mining companies that ought to be considered for those wishing to build a portfolio of promising positions.  Our reports on Aurizon Mines (AZK), Explor Resources (EXSFF), Vista Gold (VGZ), Tara Minerals (TARM), Samex Mining (SMXMF), Seabridge Gold (SA), Hecla Mining (HL) and ECU Silver Mining (ECUXF) can be accessed by clicking the links below:

http://markostake.blogspot.com/2010/04/risin-aurizon-mines.html
http://markostake.blogspot.com/2010/04/exploring-explor-resources.html
http://markostake.blogspot.com/2010/03/vista-gold-explorer-worth-exploring.html
http://markostake.blogspot.com/2010/03/tara-minerals-on-tear.html
http://markostake.blogspot.com/2010/03/samex-mining-grand-slam-ex.html
http://markostake.blogspot.com/2010/03/seabridge-gold-how-to-buy-gold-for.html
http://markostake.blogspot.com/2010/03/hecla-mining-at-119-years-old-producing.html
http://markostake.blogspot.com/2010/02/ecu-silver-mining-as-good-as-it-gets_7745.html

Marko's Take

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Exploring 'Explor' Resources

Now that we have an "all clear" signal that the precious metals sector is poised to resume its long awaited next leg up, we're going to continue to feature junior mining companies of merit.  Today, we'll feature Explor Resources Inc (EXSFF or EXS.V).  The company's website can be found here (http://www.explorresources.com/).

Explor Resources Inc. is a gold and base metals exploration company with mineral holdings in Ontario, Quebec and Saskatchewan.  The company is currently focused on exploration in the Abitibi Greenstone Belt of Ontario and Quebec, where more than 180 million ounces of gold and more than 450 million tons of Copper/Zinc ore have been found to date by other adjacent miners.  Explor's total land position in the Abitibi Greenstone Belt is approximately 10,434 hectares.  Explor also owns 1,991 hectares of mining claims in Saskatchewan and 250 hectares in New Brunswick.

While Explor remains relatively unknown, it was recently added to the TSX Venture exchange.

The company also has significant land holdings in other promising areas, including the Timmins Porcupine West Gold Property, the Eastford Lake Gold Project and controls substantial claims in Saskatchewan along the La Ronge Gold Belt, which has produced more than 600 thousand ounces of Gold and 63 million pounds of Copper from adjacent, existing mines.

As an explorer, the company should be viewed in light of its assets.  At its recent stock price of 60 cents, Explor has a minute market capitalization of about $50 million.
 
The company has no debt and has successfully raised funds in a private placement late last year to fund ongoing exploration activities.  On December 17, 2009, Explor completed an offering which resulted in new capital of nearly $7 million.
 
Explor is NOT for the feint of heart.  The stock is extremely volatile and prone to large, sudden moves.  In late 2008, Explor traded for less than 10 cents per share, then climbed to $1.50 by March, 2010.  Since its March peak, the stock suddenly plunged to below 60 cents per share in about 2 weeks!
 
If Explor is part of your portfolio, it would be highly important to make sure you remain properly diversified.
 
Here's to hoping you "explore" and find new riches in the imminent parabolic move in junior precious metals companies.
 
Marko's Take
 
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