Meet the 2010 Gold Laggards (GDXJ, GDX, DROOY, JAG, RGLD, HMY, AUY, KGC, GLD)

Gold is a currency on fire.  Currencies are losing their value against hard assets as it seems most nations are devaluing in a race to zero.  Gold is now above $1,300.00 per ounce, which will drive enormous profits for miners. Interestingly, a review of the sector shows that many gold miners are up 75%, 100%, or even more; yet there are many laggards in the group that have not participated in the rally.

We wanted to see which gold stocks were lagging the gold ETF peers.  For starters, the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) at $34.14 is up 61% from its 52-week lows and is only down 1.95% from its 52-week highs.  The larger ETF via the Market Vectors Gold Miners ETF (NYSE: GDX) at $56.66 is up 43.5% from its 52-week lows but only off 0.16% from its 52-week highs.  Some of the laggards we are tracking are DRDGOLD Ltd. (NASDAQ: DROOY), Jaguar Mining Inc. (NYSE: JAG), Royal Gold, Inc. (NASDAQ: RGLD), Harmony Gold Mining Co. Ltd. (NYSE: HMY), Yamana Gold, Inc. (NYSE: AUY) and Kinross Gold Corporation (NYSE: KGC).  We also wanted to see how these compare to the SPDR Gold Shares (NYSE: GLD).  What is interesting is that the ‘laggard’ implication may not have much standing against the future.  We have given an update and outlook for each.

DRDGOLD Ltd. (NASDAQ: DROOY) is a perpetual low-priced stock at $5.31 versus a 52-week range of $3.92 to $8.05. It is up 35% from 52-week lows, making it the healthiest of the laggards in a measurement off of 52-week lows.  Shares are also down over 35% from its 52-week highs, making it the second largest off’ from highs.  South African gold production drops in reports from earlier in the summer, as well as a June coverage initiation by Morgan Stanley at “overweight” followed by a September downgrade to “equal-weight” only added to the overhang.  The last annual dividend gave it a 1.2% yield, but that is still an unknown for 2010.

Jaguar Mining Inc. (NYSE: JAG) is a New Hampshire-based company, but its gold mining interests are just about all in Brazil.  At $6.58, its shares are up only 16% from its 52-week lows and they are the worst on the ‘off 52-week highs’ with shares down more than 50% from the $14.01 highs.  The stock was already lower in August because of mining problems, but its August earnings report was the death-blow.  After that, analysts threw in the towel and many downgrades came.  Thomson Reuters still has an average target above $12.00, although that appears to conflict with the non-U.S. research, so that is something we will leave as a wild card.

Royal Gold, Inc. (NASDAQ: RGLD) has been a long-standing anomaly in gold investing. This Colorado-based gold investment has very few employees (approximately 20), yet has a $2.8 billion market cap.  The difference between it and traditional mining stocks is that Royal Gold acquires and operates precious metals royalties rather than acting as an operator of mining operations.  At $50.76, it is up ‘only’ 23% from the 52-week low of $41.19 and it is also down ‘only’ 9.3% from the 52-week high of $55.96.  If you look at the chart here, there is nothing broken about it.  It has risen steadily over the last 5-years and Thomson Reuters has average price targets north of $58.00.  There is nothing wrong with this one on the surface.  It just has not performed as well as many of the other gold stocks.

Harmony Gold Mining Co. Ltd. (NYSE: HMY) is another South African miner, and its lack of performance may be nothing more than just lower volatility compared to many peers.  At $11.55, it is up 32% from its 52-week low and is down only 4.15% from its 52-week high.  Operations are mainly in South Africa, New Guinea, and Australia.  With a market cap of right at $5 billion.  The company has recently advised that a search and rescue team recovered one body of its two employees missing after a seismically-induced rockfall that took place at the East Shaft of its Bambanani Mine. Thomson Reuters lists an average analyst price target at $12.27, so the lack of performance here may represent nothing more than just being fairly valued.

Yamana Gold, Inc. (NYSE: AUY) at $11.45 is yolked between its 52-week high and low of $9.16 to $14.37.  That means it is up 25% from lows and down 20% from highs.  It has a low yield at 0.7% and is large with a $8.5 billion market cap.  A recent disclosure is that the Canada-based Latin American mine operator will spend $650 million to expand projects in the next two and a half years with a goal of raising production by more than 50% as it expects gold prices to remain high.  The goal is to raise annual production to 1.7 million ounces of gold by the end of 2013. Analysts have an average target of about $14.00 per Thomson Reuters, and the lowest target appears to be $11.50 of those with targets on the stock.

Kinross Gold Corporation (NYSE: KGC) at $19.00 is also close to equally yolked between high and low, with shares up 28% from the 52-week low and down 20% from the 52-week high.  It is also proof that there is no discrimination on size in the under-performers with a $13+ billion market cap.  After a recent completion of its Red Back Mining deal, the company set a goal where production is expected to grow from the then-current combined forecast of 2.6 to 2.7 million gold equivalent ounces in 2010 to 4.5 to 4.9 million gold equivalent ounces in 2015.  This Canada-based producer was punished hard for its $7.1 billion acquisition of Red Back.  Just keep in mind that it has also bounced from $15 to $19, and that has now broken its downward chart pattern.  This laggard may no longer be a true laggard.

So how do all of these compare to SPDR Gold Shares (NYSE: GLD) as the main gold trust ETF?  At $127.85, it has a 52-week trading range of $96.95 to $128.03.  Each day is a new high it feels here and the ETF is up 34.35% from its 52-week low.  As far as how it ranks in assets, it is larger than most central bank holdings: 1,305 tonnes, 41.979 million ounces, or $54.303 billion in total assets.

These stocks were not listed in any particular order, this was just the order of the names in our portfolio screen set of our own gold universe earlier in 2010.

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JON C. OGG