Personify your favorite evil villain, hunch your shoulders, rub your hands together, and repeat after me in a strangely slow drone: "Excellent!"
I will explain myself, but that, in a nutshell, is my reaction to Northgate Minerals' (AMEX: NXG ) fourth-quarter earnings results. You see, I have hatched a not-so-evil plot to accumulate shares of Northgate over the course of a challenging transitional year in which I expect the market to overlook the company's long-term growth prospects. So far, everything is proceeding according to plan.
Northgate recorded a $72 million loss for the period, after taking a non-cash impairment charge of $76.9 million on a reassessment of the company's Fosterville gold mine in Australia. With costs at that operation trending quite high at an average of $738 per ounce during 2010, and a strong Australian dollar dialing up the pressure, a downward revision to life-of-mine expectations became appropriate.
For an investor like me -- whose primary incentive for owning the stock revolves around looming production from the exciting Young-Davidson mine in Ontario, Canada -- a fresh sprinkling of negative market sentiment from a non-cash charge like this one simply enhances the opportunity to acquire long exposure in advance of commercial production from the mine (slated for early 2012). Representing nearly 80% of the company's 3.55 million ounces of gold in reserves, I believe that Young-Davidson marks the appropriate focal point for prospective long-term investors.
Despite the company's stagnant production volume and lofty costs of production, Northgate still managed to eek an adjusted profit of $17.2 million for the fourth quarter. Healthy cash flow of $56.5 million expanded Northgate's already-noteworthy cash balance to a whopping $334.8 million. Fools take notice: that cash balance equates to 41% of Northgate's market capitalization!
Some of the gold industry's singular disappointments -- like mid-tier train wreck Kinross Gold (NYSE: KGC ) , and feline femme fatale Jaguar Mining (AMEX: JAG ) -- appear to wallow in weakness with very good cause. However, along with clearly underrated stocks like Gammon Gold (AMEX: GRS ) and Yamana Gold (NYSE: AUY ) , Northgate Minerals represents one of those rare opportunities for investors to ease into a red-hot sector like gold without the sense of intimidation that can come with chasing a charging outperformer like IAMGOLD (NYSE: IAG ) .
Whatever sort of villainous plot you may be hatching to accumulate exposure to tomorrow's golden outperformers, be sure to add these and other mining stocks to your personalized watchlist, and track all of our Foolish coverage.