gold prices

NEWMONT MINING CORP. $48 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 453.5 million; Market cap: $21.8 billion; WSSF Rating: Average) is one of the world’s largest gold mining companies, with major operations in the United States, Canada, Peru, Australia, Indonesia and Ghana. It also produces other metals such as copper and zinc. Gold prices nearly tripled in the past five years, to reach a high of $1,003 an ounce in March 2008. Gold now trades at $905. However, Newmont’s shares have lagged the jump in gold prices. That’s mainly due to rising fuel, labor and steel costs. Start-up costs at new mines have also weighed on its earnings. The company recently unwound its remaining gold hedges — amounts of future production sold in advance at fixed prices. A large hedge position adds to profits when gold prices drop, but limits profits when prices rise. Eliminating these hedges puts Newmont in a better position to profit from rising spot prices....

BROADRIDGE FINANCIAL SOLUTIONS INC. $17.94, New York symbol BR, has outlined details of a recent transaction by its clearing services subsidiary, Ridge Clearing & Outsourcing, in response to last week’s downgrade of its credit rating by Standard & Poor’s. In late 2007, Ridge Clearing accepted $380 million worth of securities as collateral. That transaction increased Broadridge’s short-term debt to just $426 million, which is equal to only 17% of its current market cap of $2.5 billion. The transaction involved 143 pools of AAA-rated mortgage-backed bonds issued by the Federal National Mortgage Association. The company states “there were no exotic or illiquid mortgage-backed derivative securities in this transaction”. As well, the party who had committed to purchase these bonds is a global financial services company rated A+ by Standard & Poor’s. This party completed the transaction on January 17, 2008, and Broadridge repaid the related short-term loan....

NEWMONT MINING $46.28 (New York symbol NEM; SI Rating: Average) is one of the largest gold producers in the world with major operations in the United States, Canada, Peru, Australia, Indonesia and Ghana. Newmont expects to produce 5.3 million ounces of gold this year. Late last year, Newmont completed the sale of 290 mining and oil and gas royalty interests to Franco-Nevada Corp. This gave Newmont $1.2 billion in cash to pay for its $1.5 billion purchase of TSX-listed Miramar Mining. It also lets it focus on its core gold mining business....

TECK COMINCO LTD. $43 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 441.9 million; Market cap: $19.0 billion; SI Rating: Average) is the world’s top producer of zinc, which accounts for 35% of Teck’s revenue. To cut its dependence on zinc, Teck has diversified in the past few years through acquisitions. The biggest was its $4.1 billion cash-and-stock purchase of Aur Resources in August 2007. Aur owns the Duck Pond copper mine in Newfoundland, plus two other mines in Chile. Copper now supplies 30% of Teck’s revenue. Teck’s other products include coal (20% of revenue), as well as gold, silver, lead and other metals (15%). Thanks mainly to strong demand and rising prices for metals, Teck’s revenue jumped from $2.4 billion in 2003 to $6.5 billion in 2006. Revenue slipped to $6.4 billion in 2007. Earnings rose from $0.28 a share (total $103.0 million) in 2003 to $5.26 a share ($2.2 billion) in 2006. Earnings in 2007 fell to $4.06 a share ($1.8 billion), mainly due to lower zinc and coal prices. The rising Canadian dollar also weighed on Teck’s 2007 earnings. That’s because Teck sells its products in U.S. dollars, but most of its expenses are in Canadian dollars. Cash flow per share shot up from $0.86 in 2003 to $5.76 in 2006, but fell to $4.64 in 2007....

Teck Cominco operates in the Resources sector, which along with Manufacturing is one of the two most volatile and cyclical of the five main economic sectors (the other three are Finance, Consumer and Utility). Teck compounds its risk by growing through acquisitions. That’s riskier than internal growth because new operations may fail to live up to expectations, particularly in mineral development. However, Teck’s mining expertise and its exposure to a wide variety of minerals tempers that risk. That makes it an attractive choice for conservative investors who want a relatively low-risk mining investment. TECK COMINCO LTD. $43 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 441.9 million; Market cap: $19.0 billion; SI Rating: Average) is the world’s top producer of zinc, which accounts for 35% of Teck’s revenue....

AMERIGO RESOURCES $2.54 (Toronto symbol ARG; SI Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 94.4 million; Market cap: $239.7 million) has a contract with Codelco, Chile’s state-owned copper producer, to process the tailings from El Teniente, the world’s largest underground copper mine. Tailings are the waste rock produced in the mining process. The contract runs at least through 2021. Amerigo has a further agreement with Codelco to process a supplementary source of material from the nearby Colihues tailings pond. Amerigo also holds 13.2% of TSX-listed Candente Resource Corp. with a market value of $16.6 million. Candente explores for copper, gold and silver in Peru and Mexico. In the three months ended September 30, 2007, Amerigo’s revenues rose 44.6%, to $28.5 million from $19.7 million. (All figures except share price in U.S. dollars.) Earnings fell 20.2%, to $6.6 million or $0.07 a share from $8.3 million or $0.09. Cash flow per share fell 16.7%, to $0.09 a share from $0.10. Earnings and cash flow fell because of higher Chilean power costs. The stock now trades at 7.1 times cash flow....

Gold hit a record high of $850 an ounce in 1980, then worked its way downward for 25 years. It began rising again in 2002, and it has now broken past $850 and moved higher. It’s now trading at $882. We’re not convinced that gold prices will move significantly higher, or even hold the recent gains. However, some of the conditions that typically accompany higher gold prices are present. U.S. economic growth has slowed and stock markets have dropped. That’s pushing interest rates down. Those lower rates. plus high energy prices, could push inflation up. Either way, we still think the best way to participate in the gold market is through companies with sound production, positive cash flow and strong prospects, like the four we analyze below....

Today many people seem sure that the subprime situation and associated problems will bring on a long-term market decline that could carry stock prices much lower. When conclusions like these become widespread, the conclusion or the timing or both are often wrong. Think back to how many people agreed with former Federal Reserve Board Chairman Alan Greenspan’s famous (or notorious) ‘irrational exuberance’ speech, in December, 1996. Yet nearly four years passed before the market hit its ultimate peak. In between the Greenspan speech and 2000 market peak, we went through a market setback in response to an economic crisis that started in Thailand in 1997....

INTEL CORP. $22.67, Nasdaq symbol INTC, fell 15% this week on fears that rising loan writedowns at major banks would hurt sales of new computers. Banks are large buyers of computer technology. A slowing economy could also hurt new computer demand at other big corporations. However, Intel’s recent restructuring will help it stay profitable even if sales weaken. The launch of new, faster chips in the second half of 2008 should also expand its lead over rival chipmaker Advanced Micro Devices, particularly in the corporate server segment. Intel is a buy. NEWMONT MINING CORP. $52.42, New York symbol NEM, gained $4 this week as gold surged to a new record of $869.05 an ounce, surpassing the old peak of $850 reached in 1980....

NEWMONT MINING $49.42 (New York symbol NEM; SI Rating: Average) is one of the largest gold producers in the world with major operations in the United States, Canada, Peru, Australia, Indonesia and Ghana. Newmont expects to produce over 6.3 million ounces of gold this year. Newmont’s Canadian subsidiary Franco-Nevada Corp. has sold 82 million shares to the public. Franco-Nevada will use the $1.3 billion proceeds from the initial public offering to purchase 190 base and precious metals mining royalty interests plus 100 oil and gas royalty properties from Newmont. This will give Newmont $1.3 billion in cash to pay for its recent $1.5 billion purchase of TSX-listed Miramar Mining. It will also let it focus on its core gold mining business....