Newmont Corp.

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....

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.

How to profit from a potential gold shortage

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GABRIEL RESOURCES, $3.35, symbol GBU on Toronto, shot up over 30% this week after it added a new investor with experience in permitting and building large industrial projects in Romania. That’s where Gabriel’s 80.23%-owned Rosia Montana project is located. Rosia Montana contains an estimated 10 million ounces of gold reserves, and could produce over 500,000 ounces a year. This gives it the potential to become Europe’s largest producing gold mine. BSG Capital Markets, a unit of Beny Steinmetz Group, a privately owned holding company, is buying 30 million units of Gabriel at $2.25 each (or a total of $67.5 million). Aside from one common share, each unit includes a two-year warrant that entitles BSG to buy additional Gabriel stock. For the first 18 months, BSG may buy Gabriel shares for $2.50 each. The price rises to $3.00 a share for the final six months....

iShares CDN Gold Sector Index Fund, $21.57, symbol XGD on Toronto (Shares outstanding: 54.5 million; Market cap: $1.2 billion), aims to replicate the performance of the S&P/TSX Global Gold Index. The fund currently holds 28 stocks. The S&P/TSX Global Gold Index is made up of Canadian and non-Canadian gold stocks that S&P selects using its industrial classifications and guidelines. The fund’s MER is capped at 0.55%. The fund’s top ten holdings are Barrick Gold at 17.7%; Goldcorp, 16.0%; Newmont Mining, 11.8%; Kinross Gold, 8.1%; AngloGold Ashanti (ADR), 7.8%; Agnico-Eagle Mines, 5.5%; Gold Fields (ADR), 5.2%; Yamana Gold, 4.2%; Lihir Gold (ADR), 3.3%; and Randgold Resources (ADR), 2.4% If you want to own a gold fund, iShares CDN Gold Sector Index Fund is okay to hold....

RIOCAN REAL ESTATE INVESTMENT TRUST $17.18 (Toronto symbol REI.UN; Units outstanding: 234.1 million; Market cap: $4.2 billion; SI Rating: Average) has bought 100% of the first phase of the RioCan Centre in Vaughan, near Toronto. That’s double the 50% interest that the trust previously held. The first phase of this three-phase project consists of a shopping centre, which opened earlier this year. Wal-Mart is the anchor tenant, and has signed a 20-year lease. RioCan continues to hold a 50% interest in each of the remaining two phases. The trust also raised its stake in the RioCan Beacon Hill mall near Calgary. It now owns 50% of this property, up from 40%....

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....

ALARMFORCE INDUSTRIES, $5.40, symbol AF on Toronto, reports that it earned $1.4 million, or $0.12 a share, in the three months ended July 31, 2009. That’s up 156.5% from $553,926, or $0.05 a share, a year earlier. The home-security firm’s cash flow per share jumped 54.5%, to $0.17 from $0.11. Revenue rose 12.5%, to $8.5 million from $7.6 million. AlarmForce mainly attracts new customers by aggressively promoting itself through radio and TV advertising. In the U.S., subscriptions jumped 54.4%, to 12,200 from 7,900 a year earlier. Canadian subscriptions rose 8.7%, to 86,500 from 79,600. In all, the company had 98,700 subscribers at the end of the most recent quarter, up 12.8% from 87,500 a year earlier. Demand for security systems remains steady, and AlarmForce’s balance sheet is strong. These factors will let the company continue to profit from the economic recovery. Moreover, AlarmForce’s $929,168 long-term debt is just 1.4% of its market cap. It holds cash of $6.6 million, or $0.54 a share....

UNIVERSAL CANADIAN GROWTH FUND $17.65 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ontario, M5S 3B5. Web site: www.mackenziefinancial.com. Tel: 1-800-387-0780; Load fund: available from brokers) holds companies that its managers believe have strong management and sound business prospects. The fund holds fewer than 40 stocks. Universal Canadian’s top holdings include Thomson Reuters, Rogers Communications, Becton Dickinson, ShawCor, John Wiley & Sons, Dun & Bradstreet, Shoppers Drug Mart, Martinrea International, Waters Corp. and Enerflex Systems. The $823.1-million fund’s breakdown by economic sector is as follows: consumer discretionary (26%), energy (16.4%), industrials (12.1%), health care (8.8%), consumer staples (6.2%), telecommunications services (5.8%), information technology (5.2%), and metals and minerals (1.3%)....

NEWMONT MINING CORP. $39 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 490 million; Market cap: $19.1 billion; Price-to-sales ratio: 3.4; WSSF Rating: Average) earned $213 million, or $0.43 a share, in the three months ended June 30, 2009. That’s down 3.6% from the $221 million, or $0.50 a share, it earned the previous year. The latest figures exclude one-time costs related to Newmont’s purchase of the remaining one-third interest in Australia’s Boddington gold mine. Revenue rose 6.6%, to $1.6 billion from $1.5 billion. Gold sales (86% of revenue), rose 4%, as Newmont’s realized gold price climbed 1.7%. Copper sales (14% of revenue) rose 25% as higher production offset a 39% drop in prices. Newmont’s revenue should continue to rise in the second half of 2009, as Boddington reaches full production. (The mine officially opened on July 23.) The company is also doing a good job of lowering its production costs. Newmont is a buy.

ASA Limited, $61.09, symbol ASA on New York (Shares outstanding: 7.2 million; Market cap: $439.9 million), is a closed-end fund that must keep at least 80% of its assets in shares of companies that mine gold, silver, platinum, diamonds or other precious metals. The company mostly invests in well-established gold stocks with steady cash flows and large reserves. About 82% of its assets are now gold stocks; other natural-resource stocks account for 14%. ASA owns the following stocks: Anglo American plc, Lonmin plc, Impala Platinum Holdings, Anglo Platinum, Newcrest Mining, Barrick Gold, Goldcorp, Kinross Gold, NovaGold Resources, Randgold Resources, Compania de Minas Buenaventura, AngloGold Ashanti, Gold Fields Limited, Harmony Gold Mining, Newmont Mining and SPDR Gold Trust....