4 Plays for an Ailing Precious Metals Market

04/05/2013 7:00 am EST

Focus: COMMODITIES

As gold dips to its lowest level in a month and the chorus of voices trumpeting the end of the long bull market gets louder, Michael Teague of Equities.com writes about four companies that have side-stepped the general downturn.

Gold and silver have been taking a drubbing lately. The iShares Silver Trust ETF (SLV) has lost 16.70% in the last six months, and SPDR Gold Shares ETF (GLD) has lost almost 10%.

There are a number of reasons for which gold and silver are in this position, and the steep upward trajectory taken by the bull market since late January would have to rank among the principal ones.

The Cyprus situation may also be more than a blip on the radar. Since the European Union has signaled its willingness to keep the ship from falling apart at all costs, and especially since the crisis has been “resolved” for the immediate future, the rush to gold and silver that would have otherwise resulted from the threat of such a massive economic shockwave was averted.

There are a host of other reasons that could be cited. India, for instance, the world’s biggest buyer of gold, has recently increased taxes on imports of the metal by 50%.

There are, however, three gold and one silver stock that have made gains in 2013, and for that reason alone, they are worth a look:

Aurizon Mines Ltd. (AZK) – Aurizon is a Canadian mining company trading on the New York stock exchange. With a market cap of $725.71 million, Aurizon has gained 26.72% in 2013, with shares trading at $4.41. The company has just announced that it has reached an acquisition deal with Hecla Mining (HL), a larger silver mining company. Also, it has announced new operations at its Casa Berardi mine that, after a projected one-year period of transition, should return the mine to historical production levels.

Kingold Jewelry (KGJI) – The American company has a market cap of $85.51 million, and with a 20.87% gain for the year so far, shares are trading at $1.39. Its recent earnings report indicated that during 2012, the company’s net sales were up over 16% to $915.7 million, while it managed to get access to new sources of gold in China. Kingold expects strong demand for the rest of 2013.

Primero Mining Group (PPP) – Primero, another Canadian mining company, has a market cap of $392.90 million, and shares priced at $6.69 with a 3.40% gain for the year. On March 26, the company reported a 31% increase in 2012 year-end gold mineral reserves and a 35% increase in 2012 year-end indicated gold mineral reserves, with significant new discoveries being made at the company’s San Dimas mine.

Fortuna Silver Mines (FSM) – The Peruvian silver mining company has a market cap of $4.26 million, with shares at $4.30, and having gained 3.12% on the year so far. The company operates one mine in Lima, known for its high-quality silver, as well as zinc, and another in Southern Mexico, which produces mostly silver but also gold. In a recent earnings call, the company announced surpassing it silver production guidance by 8% percent, and expects production growth to clock in at ten percent for the rest of 2013.

By Michael Teague of Equities.com

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