With gold prices crossing $1,300 an ounce last week, Money Morning's Global Resource Specialist Peter Krauth has pinpointed gold mining stocks that are set to cash in on the rising price of gold.
With more than 20 years of experience in the precious metals industry, Peter has his finger on the pulse of the gold market. He's seen the effect that a tumultuous 2013 - when gold prices dropped 28% - has had on many gold mining stocks.
"The past couple of years have seen considerable pressure on most gold equities, thanks in large part to a declining then consolidating gold price," Krauth said. "That became a major challenge to gold miners as they've tried to grow production despite falling gold grades."
While many gold mining stocks faltered in the past two years, top companies were able to separate themselves.
"The best mining companies met these challenges by controlling and lowering costs, focusing on the most viable projects, reining in capital expenditures, and even divesting suboptimal assets," Krauth said.
Those companies that managed to strengthen operations during the down gold market are now poised to capitalize on gold prices' rise.
"Gold stocks are attractive now for several reasons," Krauth said. "On a historical basis and relative to the gold price, gold stocks are still oversold, representing a strong bargain. What's more, the World Gold Council has reported record jewelry, bar, and coin demand for 2013, with consumer demand up 21%."
Physical gold deliveries reached record levels in January at 246 tons for the Shanghai Gold Exchange, even topping worldwide mine production in the same month. Meanwhile, dividend payouts from some the largest gold miners have increased significantly in the last three years, despite the weakened gold price.
As gold prices rise, here are two gold mining stocks that Krauth expects to benefit...
Two Gold Mining Stocks to Buy Now
The first gold mining stock Krauth recommends is Goldcorp Inc. (NYSE: GG). GG is a major mining firm that operates, explores, develops, and acquires precious metal properties in Canada.
"Goldcorp is one of the world's top gold miners," Krauth said. "Over the next three years, gold-equivalent production for the company is expected to grow by 44% through organic growth and the startup of two new mines, Cerro Negro in Argentina and Eleonore in Quebec, Canada."
The company has also cut down costs during its production boom, which will contribute to bottom-line growth for the company.
"Management's focus on cost controls has this year's estimated all-in cash costs lower by $30 to $80 per ounce," Krauth said.
GG stock had a rough 2013, down 39% as gold prices fell. But in 2014, the stock has gained 14% and is poised for growth as the company expands its mining operations.
Another gold mining stock Krauth likes is Primero Mining Corp. (NYSE: PPP), a mid-tier gold producer with a $750 million market cap. The company operates in Mexico and has operations in the San Dimas District and the Durango State.
"Primero recently acquired Brigus Gold, helping to diversify production in Mexico and Ontario, Canada," Krauth said. "This acquisition plus internal growth should also vault production up some 180% by 2016."
PPP's production in 2013 was 143,000 gold equivalent ounces, and Krauth expects that figure to jump to 390,000 gold equivalent ounces in the next three years. The company has also been lowering costs to become more profitable.
"All-in cash costs have also come down from $1,134 in 2012 to about $1,000 in 2014," Krauth said. "Primero expects a strong operating cash flow of $150 million (since the Brigus acquisition), a cash balance of $110 million, and low debt of $27 million."
PPP stock has gained 46% year to date. It's one of the more affordable gold mining stocks, trading just below $6.50 a share currently.
Do you invest in gold stocks? What companies do you have on your radar? Join the conversation on Twitter @moneymorning using #Gold.
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