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A Ponzi Scheme Called America
Two Gold Bullion Junior Mining Stocks for 2013 January 8, 2013 | Posted in Gold | No comments
While investors have many things to worry about, one is the additional monetary stimulus,
or money printing, that is occurring around the globe. The recent deal to avert the fiscal cliff did nothing to reduce government spending, which is the real problem that’s driving the budget deficit. This ensures that America’s debt level will continue to grow, and it’s a sign that politicians in Washington will continue avoiding the hard decisions that will structurally change the future of America and provide stability for the economy and the U.S. dollar. The U.S. Federal Reserve has taken on unprecedented levels of monetary easing to try and inflate the economy. The end result of money printing is usually the devaluation of a country’s currency. Between the Federal Reserve printing money and Washington spending it freely, many will look toward gold bullion as a safety net. One area where there is significant value is in junior mining stocks involved with gold bullion. Gold bullion junior mining stocks have been undervalued for some time. If you think that the prices of gold bullion and other precious metals will continue to stay high for some period of time, then looking to junior mining stocks will give you more of a push upward when their true value is realized. While there can be more risk, there are also large rewards in gold junior mining stocks. One of the more interesting gold junior mining stocks to watch in 2013 is Brigus Gold Corp. (NYSE/BRD). The stock trades at a forward price-to-earnings (P/E) ratio of only 3.9 and a discount to book value of just under 1.0. (Source: Brigus Gold Corp. company profile, Yahoo! Finance, last accessed January 3, 2013.) During 2012, Brigus increased production every quarter, a trend it believes will continue in 2013. As with many junior mining stocks, Brigus continues exploration work on its properties. Of the three new zones in which exploration is occurring, the company feels confident it will ultimately find more than a million ounces of gold bullion. Brigus announced that current cash costs are expected to range between $700.00 and $750.00 per ounce of gold bullion in 2013. (Source: “A Letter from Brigus Gold’s Chairman and Chief Executive Officer,” Brigus Gold Corp., December 20, 2012, last accessed January 3, 2013.) While junior mining stocks can be a great investment, one has to ensure that the cost of extracting gold bullion is not rising faster than the actual price of the commodity. This firm obviously has a strong management team that is able to control expenses at a reasonable rate. Gold bullion junior mining stocks whose costs are rising substantially should be researched thoroughly, as the costs are fixed; however, the price of the commodity is not, and any decline in gold bullion will cause significant pain for this type of company’s corporate earnings.
Chart courtesy of www.StockCharts.com As with many junior mining stocks, the recent pullback in gold bullion also impacted Brigus. The stock trades in an ever-tightening range, with an upward-sloping support line. Once the stock can break above $1.06, this should be significant upside potential. Another gold bullion junior mining stock that appears to be quite interesting is Nevsun Resources Ltd. (NYSE/NSU, TSX/NSU). Nevsun is one of the gold bullion junior mining stocks extracting precious metals in East Africa. The company expects to produce copper and silver, in addition to gold bullion, in 2013. This is one of the junior mining stocks with extremely low cash costs, as it reported a cost of $307.00 per ounce of gold bullion in the third quarter. (Source: Corporate presentation, Nevsun Resources Ltd., October 2012, last accessed January 3, 2013.) The company has no debt, a return on equity of over 53%, and a profit margin of almost 27%. The company is wellpoised to grow its property and increase gold bullion production, in addition to other commodities. (Source: Nevsun Resources Ltd. company profile, Yahoo! Finance, last accessed January 3, 2013.)
Chart courtesy of www.StockCharts.com Nevsun’s stock price was also susceptible to the pullback in gold bullion over the past month, while it is now rebounding strongly. If the stock can take out recent highs, this company, along with Brigus, offers substantial upside potential. While many have hoped that politicians in Washington could deliver a comprehensive deal, this was not the case. In the end, we are left with more questions about the future, once again raising uncertainty and rationale to own at least some gold bullion and junior mining stocks involved in precious metals. Until structural reforms are actually made, a country that prints massive levels of money and continues to spend more than it makes in revenues will always have uncertainty surrounding its future. Read more : BLUE CHIP STOCKS
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