The Top 10 Gold Stocks for 2013: Part 1

I once asked myself a question, and the answer is what led me to seek exposure to gold when the price was just over $400 per ounce.

I asked myself what I thought I knew beyond a shadow of a doubt about the future of the financial world. I gave myself several weeks to find an answer, and concluded that a debt bubble of serious proportion loomed. Essentially, the one outcome I felt most certain of was a prolonged, debt-driven depreciation of the U.S. dollar creating resurgent investment interest in gold and silver.

Same trend, different day
This week, I asked myself the very same question again, and my reply remains substantially unchanged. I am personally confident that gold will find renewed strength during 2013 as Ben Bernanke's fourth round of quantitative easing tacks another $1 trillion onto the Fed's dangerously impaired balance sheet. Japan's returning Prime Minister Shinzo Abe, meanwhile, confirmed this week he will pursue a policy of "bold monetary easing" to target 2% inflation; just as the U.S. Federal reserve has done.

In the big picture, the two fiercest bubbles that I see looming in the financial world today are the respective markets for Japanese and U.S. bonds. I believe that one or both will inevitably provide the catalyst for a major upward repricing event for gold as the next wave of our ongoing global debt crisis comes to a head. Because the timing of such a repricing event is virtually impossible to predict, however, I have opted to retain uninterrupted investment exposure to precious metal stocks while I await prices far, far beyond my next interim target of $2,000 per ounce. With that bullish outlook for continued strength from gold in mind, I turn now to my top 10 gold stock picks for 2013.

Redoubled determination
Aside from the enormous 93% gain for my top gold pick in 2012 -- Primero Mining (NYSE: PPP  ) -- my 2012 picks overall turned in a disappointingly lackluster performance. Accordingly, I approached this year's selection process with redoubled determination to deliver market-beating gains during 2013. As I noted last year, I seek to limit my selections to companies with market capitalizations greater than $200 million, though now (as before) I permitted one slight exception. Also, simply because so many gold stocks are headquartered in Canada, the majority of these picks are accessed by U.S. investors through over-the-counter securities rather than their primary listings on the Toronto Stock Exchange, or TSX.

I would like readers to note that I have some skin in this game as well. I currently hold positions in eight of the following 10 picks within my personal stock portfolio, and will likely seek to add the remaining two before very long. Interestingly, four picks from last year's list earned another bullish nod, with each of them moving into a higher position of rank within the list.

Finally, please note that these picks are designed solely as a starting point for further research, and that every investor must take responsibility for conducting their own ample due diligence when selecting their preferred vehicles for gold investment.

I will offer brief synopses of picks 10 through six below, and dive in a little deeper when highlighting my top five selections in the second part of this discussion. Early in the new year, keep your eye out for in-depth, follow-up analysis of selected companies. Please bookmark my article list or follow me on Twitter to ensure you don't miss any of those subsequent analyses.

10. Colossus Minerals (NASDAQOTH: COLUD  ) (Ticker "CSI" on the TSX)
With more than enough capital on hand to usher its flagship Serra Pelada mine in Brazil into production during 2013, Colossus Minerals is in prime position to spark a meaningful rally in its shares. By confirming the very promising resource potential of this high-grade gold, platinum, and palladium deposit through continued exploration and an imminent bulk mining sample, Colossus presents a range of potential catalysts while progressing toward initial production during the second half of the year. The bulk sample and infill drilling are key because deposits of this type -- characterized by pods of ultra-high-grade mineralization (as high as 4,631.7 grams per ton gold over one 2.35-meter interval) -- are often difficult to assess through drilling and modeling alone. Together with a subsequent initial reserve estimate for the project, these efforts could yield substantial catalysts during the first half to get the stock moving in the right direction.

9. Premier Gold Mines (NASDAQOTH: PIRGF  ) (Ticker "PG" on the TSX)
Somehow, this beautifully positioned gold company has shed fully half of its market capitalization since I highlighted the stock's highly alluring project portfolio back in mid-2011. I believe the result is a crystal-clear bargain for exposure to an extraordinarily well-funded developer where cash and equivalents account for roughly one-quarter of the company's resulting $600 million market cap. Major miner Goldcorp (NYSE: GG  ) continues to advance a major tram project to connect its Cochenour and Bruce Channel gold deposits to its legendary Red Lake mining complex, and Premier remains a major beneficiary as the tram traverses the highly prospective Rahill-Bonanza properties in which Premier holds a 49% joint-venture stake. This haulage drift has already "intersected multiple anomalous gold-bearing structures" that warrant systematic underground exploration with a strong likelihood of meaningful success, and I discuss the significance of this strong exploration potential within my premium research report on Goldcorp (which investors can access simply by clicking here). But the company also boasts a 4.2 million ounce resource (measured and indicated) within a district-scale cluster of gold deposits elsewhere in Ontario, as well as an eye-catching prospect adjacent to the historical Cove mine along Nevada's famed Battle Mountain/Eureka trend.

8. B2Gold (NYSEMKT: BTG  ) (Ticker "BTO" on the TSX)
Well what do you know? It appears they've done it again! The same folks who built Bema Gold into a leading mid-tier producer -- and one that Kinross Gold (NYSE: KGC  ) couldn't resist gobbling up back in 2006 for $3.1 billion -- have built another budding mid-tier miner that's now looking to quadruple annual production to roughly 700,000 just over the next four years! After forging a rock-solid foundation with two high-quality mines in Nicaragua, these savvy operators initiated a major strategic acquisition in 2012 that will more than double output in 2013 with the addition of the already producing Masbate mine in the Philippines. After scrutinizing B2Gold's Otjikoto project in Namibia (where mine construction is set to commence early in 2013), and given the promising outlook for the company's Gramalote joint venture in Colombia with 51% stakeholder AngloGold Ashanti (NYSE: AU  ) , I believe that B2Gold has trailblazed its way into one of the industry's foremost long-term growth outlooks. A prefeasibility study for the Gramalote project, due during the first quarter of 2013, offers just one of several potential catalysts looming for this highly desirable gold stock.

7. Sandstorm Gold (NYSEMKT: SAND  )
Even following a standout performance during 2012 that left this Fool wishing he had initiated a position in the shares much earlier, I believe that gold streamer Sandstorm Gold holds the promise of continued outperformance based upon the same ingenious business model that has made Silver Wheaton (NYSE: SLW  ) one of the 21st century's more noteworthy stock performances. Founded by entrepreneurial Silver Wheaton alum Nolan Watson, Sandstorm has quickly amassed an attractive portfolio of assets with some of the more promising junior operators in the mining business (including Colossus Gold).

6. Pretium Resources (NYSE: PVG  )
Under the extremely capable leadership of President and CEO Robert Quartermain, Pretium Resources has already tackled the same challenge that Colossus now faces to produce a reliable and conservative estimate of a resource that is -- particularly in Pretium's case -- characterized by some of the richest pockets of bonanza mineralization this Fool has ever seen! Going out of its way to adjust for the potential data-skewing impact of those world-class bonanza zones, Pretium delivered meaningful shareholder value during 2012 by adhering to very conservative estimation parameters that lend a truly uncommon degree of confidence to the 8.5 million ounces in indicated resources within the Brucejack deposit's Valley of the Kings. When Pretium releases its pending feasibility study for the project by mid-2013, I anticipate pristine project economics that will leapfrog the project toward a fast-tracked construction phase with strongly bullish implications for the stock.

Please stay tuned for the second half of this list by bookmarking my article list or following me on Twitter. In the meantime, I encourage you to share your thoughts on the above selections using the comments section below, and to dig deeper into another of my top gold picks by accessing this premium research report on the fastest-growing major gold producer: Goldcorp.


Read/Post Comments (21) | Recommend This Article (63)

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 December 27, 2012, at 4:45 PM, SN3165 wrote:

    Looking forward to the top 5. (Petaquilla and Claude!) :-)

  • Report this Comment On December 27, 2012, at 4:51 PM, XMFSinchiruna wrote:

    SN: Please note my selection criteria above. :)

  • Report this Comment On December 27, 2012, at 5:58 PM, SN3165 wrote:

    Ah, yes. Perhaps when you are writing your top gold stocks for 2014 they will fit the criteria.... :-)

  • Report this Comment On December 28, 2012, at 7:13 AM, Afghan1 wrote:

    I took a quick look at the key statistics for some of these companies. BGLPF has decent numbers and minimal debt. SAND also had dencent numbers and no debt. COLUF has very poor managment effectivness and has high debt. I would consider the SAND the best investment. However all of these investments are specluative because they are based on the price of gold increasing not on because these are good business.

  • Report this Comment On December 28, 2012, at 4:02 PM, EllenBrandtPhD wrote:

    Clearly Chris is concentrating on the juniors with buyout hopes - and I suspect he will include our mutual favorite PZG in the second part of the story.

    But I want to stress that the majors will also do much better in 2013 than they did in 2012, as the entire world embarks on a money printing spree not seen for decades.

    Among the majors, IF - as Forbes and others have been hinting the past couple of months - CDE is named to fill a new mining slot in the S&P 500, it will - not may, WILL - outperform the rest of the majors by a mile in 2013.

    This is totally mechanical: Very few generalist funds own it yet, and they will have to buy it if it joins the S&P. It has a smallish float now, which exacerbates the problem. Expect CDE to start trading in a range 50-60 percent higher than its current range if it gets that S&P nod.

    Now, I want to emphasize that I personally have no information whether or not the hints from Forbes and others are true. So this is purely conditional. We will have to see if the hints come to fruition as fact.

  • Report this Comment On December 28, 2012, at 11:17 PM, skypilot2005 wrote:

    Venerability,

    Is CDE the only mining stock you own / follow?

    Come On.

    I.M.O., you certainly appear to be pumping up the stock everywhere.

    You aren't the only one with a P. C., software and search engine.

    Sky

  • Report this Comment On December 28, 2012, at 11:36 PM, skypilot2005 wrote:

    On December 28, 2012, at 7:13 AM, Afghan1 wrote:

    “ However all of these investments are specluative because they are based on the price of gold increasing not on because these are good business.”

    SLW and Standstorm are “Streamers”.

    I.M.O., to state that “Streaming” is not a good business displays a complete ignorance of the mining industry.

    Sky

    Yes. A guy can only read comments like some of the above just so long without saying something…..

  • Report this Comment On December 29, 2012, at 12:44 AM, skypilot2005 wrote:

    Sinchi,

    SAND #7?

    Just Watson, Awram & Kazemi are worth $10 a share…………

    Ha.

    Sky

    Loooong SAND - #1 holding out of +60.

  • Report this Comment On December 29, 2012, at 3:45 AM, fazsha wrote:

    Chris and I think along the same lines, though he is much more the expert. I like B2Gold, very good growth story. I get my Colossus exposure via Sandstorm's streaming interest. Primero is terrific. Pretium is still early days - I want cash flow now - but I see the LT potential, certainly. SLW is a core holding. For the first 5, I have no idea what he will choose, but I would choose, in no particular order, Allied Nevada, Semafo, Argonaut, Santacruz Silver, and Teranga.

  • Report this Comment On December 29, 2012, at 7:40 AM, skypilot2005 wrote:

    On December 29, 2012, at 3:45 AM, fazsha wrote:

    "I have no idea what he will choose, but I would choose, in no particular order, Allied Nevada, Semafo, Argonaut, Santacruz Silver, and Teranga."

    I have Monday off. I work for “The Government”, you know.

    I currently have over 50 companies I am actively following for possible purchase.

    I am looking to buy SGSVF & STTYF (add to positions). MTYGF initiate a position.

    I increased my SAND and STTYF positions this past week. SAND & STTYF are my

    two largest positions. Nolan Watson being the primary reason. The “Streaming model” is a close second reason.

    I have recently increased my Arcana, Donner, PTQMF & Rambler positions, as well.

    I find Thunderbird Energy to be “interesting”. I initiated a “starter” position last month.

    Fool On,

    Sky

  • Report this Comment On December 29, 2012, at 8:04 AM, skypilot2005 wrote:

    re.: Thunderbird Energy TBDYF (OTC)

    Sinchi,

    Don't hesitate to let me know if, I am posting too much.

    BTW, Happy and prosperous New Year to all.

    Fool On

    Sky

  • Report this Comment On December 29, 2012, at 9:46 AM, EGTalbot wrote:

    Regarding B2:

    I'm familiar with some of the issues in other places, but what's the political situation in NIcaragua and the Phillipines as it relates to precious metals? Any rumblings about labor issues, legislation or other roadblocks to be concerned about?

  • Report this Comment On December 29, 2012, at 11:46 AM, skiem wrote:

    I'm surprised that the South African miners were not covered here. seems like the strength of the Rand will propel these stocks without a change in the price of gold.

  • Report this Comment On December 30, 2012, at 1:52 AM, Afghan1 wrote:

    Skypiolt2005 is right Afghan1 does not follow this industry. Howver, the basis of the ariticle is based on how the quantitative easing in Japan and the U.S. will affect the gold market. This is speculative. None of these companies have a durable competative advantage. Which for long term investors is not the basis for a good investment.

  • Report this Comment On December 30, 2012, at 5:56 AM, skypilot2005 wrote:

    On December 28, 2012, at 7:13 AM, Afghan1 wrote:

    “ However all of these investments are specluative because they are based on the price of gold increasing not on because these are good business.”

    “Skypiolt2005 is right Afghan1 does not follow this industry.”

    “None of these companies have a durable competative advantage. Which for long term investors is not the basis for a good investment.”

    Afghan1,

    You state you don’t follow the industry.

    Using Mr. Buffet’s definition, how do you know whether or not any of the “Streaming” companies have a durable competitive advantage?

    I’ve worked in management for two multinational corporations with durable competitive advantage. We referred to it as distinct competitive advantage. They are not always the best investment. It depends on Management’s competency. Also, there are macroeconomic conditions that can adversely affect even the best managed companies.

    My perception is that you are the typical “Drive By” blog poster.

    You are wasting everyone’s time. The writers here put time and effort into their work. Respect that. If you don’t agree with a position, take the time to state why in a well thought out manner. That way we all may learn something.

    Commenting on an industry or company you admittedly know nothing about is just plain lazy or ignorant.

    Fool On,

    Sky

  • Report this Comment On December 30, 2012, at 10:59 AM, XMFSinchiruna wrote:

    Skiem, it would take a lot more than a favourable currency environment to get me to embrace South African gold operations. I will continue to systematically avoid such exposure. See below:

    http://www.fool.com/investing/general/2012/11/28/the-race-to...

  • Report this Comment On December 30, 2012, at 11:12 AM, XMFSinchiruna wrote:

    EGTalbot,

    B2Gold has been a trailblazer in Nicaragua, and I am not aware of any significant jurisdictional issues there. B2's operations there must be major contributors to the economy.

    I am unfamiliar with jurisdictional issues relating to the Philippines, as this will be the first mining operation I've covered there. This team seems to enjoy working in areas that are not crowded by competitors.

  • Report this Comment On December 31, 2012, at 3:28 PM, XMFSinchiruna wrote:

    Please also find my Top 5 Silver Stocks for 2013:

    http://www.fool.com/investing/general/2012/12/31/the-top-5-s...

    Happy New year!

  • Report this Comment On January 01, 2013, at 5:42 PM, EGTalbot wrote:

    Chris -

    Thanks for the follow-up! I'll be looking more into B2 for sure.

  • Report this Comment On January 04, 2013, at 10:23 AM, speedybure wrote:

    Sinch, I suspect youll be up in Vancouver for the conference in a few weeks? If so, we should meet up again. I will also be giving a workshop on our stock picking metholdology but other than that, should have quite a bit of free time.

  • Report this Comment On January 28, 2013, at 10:35 PM, Seany11 wrote:

    I must agree with some of these suggestion after reviewing their stats carefully here: https://miningstockvaluator.com/gold-stocks.php

    Especially Pretium which seems to have a huge amount of resources! I love that leverage!

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