Amid a welcome patch of near-term weakness for gold mining and exploration stocks, this Fool recently became an active buyer in an array of gold stocks that I believe offer top-quality exposure to an anticipated resumption of the metal's multiyear bull-market blitz.
As an update to my initial top 10 picks for gold and silver in 2011, this two-part series highlights those elite gold stocks that I currently consider the most opportune vehicles for new gold investment. Accordingly, these stocks also figure prominently within my own investment allocation into precious metals, and I personally own shares of all 10. Counting down from number 10 to my top pick for gold, my selections are:
10. Thompson Creek Metals (NYSE: TC )
My recent survey of bargain-basement stock valuations among gold miners identified Thompson Creek Metals as a glaring opportunity for value investors. The miner sports two world-class molybdenum mines with 534 million pounds of reserves between them, along with an array of attractive development projects in the pipeline. Foremost among those is the Mt. Milligan copper and gold project, where Thompson Creek expects to launch itself into the ranks of intermediate gold producers with production commencing in late 2013.
With 6 million ounces of gold reserves, accompanied by 2.1 billion pounds of copper, Mt. Milligan will deliver about 262,100 ounces of gold per year for the first six years of a 22-year mine life, averaging 194,500 ounces annually over that entire span. Although 25% of that gold production is already spoken for through a gold stream agreement with Royal Gold (Nasdaq: RGLD ) , Thompson Creek Metals is sure to enjoy a powerful cash-flow explosion.
9. IAMGOLD (NYSE: IAG )
Although I have not shed my long-standing contention that Yamana Gold offers one of the more deeply discounted vehicles for long-term gold exposure, lately my outlook for IAMGOLD has turned particularly bullish. With a looming spin-off of a 10% to 20% stake in the company's reliably profitable Niobec niobium mine, and the recent sale of its interest in a pair of high-cost gold operations in Ghana for $667 million, IAMGOLD finds itself in terrific financial shape to execute an aggressive $1.2 billion expansion imitative at existing operations.
Considering the $1.6 billion net asset value (after tax) that IAMGOLD recently assessed for the Niobec mine alone, and a presumed hoard of more than $1.2 billion (in cash, cash equivalents, and gold bullion held for investment), at a market capitalization of $6.9 billion I find extreme comfort in the market's resulting valuation for IAMGOLD's 15.2 million ounces of attributable gold reserves.
8. Premier Gold Mines (OTC BB: PIRGF)
I still have great expectations for gold explorer Rubicon Minerals following a rather disappointing assessment of the company's F2 gold deposit, but another successful explorer drilling right in the heart of the prolific Red Lake gold district in Ontario now commands our Foolish attention. Premier holds a 49% stake in a joint venture with Goldcorp (NYSE: GG ) for the Rahill-Bonanza project, which is flanked on one side by Goldcorp's flagship Red Lake mine and on the other by Goldcorp's satellite Cochenour and Bruce Channel deposits. In fact, the underground tram Goldcorp is constructing to carry Cochenour's ore to the Red Lake mill runs through the property and offers intriguing access for underground exploration. Premier considers Rahill-Bonanza the "best positioned gold property anywhere," but the explorer's fate does not rest with that property alone.
Premier is involved in two additional joint venture projects within the Red Lake district, one of which is 65% owned by Goldcorp. Elsewhere in Ontario, the company recently consolidated its ownership of the Hardrock deposit -- with its 2.5 million ounces of measured and indicated gold -- through the acquisition of former joint venture partner Goldstone Resources. For the attractive combination of a multimillion-ounce deposit already in the bag, and the prospects for meaningful discoveries in partnership with the likes of Goldcorp, Premier Gold Mines offers a high-octane choice for growth-hungry gold investors.
7. New Gold (AMEX: NGD )
This stock has set the gold standard for share price appreciation among gold miners, advancing more than 140% since I introduced Fools to the new face of New Gold back in January 2010. Looking out over the long-term horizon, New Gold has constructed a gorgeous development pipeline to complement its trio of producing gold mines, featuring: a low-risk 30% stake in Goldcorp's El Morro project in Chile, the New Afton copper and gold project in British Columbia (with production scheduled to begin mid-2012), and the recently acquired Blackwater project north of New Afton.
Although I expect the Blackwater deposit to expand considerably with further exploration, the project's initial indicated gold resource of 1.8 million ounces already leaves New Gold in command of 14.7 million ounces of measured and indicated gold resource. Tossing in copious supplies of by-product metals -- most notably 83.5 million ounces of silver and 3.5 billion pounds of copper -- New Gold is positioned to enjoy consistently low production costs throughout its sustained growth trajectory.
6. Claude Resources (AMEX: CGR )
Hardly a johnny-come-lately, Claude Resources initiated small-scale gold production from its flagship Seabee mine in Saskatchewan in 1991. Just last year, Claude added the Santoy 8 mine to that operation to offer a touch of timely growth. Meanwhile, the operation hosts a number of compelling exploration targets like the recently discovered Neptune zone. After 10 of 15 recent drill holes from Neptune featured visible gold, including a nice high-grade intercept of 84.66 g/t over 3.2 meters, prospects are building for Claude to add some additional years to this time-tested operation.
While I welcome the existing cash flow from Seabee, my investment thesis for Claude Resources centers around a pair of exciting exploration properties: the Amisk joint venture project southeast of Seabee and the Madsen property at Red Lake, Ontario. At Madsen, historical gold production between 1938 and 1976 yielded 2.4 million ounces at an average grade of 9 g/t. To date, Claude has identified an indicated resource of 928,000 ounces at a comparable grade. At Amisk, drill intercepts of eye-catching thickness suggest strong potential for a profitable open pit operation, including an intercept of 2.16 g/t over 241 meters! The deposit's 921,000 indicated gold-equivalent ounces represent only an early stage hint of the deposit's full potential. The stock is a top-10 holding for Sprott Asset Management, and a core holding for this Fool as well.
Now that you have reviewed my first five picks, please be sure to discover my top five recommendations in the gold patch by following this link to Part 2 of this Foolish discussion.