2 Shiny Mining Plays
09/28/2011 6:30 am EST
Marcus New of Stockhouse shares a pair of lesser-known miners from north of the border that have lucrative reserves, and which he believes have lots of room to run, in this exclusive interview with MoneyShow.com.
Marcus, give us a couple of specific ideas in this natural resource boom.
Well, we have a couple of companies we like, and for a couple of different reasons.
There is a company we like in our model portfolio called Pacific Wildcat Resources (Toronto: PAW). It is in the rare-earth elements or metal space. One of the reasons we like that space: it is relatively high risk because China itself controls 90% of rare-earth metals. So most of the mines are over in China.
But they have a very significant discovery in that they have a near-term producing mine coming up in Mozambique, and it has some of the highest grades that actually has been seen in any mine. So, it is near-term, but again more speculative because of the early-stage nature of it.
Another company we like actually is a Mexican near-term silver producer called Golden Fame (Toronto: GFA), and again trading on the Toronto Stock Exchange. The reason we like it is because the management team is a world-class management team, delivered over $1.3 trillion to shareholders over the last 30 years for big mines that were put in production, including the third biggest copper mine in the world and one of the largest silver mines in Mexico.
Mexico is one of the largest silver areas in the world, and actually one of the biggest producers of silver anywhere in the world. So this is a great location. They have a historical mine there that they are bringing back into production.
What would be your limit buy price on those two?
You know, I think Pacific Wildcat has come up quite a bit over the last four months, as have most natural resource companies. Most of these stocks are trading…
Do you have a number for each of them?
I think Pacific Wildcat is somewhere around 65 cents or something like that. Up in Canada, obviously, a lot more stocks trade in the pennies and low dollars than in America, because there are a lot more shares of it.
So you would buy it up to 65 or 70 cents.
Yep, yep, that would be about right. And then we like Golden Fame a lot. We see something up to about 40 cents there.
Pacific Wildcat has about a $200 million market cap, roughly, and both of them are well funded for the next year or so. We love natural resources, and we think they are in strong demand, will be in a strong continued demand.
We don’t see any reason for gold prices to drop $500—especially for the next couple of years, in this environment—so I think one of the great things too is that if you look at commodity prices and then you look at producers and then you look at the exploration companies.
Some of these exploration companies have the biggest bang for the dollar, because they have proven resources in the ground—ounces of gold at $20 to $30 an ounce, with gold trading at $1,650. So you know you see this huge inflection as they take two years to go into production and you start to see the ability for price increase.
The disadvantage obviously is liquidity. They don’t have the same levels of liquidity that obviously the big companies such as Barrick (ABX) do, and things of that nature, but as we see those companies grow in terms of development, we think there is a lot of opportunity.