AngloGold Ashanti Prepared To Surge Higher
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Gold has been at the top of its game for a while now, but investors are starting to turn bearish as stocks trembled across the board last week. For Goldcorp (NYSE: GG) investors, dividend time is approaching, and these shareholders are holding their breath to see what the industry is going to do to their payout.
Goldcorp looks like one of the more stable gold mining stocks to own right now, in my opinion, and I expect that the company’s announcement of a $0.045 dividend should meet expectations. However, this stock is nearing its 52-week low, as it stands merely 1.53% above that value at the time of writing. Over the past week, shares have dropped over 8%, and the stock’s monthly performance is even worse, with a fall of 12%. Investors would have good reason to feel nervous.
However, I don’t think that the situation is as dire as it looks for investors with long positions. Although it seems likely that the stock will continue to fall for a while, it looks to me like the people at the top are involved in exploring new growth areas while expanding active operations. For example, in Timmins, Ontario, where the company will unprecedentedly hold its corporate annual general meeting this year, Goldcorp has plans to gather around 800,000 ounces of gold left over in a former mine, known as the Hollinger underground gold mine. This move could stir up some unpleasant sentiment in the community, but only if the operation strays outside the company’s already established perimeter, which general manager Marc Lauzier promises will not happen. The project is part of Goldcorp’s closure of the mine, but long-term viability for this region has not been discounted.
In my opinion, the effect that this type of operation will have on stock value depends on how well the company can handle it. If the company proceeds delicately and involves the community in the decision-making processes, then I expect the results to be favorable all around. However, the company’s past suggests that it will not necessarily know how to engage in revenue-generating activities without harming stakeholders in the area.
A disappointing jobs report analyzed by Bloomberg indicated that the United States job market has been increased by 85,000 fewer positions than originally predicted for the month of March. Although gold prices continue to rise, this situation means that luxury items are still out of the reach of many potential consumers. Once again, the long-term investors are the most likely to see real returns, in my opinion.
Goldcorp has just updated its agreement with Quaterra Resources (QMM) from 2010. This stock holds promise, in my view, because the company has just completed exploratory drilling on four separate projects in central Mexico, namely Tecolotes, Microondas, Onix and El Calvo. These explorations have yielded evidence of some gold, silver, lead and zinc deposits, which could help Goldcorp recover from its recent blows.
Newmont Mining (NYSE: NEM) has also been feeling the pain. This stock hit its highest point in years this past winter, but it has not been able to maintain this position. One reason for my low opinion of this stock right now is its recent addition of more debt than it might be able to handle. While it is difficult to predict where gold will be in ten years when the debt comes due, I feel like it is unwise to make a move like this at a time when values are shaky and mining companies are starting to trip over themselves.
South Africa’s AngloGold Ashanti Ltd. (NYSE: AU) is also nearing its 52-week low, and its performance year-to-date is currently a red -19.13% at the time of writing. However, in sharp contrast to this evidence, EPS this year stands at a whopping 1600%, which probably means either that the company has some tricks up its sleeve, or the people in charge are desperate to keep up an appearance of profitability in the face of dire losses. I would argue that the former is true. Although AngloGold Ashanti did not reach as high as Newmont, its stock has been much more stable, which tells me that the company has a good sense of control and direction that keeps investors satisfied without offering huge payouts at any one time.
On the opposite end of the stability spectrum, investors find Compania de Minas Buenaventura SA (NYSE: BVN). This stock has been all over the place, but today I believe it presents a good buying option due to its resistance to the overall decline in gold share value last week. It did drop a little, but I expect to see it rise back up more quickly than the others, which means that if I’m right, then now is the perfect opportunity for new investors to get on board. With a dividend of about 1.6%, Buenaventura blows Goldcorp out of the water in terms of its ability to manage cash flow. Although this company might not rake in as much as Goldcorp, which makes the total amount higher for the latter, I think that Buenaventura shows the kind of responsibility and flexibility with its money that Goldcorp can’t match.
The blow that gold took after its recent drawn-out success has affected most stocks negatively, but I think that some patient investors with enough willpower to wait it out will see their investments pay off down the road. Goldcorp is a not the best bet right now, in my opinion, and Newmont needs to figure out how to handle its money if it hopes to attract interest. Buenaventura and AngloGold Ashanti, on the other hand, still seem like smart stocks to hold onto or start investing in, as I see it, because these companies look like they know what they are doing. This minor setback is unlikely to upset their operations very much.
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