Gold Bullion The Place To Be In 2012
Tyler McKee, Forbes Staff
I recently checked in with Curtis Hesler, editor of Professional Timing Service, for his thoughts on gold, which is now trading above $1,700.
Below is his take on the commodity and his recommendation on how to best play gold:
Gold usually hits a low during the fourth quarter and launches into a strong rally that culminates late in the first quarter of the New Year. I have been accumulating positions over the last several months with this expectation in mind.
Looking at gold from a purely technical perspective confirms my bullish outlook. Plus, with European debt problems destined to evolve to a full blown crisis next year, the U.S. banking system will be drenched in its wake. The future for gold looks bullish from a fundamental viewpoint as well.
Gold bullion topped out in September above $1,900, and it has been consolidating since. Bullion is currently trading above $1,700; but soon, we will likely be looking back at sub-$1,800 gold as a fond memory.
Iamgold has held up very well during this corrective phase in bullion, which in itself is a positive technical sign.
Special Offer: Curtis Hesler recommended Silver Wheaton (SLW) at $8. The stock now trades above $32. His readers have also been in gold all the way from $250 to $1,700. Is Hesler still bullish on either metal? Click here for important portfolio updates in Professional Timing Service.
In order to take advantage of weakness and diversify our holdings, I have been recommending Iamgold (IAG).
It is an up and comer with exciting growth prospects. Third quarter revenue came in strong with a respectable 222,000 ounces of production. Cash flow is up more than 100%, and it increased its dividend over 200% to $0.20 per share. That only amounts to a bit over 1% and is modest, but I do like companies that will share the wealth. Consider that 1% is better than you can get for a one-year CD these days.
Iamgold has several projects in the works that promise to increase its production down the road. IAG is not as mature as some of the major producers on our list and, thus, should be considered more speculative. However, a few shares for diversification should fit well in your precious metals portfolio.
If you prefer to invest in exchange-traded funds instead of individual stocks, Market Vectors Gold Miners (GDX) and PowerShares Active Alpha Multi-Cap Fund (PQZ) both hold Iamgold.
Gold Bullion The Place To Be In 2012 - Forbes
MINING FINANCE / INVESTMENT
Vast majority of mining projects experience steeper cost over-runs
Mining companies need to admit that a 10% cost overrun for mining projects has become an anachronism as more and more projects are coming in way over budget.
Author: Dorothy KosichPosted: Wednesday , 30 Nov 2011
RENO, NV -
Mining companies which only factor in a 10% cost over-run for mining projects are asking for trouble, warned experts in mining financing Tuesday during a session at the Northwest Mining Association convention in Reno.
Resource Capital Funds' Jasper Bertisen said the "vast majority" of mining projects have been coming in "way over budget" for the past couple of decades. As a result, RCF now automatically factors in an average cost overrun of 25% when it considers the cost of mining projects.
RMB Resources' Alvaro Belevan said the traditional 10% overrun contingency has been insufficient in recent years. Worse yet, the magnitude of mining project cost overruns are greater nowadays, he added.
"Cost over-runs means the economics of your projects has changed, and changed for the worst," Belevan warned.
Unexpected cost overrun often complicates arranging additional project funding, he observed. Delays in obtaining additional funding may compound the problem in an inflationary cost environment; throw-off procurement schedules causing significant delays; and increase the costs of debt/equity and decrease project returns.
"Management must set up a Cost Overrun Provision (COP) when project development begins," Belevan advised. "These are readily available funds held in reserve specifically available for cost overruns."
A COP may be funded from equity and/or a Cost Overrun Facility (COF). A COF is most advantageous to emerging producers, single-assets companies, and companies with multiple development assets who wish to limit cross-subsidies, he suggested.
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