gold prices

NEWMONT MINING CORP. $55 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 490.2 million; Market cap: $27.0 billion; Price-to-sales ratio: 4.0; WSSF Rating: Average) is one of the world’s largest gold-mining companies. Newmont has major mines in the U.S., Canada, Australia, New Zealand, Peru and Ghana. It gets about 80% of its revenue from gold. The remaining 20% comes from copper, zinc and other metals. Most of Newmont’s copper comes from the large Batu Hijau gold/copper mining complex in Indonesia. As part of its original 1986 deal to develop Batu Hijau, Newmont and its partners agreed to lower their stakes in the mine, in stages, by selling them to the Indonesian government. As a result, the company recently reduced its stake in Batu Hijau to 31.5% from 45%. In exchange, Newmont received roughly $669 million. The company expects to sell more of its stake in Batu Hijau over the next few months. Meanwhile, Newmont earned $388 million in the three months ended September 30, 2009. That’s 113.2% higher than the $182 million it earned a year earlier. Per-share earnings jumped 97.5%, to $0.79 from $0.40, on more shares outstanding. Cash flow per share gained 94.8%, to $1.85 from $0.95. Revenue climbed 49.5%, to $2.05 billion from $1.4 billion. The gains were mainly caused by higher average gold prices (up 11%), and higher gold sales (up 16%). Newmont also cut its operating costs and benefited from higher copper prices and production....

Resource prices have climbed sharply since early 2009, as the global recession began to ease and some countries’ economies returned to growth. Despite their recent gains, prices for oil, gold and other commodities will likely keep rising. That’s partly because resources act as a hedge against inflation. We feel the best way to profit from rising resource prices is with high-quality companies, such as these four. They are all leaders in their fields, and are doing a good job of keeping their costs down. However, only three are buys right now. ENCANA CORP. $55 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.2 million; Market cap: $41.3 billion; Price-to-sales ratio: 2.1: WSSF Rating: Average) will split itself into two separate companies in December, now that shareholders have approved the plan. Break-ups like this help unlock hidden value, and generally lead to above-average results for a period of years....

Three years ago, when gold was at half of today’s price, we said that the best way to profit in gold was through junior miners that were increasing production by adding new mines. Our picks have done just that. Plus, they are generating lots of cash flow with rising gold prices. Here’s how they look today: European Goldfields $7.33, Toronto symbol EGU, has one mine in Greece and is nearing final approval on two more. Buy....

Last week, Barrick Gold (symbol ABX on Toronto) said that its research shows that global gold production has been falling by roughly one million ounces a year since 2000. Barrick is the world’s largest gold-mining company. Moreover, the company says that poorer-quality ore has driven down total global mine supply by roughly 10%. In Canada, the U.S, and Australia, for example, average grades of mined ore have fallen to nearly three grams per tonne. That’s down from roughly 12 grams per tonne in 1950. What’s more, Barrick says that South Africa’s gold output has fallen by about 50% from its peak in 1970. ...

With commodity prices on an upswing, many investors have turned their attention to companies that produce and explore for minerals. These include Canadian gold stocks, especially in light of gold’s recent rise to over $1,030 U.S. an ounce. (In the current Stock Pickers Digest, we take a close look at a junior gold explorer we’ve recommended in the past. It has a presence in one of the world’s most productive gold-producing regions. What’s more, it’s up 72.2% for us since early this year. Read on for further details.) ...

AMERIGO RESOURCES $0.79 (Toronto symbol ARG; SI Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 132.6 million; Market cap: $104.8 million) has jumped 173.3% since May on higher copper prices. Copper is up 49.0% during that period, to $2.98 U.S. a pound. Amerigo processes copper and molybdenum from the waste rock, or “tailings,” from Chile’s El Teniente, the world’s largest copper mine. In the three months ended June 30, 2009, Amerigo’s revenue fell 42.0%, to $18.1 million from $31.2 million a year earlier. (All figures except share price in U.S. dollars.) Metal prices rose during the quarter, but copper prices were still 45.8% below their 2008 highs of $3.80 a pound. Molybdenum prices were 73.4% off their 2008 highs. Amerigo’s cash flow was $0.013 a share in the latest quarter, compared to $0.065 a share a year earlier....

Energold Drilling Corp., $2.18, symbol EGD on Toronto (Shares outstanding: 34.1 million; Market cap: $74.3 million), sells contract-drilling services to the mining industry. The company has a fleet of 79 rigs operating in 19 countries. It specializes in highly portable drilling rigs that it believes have a smaller environmental impact than traditional rigs. The company gets the majority of its revenue from developing countries, where labour costs are lower and there is little competition for drilling services. Mexico, the Caribbean and Central America account for roughly 55% of Energold’s revenue, followed by South America (35%) and Africa and Asia (10%). Energold also owns 13.8% of Impact Silver Corp. (symbol IPT on Toronto), which operates silver mines in the Dominican Republic and Mexico. At the current price of Impact’s shares, this investment is worth $6.3 million, or 8% of Energold’s market cap....

ADOBE SYSTEMS INC., $32.95, Nasdaq symbol ADBE, will buy Omniture Inc. (Nasdaq symbol OMTR), which makes software that measures and analyzes web-site traffic. The deal will close later this year. Omniture’s software tracks the pages that site visitors view, as well as the links they click. Omniture’s 5,000 clients use this information to improve their sites, and to help determine how much to charge advertisers. Adobe makes web-design software, which it plans to modify to take advantage of Omniture’s online-marketing expertise. This should help Adobe’s customers increase their ad revenues....

FAIRFAX FINANCIAL HOLDINGS, $371.00, symbol FFH on Toronto, plans to buy the 27.4% of Odyssey Re Holdings Corp. (New York symbol ORH) that it doesn’t already own for $960 million U.S. Odyssey Re is a major worldwide underwriter of property and casualty reinsurance. Reinsurers sell insurance to insurance companies. This lets those companies offset large risks. To pay for the purchase, Fairfax will raise $1 billion U.S. by selling 2.9 million shares at $347.00 U.S. a share....

Economic statistics are big news these days, but they have a weak link at best with the value of your investment portfolio. A surprisingly good economic statistic can make the stock market jump. But a bad surprise can come along and reverse that move the next day. In retrospect, it’s clear that economic turning points do have an impact on the market. But nobody can consistently predict these points. That’s also true of key economic factors like interest rates, oil and gold prices....