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The Definitive Guide to 2010 Gold Stocks

Written By Luke Burgess

Posted February 5, 2010

There’s no doubt about it… Everything points to higher gold prices this year:

  • Weakness in the U.S. dollar: The value of the dollar has fallen 35% since 2002 and 9% in the past 12 months. Meanwhile, the national debt is approaching $12.5 trillion and the 2010 budget deficit is projected to hit a new record: $1.56 trillion.

  • Economic uncertainty: Investment markets worldwide continue to be on shaky ground. Gold is considered the most respected store of value. It is the ultimate safe haven and the least risky of all investments.

  • Supply constraints: World gold production has fallen every year since 2001. Meanwhile, central banks have now become net buyers of gold after over 30 years of selling.

  • Growing investment demand: Global investment demand has more than tripled in the past few years and continues to spike higher.

  • Cyclical bull market: Gold prices are in a long-term cyclical bull market that will continue to push prices higher. The price of gold has increased over 150% while the Dow Jones has remained flat in the past five years.

Gold bugs are buying the physical metal in the form of bars, coins, and ETFs. Meanwhile, more speculative investors are tapping into gold stocks where the rewards are much higher.

Investors buy gold stocks because they have leverage. That means small changes in the price of gold can greatly affect share prices of gold stocks. For example, over the past 12 months gold has increased 23%. But at the same time, AngloGold Ashanti (NYSE: AU) has increased 40%; Randgold Resources (NASDAQ: GOLD) is up 68%; and IAMGOLD (NYSE: IAG) has returned a 112% gain.

Of course, the leverage effect goes both ways. And gold companies with falling production — or forecasts of falling production, like DRDGold (NASDAQ: DROOY) and Kinross Gold (NYSE: KGC) — have underperformed the underlying metal. While gold has gained 23% in the past year, DRDGold pulled back 21% and Kinross lost about 4%.

In 2010, things will be no different. Gold companies with steady and rising production will most likely be this year’s success stories. And those with falling production will be the year’s flops.

To get you started investing in gold stocks for 2010, here are…

Three Large-Cap Gold Stocks Increasing Production

 Barrick Gold (NYSE: ABX)
 Share Price: ~$36
 Market Capitalization: ~$35 billion
 2009 Gold Production: 7.2 – 7.6 million ounces

 2010 Gold Production Guidance:

 7.7 – 8.1 million ounces
 Change: +7%

Barrick Gold is the world’s largest gold producer. The company retains a portfolio of 26 operating mines and a pipeline of projects located across five continents, as well as large land positions on some of the most prolific mineral districts.

The company estimates to have produced 7.2 to 7.6 million ounces of gold in 2009 at total cash costs of $450-$475 per ounce. This year, Barrick expects to lower production costs and increase gold output to 7.7-8.1 million ounces with the startup of Cortez Hills operation in Nevada.

 Goldcorp (NYSE: GG)
 Share Price: ~$35
 Market Capitalization: ~$26 billion
 2009 Gold Production: 2.4 million ounces

 2010 Gold Production Guidance:

 2.6 million ounces
 Change: +8%

Goldcorp is the lowest-cost and fastest growing senior gold producer, boasting 14 operations and development projects throughout North and South America.

The company reported record gold production for the 2009 year of over 2.4 million ounces at a total cash cost of approximately $295 per ounce on a by-product basis and $390 per ounce on a co-product basis. In 2010, Goldcorp expects to produce 2.6 million ounces of gold with an increase of approximately 17% to total cash costs.

The overall forecast production increase in 2010 is broad-based, featuring increases at nearly every mine in the portfolio. Going forward, Goldcorp aims to lift gold production to 3.8 million ounces by 2014.

 Newmont Mining (NYSE: NEM)
 Share Price: ~$46
 Market Capitalization: ~$23 billion
 2009 Gold Production: 5.2 million ounces

 2010 Gold Production Guidance:

 5.5 – 5.7 million ounces
 Change: +5% – +10%

Newmont Mining is a leader in the mining industry, with operations on five continents.

The company estimates 2009 gold equity sales of approximately 5.2 million ounces at a total cash cost of $400–$425 per ounce, reflecting ongoing cost reduction efforts and favorable by-product credits. For 2010, Newmont expects to produce between 5.5–5.7 million ounces, primarily as a result of higher production from its Boddington mine in Australia and Batu Hijau operation in Indonesia.

With gold demand on the rebound and prices holding record levels, these are just a few stocks that are positioned for growth this year.

Here’s one last…

2010 Gold Stock Doubling Production

 Agnico-Eagle Mines (NYSE: AEM)
 Share Price: ~$54
 Market Capitalization: ~$9 billion
 2009 Gold Production: 500,000 ounces

 2010 Gold Production Guidance:

 1.0 – 1.1 million ounces
 Change: +100% – +120%

Agnico-Eagle Mines is a mid-tier gold company with operations in Quebec and Finland, and exploration and development activities in Canada, Finland, Mexico, and the United States.

The company expects to produce 500,000 ounces of gold in 2009 at a total cash cost of $340 an ounce. This year, Agnico-Eagle is looking to more than double gold production to 1.0–1.1 million ounces at a slightly higher cash cost. Going forward, the company expects gold production to average 1.4 million ounces annually from 2011 to 2014.

I expect sizable gains from these and other mid- to large-cap gold companies that will be increasing production in 2010. Larger gains, however, will be returned by…

Investing in Junior Gold Stocks in 2010

Don’t be fooled… Mining for gold is a risky business.

Not only are mining companies subject to volatility in the price of gold, but they must also bear the burden of geological, operational, and geopolitical risks. But it is this risk that allows gold stocks to outperform their underlying commodity, as I discussed earlier.

Junior gold stocks are even more speculative. But their risk/reward tradeoff amplifies potential gains even further. And when junior gold stocks are in favor, they can quickly return legendary gains…

One good example is Ventana Gold (TSX: VEN), which increased 3,589% in the first 11 months of 2009 as the company explored their Colombian gold projects and made mineral discoveries. A $5k investment turned into $180,000. Check it out:


Junior gold stocks, like Ventana, give investors spectacular opportunities to make a lot of money. But the problem for average investors is choosing the right junior gold stock.

There are over 1,000 junior mining companies that are listed on the TSX Venture exchange alone. And it’s very difficult to sort through all the promotions and scams to find solid junior gold stocks.

My job as a newsletter writer is to sort through all the garbage to find the real opportunities that can deliver the big returns. For example, I waded through around 70 junior gold stocks to find my latest recommendation; a small $32 million company with a $727 million gold resource. With a resource worth over 22 times its market capitalization, strong management, geopolitically safe projects, and near-term production, I expect this $0.50 stock to be trading over $4.50 in short order, for a +900% gain.

Going through all those companies was a very time-consuming and nerve-racking ordeal. If you don’t have the time or patience to spend pouring over junior gold stocks, I recommend taking a look at the Market Vectors Junior Miners ETF (NYSE: GDXJ).

The Market Vectors’ Junior Miners ETF just started trading a few weeks ago. The ETF is composed of 56 mineral companies of small-and medium-capitalization. To be eligible to be listed in the ETF, companies must have a market capitalization of greater than $150 million and a three-month average daily trading volume of at least $1 million. Here is a list of the top ten holdings in GDXJ:

 Company Symbol GDXJ Holdings
 New Gold
 NGD 5.24%
 Alamos Gold
 AGI.TO 4.07%
 Gammon Gold
 GRS 4.00%
 Helcla Mining HL 3.78%
 Silver Standard Resources
 SSRI 3.60%
 Couer d’Alene Mines
 CDE 3.50%
 Silvercorp Metals
 SVM 3.42%
 Allied Nevada Gold
 ANV 2.72%
 San Gold
 SGR.V 2.65%

If and index ETF isn’t for you, then I invite you to check out the profits you could be making right now by joining my Hard Money Millionaire advisory service.

In 2009, the Hard Money Millionaire portfolio delivered 22 winning investment recommendations out of 23 ventures — a 95.7% success rate.

At its best, my portfolio returned members seven (7) winning investments that each returned a +100% gain.

In fact, the gains from my Hard Money Millionaire portfolio are on par with $100 million hedge funds!

For the year, the Hard Money Millionaire portfolio returned an average of 21.3%. The Barclay Hedge Fund Index, which uses data from 1,658 hedge funds around the world, calculates that hedge funds returned an average of 24.1% for 2009 — only slightly higher than my average return.

The difference between the hedge fund gains and Hard Money Millionaire? You don’t need a million dollars to join. (Check out my latest recommendation here.)

Whether you join my team of investors or not, I strongly urge you to take some time to explore junior gold stocks.

I believe that 2010 is the year gold bugs have been waiting for. There’s no doubt that gold will breach the $1,500 level this year. As it does, junior gold stocks are going to be in play.

Only through diligent research is it possible to thresh out the good from the bad. But with time, patience, and maybe some aspirin, you can make a lot of money in gold stocks in 2010.

Good Investing,


Luke Burgess
Editor, Wealth Daily
Investment Director, Hard Money Millionaire