African Gold Group stock forecast (PINK:AGGFF, CVE:AGG)

The biggest news out of African Gold is the company’s upcoming resource estimate at its Kobada project. Those numbers are expected sometime this month.

This post is part of series where we’re checking in on the Top 500 junior gold and silver mining stocks profiled in our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock.

Performance: First, let’s compare African Gold Group’s performance against the AMEX Gold Bugs Index (HUI) – a basket of industry-leading gold stocks.

Time Span AGONF Performance HUI Performance
1 Month +48% +13%
3 Month +6% +3%
YTD -41% -12%

African Gold Group’s following the usual trend: as a junior gold mining stock, it’s more volatile than shares in larger mining companies. When times are good, they’re really good for small cap miners. When times are bad, the declines are steeper.

Profile: African Gold Group, Inc., holds rights to five projects: three in Ghana and two in Mali. The Company’s most advanced asset is its Kobada gold project in Mali. The Kobada Trend contains an inferred mineral resource of 740,000 ounces of gold at a 0.3 g/t gold cutoff (recently upgraded to 1.1 million ounces), and the company believes that Kobada could be a multi-million ounce deposit. African Gold’s Ghana property also includes land abutting Keegan Resources’ holdings. http://www.africangoldgroup.ca/

Risks: With an average trading volume of 20,500 shares per day, volume on AGONF is low, but not too low. Just keep in mind that taking a large position in a small-cap stock means you may have to wait a long time to find buyers for all your shares. Volume is slightly higher on the CVE, where an average of 44K shares trade hands daily.

Recent News: The biggest news out of African Gold is the company’s upcoming resource estimate at its Kobada project. Those numbers are expected sometime this month.

“(Our resource estimate) will be upgraded to indicated from inferred and a percentage of that will go into measured,” company founder Nikiforuk told the Northern Miner in April. “We also anticipate a meaningful increase in grade.”

Step-out holes drilled at the site this spring included highlights of 70 metres of 1.83 g/t gold and 84 metres of 1.26 grams gold. If the company’s resource estimate is significantly higher, expect a boost in share price.

Last year’s preliminary economic assessment indicated that “the project could produce gold at US$470.90 per oz. processing 20,000 tonnes per day, for a total of 7 million tonnes a year” (per Northern Miner). The project currently boasts an inferred resource of 1.1 million ounces of gold.

Check out our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock (pictured above) to uncover more undiscovered gold and silver mining stocks.

How to pick gold stock takeover targets in 2012

With gold mining stocks hovering near two-years low, the mining sector is looking ripe for consolidation. Here are three tips for identifying potential gold mining takeover targets.

“The gold miners are cheaper today versus the price of gold than at any time in this 12-year bull market,” Fred Hickey of the Barron’s Roundtable said recently (per IBT). Indeed, gold stocks are hovering near two-years low, and the mining sector is looking ripe for consolidation. Here are three tips for identifying potential gold mining takeover targets:

1) Follow the pros. One of my favorite tactics for identifying strong junior mining companies is by looking at the companies professionals are investing in. A great starting place is the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ). This ETF invests in a basket of junior gold mining stocks, and the fund regularly updates its holdings. As of right now, GDXJ holds shares in 82 companies (download the excel file here), and it reads like a who’s who in the industry – particularly when you’re looking at the miners towards the top of the list.

Right now, GDXJ likes Perseus Mining (TSE:PRU), Silvercorp Metal (NYSE:SVM), Medusa Mining (ASX:MML), Rubicon Minerals (AMEX:RBY), Endeavour Silver (NYSE:EXK), Evolution Mining (ASX:CAH) and Aurizon Mines (AMEX:AZK) among others.

2) Look at past acquisitions. Perhaps the best way to see which gold mining stocks are worthy of acquiring is by looking at past acquisitions for clues. In March, for example, Pan American Silver Corp. (NASDAQ:PAAS) completed its acquisition of gold and silver mining company Minefinders Corp. Ltd. Let’s take a look at what made Minefinders a tantalizing takeover target:

  • A producing gold and silver mine at the multi-million ounce Dolores project in Northern Mexico.
  • 2.34 million ounces of proven and probable gold (as of 2010) as well as 119 million ounces of proven and probable silver.
  • Low cash costs of $450-$500 per gold ounce equivalent.
  • A small debt load and more than $200 million in cash before the acquisition

Find a company with similar prospects and you’ve probably identified a takeover target.

3) Positive cashflow. It seems obvious, but a lot of beginning gold and silver investors like the idea of getting in on a junior mining stock before they hit the mother lode during exploratory drilling. In my mind, that’s a lot like gambling, and I encourage investors to look instead at junior gold miners that are already pulling ore out of the ground.

The majors want to acquire companies that have made it through the often arduous permitting process, have proven reserves and are already generating cashflow. At that point, the major just needs to bring in its deep pockets and mining expertise to join in the reaping of rewards.

So, while it’s definitely tempting to try to guess which junior mining company is going to uncover the next Brucejack project, you’re a lot safer buying shares in a miner that’s already making money. It’s not as glamorous, but trust me – it’s probably more profitable.

Undervalued Gold Mining Stocks: Petaquilla Minerals Ltd.

At least one writer pegs Petaquilla Minerals’ price target above $3 a share. Here’s why.

It’s not often that you find a promising junior gold mining stock trading at a P/E of 2.1. Petaquilla Minerals Ltd. (OTC:PTQMF, TSX:PTQ) is doing just that, though, even as it expects to rapidly ramp up gold production at it’s growing deposits in Panama.

You can blame the stock’s poor performance (shares are down 30 percent YTD) on overall weakness in gold mining shares, but if interest in the sector returns, I expect Petaquilla to outperform. Here’s why:

1) Promising production. Cash flow is the lifeblood of a small mining company, and Petaquilla’s cash flow from its Molejon gold mine in Panama is growing along with production targets.

“For the current fourth quarter of fiscal 2012, the Company is forecasting gold poured within the range of 18,000 to 21,000 ounces, and revenues within the range of $27 to $31.5 million,” Petaquilla wrote in its most recent earnings report.

All told, Petaquilla expects to mine more than 100,000 ounces of gold in 2012, up to 145,000 ounces in 2013 and perhaps as many as 250,000 ounces by 2015. Promising exploration is also ongoing at the Lomero-Poyatos project in the wake of Petaquilla’s 2011 acquisition of Iberian Resources Corp. in Spain. Exploration there should kick off within two months (per reports).

2) Big backers. One of the more promising signs Petaquilla’s committed to growth is the fact that management owns more than 12 percent of the company. Other big shareholders include Sprott Asset Management, U.S. Global Investors and Libra Advisors, according to Morgan Report contributor Chris Marchese. Nasdaq.com lists Account Management LLC as the single biggest holder in Petaquilla with 122,780 shares.

3) Fair cash costs. Petaquilla’s cash costs for fiscal 2012 are expected to fall between $550-$600 per ounce of gold sold. Compare that with a company like Alexis Minerals that recently reported cash costs north of $2,000 an ounce.

Those low costs prompted Chris Marchese to put peg Petaquilla Minerals’ price target above $3 a share.

“I’ve modeled a net asset value on a fully diluted basis of over $3/share [using $1,600/oz. gold and $2.50 copper – discounted at 15 percent], significantly higher than the current $0.42/share market price,” he said in an interview with The Gold Report. “It has been completely overlooked by the market even though it has one of the best production growth profiles out there, courtesy of its recent acquisition of Iberian Resources Corp. in August 2011.”

Like this post? Check out our brand new book The Top 500 Gold and Silver Mining Stocks to uncover more great junior miners that analysts may have missed.

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Gold mining stocks haven’t looked this attractive in four years

A simple chart shows that gold mining stocks potentially present a better buying opportunity now than they have at any time over the past four years.

Frank Holmes has a fascinating post over at WallStreetPit called Where’s the Beef for Gold Equities? In it, he urges investors to “think contrarian: Eat up all you can while the pasture is wide open, because … when gold equities reverse, it happens quickly.”

We all know that gold mining stocks have grossly underperformed the spot price of gold recently. What you might not know is that gold mining stocks (via the NYSE Arca Gold Miners Index) haven’t underperformed spot gold this badly since the very height of credit crisis in 2008. Reference Frank’s chart for proof:

It’s evidence that gold mining stocks potentially present a better buying opportunity now than they have at any time over the past four years.

“The cold shoulder from investors has also given way to a promising trend in the gold space—growing dividend payouts,” Holmes writes. Newmont Mining Corporation (NYSE:NEM), for instance, has started paying dividends with a yield that’s based on the current price of gold. When gold goes up, so does NEM’s dividend payout. The stock’s currently yielding 2.88 percent.

Our new book, The Top 500 Gold and Silver Mining Companies, is filled with lists that compare gold and silver mining companies by things like dividends, amount of gold and silver in the ground, and recent stock price performance. You can find it on Amazon.

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3 reasons to invest in Argonaut Gold Inc. (PINK:ARNGF)

Argonaut Gold (ARNGF) is one of our favorite junior gold and silver stocks. Here are three reasons why.

Argonaut Gold (ARNGF) is one of our favorite junior gold and silver stocks. We profiled the company in our brand new book The Top 500 Gold and Silver Mining Stocks, and we included it in our list of our Top 100 stock picks. Here are three reasons why:

1) Already in production. Unlike a lot of small-cap gold mining stocks, Argonaut Gold’s already in production. When the company reported its Q4 earnings two weeks ago, we learned that Argonaut netted $26 million ($0.30 per share) on revenue of $105 million in 2011. All told, the company sold 66,521 ounces of gold last year.

2) A growing gold resource. Argonaut Gold acquired Pediment Gold in January 2011. Along with new exploration results, that helped the company grow its gold resource from 2 million to 6.5 million ounces last year.

3) More production in 2012. After producing 66,521 ounces last year, Argonaut expects to produce anywhere from 88,000 to 97,000 ounces of gold in 2012 at cash costs between $625 and $650 an ounce. The bulk of that gold (75-80,000 ounces) should come from the company’s flagship El Castillo project. The La Colorada project (which was acquired from Pediment Gold) should yield 13-17,000 ounces of gold.

“The lowest cost ounces we will ever find are the ones that lie within the properties we already own,” Argonaut’s President Pete Dougherty said in a press release. “We remain committed to exploration as we look to grow the Company.”

Argonaut expects to spend as much $34 million in exploration and development this year. The bulk of that money will be spent at La Colorada, where the company should soon enter production.

TradingStocks.me has identified 99 more promising gold and silver mining stocks (and profiled another 400 companies) in our brand new book The Top 500 Gold and Silver Mining Stocks.

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