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Re: OhManIDied post# 68

Thursday, 01/15/2015 1:30:08 PM

Thursday, January 15, 2015 1:30:08 PM

Post# of 80
5 Of Our Favorite Gold And Silver Stocks For 2015

Dec. 30, 2014 8:55 AM ET - Seeking Alpha

Randgold meets the "best in class" standards with low costs, a clean balance sheet, and future gold growth which makes it one of our top picks.

Tahoe Resources is one of the few silver producers producing silver at a profit at sub-$20 silver and is clearly an industry leader in terms of profit margins.

Timmins Gold has a relatively clean balance sheet and has the possibility to re-rate much higher as investors digest their Caballo Blanco acquisition.

Exeter Resources owns one of the largest gold deposits in the world and offers acquirers a cheap target in an already popular mining district.

Bear Creek Mining is another "best in class" developer that owns one of the largest silver deposits in the world that is practical at today's silver price.

We released an earlier article (before the 2014 calendar year began) in which we picked our top four gold stocks for FY2014.

Our comparison index, the Market Vectors Gold Miners ETF (NYSEARCA:GDX), so far as brought investors a -15.7% return - another disappointing year for gold stocks. Three of our picks have pretty much tracked the GDX, with Pretium Resources (NYSE:PVG) earnings a positive 0.19% return (yes we know, BARELY positive). Richmont Mines (NYSEMKT:RIC) has significantly outperformed and its 201% return brought the average return of all four of our picks to 44% YTD (as of 12/29/14). That's often what you can expect in the mining sector as a portfolio's performance can be significantly impacted by the performance of a few of the positions.

With that we'll do the same thing for 2015 and offer investors our top 5 picks for 2015. We want to make sure we emphasize that with any "annual picks", and even more so mining, investors NEEDS to track the companies as news or events can significantly change the picture - these are not picks to be held through thick and thin. Based on the current environment, we feel that these picks would offer investors the best risk-reward, but that could change if the specific company situation changes - nothing is in stone here.

We'll try to mention, in an abbreviated fashion, what we like about the company and also the biggest risk for the company moving forward into 2015.

Pick #5 - Bear Creek Mining

We end with another speculative pick in Bear Creek Mining (OTCPK:BCEKF), but the difference is that unlike Exeter Resources, Bear Creek can actually develop its deposit independently given better market conditions. Bear Creek is another company that we've covered in quite bit of detail, but in summary it has one of the largest silver deposits in the world in Corani - and possibly the largest one not already owned by a major mining company (with the other large deposits requiring much greater initial capital costs than Corani). This makes Bear Creek a best-in-breed in terms of large, acquisition ready silver deposits.

Finally, Bear Creek also owns another Peruvian deposit named Santa Ana that offers extremely low cost silver paired with low initial capital costs - a perfect combination to generate cash flows to begin construction on the larger Corani mine. The problem with Santa Ana is that a few years ago the government revoked the company's permit, which ordinarily would cause us to completely discount and ignore the deposit. But recently a ruling by a Peruvian court returned the mineral concessions and the rights to operate the Santa Ana mine to the company, though Bear Creek is still awaiting the Federal government in the case. In fact, the company has filed for arbitration with the Federal government despite the fact that they are positive that they will be able to work with the government to find a positive solution.

The ruling should be expected shortly, and we are very optimistic it will be a positive catalyst for the company as they will either receive the ability to start the project or compensation for it. We feel that none of these things are factored into the $100 million enterprise value that the company currently trades for.

The biggest risk for Bear Creek is that the relations with the Peruvian government deteriorate. We don't think this is likely, but it is nevertheless a risk as both of the company's mines are located in Peru.

For a number of reasons that we went into detail in the above-mentioned article, we think Bear Creek will receive a positive ruling on Santa Ana and that will help add value to the company's shares as its total silver reserves will be around 400 million ounces. That will be pretty tempting for a number of silver producers (including a company looking to diversify like Tahoe), and considering the company is currently valued at $100 million (with $40 million in cash) - that is extremely cheap and affordable. Thus Bear Creek has the potential to increase in value regardless of what happens to the silver price - and if the silver price increases it would simply be gravy for the company.