With so much that I wish to convey about the top five selections among my top 10 gold stocks for 2013, please indulge me while I dive right in. I strongly encourage readers to begin with Part 1 of this series to consider my associated outlook for continued strength in the gold price, and to review my first five selections. I also invite readers to bookmark my article list or follow me on Twitter in order to track my ongoing coverage of these and other standout gold equities throughout the year ahead. With that said, here's wishing every Fool a happy and profitable year of prospecting in the gold patch during 2013.
5. Primero Mining (NYSE: PPP )
Following a monumental 162% advance since I declared Primero the greatest gold stock in the world some 15 months ago, it stands to reason that the stock would slip back a few spots from its prior position at the top of my list for 2012. But this standout growth story is far from over, and Primero remains a core position in this Fool's stock portfolio. CEO Joe Conway and his team delivered a truly masterful performance during 2012, and now looks to deliver additional growth through the addition of a second gold mine by 2015. Like the looming expansion at San Dimas, the construction of Cerro del Gallo in Mexico's Guanajuato state strikes me as an attractively low-risk venture that will indeed catapult Primero into the next class of budding mid-tier gold producers. Although I certainly don't anticipate another multibagger run for 2013, I see scope for perhaps a 30% advance or better with continued organic resource growth as a key potential catalyst.
4. Eldorado Gold (NYSE: EGO )
By hiking the ancient silk road -- from its previous foray into China to a new operational focus upon Turkey and Greece -- Eldorado Gold has amassed a peer-leading growth profile that targets a monumental 158% expansion of annual gold production over the next four years. Growing from a larger base this time around, it's reasonable to expect some meaningful challenges along the way for such an aggressive growth trajectory. However, given the undeniable quality of the underlying asset portfolio, paired with an exceptional outlook for continued organic resource growth like the 1.5 million gold ounces added to the Certej project in Romania during 2012, Eldorado presents some of the more exciting upside potential among the larger mid-tier producers. Provided the company continues to execute well as these growth initiatives gather steam in 2013, I see potential for the stock to surpass $18 per share during 2013 for more than a 40% advance.
3. Goldcorp (NYSE: GG )
Every ship needs an anchor, and for gold investors looking to navigate the admittedly rough seas of the gold mining industry, I can think of no greater anchor than Goldcorp. With the important caveat that some of the company's substantial challenges faced during 2012 could present further selling pressure in early 2013 as forward production guidance takes a bit of a haircut, I agree with Credit Suisse analyst Anita Soni that any such weakness may present a meaningful buying opportunity. I won't go into great detail here, since investors can access my premium research report on Goldcorp for further discussion of the substantial long-term investment opportunity in the shares of this quality producer.
2. Pilot Gold (NASDAQOTH: PLGTF ) (Ticker "PLG" on the Toronto Stock Exchange, or TSX)
As I stated on my blog at Motley Fool CAPS back in September, I consider Pilot Gold a must-own stock for discerning gold investors. After selling Fronteer Gold with its strategic Long Canyon asset in Nevada to Newmont Mining (NYSE: NEM ) for $2.3 billion, the pilots have landed on the gold yet again! Pilot Gold launched as a spin-off from that watershed Fronteer transaction, retaining a joint-venture stake with partner Teck Resources (NYSE: TCK ) in a pair of important gold-bearing properties in Turkey. The Haligaga project already sports an encouraging preliminary economic assessment outlining an after-tax net present value (7% discount rate) of $474 million with an internal rate of return of 20%. Accordingly, Pilot's current market capitalization of $175 million stands at a discount to the estimated value of the company's 40% share of Haligaga alone. Accounting for Pilot's substantial treasury of $43 million, that discount grows deeper still.
But it's the other project in Turkey -- the one with the quirky name -- that's driving the bulk of shareholder value creation at present! The company's 2012 drilling campaign at the TV Tower property -- and in particular at the high-priority Kucukdag (or "KCD") target -- produced truly game-changing results. In one phenomenal intercept released in September, KCD returned a major 137.1-meter interval grading 5.9 grams per tonne gold, 12.6 g/t silver, and 0.53% copper. Providing glorious catalyst potential for 2013, 26 holes from the 2012 campaign are still pending assays, and Pilot is following up with an ambitious plan to drill 25,000 meters at TV Tower in the coming year. An initial resource estimate for the KCD deposit, furthermore, is expected by mid-year.
During the second half of 2013, Pilot intends to conduct a 25,000-meter exploration campaign at the company's 100%-owned, past-producing Kinsley asset in Nevada. Kinsley sits directly on-trend with the Long Canyon project that Pilot's own team first discovered, and possesses "the same stratigraphy, structure and mineralization style as Long Canyon." Initial drill results show promise there as well, placing another important golden nugget in what may be the industry's most exciting investment prospect. I'm looking for a $3 share price for Pilot Gold in 2013, but longer term I believe that legendary gains will likely be enjoyed by those who opt to fly with these proven gold-spotting pilots.
1. Sabina Gold & Silver (NASDAQOTH: SGSVF ) (Ticker "SBB" on the TSX)
I have called Sabina the best-kept secret in gold, but the time has come for this secret to get out! With a current market capitalization of just $390 million, these shares presently value the entirety of Sabina's non-cash assets at a mind-boggling $261 million. The company's enormous silver royalty alone is worth far more!
Sabina is due 22.5% of the first 190 million ounces of silver produced from XSTRATA's Hackett River polymetallic property, and 12.5% of any silver output thereafter. Using a conservative silver price of $22 per ounce, Sabina makes a convincing case for a $650 million net present value for that silver royalty alone. XSTRATA completed 50,000 meters of exploration drilling at Hackett River during 2012, and has proposed to partner with Sabina to build a seaport and road for their respective properties in Canada's Nunavut province. Because XSTRATA is obligated to produce a bankable feasibility study by about mid-2015, I think we can expect to see some preliminary assessment work to define development scenarios for Hackett River within the near future. Naturally, any explicit indication of pending mine development by XSTRATA could spark a massive catalyst for the shares as a more reasonable valuation for the silver royalty is achieved. Meanwhile, Silver Wheaton's (NYSE: SLW ) 7.8% equity stake in Sabina reminds silver-savvy Fools not to underestimate the potential value of this fascinating non-core asset.
Remarkably, you could strip away that exciting silver royalty, and I would still be touting the powerful multibagger potential of Sabina Gold & Silver! Sabina's flagship Back River property boasts an uncommonly high average gold grade of 5.6 grams per tonne across an indicated resource of 4.2 million gold ounces, plus another 1.7 million ounces in the inferred category. And you can expect that tally to grow very soon following a major 76,000-meter exploration program during 2012. Sabina CEO Rob Pease recently commented: "This is a highly prospective land package and year over year we continue to extend mineralization to depth and along strike, all the while adding ounces and finding new targets that warrant follow-up." With an array of substantial intercepts -- like one 16.1-meter interval of 51.9 grams per tonne gold that extended the "G2 zone" of Sabina's Umwelt deposit down-plunge -- I view the pending year-end resource update for Back River as another compelling catalyst for a rally in the shares during 2013.
Another major catalyst looming is the project's ongoing pre-feasibility study, which is expected by mid-year 2013. The study will follow-up on a very successful preliminary economic assessment released last May, which outlined robust economics to counteract the project's remote location and frigid climate. Agnico-Eagle Mines (NYSE: AEM ) has proven willing to brave the cold for gold in Nunavut with the pending construction of a second mining operation in the region, and I consider Back River every bit an equal to Agnico's Meliadine. Sabina's PEA for Back River outlined a mining operation to produce 300,000 ounces of gold per year at an extremely competitive all-in cost of $542 per ounce (based upon a conservative $1,250 gold price). Requiring only $450 million in pre-production capital, Back River boasts an after-tax net present value (5% discount rate) of $650 million with a 25% internal rate of return. Given Sabina's unique potential capacity to fund all pre-production capital expenditures for Back River by monetizing its silver royalty on Hackett River, I find ample cause for a substantial rerate of Sabina's shares to reflect the company's entirely positive prospects for ushering this high-grade gold project into production.
Please stay tuned on New Year's Eve for my annual offering of the top silver stocks for 2013. In the meantime you can hone your understanding of Silver Wheaton by clicking here to access The Motley Fool's premium research report on this legendary silver streamer.