24/7 Wall St. » GG

After The Fall, Huge Upside & Value In Gold/Silver Miners (GDX, SIL, ABX, GG, NEM, AU, KGC, AEM, GFI, AUY, IAG, HMY, EGO, RGLD, SLW, PAAS)

Administrator — Tue, 22 May 2012 14:44:10 +0000

Gold and silver have finally indicated that the free fall we saw over the last month may have at least stabilized. The markets are mixed today in the commodities and the miners and we admit that no one truly knows what is the bottom-dollar that these can hit and no one knows the real top-dollar that investors will pay in a rally. What we do know is that the sell-off has literally gutted many of the key players in gold and silver and there is huge upside and value here if the consensus analyst price targets for one year from now are anywhere near correct.

At issue may be a stock market stabilization, or perhaps it is a stabilization aimed solely at the commodities and those companies which profit from either the rise of commodity prices or the rise of the demand for those commodities. It was just yesterday evening that Dennis Gartman of the Gartman Letter was talking up gold miners as his method of choice to play the current bounce in gold.

To show just how much implied upside there is we found some large cap gold stocks that have upside of about 100% and many of the big players have implied upside of well over 50%. The key ETFs for these miners show just how widespread the damage was during the last sell-off. The Market Vectors Gold Miners ETF (AMEX: GDX) trades at $43.35 against a 52-week trading range of $39.08 to $66.98 and that is down about 35% as a group from the highs. The Global X Silver Miners ETF (AMEX: SIL) trades at $18.00 against a 52-week range of $16.54 to $29.05 and that is down almost 38% from its high in the last year.

We included the implied dividend yields but due to foreign issues and ADRs causing currency translations and due to some payouts not being quarter like U.S. companies do, we would urge you to only consider the dividend as a footnote and something you should be verifying on your own. Besides that, who buys gold (and silver) miners because of their dividend yields only?

We have evaluated the following large-cap gold stocks: Barrick Gold Corporation (NYSE: ABX); Goldcorp Inc. (NYSE: GG); Newmont Mining Corp. (NYSE: NEM); AngloGold Ashanti Ltd. (NYSE: AU); Kinross Gold Corporation (NYSE: KGC); Agnico-Eagle Mines Ltd. (NYSE: AEM); Gold Fields Ltd. (NYSE: GFI); Yamana Gold, Inc. (NYSE: AUY); IAMGOLD Corp. (NYSE: IAG); Harmony Gold Mining Co. Ltd. (NYSE: HMY); Eldorado Gold Corp. (NYSE: EGO); and Royal Gold, Inc. (NASDAQ: RGLD). We have covered also two of the larger silver players of Silver Wheaton Corp. (NYSE: SLW) and Pan American Silver Corp. (NASDAQ: PAAS).

Barrick Gold Corporation (NYSE: ABX) traded at $37.60 and has a market value of $37.6 billion. The consensus target price from Thomson Reuters is $59.10 and the 52-week range is $34.82 to $55.95. Barrick has a dividend yield of 2.2%. The implied upside to the consensus target: 57% but we would note that the target is above the 52-week high.

Goldcorp Inc. (NYSE: GG) traded at $34.90 with a market value of $28.2 billion. The consensus target price from Thomson Reuters is $60.42 and the 52-week trading range is $32.16 to $56.31. Goldcorp’s most recent yield was listed as 1.6%. The implied upside to the consensus target is 73% but we would note that the consensus target is still above the 52-week high.

Filed under: ADR, Commodities, Corporate Governance, ETF, Metals, Trading Alert, Value Investing Tagged: ABX, AEM, AU, AUY, EGO, GDX, GFI, GG, HMY, IAG, KGC, NEM, PAAS, RGLD, SIL, SLW

Royal Gold’s Reserves Grow Even as Results Lag (RGLD, ABX, KGC, NEM, GG, PAAS, GLD)

Paul Ausick — Thu, 03 May 2012 14:00:30 +0000

For those who believe that the price of gold is going to rise, Royal Gold Inc. (NASDAQ: RGLD) may be worth another look. Shares are essentially flat over the past 12 months, but the company’s results have been outstanding even though they slightly missed estimates for the company’s third fiscal quarter.

The company owns shares of production in mines operated by Barrick Gold Corp. (NYSE: ABX), Kinross Gold Corp. (NYSE: KGC), Newmont Mining Corp. (NYSE: NEM), Goldcorp Inc. (NYSE: GG), and Pan American Silver Corp. (NASDAQ: PAAS) among many others. The company gets a portion of production without the impact of rising costs on production, costs which have bedeviled the miners for some time now.

For the company’s third quarter EPS came in at $0.44 versus a consensus estimate of $0.45. Revenues rose to $69.6 million, compared with an estimate of $69 million. Royal Gold also reported an increase in its gold reserves this morning, from a previous total of 83.9 million ounces of gold and 12.4 billion ounces of silver to 84.5 million ounces of gold and 1.2 billion ounces of silver.

After applying the company’s royalty participation formula, Royal Gold claims its precious metals reserves increased 19% on a gold equivalent basis from December 2010 to December 2011.

The consensus estimate for 2012 EPS is $1.83, growing to $2.32 in 2013. The company’s dividend yield is just 1%, and an increase to the annual $0.15/share dividend would probably help the stock more than another gold strike.

Compared with the SPDR Gold Shares ETF (AMEX: GLD), Royal Gold comes up a little short, with five-year share-price growth of 101% compared with growth of 138% for the ETF.

Royal Gold’s shares hit an all-time high last September near $84 and it’s trading today at $59.65, down about -2.3% from last night’s close. The 52-week range is $55.00-$83.87. Year-to-date shares are down -11.6%, even after a jump above $75/share following a January at-the-market purchase of 4 million shares by Goldman Sachs. Shares could be available at a bargain price real soon now.

Paul Ausick

Filed under: Commodities, Earnings, Metals Tagged: ABX, GG, GLD, KGC, NEM, PAAS, RGLD

Gold Miners in Flux (ABX, GG, NEM, KGC, AUY, FCX)

Paul Ausick — Wed, 02 May 2012 13:37:43 +0000

Gold has been trading in a fairly narrow range between $1,600-$1,700/ounce for the past two months after ending 2011 at around $1,525/ounce. Gold prices spiked to near $1,800/ounce in February, but none of this has helped gold mining stocks which are down anywhere from -20% to around -45% for the past 12 months.

Barrick Gold Corp. (NYSE: ABX), which reported quarterly results this morning, is just the latest casualty in the gold mining business. Goldcorp Inc. (NYSE: GG) missed estimates by a modest amount, and Newmont Mining Co. (NYSE: NEM) reported a modest beat for the quarter. Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) beat EPS estimates by nearly 12%, the best showing of the bunch so far. Yamana Gold Inc. (NYSE: AUY) missed estimates yesterday, and Kinross Gold Corp. (NYSE: KGC) won’t report first quarter results until next week.

Demand for bullion, from central banks and investment instruments like the SPDR Gold Shares ETF (AMEX: GLD) are driving the price of gold, but not driving it to great new highs. Equity markets have been strong in the first quarter of the year, and investors have been chasing returns rather than seeking the safe haven of gold.

For the miners themselves, costs are the constraint. Barrick, for example, realized an average gold price of $1,691/ounce in the first quarter, up from $1,389/ounce in the same period a year ago, an increase of more than 21%. Cash costs rose from $437/ounce a year ago to $545/ounce in the first quarter, more than 24%. Total production costs rose from $595 to $737 per ounce, a jump of nearly 24%.

Barrick reported total cash margin on gold of $1,146/ounce, while Goldcorp reported total cash margin of $1,456/ounce. Labor and regulatory issues contribute to higher costs, as do less productive ores. Then there are the rising costs of new exploration and development.

If investors continue to flock to equity markets, only central banks and jewelry makers are left to push demand for gold. That’s not a good position for the miners to be in.

Barrick’s announced a 33% increase in its quarterly dividend this morning, to $0.20/share. Goldcorp raised its quarterly dividend to $0.35/share earlier. Neither move will boost the dividend yield above 2% though — and even if it did, it probably wouldn’t be enough to lift the share prices much.

Barrick stock is down about -1.6% in the pre-market, at $39.80 in a 52-week range of $38.46-$55.95.

Paul Ausick

Filed under: Commodities, Earnings Tagged: ABX, AUY, FCX, GG, KGC, NEM

24/7 Wall St. Closing Bell (AAPL, ESRX, GG, NFLX, SLB, CMVT, ISCA, FRS, TISI, MIND, MON, AYI, HEAT, FSLR, VRNG, AONE, MRGE, CONN)

Paul Ausick — Tue, 03 Apr 2012 20:06:50 +0000

Markets opened flat to lower this morning and stayed right around the break-even line most of the morning. The report on factory orders was weaker than expected(our coverage here), although new car sales are up sharply (our coverage here). The minutes of the FOMC’s March meeting quelled for now any thoughts of additional easing, and sent all three major indexes sharply lower (our coverage here). The US dollar index rose sharply today, now up 0.81% at 79.460. Commodities were mixed on the stronger dollar, with cocoa falling the most and cotton also down (our coverage here). WTI crude oil closed down -1.2% at $104.01/barrel, and Brent crude trades down -0.48% at $124.83/barrel. Gold settled down -0.5% today, at $1,672.00/ounce.

The unofficial closing bells put the DJIA down nearly 65 points to 13,199.55 (-0,49%), the NASDAQ fell more than 6 points (-0.20%) to 3,113.57, and the S&P 500 fell -0.41% or nearly 6 points to 1,413.29.

There were several analyst upgrades and downgrades today, including Apple Inc. (NASDAQ: AAPL) started as buy at Auriga and target raised to $715 at Morgan Stanley; Express Scripts Inc. (NASDAQ: ESRX) started as ‘overweight’ at JPMorgan; Goldcorp Inc. (NYSE: GG) started as ‘neutral’ at Citigroup; Netflix Inc. (NASDAQ: NFLX) cut to ‘equal weight’ at Barclays; and Schlumberger Ltd. (NYSE: SLB) raised to ‘buy’ at Sterne Agee.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Comverse Technology Inc. (NASDAQ: CMVT) is down -6.4% at $6.41; International Speedway Corp (NASDAQ: ISCA) is down -0.14% at $28.31; and Frisch’s Restaurants Inc. (AMEX: FRS) is down -0.04% at $27.29. After markets close today we get earnings from Team Inc. (NYSE: TISI) and Mitcham Industries Inc. (NASDAQ: MIND) markets. Before markets open tomorrow we’ll get earnings from Monsanto Co. (NYSE: MON) and Acuity Brands Inc. (NYSE: AYI).

Other standouts from today include the following stocks:

SmartHeat Inc. (NASDAQ: HEAT) is up 93% at $5.29. The Chinese maker of heat exchangers reported weak earnings, but promised to cut costs and do better. More coverage here.

First Solar Inc. (NASDAQ: FSLR) is down about -8% at $22.56 after posting a new 52-week low of $22.42 earlier today. The solar panel maker is simply dying a slow death. More coverage here.

Vringo Inc. (AMEX: VRNG) is up 5.8% at $3.28 after posting a new 52-week high of $4.05 earlier today. The ringtone company is merging with a patent protection firm and this is the second day in a row that shares have posted a new high. Here’s our story from yesterday.

A123 Systems Inc. (NASDAQ: AONE) is down more than -16% at $0.85, the second consecutive day for the shares to put up a new 52-week low. The battery maker is still getting walloped over a recall and its relationship with Fisker Automotive. Here’s our story from yesterday.

Merge Healthcare Inc. (NASDAQ: MRGE) is down more than -16% at $4.95. The healthcare kiosk provider has agreed to sell $2.75 million worth of kiosks to a company controlled by Merge’s chairman.

Conn’s Inc. (NASDAQ: CONN) is up about 14.5% at $18.88 after posting a new 52-week high of $19.75. The regional electronics retailer busted through earnings expectations.

Stay tuned for Wednesday. San Francisco Fed President John Williams is giving a speech. We have also noted the following events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers’ Association purchase applications
7:30 a.m. – Challenger Gray & Christmas layoff report
8:15 a.m. – ADP employment report
10:00 a.m. – Institute for Supply Management non-manufacturing index
10:30 a.m. – EIA weekly petroleum status report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AAPL, AONE, AYI, CMVT, CONN, ESRX, FRS, FSLR, GG, HEAT, ISCA, MIND, MON, MRGE, NFLX, SLB, TISI, VRNG

Top Analyst Upgrades & Downgrades (AAPL, CCL, CLNE, DFS, ESRX, GNC, GG, GRPN, KGC, NFLX, NEM, PM, SLB, TKR, URBN)

Administrator — Tue, 03 Apr 2012 12:03:02 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Tuesday.

Apple Inc. (NASDAQ: AAPL) Started as Buy at Auriga; target raised to $715 at JPMorgan

Carnival Corporation (NYSE: CCL) named as Bear of the Day at Zacks.

Clean Energy Fuels Corporation (NASDAQ: CLNE) Started as Neutral at Macquarie.

Discover Financial Services (NYSE: DFS) named as Bull of the Day at Zacks.

Express Scripts Inc. (NASDAQ: ESRX) Started as Overweight at JPMorgan.

GNC Holdings Inc. (NYSE: GNC) Raised to Outperform at BMO.

Goldcorp Inc. (NYSE: GG) Started as Neutral at Citigroup.

Groupon, Inc. (NASDAQ: GRPN) Started as Neutral at Stern Agee.

Kinross Gold Corporation (NYSE: KGC) Started as Buy at Citigroup.

Netflix, Inc. (NASDAQ: NFLX) Cut to Equal-weight at Barclays.

Newmont Mining Corporation (NYSE: NEM) Cut to Neutral at Citigroup.

Philip Morris International, Inc. (NYSE: PM) Cut to Neutral at Credit Suisse.

Schlumberger Limited (NYSE: SLB) Raised to Buy at Stern Agee.

The Timken Company (NYSE: TKR) named as Value stock of the day at Zacks.

Urban Outfitters Inc. (NASDAQ: URBN) Raised to Neutral at Citigroup.

If you enjoyed the top analyst upgrades and downgrades, you can join our free email newsletter that includes analyst summaries each morning sent right to your inbox. We also cover top issues such as IPOs, special financial exclusives, mergers and more. Sign up in the box below.

JON C. OGG

Filed under: Analyst Calls Tagged: AAPL, CCL, CLNE, DFS, ESRX, GG, GNC, GRPN, KGC, NEM, NFLX, PM, SLB, TKR, URBN

Junior Gold Miner Rubicon Gets Permits (RBY, GG, GDXJ)

Paul Ausick — Wed, 21 Mar 2012 17:16:56 +0000

Rubicon Minerals Corp. (AMEX: RBY) said today that it has received approval from the Ontario, Canada, environmental ministry for its proposed amendments to water, sewage, and air permits at the company’s Phoenix Gold Project at Red Lake, Ontario. The company is now “fully permitted to develop, construct and operate a potential mining and milling facility.”

The Red Lake project is near three mines operated by Goldcorp Inc. (NYSE: GG), which Rubicon claims is “the richest gold deposit in the world.” The company owns 100% of the project, as well as about 100 square miles of acreage in the area for further exploration.

Shares of Rubicon are up about 0.9% today at $3.41 in a 52-week range of $2.87-$5.86. The Market Vectors Junior Gold Miners ETF is up about 0.2% at $24.85 in a 52-week range of $22.58-$42.97. Rubicon comprises 2.2% of the assets in the Junior Gold Miners ETF.

Filed under: Commodities, Metals, Regulation Tagged: AMEX: RBY, Canada, GDXJ, GG, gold mining, NYSE: GDXJ, NYSE: GG, RBY

Are Gold Stocks a Bargain at 52-Week Lows? (GLD, ABX, NEM, GG, GDX)

Administrator — Thu, 15 Mar 2012 17:55:11 +0000

Gold is trying to recover on Thursday as it moves back and forth between being a risk-trade asset and an end of the world trade. While gold may be on the mend or at least trying to find some footing, it is impossible to not notice that the major gold stocks in many cases are down very close to their 52-week lows. Does this make the gold giants like Barrick Gold Corporation (NYSE: ABX), Goldcorp Incorporated (NYSE: GG), and Newmont Mining Corporation (NYSE: NEM) bargains? And what about the Market Vectors Gold Miners ETF (NYSE: GDX)? Maybe more is up to the charts than to fundamentals right now (see below).

Barrick Gold Corporation (NYSE: ABX) is up 1.2% at $43.84, but its 52-week trading range is $42.50 to $55.95. The market value is still almost $44 billion. Goldcorp Incorporated (NYSE: GG) is up only $0.03 at $44.48 but its 52-week trading range is $41.91 to $56.31. Goldcorp is still worth nearly $36 billion today. Newmont Mining Corporation (NYSE: NEM) is down around $54.15 after a $0.15 drop on Thursday and the 52-week trading range is $50.16 to $72.42. It is still worth more than $26 billion and it has a 2.6% dividend yield.

To show that these large players are not alone, the Market Vectors Gold Miners ETF (NYSE: GDX) is up 0.5% at $50.34 but the 52-week trading range is $49.22 to $66.98.

Gold itself is up almost 1% at $1658.90, but that is down from about $1,780 at the end of February and down from above $1,700.00 just last week. If you just look at gold via the SPDR Gold Trust (NYSE: GLD), it is up 1% at $161.30 and the 52-week range is $136.25 to $185.85. The “GLD” is at an important juncture on its chart if you take a look at the stockcharts.com chart below.

JON C. OGG

Filed under: ADR, Commodities, ETF, Luxury, Metals Tagged: ABX, GDX, GG, GLD, NEM

Top Earnings & Economic Previews For The Day Ahead (ANF, A, NILE, CLWR, CMCSA, NVDA, PCG, DVN, DE, GG, WFR, NTAP, TEVA)

Administrator — Tue, 14 Feb 2012 16:28:53 +0000

Wednesday is a fairly busy day for earnings expectations. We are expecting the following reports: Abercrombie & Fitch Co. (NYSE: ANF); Agilent Technologies, Inc. (NYSE: A); Blue Nile Inc. (NASDAQ: NILE); Clearwire Corporation (NASDAQ: CLWR); Comcast Corporation (NASDAQ: CMCSA); NVIDIA Corporation (NASDAQ: NVDA); PG&E Corp. (NYSE: PCG); Devon Energy Corporation (NYSE: DVN); Deere & Co. (NYSE: DE); Goldcorp Inc. (NYSE: GG); MEMC Electronic Materials Inc. (NYSE: WFR); NetApp, Inc. (NASDAQ: NTAP); and Teva Pharmaceutical Industries (NASDAQ: TEVA). We have used the consensus estimate data from Thomson Reuters and compiled additional data on each.

Abercrombie & Fitch Co. (NYSE: ANF) is expected to report $1.12 EPS on $1.33 billion in sales; shares are very close to 52-week lows and the downward channel in the chart continues.

Agilent Technologies, Inc. (NYSE: A) $0.69 EPS and $1.65 billion in sales. Interestingly enough, this one was one of the stocks outperforming Apple so far in 2012.

Blue Nile Inc. (NASDAQ: NILE) $0.42 EPS on $123.17 million.

Clearwire Corporation (NASDAQ: CLWR) -$0.35 EPS and $356.72 million in sales; we will be watching closely for any discussions about funding its business plan.

Comcast Corporation (NASDAQ: CMCSA) $0.41 EPS on $14.87 billion in sales; shares are very close to a 52-week high at $27.20 versus a high of $27.52.

NVIDIA Corporation (NASDAQ: NVDA) $0.19 EPS on $950.44 million in sales; expected 7% sales growth and a drop in earnings. The most recent Rambus pact details may become more clear as those patent agreements were not disclosed.

PG&E Corp. (NYSE: PCG) $0.85 EPS on $3.49 billion in sales. PG&E shares are off of highs more than other utilities in general and room for the 4.4% dividend to be discussed.

Devon Energy Corporation (NYSE: DVN) $1.48 EPS

Deere & Co. (NYSE: DE) $1.23 EPS on $6.49 billion in sales; watch currency discussions for guidance ahead.

Goldcorp Inc. (NYSE: GG) is one of the top gold companies with a $36.5 billion market value. Estimates are $0.60 EPS and $1.49 billion in revenue.

MEMC Electronic Materials Inc. (NYSE: WFR) is now down big again due to Energy Conversion Devices bankruptcy on fears that the solar sector is again going to crumble. This has moved from a value stock to a value trap now that it is expected to lose money. Estimates are -$0.06 EPS and $769.49 million in sales.

NetApp, Inc. (NASDAQ: NTAP) $0.58 EPS on $1.56 billion in sales; next quarter $0.63 EPS on $1.68 billion in sales; under $40 it is way under its 52-week high and now valued at only about 16.5-times fiscal April-2012 earnings estimates.

Teva Pharmaceutical Industries (NASDAQ: TEVA) is going to show whether or not generic ambitions can trump branded drugs. The turnaround in the share price has just not materialized. Estimates are $1.58 EPS and $5.63 billion in sales.

ECONOMIC DATA FOR WEDNESDAY:

8:30 AM EST Empire Manufacturing (Feb.)
9:15 AM EST January Industrial Production expected +0.6%
9:15 AM EST January Capacity Utilization expected 78.6%
10:00 AM EST NAHB optimism (Feb.)
10:00 Treasury’s Geithner testifies to House Ways & Means on 2013 budget
10:30 AM EST EIA Weekly Petroleum Inventory
2:00 PM EST FOMC Minutes

JON C. OGG

Filed under: 24/7 Wall St. Wire, Calendar, Earnings, Economy Tagged: A, ANF, CLWR, CMCSA, DE, DVN, GG, NILE, NTAP, NVDA, PCG, TEVA, WFR

Gold & Silver Miners Love Low-Rate Outlook (SLW, PAAS, GG, NEM, KGC, AEM, GDX, GDXJ, SIL)

Administrator — Wed, 25 Jan 2012 20:07:06 +0000

Silver and gold miners just got some great news today after having lost so much luster in recent months. The FOMC has now telegraphed that it expects that interest rates will remain exceptionally low through at least the end of 2014. While an expectation is not a formal pledge nor a formal promise, this is much longer than what the public had been told over and over before. The prior language was “through at least mid-2013″…

Silver Wheaton Corporation (NYSE: SLW) is up 6.7% at $34.07, and the 52-week trading range is $25.84 to $47.60.

Pan American Silver Corp. (NASDAQ: PAAS) is still only flat at $21.85 but it was lower before the FOMC comments today. The 52-week trading range is $19.93 to $43.06.

Goldcorp Incorporated (NYSE: GG) is up 5.2% at $46.70, and the 52-week trading range is $39.93 to $56.31.

Newmont Mining Corporation (NYSE: NEM) is up 3.4% at $59.43, and the 52-week trading range is $50.05 to $72.42.

Kinross Gold Corporation (NYSE: KGC) up over 6% at $11.23, and the 52-week trading range is $9.96 to $18.25.

Agnico-Eagle Mines Limited (NYSE: AEM) up 8% at $37.23, and the 52-week trading range is $34.36 to $76.49.

ETFs are rocking as well. The Market Vectors Gold Miners ETF (NYSE: GDX) is up 5.3% at $54.58 against a 52-week range of $49.22 to $66.98. Market Vectors Junior Gold Miners (NYSE: GDXJ) is up 6.5% at $28.66 against a 52-week range of $22.58 to $42.97. The Global X Silver Miners ETF (NYSE: SIL) is up 3.9% at $23.69 and the 52-week range is $19.05 to $31.34.

The logic is simple enough… This signals extremely low interest rates and low costs of borrowing. It also signals that investors will have to look elsewhere yet again to seek higher returns than short-term and intermediate-term Treasuries. As this means that rates will be low in the U.S. for longer than expected, that is going to drive a weak dollar policy as long as things remain static in Europe and in other major economic zones. That is the perfect storm for gold and silver as they are often inversely correlated to the dollar.

JON C. OGG

Filed under: 24/7 Wall St. Wire, ADR, Commodities, Consumer Goods, Corporate Governance, Currency, Economy Tagged: AEM, GDX, GDXJ, GG, KGC, NEM, PAAS, SIL, SLW

Faltering Kinross Gold May Be Buyout Target (KGC, NEM, ABX, GG, AU, GLD)

Paul Ausick — Fri, 20 Jan 2012 17:17:10 +0000

Earlier this week, Kinross Gold Corp. (NYSE: KGC) released a preliminary statement on 2012 production, mining costs, and a writedown a portion of $4.6 billion in goodwill on an African property. Shares traded at a new 52-week intra-day low below $10 yesterday as a result of the poor outlook.

Kinross is making a bit of a comeback on speculation that the company may now be a takeover target. Larger Canadian gold miners Newmont Mining Corp. (NYSE: NEM) and Barrick Gold Corp. (NYSE: ABX) are included in the number of possible buyers, as are Goldcorp Inc. (NYSE: GG) and AngloGold Ashanti Ltd. (NYSE: AU). Another potential buyer is London-traded Polyus Gold International Ltd. according to a report at Bloomberg News.

Kinross acquired Canadian miner Red Back in 2010 for $7.8 billion, and the deal included the Tasiast mine in Tanzania. The Tanzanian mine is the cause of the goodwill writedown, but the simple fact is that Kinross paid way too much for Red Back. Kinross has admitted that itself.

Of the potential buyers, Polyus might be the one to take most seriously. The Russian company has said that it wants to become one of the three largest gold miners in the world. Acquiring Kinross would achieve that goal.

Kinross might also be a good acquisition for Newmont, which currently has few growth prospects according to an industry analyst cited by Bloomberg: “Newmont has no growth, whereas Kinross has plenty of growth projects.”

Kinross is now trading at around $10/share though its asset value is about double that. That’s still a $20 billion+ deal at a time when production costs are rising and the price of gold going forward is unclear.

Shares of Kinross are up about 1.5% at noon today at $10.25 in a 52-week range of $9.96-$18.25. Shares of the SPDR Gold Trust (NYSE: GLD) are up 0.27% at $161.65 in a 52-week range of $127.80-$185.85.

Paul Ausick

Filed under: Mergers and Buy Outs, Metals Tagged: ABX, AU, GG, GLD, KGC, NEM