This Miner Deserves to Be on Your Radar

Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. Getting in before Wall Street discovers them -- or rediscovers them -- means you can stake a claim before they start to take off.

Here we check out companies with minimal analyst coverage at best, and then pair our list with the opinions of the Motley Fool CAPS community. A stock that garners CAPS' top ratings but hasn't yet caught analysts' attention could be your next home-run investment.

For instance, precious-metals miner Paramount Gold & Silver (NYSE: PZG  ) could be the one. None of the analysts that CAPS tracks are following this stock, but it's enjoying a growing following on the investor community site, as 93% of the All-Star CAPS members rating it see it beating the Street. That may be enough to give you a head start.

But remember: Without much analyst support, you'll have to do more digging on your own to see whether it deserves a spot in your portfolio, so don't just buy or sell it based solely on its appearance here.

Hiding in plain sight
Gold prices haven't really gone anywhere since the start of the year. After a brief rally early on, the price of gold has been fairly range-bound between $1,550 and $1,650 per ounce. While India and China -- the biggest consumers of gold, accounting for half of the world's total consumption -- have eased up on their purchases, they still have a voracious appetite for the yellow metal, with China alone importing 383 tons over the first six months of 2012.

And it's not done yet. China continues to gather assets into its hand, particularly in Africa. The China National Gold Group is buying Barrick Gold's (NYSE: ABX  ) African operations, and China's sovereign-wealth fund is turning away from Europe and looking to make strategic investments in Africa.

China's not alone in its golden pursuit. Hedge funds run by John Paulson and George Soros have also been gobbling up gold in anticipation of a rally.

East versus West
Paramount Gold's assets lie in Mexico and Nevada, not Africa, but it is still poised to capitalize on the new gold rush when it comes. Its portfolio is chock-full of potential, including its high-grade gold and silver veins at San Miguel, which has a nexus with the world-class Palmarejo mine owned by Coeur d'Alene Mines (NYSE: CDE  ) and the Sleeper project that connects to Newmont Mining's Sandman development. Since Paramount is more of an explorer than a miner, it will be looking for someone to come in and do the dirty work of actually getting the gold and silver out of the ground while it can focus on exploring.

That sets it apart from the likes of Great Panther Silver (AMEX: GPL), Primero Mining  (NYSE: PPP  ) , or Brigus Gold, all three of which have plenty of their own assets left to exploit, but they also generate revenue from production. The lack of current production causes the market to misprice the value of the assets Paramount holds.

Secure as Fort Knox
Shares of Paramount are down 27% from their 52-week high (though up 25% from their low) and have gained almost 3% so far this year, as opposed to shares of Great Panther and Brigus, which are both down by double-digit percentages. Primero is on a tear of its own since reporting record earnings last month and increasing production estimates for the year: Its stock is up 24% year to date and has nearly doubled off its lows.

That ought to give a sense of what Paramount can achieve as it entices miners to come in and develop its projects. The CAPS community is anticipating that run, with 96% of the 437 members rating the gold and silver explorer to outperform the broad market indexes.

I also like its prospects and rated it to outperform on CAPS, and I own shares of it as well, but let me know in the comments box below if you agree that there will be a new gold rush in China (and India) and that Paramount Gold & Silver stands to gain handsomely from the surge.

Swing for the fences
Looking for more golden opportunities like Paramount? Download The Motley Fool's special free report "The Tiny Gold Stock Digging Up Massive Profits." Our analysts have uncovered a little-known gold miner they believe is poised for greatness. Find out which company it is and why they strongly believe in its future -- for free!

Fool contributor Rich Duprey owns shares of Great Panther Silver, Primero Mining, and Paramount Gold and Silver, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Primero Mining. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (2) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 20, 2012, at 2:09 PM, clawmann wrote:

    Waiting for the updated resource report on San Miguel (Mexico), due by the end of August. It could really be a game-changer.

    In July the Sleeper (Nevada) property had an initial PEA (preliminary economic assessment) done by an independent analys. It was given a net present economic value (NPV) in excess of $600 mil even assumming a gold price of less that $1.4K.

    Given that PZG has an OS of some 150m shares, Sleeper alone justifies the current share price. But San Miguel is clearly the more valauble of the two properties.

    Why this is not trading at $5+ is a bit of a mystery. It may be that someone out there is keeping an artificial lid on the pps.

  • Report this Comment On August 20, 2012, at 2:14 PM, clawmann wrote:

    July 30 PR:

    Preliminary Assessment Completed for Paramount Gold's Sleeper Project

    http://www.equities.com/news/headline-story?dt=2012-07-30&am...

    "At a gold price of US$1,384 per ounce and a silver price of $26.33 per ounce (the 3 year trailing average of gold and silver prices as at July 3, 2012), the base case has a US$1.2 billion pre-tax net cash flow, a US$695 million net present value at a 5% discount rate and an internal rate of return (IRR) of 26.8%. At US$1,618 gold (the spot price on July 3, 2012), the total pre-tax net cash flow increases by 160% over the base case to US$1.9 billion, the net present value at a 5% discount rate almost doubles to US$1.2 billion and the internal rate of return improves to a robust 40%."

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1988359, ~/Articles/ArticleHandler.aspx, 10/24/2014 11:57:38 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement