Altera Corporation (NASDAQ: ALTR) Cut to Neutral at Baird.
Bank of New York-Mellon (NYSE: BK) named as Bear of the Day at Zacks.
Broadcom Corporation (NASDAQ: BRCM) Raised to Outperform at Baird.
Cell Therapeutics, Inc. (NASDAQ: CTIC) named as Bull of the Day at Zacks.
Clearwire Corporation (NASDAQ: CLWR) was Underperform and has been dropped from coverage by BofA/ML as fundamentals are not driving the shares.
ConocoPhillips (NYSE: COP) Reiterated Buy with $85 target on Focus List at Argus.
Dollar General Corporation (NYSE: DG) reiterated strong buy as Momentum stock of the day at Zacks.
Gold Fields Limited (NYSE: GFI) named as Value stock of the day at Zacks.
Hatteras Financial Corporation (NYSE: HTS) Cut to Neutral at Macquarie.
The Kroger Co. (NYSE: KR) Cut to Hold at Jefferies.
NetEase.com, Inc. (NASDAQ: NTES) Raised to Overweight at Piper Jaffray.
Novavax, Inc. (NASDAQ: NVAX) Started as Buy at Ladenburg Thalmann.
Rackspace Hosting, Inc (NYSE: RAX) Raised to Buy at Goldman Sachs, but reportedly Downgraded to Hold at a firm called Benchmark.

JON C. OGG

The world’s fourth-largest gold producer posted net earnings for the June quarter of $186 million, against $158 million in the March quarter. Cash-operating cost increases of 6% (to $816 per ounce) were offset by gains in production and gold prices of 5% (to 872,000 ounces) and 7.7% (to $1,496 per ounce).

Gold Fields has quality gold reserves of some 77 million equivalent ounces, with eight operating mines in Ghana, Australia, Peru and South Africa capable of pumping out about 3.6 million ounces in annual production.

Though the company has a diverse global growth pipeline, with four major projects in resource development, plans to grow annual production to 5 million ounces by 2015 are underpinned on expanding base load capacity in South Africa, home to its biggest and longer-lived mines. The KDC, Beatrix and South Deep complexes — average mine lives of 18, 13 and 42 years, compared with 5.5 years in Australia or 15 years in Peru — produced in the aggregate 446.6 million ounces of gold, or 51.2% of total processed output in the quarter ended June 30.

Operating Costs Are Rising in Largest Production Areas

However, the richest of these shafts are aging, with some veins from KDC 50 to 75 years old! Ramping up production at these world-class mines requires the miners to dig deeper — more than two miles down in many places — to find more gold. Consequently, total notional costs (extraction, general and administrative and capital expenditures) are rising. Weighted-average total costs at the South African operations have increased to $1,401 per ounce, double the cost of two years ago.

Increasing transport distance costs are being compounded by rising energy costs. Electricity costs as a portion of Gold Fields’ total operating costs are expected to rise from 12% to an estimated 20% in the next few years, due to power tariff increases (averaging 25%) granted last fall to utility companies.

Labor-related costs could continue to pressure margins too. A recently settled miners’ strike in South Africa will see wages climb from 7.5% to 10% in the next two years.

Additionally, Gold Fields could see employee-related costs skyrocket due to a little publicized ruling by the high court last spring. In March 2011, the South African Constitutional Court ruled that legislation that limited employees’ rights to claim compensation for certain diseases, including miners’ lung disease (silicosis), were unconstitutional. The company is among South African producers now threatened with costly court battles as rights groups enlist thousands of former miners with work-related lung disease for a class-action suit. According to recent regulatory filings, the company said it was “assessing the potential effect of a claim.” To date, however, no litigation reserves have been set aside for potential losses.

Chief Executive Nicholas Holland reminded industry analysts on the quarterly earnings call that cost pressures are not just limited to South African operations. For example, open-pit mining operations in Peru are heavily dependent on diesel power, the price of which is rising with oil (to about 15% of total cash costs).

Is Gold Price Overextended?

Many pundits are predicting $2,000 per troy ounce for gold in 2012. That is good news for Gold Fields, as the company does not hedge any of its production.

Nonetheless, some analysts remind us that the sky was the limit for oil prices once too.

“Gold is too extended over price-averaging algorithms, is 7.5 times what it was worth ten years ago and is the subject of relentless sales pitches on cable TV and radio,” Elliot Wave International chief marketing analyst Steve Hochberg noted in an interview with the 10Q Detective:

Trading volume is surging, suggestive of froth — and trader optimism has just reached 98 percent out of 100 percent, according to MBH Commodities. Major world central banks, which were sellers of gold at the lows in 1999, are now buyers, a dangerous sign since government is always the last to act upon a trend and usually near the trend’s exhaustion point. Further, Exponential price rises are always dangerous because they go further than anyone thinks and then they crash. Oil is a recent classic example — When it spiked to $147 in July 2008 and then crashed 78 percent in just five months. Anyone remember the “Peak Oil” arguments near the top, when oil bulls were telling us the world was running out of oil?

Hochberg did note that $2,000 gold is only about 10% above current prices. “I don’t know if the blow off ends before that level, or after,” he said, “but gold should be closer to $1,000 than $2,000 sometime over the next year or more. This is one venue that is ripe for reversal.”

Credit Facility Preserves Financial Flexibility

Gold mining is a capital-intensive business. With net debt of $2.7 billion just 44.1% of stockholder equity at Gold Fields, the mining company can take on incremental debt to meet costs of development programs. The company recently secured a five-year $1 billion revolving credit facility to support drilling programs (in places from the Philippines to Finland) meant to lessen dependence on domestic production.

Expanding global production is necessary to help ease margin pressures at home. For example, notional costs at the recently purchased Damang Mine in southwestern Ghana are forecast to be about $900 per ounce this year. At present, however, quarterly capacity at this open-pit operation is estimated to be only about 60,000 ounces.

“All that glisters is not gold,” wrote Shakespeare in The Merchant of Venice. Core gold operations threw off free cash flow of just $100 million last quarter. With operating costs likely to remain onerous, look for Gold Fields to tap its credit lines in coming quarters to meet its stated capacity goal of five million ounces by 2015.

Should the spot price of gold lose its growth luster, the company will end up mining plenty of “fool’s gold,” especially in South Africa.

David Phillips

No money was injured while filming

Billionaire and hedge fund manager John Paulson of Paulson & Co. and of Paulson Management is a widely followed equity hedge fund manager for whale watchers.  He has made billions of dollars, but 2011 is proving to be a very tough year.  We have tracked some of the more obvious portfolio changes in the Paulson 13F filing from this evening (as of June 30):

Bank of America Corporation (NYSE: BAC) has been trimmed to about 60.4 million shares, down from about 123.6 million from March 31, 2011.  It is likely that Paulson has trimmed even more as the price tanked, unless he bought more last week during the panic.  Keep in mind that there are some additional warrants for 29 million shares expiring in 2019 and some 9.68 million warrants expiring in 2019.  Both warrant positions are smaller than the May 16 filing as well for the March 31 cut-off date.

Citigroup Inc. (NYSE: C) was also cut to 33,505,002 shares and there are warrants for another 225,000 shares.  The split adjusted shares on March 31 were 41.2 million shares.

A partial list of the standout changes we saw are as follows…

Agnico-Eagle Mines Ltd. (NYSE: AEM) is a new small position listed as 700,0000 shares as of June 30 that was worth some $44.2 million at the time.

AngloGold Ashanti Ltd. (NYSE: AU) is a lower ADR stake as the June 30 position was listed as 39,935,382 versus what was listed 41,046,974 on March 31.

Capital One Financial Corporation (NYSE: COF) is one that Paulson actually grew to 21,100,000 as of June 30 versus 18,000,000 as of March 31.

Gold Fields Ltd. (NYSE: GFI) was down slightly listed as 24,700,000 shares on June 30 versus 26,050,000 on March 31.

Grifols, S.A. (NASDAQ: GRFS) is a new position for Paulson and the ADR’s worth was $107.1 million for the 14,266,995 shares as of June 30.

J.P. Morgan Chase & Co. (NYSE: JPM) was cut to 47 million shares as of June 30 versus 50 million shares as of March 31.

Life Technologies Corporation (NASDAQ: LIFE) was listed as a new position of 7,520,000 shares as of June 30.  That stock has been pounded since June 30 when shares were above $50.00 versus $38.84 today.

NYSE Euronext Group Inc. (NYSE: NYX) was a new position of 3,000,000 shares as of June 30, implying he is ready to profit from the buyout (merger).

Ralcorp Holdings Inc. (NYSE: RAH) is a much higher position as Paulson must think the buyout merits are there… This was listed as 3,692,000 shares at June 30 versus only 400,000 back on March 31.  Nice gains have been made since.

Tenet Healthcare Corp. (NYSE: THC) is one where Paulson must think a buyout will ultimately come because he has added Tenet as a pick whereas it was not on there before.  The new position was listed as 20,000,000 shares.

Wells Fargo & Co. (NYSE: WFC) was listed as being 33,600,000 shares as of June 30, but this is a gain compared to the 20,500,000 shares as of March 31.

The big surprise is that the SPDR Gold Trust (NYSE: GLD) was kept static at 31,500,000 shares worth some $4.59 billion as of June 30.  What is interesting is that if he has stuck by the position he is up more.

Trouble is apparently no obstacle, if Paulson stuck with this position.  News Corporation (NASDAQ: NWSA) was listed as a new position with some 10.4 million common shares.

If you want to see the change in the total value of Paulson’s holdings, it is being confirmed that his value fell.  It was listed as $29.05 billion in total for the funds under the filing as of June 30, 2011.  The figure total was $34.27 billion on March 31.

JON C. OGG

Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) Started as Neutral at Credit Suisse.
Banco Santander S.A. (NYSE: STD) Started as Neutral at Credit Suisse.
El Paso Corporation (NYSE: EP) Reiterated Buy as Bull of the Day at Zacks.
El Paso Electric Co. (NYSE: EE) Cut to Hold at Argus.
Finisar Corporation (NASDAQ: FNSR) Raised to Buy at Citigroup.
First Solar Inc. (NASDAQ: FSLR) Maintained Neutral at Credit Suisse.
Gold Fields Limited (NYSE: GFI) Reiterated Buy as Value at Zacks.
The Goldman Sachs Group Inc. (NYSE: GS) Reiterated Underperform as Bear of the Day at Zacks.
Harmonic Inc. (NASDAQ: HLIT) Cut to Neutral at BofA/ML.
HCA Inc. (NYSE: HCA) Cut to Neutral at Goldman Sachs.
Mentor Graphics Corporation (NASDAQ: MENT) Raised to Buy at BofA/ML.
Netflix Inc. (NASDAQ: NFLX) Reiterated Outperform and raised target to $310 at Credit Suisse; Reiterated Sell at Janney Capital; Maintained as Buy with $300 target at Canaccord Genuity.
PetSmart, Inc. (NASDAQ: PETM) Started as Outperform at RBC.
Ryanair Holdings plc (NASDAQ: RYAAY) Cut to Market Perform at Raymond James.
Sprint Nextel Corporation (NYSE: S) Raised to Outperform at RBC.
The TJX Companies, Inc. (NYSE: TJX) Started as Buy at BofA/ML.
ValueClick, Inc. (NASDAQ: VCLK) Raised to Overweight at Piper Jaffray.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

A new report from ABN Amro Bank, VM Group, and Haliburton Mineral Services provides details on rising production costs in the major mining regions of the world.  The report is based on cash costs per ounce of production from 111 gold mining companies operating a total of 274 mines. Barrick Gold Corp. (NYSE: ABX) and Newmont Mining Corp. (NYSE: NEM) are among the companies mentioned specifically in the report.

Cash costs include direct mining and processing expenses, other onsite charges, third-party smelting and refining charges, and royalties and taxes net of by-product credits. In the first quarter of 2011, the average cash cost of production rose from $609/ounce to $620/ounce, a boost of 1.8%.

The other side of the coin is that rising costs have not prevented producers from posting record margins. In the first quarter, margins rose from $758/ounce to $767/ounce. In the fourth quarter of 2008, margins stood at $422/ounce. Comparing production of 100,000 ounces in the fourth quarter of 2008 and the first quarter of 2011, miners’ margins are $42 million better. For Barrick Gold, which produced 7.8 million ounces of gold in 2010, that’s a boost in margins of nearly $3.3 billion. Not a bad bounce in just two years.

A weak US dollar has contributed to a rise in global average production costs, but has kept US production costs down to an average of about $546/ounce. In South Africa, which has faced power supply shortages, labor disputes, and other issues, the average cash cost rose to $869/ounce. Some 10% of the country’s gold was produced at a cash cost above $1,200/ounce. And that number could go higher.

Wage negotiations in South Africa have begun between the miners’ union and three producers, AngloGold Ashanti Ltd. (NYSE: AU), Gold Fields Ltd. (NYSE: GFI), and Harmony Gold Mining Co. Ltd. (NYSE: HMY). The union is seeking a pay hike of more than 14%, and has already turned down a counter offer of 4%. Food and energy inflation are rising more rapidly than the official 4.2% inflation rate in South Africa and the country’s miners want the mining companies to share their climbing margins with the workers.

In the past year, Gold Fields and Harmony have posted the best share price gains, with nearly a 10% gain for Gold Fields and about a 25% gain for Harmony. Protracted negotiations or strikes could put a real dent in revenues and earnings. Harmony’s trailing P/E ratio is 55.23, while its forward P/E is just 14.19. Gold Fields’ trailing P/E is 37.49, and Thomson Reuters has no forward P/E estimate. AngloGold’s trailing P/E is a whopping 97.56, while its forward P/E is just 9.30.

Production costs, which are already high, are going to get even higher as the year progresses. In South Africa, where costs are highest, it seems likely that production costs will rise even more. A weak dollar doesn’t help because the lowers the margins on an ounce of gold and raises the cost of energy.

Barrick Gold has no operations in South Africa and its other African mines were spun off last year to a company called African Barrick Gold plc, which trades on the London exchange. Newmont, likewise, has no operations in South Africa, although it does operate two mines in Ghana.

The Market Vectors Gold Miners ETF (NYSE: GDX) holds Barrick, Newmont, AngloGold, and Gold Fields as three of its top ten investments, representing about 35% of the fund’s assets. The fund’s shares are up more than 2% in the early afternoon today, to $55.24, in a 52-week range of $46.80-$64.62. The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) does not hold any of these large-company shares, and is trading up more than 3.5% today, at $35.20, in a 52-week range of $25.10-$44.86.

The SPDR Gold Trust (NYSE: GLD) is up about 0.3% today, to $151.27, in a 52-week range of $113.08-$153.61. Comex gold futures have risen to a high today of $1,559.30, within reach of the 52-week high set in early May.

Paul Ausick

Atmel Corporation (NASDAQ: ATML) Reiterated Buy and $17 target at Gleacher & Co.
Comerica Incorporated (NYSE: CMA) Reiterated Buy at BofA/ML.
Cracker Barrel Old Country Store Inc. (NASDAQ: CBRL) Cut to Hold at Argus.
Dendreon Corporation (NASDAQ: DNDN) Started as Buy at Goldman Sachs.
DeVry, Inc. (NYSE: DV) Raised to Buy at BofA/ML.
Education Management Corporation (NASDAQ: EDMC) Raised to Neutral at BofA/ML.
General Mills, Inc. (NYSE: GIS) Cut to Neutral at UBS.
Gold Fields Ltd. (NYSE: GFI) Raised to Overweight at Morgan Stanley.
Imperial Sugar Co. (NASDAQ: IPSU) Raised to Buy with $30 target at Janney Capital.
Janus Capital Group Inc. (NYSE: JNS) Reiterated Underperform but cut target to $11 at BofA/ML.
Lender Processing Services, Inc. (NYSE: LPS) Cut to Underperform as Bear of the Day at Zacks.
Mechel OAO (NYSE: MTL) Started as Buy at UBS.
Medco Health Solutions Inc. (NYSE: MHS) Reiterated Buy with $69 target at Argus.
Melco Crown Entertainment Ltd. (NASDAQ: MPEL) Reiterated Buy and raised target to $13.30 at Citigroup.
Quality Distribution Inc. (NASDAQ: QLTY) Started as Neutral at Credit Suisse.
Signet Jewelers Limited (NYSE: SIG) Maintained Strong Buy as Value at Zacks.
SIRIUS XM Radio Inc. (NASDAQ: SIRI) Raised to Outperform as Bull of the Day at Zacks.
Vonage Holdings Corporation (NYSE: VG) Started as Buy at Janco Partners (Wednesday).
Zumiez, Inc. (NASDAQ: ZUMZ) Cut to Neutral at Janney Capital.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

The Global X Pure Gold Miners ETF is a global fund and is not limited to US markets nor just to North America.  As of March 15, 2011, the Fund includes companies based in Canada, the United States, the United Kingdom, Hong Kong, Australia and Turkey.  As of March 10, 2011, the three largest components of the index were Gold Fields Ltd. (NYSE: GFI), Polyus Gold, and Kinross Gold Corporation (NYSE: KGC).  Other key holdings are AngloGold Ashanti Ltd. (NYSE: AU), Eldorado Gold Corp. (NYSE: EGO), Harmony Gold Mining Co. Ltd. (NYSE: HMY) and others.  A full list of the global holdings inside this ETF is here.

Management Fee is listed as 0.59% and the custody fee is 0.00%, for an annual fund operating expense of 0.59%.

JON C. OGG

We decided to screen the gold universe to find out which companies pay dividends and then which ones pay right “about” 1.0% and higher.  There are very few, but the search is as follows: Newmont Mining Corp. (NYSE: NEM); Gold Fields Ltd. (NYSE: GFI); Yamana Gold Inc. (NYSE: AUY); Royal Gold, Inc. (NASDAQ: RGLD); and The Gabelli Global Gold, Natural Resources & Income Trust (NYSE: GGN).

Newmont Mining Corp. (NYSE: NEM) has one of the better cost structures out there and its jump in the 2010 payout to $0.15 from $0.10 per quarter has made a difference.  Its dividend had been at $0.10 since 2004.  The current dividend at $54.85 is roughly 1.1% and the 52-week trading range is $48.20 to $65.50.  Thomson Reuters has estimates for this Colorado-based operator at $5.07 EPS for 2011, so any gain to earnings would lend more support for future dividend hikes if it wanted to stand out from the crowd.

Gold Fields Ltd. (NYSE: GFI) is based in South Africa and it pays dividends semi-annually rather than quarterly to its ADR holders.  The financial reporting services count the yield above 1% but it is generally not a steady dividend and it has fluctuations to it.  Due to fluctuations and currency risks, we are skipping this as a “reliable 1% dividend” gold stock.

Yamana Gold Inc. (NYSE: AUY) is a Canadian-based gold producer with a $0.03 per quarter dividend. A potential problem we see is that this dividend was raised twice in 2010.  This new $0.12 annualized payout comes to 0.95% in a current yield and Thomson Reuters has estimates of $0.96 EPS for 2011.  If any earnings hit comes from its operations in Brazil, Argentina, Chile, Mexico or Colombia, then this near-1% yield may suffer.  At $12.70, its 52-week trading range is $9.16 to $13.13.

Royal Gold, Inc. (NASDAQ: RGLD) just declared its second $0.11 quarterly dividend this morning and the $0.48 annual rate generates a yield of 0.97% with a $49.15 share price.  Its 52-week trading range is $42.15 to $55.22 and Thomson Reuters has annual June-2011 estimates of $1.29 EPS.  This Colorado-based company is a royalty play rather than a mining play and it owns many royalty interests in the U.S., South America, Australia, Russia, and elsewhere.

The Gabelli Global Gold, Natural Resources & Income Trust (NYSE: GGN) is a very different beast in the world of gold with a very high dividend.  It is a closed-end fund.  So far it has been able to maintain a $0.14 monthly payout to holders and that comes to an 8.9% yield to holders based upon an $18.80 price.  Keep in mind that it is not 100% gold, and its strategy to generate income is enhanced by writing covered calls.  The 52-week trading range is $14.86 to $19.77.  This is not a perfect gold play, but with a yield like this it may get a pass compared to others.

As you can tell, getting to even a 1% yield is a challenge in most gold mining stocks.  The underlying value here generally revolves around the price of gold.  Live by the golden sword and die by the golden sword.

JON C. OGG

Amgen Inc. (NASDAQ: AMGN) Started as Neutral at Credit Suisse.
AstraZeneca (NYSE: AZN) Cut to Underperform at Credit Suisse.
Biogen Idec Inc. (NASDAQ: BIIB) Started as Neutral at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Started as Neutral at Credit Suisse.
Gilead Sciences Inc. (NASDAQ: GILD) Started as Outperform at Credit Suisse.
GlaxoSmithKline plc (NYSE: GSK) Raised to Neutral at Credit Suisse.
Gold Fields Ltd. (NYSE: GFI) Raised to Overweight at HSBC.
Human Genome Sciences Inc. (NASDAQ: HGSI) Started as Outperform at Credit Suisse.
LDK Solar Co., Ltd. (NYSE: LDK) Started as Market Perform at Wells Fargo.
MeadWestvaco Corporation (NYSE: MWV) Cut to Neutral at BofA/ML.
Novartis (NYSE: NVS) Raised to Outperform at Credit Suisse.
Red Hat Inc. (NYSE: RHT) Raised to Overweight at Morgan Stanley.
Research in Motion Ltd. (NASDAQ: RIMM) Cut to Neutral at Gleacher & Co.
Seagate Technology PLC (NASDAQ: STX) Started as Buy at Citigroup.
Smithfield Foods Inc. (NYSE: SFD) Raised to Buy at BofA/ML.
Suntech Power Holdings Co. Ltd. (NYSE: STP) Raised to Neutral at Goldman Sachs; Reiterated Buy and Raised target to $12 at Auriga.
Temple-Inland Inc. (NYSE: TIN) Cut to Neutral at BofA/ML.
Trina Solar Ltd. (NYSE: TSL) Raised to Buy at Goldman Sachs.
Western Digital Corporation (NYSE: WDC) Started as Buy at Citigroup.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Brightpoint Inc. (NASDAQ: CELL) Cut to Hold at Jefferies.
Chesapeake Energy Corporation (NYSE: CHK) Cut to Sell at Argus.
CNOOC Limited (NYSE: CEO) Raised to Overweight at HSBC.
Digital Realty Trust (NYSE: DLR) Started as Buy at Jefferies.
The Dow Chemical Company (NYSE: DOW) Started as Outperform at Macquarie.
DryShips Inc. (NASDAQ: DRYS) Started as Neutral at Goldman Sachs.
Gold Fields Limited (NYSE: GFI) Cut to Equal-weight at Morgan Stanley.
Harmony Gold (NYSE: HMY) Cut to Underweight at Morgan Stanley.
Integrated Silicon Solution  (NASDAQ: ISSI) Raised to Buy at Auriga.
Kinder Morgan Energy Partners (NYSE: KMP) Cut to Market Perform at Morgan Keegan.
Kinross Gold Corporation (NYSE: KGC) Raised to Outperform at Credit Suisse.
NetSpend Holdings (NASDAQ: NTSP) Started as Outperform at William Blair.
NRG Energy, Inc. (NYSE: NRG) Started as Neutral at Goldman Sachs.
Research In Motion Ltd. (NASDAQ: RIMM) Raised to Buy at Jefferies.
Shanda Interactive (NASDAQ: SNDA) Cut to Hold at Auriga.
Tiffany & Co. (NYSE: TIF) Started as Overweight at Morgan Stanley.
Yanzhou Coal Mining Co. Ltd. (NYSE: YZC) Raised to Buy at Citigroup.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG