The Gold Company With Two Aces Up Its Sleeve
Last week I gave you a cheap way to play the upside of silver. (If you didn’t see it, you can check it out here: “Priced to Perfection: The $3 Precious Metal Play”)
Today I’m back with a $3 way to play the gold market.
As you’ll see, if gold prices can remain steady above $1,200, many beaten-down miners that weathered the storm could be set for a nice turnaround. Today we’ll cover one of them…
A year ago, gold was sitting near $1,700/oz. (Hard to believe it was only a year ago, right?)
Then in April 2013, the Federal Open Market Committee (FOMC) announced the specter of pulling back on the monthly stimulus spending …the infamous “taper.”
…with gold prices looking steady above $1,200, NovaGold has two aces up its sleeve…
By July 2013 gold was closer to $1,200. And after a failed attempt at re-taking $1,400 in August the market has since mellowed out again around $1,250.
Looking back, gold hasn’t had a pleasant 12-month stretch.
Luckily for gold holders, though, the market has shown extended support around the $1,200-level. And if you’ve been wondering when this falling dagger would stop, we may very-well have an answer!
If support holds for gold at $1,200 there’s one sector that’s poised to profit.
You see, a steady price per ounce makes the math for junior miners much easier. It’s this “easy math” that spurs traders back into the sector. That is, prior to $1,200 support no one wanted to catch the dagger and try to bet on where gold prices would land. Indeed, without reliable gold price forecasts many traders won’t even touch miners!
And who can blame em. If you’re trying to analyze and trade a junior miner that has an “all in” cost around $1,100 per ounce, that miner would likely be out of business at $800 gold. However the play could work out with gold closer to $1,300.
Today, with more sideways action above $1,200, it looks like the metal could be settling into a nice price range. That means the math for miners is starting to become very important – and that means some well-run miners are set to catch a bid!
One company to keep a keen eye on is NovaGold (NG.)
NovaGold is a pre-production, speculative, junior mining play. But from my perch it’s a $3 lottery ticket you’ll want to hold.
You see, with gold prices looking steady above $1,200, NovaGold has two aces up its sleeve…
These “aces” come in the form of two well-defined, exploration-stage projects, by the name of Donlin Gold and Galore Creek. Both are world-class projects. Let’s take a look at the latter, first.
Galore Creek is an exploration property that NovaGold owns in conjunction with Teck Resources. The property is said to be the largest and lowest cost copper mine in mining-friendly Canada. It also boasts a large stash of gold and silver.
But here’s the kicker…
NovaGold isn’t coy in letting the public know it’s aspiration with this mining project – it wants to sell! Down the road as metal prices stabilize and a mergers and acquisitions (M&A) pick up, there will surely be a nice boost to the balance sheet for the sale of Galore Creek. On this note NovaGold may not have “money in the bank” but the company sure as heck has “ounces in the ground” – copper, silver and gold!
The second mining project NovaGold owns is Donlin Gold.
This project is much more coveted and said to be one of the largest undeveloped gold deposits in the world. And when I say largest I mean it — with measured and indicated resource estimates near 39 million ounces of gold.
NovaGold has a 50% stake in this project – the other 50% belongs to a familiar, big name in the mining space, Barrick Gold. And while this project won’t provide the quick cash like a sale at Galore Creek, this project is expected to be a long-term cash cow – with mine life over 25 years.
Add it all up and NovaGold’s share price may have been beaten down in the past few years, but this miner is far from out. Both of its promising projects – one for sale and one for long-term growth –hold the potential to boost share price over the next 12 months.
At $3 a share and some bottoming action in the price of gold, now’s the time to look at this well-endowed miner.
Keep your boots muddy,
Ed. Note: The next chapter of the gold story could be tremendous for early investors. You can follow Matt’s updates on this and the entire resource market in his FREE Daily Resource Hunter, which gets delivered straight to your email inbox every morning. It comes complete with a rundown of the world’s most exciting resource and metals stories, and offers readers at least 3 chances to discover real, actionable investment opportunities. So don’t wait. Sign up for FREE, right here to get started.
This article was originally featured in Daily Resource Hunter