gold prices

NEWMONT MINING CORP. $55 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 496.2 million; Market cap: $27.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.5%; TSINetwork Rating: Average; www.newmont.com) is the world’s second-largest gold miner by production, behind Barrick Gold Corp. (New York symbol ABX). The company has major mines in the U.S., Australia and Peru. It gets about 90% of its revenue from gold. The remaining 10% comes from copper, zinc and other metals.

Newmont sells its gold at the market rate instead of through hedging contracts that lock in prices. This policy has helped it take full advantage of rising gold: its average realized gold price jumped 124.1%, from $697 an ounce in 2007 to $1,562 in 2011.

Lack of hedges unleashed earnings

...

Sandstorm Gold, $8.65, symbol SSL on Toronto (Shares outstanding: 70.1 million; Market cap: $606.4 million; www.sandstormgold.com), has royalties on gold production at the following mines: Aurizona (Brazil), 17%; Santa Elena (Mexico), 20%; Black Fox (Canada), 12%; the Ming project (Canada), 12%; the Bracemac-McLeod project (Canada), 17.5%; the Bachelor Lake project (Canada), 20%; and the Summit mine (U.S.), 22%. Sandstorm consolidated its shares on a one-for-five basis in May 2012. The company acquires its royalties through gold-purchase agreements. Under these deals, Sandstorm makes an upfront cash payment to gold mine operators. In exchange, Sandstorm receives the right to purchase a percentage of the gold produced for the life of the mine at a fixed price per ounce....

CAMECO CORP. $22.34 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 395.3 million; Market cap: $8.8 billion; Dividend yield 1.8%) is the world’s largest uranium producer. It supplies roughly 25% of global production and has large, high-grade reserves, low-cost operations, significant market share and a number of uranium mines. Cameco also holds a 31.6% stake in Ontario’s Bruce Power partnership, which operates four of the eight reactors at the Bruce plant, North America’s largest nuclear power complex. In the three months ended March 31, 2012, Cameco’s revenue rose 22.1%, to $563 million from $461 million a year earlier. It sold more uranium in the latest quarter, and its selling prices also rose. Earnings per share jumped 47.6%, to $0.31 from $0.21....

ALIMENTATION COUCHE-TARD, $48.20, symbol ATD.B on Toronto, reported sharply higher sales and earnings in the latest quarter. The company is the largest convenience store operator in Canada, with over 2,000 outlets. It also has nearly 3,700 U.S. stores. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. In the three months ended April 29, 2012, Couche-Tard’s earnings jumped 82.6%, to $117.8 million from $64.2 million a year earlier (all figures except share price in U.S. dollars). Earnings per share rose 88.6%, to $0.66 from $0.35, on fewer shares outstanding....

IAMGOLD $10.71 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 376.1 million; Market cap: $4.0 billion; Dividend yield: 2.4%) owns 38% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 90% of its new Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 100% of the Rosebel mine in Suriname, South America.

In addition, IAMGold has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories. It also owns the Niobec niobium mine in Quebec. Niobium is a rare metal that when used as an additive makes steel stronger, more heat resistant and easier to weld.

In the three months ended March 31, 2012, IAMGold’s revenue fell 2.4%, to $404.2 million from $414.0 million a year earlier. Cash flow per share fell 14.0%, to $0.49 from $0.57. The declines came from lower gold sales, partly because some shipments were delayed until after the quarter ended. That was partially offset by higher gold prices and niobium sales.

...

Gold prices have moved down from their peak of $1,918 an ounce in August 2011 to the current price of $1,571. Gold could well regain its highs and move up even further over the longer term, although it will likely remain volatile. Higher prices would arise from investor fears that inflation or global political and economic instability will weaken key currencies, such as the euro or the U.S. dollar. If you do hold gold stocks, we recommend that you keep them to a reasonable part of the resources component of a well-balanced portfolio. YAMANA GOLD (Toronto symbol YRI; www.yamana.com) owns seven operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina, and has three other properties in advanced stages of development....

YAMANA GOLD $16.36 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416-815-0220; www.yamana.com; Shares outstanding: 746.0 million; Market cap: $12.2 billion; Dividend yield: 1.3%) owns seven operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina, and has three other properties in advanced stages of development. In the quarter ended March 31, 2012, Yamana’s revenue rose 17.6%, to $559.7 million from $476.1 million a year earlier (all figures except share price and market cap in U.S. dollars). The company increased its production and benefited from higher gold prices. Earnings per share rose 19.0%, to $0.25 from $0.21. Yamana held a high cash balance of $867.6 million, or $1.16 a share, on March 31. Its $766.0 million of debt is just 6.3% of its market cap. Thanks to the improved results, the company is raising its quarterly dividend by 18.2% with the July 2012 payment, to $0.065 from $0.055. The shares now yield 1.3%....

YAMANA GOLD $16.36 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416-815-0220; www.yamana.com; Shares outstanding: 746.0 million; Market cap: $12.2 billion; Dividend yield: 1.3%) owns seven operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina, and has three other properties in advanced stages of development.

In the quarter ended March 31, 2012, Yamana’s revenue rose 17.6%, to $559.7 million from $476.1 million a year earlier (all figures except share price and market cap in U.S. dollars). The company increased its production and benefited from higher gold prices. Earnings per share rose 19.0%, to $0.25 from $0.21.

Yamana held a high cash balance of $867.6 million, or $1.16 a share, on March 31. Its $766.0 million of debt is just 6.3% of its market cap. Thanks to the improved results, the company is raising its quarterly dividend by 18.2% with the July 2012 payment, to $0.065 from $0.055. The shares now yield 1.3%.

...

Victoria Gold, $0.25, symbol VIT on Toronto (Shares outstanding: 339.3 million; Market cap: $84.8 million; www.vitgoldcorp.com), is focused on bringing its Eagle gold deposit into production in 2014 or 2015. The company aims to build a $430-million mine on the site. Victoria expects this mine to produce 212,000 ounces of gold annually in its first five years, and an average of 192,000 ounces annually over its 12-year life. The company also believes there is lots of room to increase the deposit’s reserves, and possibly its annual production. Right now, it appears the deposit could hold as much as 6.3 million ounces of gold....

SASOL LTD. (ADR), $45.65, symbol SSL on New York, has developed a technology to convert coal and natural gas into motor fuels. The company is now the world’s largest producer of fuel from coal at its facility in Secunda, South Africa. Sasol also produces synthetic fuels from natural gas at plants in Qatar and Nigeria. In addition, the company has substantial chemical production interests, and produces oil and gas in Africa. Sasol is also South Africa’s third-largest coal producer. In the six months ended December 31, 2011, Sasol’s revenue rose 23.9%, to $11.0 billion from $8.9 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 81.8%, to $3.04 from $1.67. Higher oil prices were the main reason for the gains. A stronger U.S. dollar against the South African rand also pushed up the value of sales outside South Africa....