Insights: Bullish Gold Mining Stocks
The return of the gold trade -- Buy the miners• Gold prices. Gold is breaking above major resistance in the $1,360-$1,370 range following a 6-year basing pattern. Additionally, volume is confirming the breakout. We believe this breakout marks the return of the gold trade; gold's basing pattern implies a minimum price target of $1,650 -- roughly 20% upside from current levels.
• U.S. dollar. Over the past month we have highlighted what we believe to be a rising wedge pattern on the U.S. dollar index (DXY), a pattern we believe will result in a breakdown below support at the 200-day moving average. With gold a major beneficiary of a weaker dollar, we believe this will be another tailwind for the gold trade.
• With gold prices moving higher, the gold miners are likely to have outsized gains. The VanEck Vectors Gold Miners ETF (GDX) depicts this opportunity, as widespread price and relative strength bottoms are evident for both the ETF and many of its constituents. We view this as a timely entry point to add exposure to the gold miners.
• In today's report we highlight the following actionable names, many of which have dual-listings in the U.S. and Canada: Barrick Gold (GOLD-US, ABX-CA), Agnico Eagle Mines (AEM-US, AEM-CA), Kirkland Lake Gold (KL-US, KL-CA), Royal Gold (RGLD), Northern Star Resources (NST-AU), Kinross Gold (KGC-US, K-CA), Alamos Gold (AGI-CA), Saracen Mineral Holdings (SAR-AU), Detour Gold (DGC-CA), SSR Mining (SSRM-US, SSRM-CA), and Premier Gold Mines (PG-CA).
Agnico-Eagle Mines is a gold mining company with mining operations in Canada, Mexico and Finland. Co. earns a proportion of its revenues from the production and sale of gold in both dore bar and concentrate form. The remainder of revenue and cash flow is generated by the production and sale of byproduct metals. The revenue from byproduct metals is mainly generated by production at the LaRonde mine in Canada (silver, zinc, copper and lead) and the Pinos Altos mine in Mexico (silver).
Alamos Gold is engaged in the exploration, mine development, and the mining and extraction of precious metals, primarily gold. Co.'s s primary asset is the Mulatos Mine and holds the mineral rights to the Salamandra group of concessions in the State of Sonora, Mexico, which includes several known satellite gold occurrences.
Barrick Gold is engaged in the production and sale of gold, as well as related activities such as exploration and mine development. Co. also produces copper and hold interests in oil and gas properties located in Canada. Co.'s mining operations are concentrated in three regional business units: North America, South America and Australia Pacific. Co. also hold a 73.9% equity interest in African Barrick Gold plc that owns gold mines and exploration properties in Africa. Co.'s copper business unit contains producing copper mines located in Chile and Zambia; and a mine under construction located in Saudi Arabia.
Detour Gold is a Canadian gold producer engaged in the acquisition, exploration, development and operation of mineral property interests. Co.'s primary asset is the Detour Lake mine where the first gold pour occurred in Feb 2013 after 27 months of construction.
Kinross Gold is engaged in the mining and processing of gold and, as a by-product, silver ore and the exploration for, and the acquisition of, gold bearing properties in the Americas, the Russian Federation, West Africa and worldwide. As of Dec 31 2013, Co.'s proven mineral reserves for gold and silver were 1,122 ounces and 1,179 ounces respectively.7,883 7,883 7,883
Kirkland Lake Gold is a Canadian gold mining and exploration company with three producing mines in Australia: the Fosterville Gold Mine and the Stawell Gold Mine in the State of Victoria and the Cosmo Gold Mine in the Northern Territory. Co. also has a portfolio of development opportunities on its significant land package, including the Big Hill Project at Stawell and various projects in the Northern Territories. In addition, Co. owns title to a mining lease located in north-central Newfoundland, Canada.
Northern Star Resources is a production and exploration company with a mineral resource base and ore reserves located in regions of Western Australia and the Northern Territory. Co. has six operating segments: Paulsens, Western Australia, Australia, which is engaged in mining and processing of gold; Kundana, Western Australia, Australia, which is engaged in gold mining; Kanowna Belle, Western Australia, Australia, which is engaged in mining and processing of gold; Jundee, Western Australia, Australia, which is engaged in mining and processing of gold; Tanami, Northern Territory, Australia; and Exploration, which is engaged in exploration and evaluation of gold mineralization.
Premier Gold Mines is a Canadian-based mineral exploration company, focused on exploring for and developing gold deposits within the Americas. Co. has a portfolio of advanced-stage gold exploration properties in Northwestern Ontario, Canada and a joint venture in Mexico.
Royal Gold acquires and manages precious metal streams, royalties and similar interests. The company acquires existing stream and royalty interests or finances projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in mining projects that provide the right to a portion of revenue or metals produced from the project after deducting specified costs, if any.
Saracen Mineral Holdings is engaged in mineral development and exploration. Co.'s subsidiary, Saracen Gold Mines Pty Limited, is engaged in the exploration, production and administration relating to the Carosue Dam operations. Co.'s other subsidiary, Saracen Metals Pty Limited, is engaged in Co.'s exploration, development, production and administration relating to the Thunderbox operations. As of June 30 2016, Co. had total ore reserves of 26.4 million tonnes.
SSR Mining is engaged in the acquisition, exploration, development and operation of silver-dominant resource properties located in the Americas. Co.'s strategic focus is to optimize the production of silver from its Pirquitas mine in Argentina, and to advance other principal development and exploration projects including San Luis in Peru, Diablillos in Argentina, and Pitarrilla and San Agustin in Mexico. In addition to its principal projects, Co. holds a geologically-diverse portfolio of other predominantly silver projects in various stages of exploration.
Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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