Newmont Corp.

PLEASE NOTE: This is our last Hotline for 2012. Our next Hotline will go out on Friday, January 4, 2013. GOOGLE INC., $715.63, Nasdaq symbol GOOG, is selling its Motorola Home division, which makes TV set-top boxes and modems for cable companies. The company acquired this business as part of its $12.5-billion purchase of cellphone maker Motorola Mobility Holdings in May 2012. The buyer is Georgia-based Arris Group Ltd. (Nasdaq symbol ARRS). When the deal closes in the first half of 2013, Google will receive $2.05 billion in cash plus $300 million of Arris’s common shares. That will give it a 15.7% stake in Arris....

Candente Copper, $0.32, symbol DNT on Toronto (Shares outstanding: 121.9 million; Market cap: $39.0 million; www.candentecopper.com), is developing the Canariaco Norte copper/gold/silver project in northern Peru. The deposit holds as much as 8.9 billion pounds of copper, 2 million ounces of gold and 53 million ounces of silver. Candente handed out shares of Cobriza Metals (Toronto symbol CZA) to its shareholders in October 2011. Cobriza holds all of Candente’s properties in Peru except for Canariaco Norte. The company holds cash of $14.4 million U.S. That’s enough to complete its feasibility study on the financial viability of a mine. Candente expects to complete this study in mid-2013. If it decides to go ahead, it will need to find a major partner because it will cost over $1.6 billion to develop a mine at the site....

NEWMONT MINING $47.31 (New York symbol NEM; Shares outstanding: 491.2 million; Market cap: $23.2 billion; TSINetwork Rating: Average; Dividend yield: 3.0%; www.newmont.com) operates gold mines in the U.S., Canada, Mexico, Australia, New Zealand, Peru, Indonesia and Ghana. The company’s worldwide diversification, plus its strong cash flow and balance sheet, make it our favourite gold stock for safety-conscious investors. In the three months ended September 30, 2012, Newmont’s cash flow fell 20.4%, to $849 million, or $1.72 a share, from $1.1 billion, or $2.12 a share, a year earlier. Lower gold prices and higher costs were the main reason for the decline. The company holds cash of $1.5 billion, or $3.07 a share....

Pat McKeough responds to many personal questions about specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle. This week, one question from an Inner Circle member concerned a fund that holds gold stocks. The fund’s high distributions give it a substantial dividend yield. Pat examines whether it can sustain its yield and also looks at its policy of using call options to boost returns....

Faircourt Gold Income Corp., $8.33, symbol FGX on Toronto (Shares outstanding: 4.5 million; Market cap: $37.5 million; www.faircourtassetmgt.com), mainly invests in large- and mid-sized gold producers that are part of the S&P/TSX Global Gold Index. The company holds mostly high-quality stocks, including Barrick Gold, Detour Gold, Franco-Nevada Corp., Freeport-McMoran Copper & Gold, Goldcorp, Kinross Gold, Newmont Mining, Yamana Gold and New Gold. Faircourt pays a high 7.2% dividend yield. To meet its high distributions, the company may use capital gains on its investments to increase its cash flow—a strategy that works when markets are rising but not when they are falling....

In September 2011, gold hit an all-time high of $1,900.30 U.S. an ounce. It now trades at around $1,772.50. 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 hurt key currencies, such as the euro or the U.S. dollar. We feel that it’s okay to hold some gold or silver stocks as part of the Resources component of a well-balanced portfolio, but you’ll want to keep them to a reasonable part of that portfolio....

ISHARES S&P/TSX GLOBAL GOLD INDEX FUND $19.69 (Toronto symbol XGD; buy or sell through brokers; ca.ishares.com) aims to mirror the performance of the S&P/TSX Global Gold Index.

This index is made up of 58 gold stocks from Canada and around the world. The fund’s MER is 0.55%. iShares S&P/TSX Global Gold Index Fund began trading on March 23, 2001.

The fund’s top 10 holdings are Barrick Gold at 16.0%; Goldcorp., 13.8%; Newmont Mining, 10.5%; Yamana Gold, 5.3%; AngloGold Ashanti (ADR), 5.1%; Kinross, 4.2%; Eldorado Gold, 3.9%; Randgold Resources, 3.9% Gold Fields (ADR), 3.7%; and Agnico-Eagle Mines, 3.4%.

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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...

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

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In September 2011, gold hit an all-time high of $1,900.30 U.S. an ounce. It now trades at around $1,700.80. Silver rose to an all-time high in April 2011, when it reached $49.76 U.S. an ounce. It has since pulled back to today’s price of $32.63. Gold and silver could well regain their highs and move up even further over the longer term, although they will likely remain volatile. Higher prices would arise from investor fears that inflation or global political and economic instability will hurt key currencies, such as the euro or the U.S. dollar. If you want to hold a number of gold or silver stocks, these two exchange traded funds offer top-quality global miners and low fees....