Tom’s Note: The following are my unedited notes on our 10 mining picks in
Tom’s Confidential, as promised in our recent call with expert money
manager “Sean Madden.”
Please buy these 10 stocks in equal weights. Make the total basket a 5%
position in your Performance Portfolio.
For Semafo and Detour Gold, I’d prefer you buy them on the Toronto
Exchange (consult your broker). If this option is not available, you can use
the over-the-counter symbols below.
*** Randgold (GOLD): Buy up to $97 per share. Add a trailing stop of 31.1%.
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Current market cap: $8.1 billion
Founded in 1995, IPO’d in 1997
Dividend: Yes, 0.6% yield; six raises since 2007
$168 million working capital ($38 million cash) + $200 million credit facility; no
long-term debt
Jurisdiction: Four mines in W. Africa (Mali and Cote d’Ivoire), one in Congo
Notes: 3-year average cash cost $712; 24 million ounce proven + probable;
brought Kibali project to production early (Q4 2013); 2014 profits project; P/S
7.1, last time that low end of 2008, share price up over 200% a year later
*** Semafo (SMF.TO, SEMFF): Buy up to $5.50 per share. Add a trailing stop
of 51.7%.
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Current market cap: $1.1 billion
Founded in 1994 as West Africa Mining Exploration; Changed name to Semafo in
1997
Dividend suspended
$109 million in working capital ($62 million in cash) + no credit facility; no debt
Jurisdiction: One mine in Burkina Faso, West Africa
Notes: From 2008 Q4 low around $1, ran to $5 one year later and $13 two years
later; financial reports in French
*** Primero Mining (PPP): Buy up to $9. Add a trailing stop of 40.2%.
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Current market cap: $1.2 billion
Originally formed in 2007 as Mala Noche Resources, IPO’d same year; changed
name to Primero Mining in 2010
No dividend
$30 million working capital ($86 million in cash) + expects to close a $75 million
credit facility in 2014; $8.3 million in long-term debt
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Jurisdiction: One producing mine in Mexico
Notes: Trading on US exchange since 2011; P/B 1.3 (low 0.4 Jul 2012); P/S 4.5
(low 1.5 Oct 2011); stock ran from $2.50 to $7.50 July 2012 – Oct 2012, currently
$7.91
*** Agnico Eagle Mines (AEM): Buy up to $46. Add a trailing stop of 35.3%.
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Current market cap: $7 billion
Company dates back to 1957; first listed on TSE in 1972
Dividend: Yes, 0.8% yield
$635 million working capital ($206 million in cash) + $920 million long-term
debt; $1.2 billion credit facility ($1 billion available)
Jurisdiction: Three mines in Canada, two in Mexico, one in Finland
Notes: P/S 4.2 vs lowest point in 2008 of 8.4; in 2008 stock ran from $25 to $70
in one year
*** Eldorado Gold (EGO): Buy up to $8.50. Add a trailing stop of 39%.
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Current market cap: $5.2 billion
Founded 1991, listed in 1996
Dividend: Yes, 0.2%; Paid dividends since 2011, fluctuating payments
$741 million working capital (w $614 million in cash) + $375 credit facility;
$585k long-term debt
Jurisdiction: Two mines in Turkey, one mine in Greece, three mines in China,
one mine in Brazil
Notes: 2013: 721 koz production, $494 cash costs; P/B 5.1, lowest since Q4 2008
when stock ran from $3 to $11 in one year
*** McEwen Mining (MUX): Buy up to $3.50. Add a trailing stop of 59.2%.
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Current market cap: $740 million
Originally Silver State Mining (founded 1979), renamed US Gold in 1988,
McEwen becomes largest shareholder, Director, CEO & Chairman in 2005, US
Gold merges with Minera Andes to form McEwen Mining in 2012.
No dividend
$30 million working capital ($19 in cash) + no credit facility; no long-term debt
Jurisdiction: two mines in U.S., one mine in Mexico, two mines in Argentina; two
producing mines, Argentina and Mexico, 2nd mine in Mexico fully permitted but
postponing until silver price rises over (needs at least $22.50 for viable IRR); 2nd
Mexico mine and US mine projected to be producing in 2016
Notes: McEwen has 25% ownership and takes no salary; projected to increase
production from 131 koz 2013 to 330 koz 2017; cash costs $775, project 21%
reduction to $650 in 2017; P/B 1.05, last under 1 in 2008, stock traded at $0.50
at one point and ran to over $9 in 27 months
*** Franco-Nevada (FNV): Buy up to $62.50. Add a trailing stop of 29.2%.
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Current market cap: $8.2 billion
Old Franco-Nevada listed 1983-2002. Bought out by Newmont in 2002.
Newmont spun off Franco-Nevada in 2007
Dividend: Yes, 1.4% yield, raised 5 consecutive years
$770 million working capital ($670 million in cash) + $500 million credit facility;
no debt
Jurisdiction: 67% of revenues come from North America and Australia
Notes: 2013: 60% sales turned into free cash flow, 40% free cash flow paid out in
dividends; FNV provides yield and more upside than a gold ETF with less risk
than an operator; expose to gold plus PGMs, oil, gas and nickel
*** AngloGold Ashanti (AU): Buy up to $20.50. Add a trailing stop of 32.9%.
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Current market cap: $7.20 billion
Founded in 2004 after a merger between AngloGold and Ashanti Goldfields
Dividend suspended
$1 billion working capital ($648 million in cash) + $1.24 billion credit facility;
$235 million long-term debt
Jurisdiction: 20 mines in 10 countries… U.S.(one), Brazil (one), Argentina (one),
Africa (eight), Australia (two), South Africa (seven)
Notes: Partner with Randgold (operator) with Kibali project in West Africa; At
low in 2008 P/S was 1.3 to 1.8, stock up 200% a year later, P/S currently 1.3
*** IAM Gold (IAG): Buy up to $4.50. Add a trailing stop of 42.3%.
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Current market cap: $1.4 billion
Founded 1988, listed in 2001
Dividend suspended
$407 million in working capital ($140 million cash) + $750 million credit facility;
$640 million long-term debt
Jurisdiction: two mines in Quebec, Canada, one mine in South America, three
mines in West Africa
Notes: 2014 production guidance 835-900 koz; P/B currently 0.5, last time this
low Q4 2008, stock went from $3 to $15 in a year
*** Detour Gold (DGC.TO, DRGDF): Buy up to $15.50. Add a trailing stop of
47.3%.
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Current market cap: $1.1 billion
Founded in 2006, IPO in 2007
No dividend
$179 million in working capital ($143 million cash) + $90,000 credit facility
($70,000 drawn); $510 million long-term debt
Jurisdiction: one asset at Detour Lake, Ontario, Canada
Notes: 16 million oz proven + probable; expect 600 koz production avg next 10
years; P/B 1.2 end of 2008, stock ran from $4 to $16 one year later, $30 two
years later, P/B currently under 1