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Welcome to Profit Confidential • Monday, May 21, 2012

Mining for Riches: Great Metals
Stocks to Check Out

Friday, November 18th, 2011
By George Leong, B.Comm. for Profit Confidential

Analyst George Leong favors the metal plays and continues to smell opportunities, especially in the mining companies and junior gold miners, which have lagged the gold and silver rally. The risk in the European debt crisis continues to be favorable for metals. While the metals have been laggards in the recent months, gold did recently break above $1,800 an ounce before retrenching.

I favor the metal plays and continue to smell opportunities, especially in the mining companies and junior gold miners, which have lagged the gold and silver rally.

On Wednesday, small-cap gold miner Jaguar Mining Inc. (NYSE/JAG) surged 45% on news of a potential $1.0-billion takeover bid from China-based Shandong Gold Group. If the deal pans out and is accepted by Jaguar, the price of JAG may still have some room to move higher, as the current market-cap is still below $700 million. Of course, if the proposed price includes the $247 million in debt on the balance sheet, then there is little wriggle room.

I’m not surprised with the bid, as Chinese mining companies have been buying foreign mining companies for years in an effort to increase the metal reserves the country controls. This is the reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground waiting to be developed.

If you want to play the small mining companies, there are hundreds of plays. While I do not guarantee that these stocks will be like Jaguar, you never know, which is why it’s speculative.

I have listed several small mining companies below that look interesting for the speculative trader. I’m not specifically recommending that you buy any of these stocks; just that you take a look at them.

Keegan Resources Inc. (AMEX/KGN, TSX/KGN) recently reported positive feasibility results. I like this stock as an aggressive small-cap play.

Another I like is Canada-based Taseko Mines Limited (AMEX/TGB), which mines for copper and gold in Canada. The small-cap has a market cap of $604 million and is profitable, with above-average price appreciation potential. The stock is interesting, as it is trading just above its 52-week low and well below its 52-week high of $6.38.

Take a look at small-cap Golden Star Resources Ltd. (AMEX/GSS). The gold company has operating mines in western Ghana and southwest Ghana, along with exploration properties in Ghana, Sierra Leone, Burkina Faso, Niger, Cote d’Ivoire, and Brazil. With the stock trading at 5.71X its 2012 earnings per share (EPS), I like the valuation and potential for long-term gains.

For gold traders, check out small-cap Nevsun Resources Ltd. (AMEX/NSU), which beat on EPS and revenues.

Within the non-precious metals mining companies, take a look at Thompson Creek Metals Company Inc. (NYSE/TC), a miner of molybdenum—a metal used for creating stainless steel and other applications, including the production of rare earth used in electronics

My advice to you is to buy a mixture of exploration-stage gold mining companies and small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers.

One of my top large-cap mining plays is Newmont Mining Corporation (NYSE/NEM), which I recently discussed in Newmont Mining: A Class Act in Gold.

I also think gold will again challenge the $2,000 level in 2012. Read my thoughts in Debt Crises & Economic Fragility Around the World: Is There a Better Reason to Buy Gold Right Now?

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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