Mizrahi's Gold Buys

11/14/2017 5:00 am EST

Focus: COMMODITIES

Charles Mizrahi

Editor, Park Avenue Investment Club and Inevitable Wealth Portfolio

I don’t believe holding gold bullion as an investment is a good idea and I see no reason to own physical gold as bullion or coins, asserts Charles Mizrahi, editor of Insider Alert.

But buying gold mining companies that have rock-solid balance sheets when they are trading for an attractive price make sense. We recently added two gold mining companies to our model portfolio.

Canadian gold mining company Centerra Gold (CAGDF) is based in Toronto and operates two mines: the Kumtor mine in Kyrgyzstan, and the Mt. Milligan mine in Canada. It also explores for gold in Canada, Armenia, and Turkey, among other countries.

Centerra is the largest Western-based gold producer in Central Asia.  The Mt. Milligan mine was bought along with Centerra’s molybdenum business when it acquired Thompson Creek Metals Company in October 2016 for $1.1 billion.

Centerra has long-lived mine assets. The Kumtor mine has a mine life of about eight years and a gold reserve of 5.1 million ounces. Mt. Milligan has a mine life of over 20 years and more than 5.8 million ounces of mineral reserves.


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These mines provide long-term stability to Centerra’s operations and cash flows, which can be used to explore and develop other mines. The company also has low-cost mines compared to its peers.

For the first half of 2017, the AISC (all-in-sustaining cost) was $746 per ounce. Centerra’s AISC places it in the second lowest quartile of industry-wide costs.

Centerra also owns two molybdenum mines that are temporarily closed due to low molybdenum prices. Management is keeping the mines closed if molybdenum prices improve.

IAMGOLD Corp. (IAG) operates and owns three gold mines and has a stake in a fourth gold mine. The company also has several gold exploration and development projects underway, primarily the Côté Gold Project in Canada.

IAG has a strong balance sheet with $776 million in cash and cash equivalents, and mining efficiency continues to improve.

We did not add the two gold mining stocks because we have any idea where the price of gold is heading. Instead, we added them because they were financially sound and trading at bargain price — the same reason we add any stock to our portfolio.

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