It's no secret that precious metal stocks have enjoyed noteworthy strength here as metal prices continue their multiyear advance. But even the hottest sector around will have its laggards.
When a rising tide like gold and silver seeks to carry all ships, turn on your Foolish sonar and locate some submarines before they rise to the surface.
Currently, some of my own sonar's loudest pings are bouncing off Gammon Gold
Gammon, whose modest gold reserves are substantially enriched by 66 million ounces of silver reserves, has seen its shares fall by more than 30% this year even as gold and silver proxies have surged by more than 20% and 60%, respectively. Ouch! When the company discontinued operations at its El Cubo mine due to a catastrophic impasse with the workforce, I believe the stock became grossly oversold at that juncture. Even today's improved price beneath $8 per share remains below levels seen all the way back in 2005, before the company even acquired the El Cubo asset (and gold fetched less than $500 per ounce!).
A summary of operations at the Ocampo mine for October and November reveals a mine that is finally hitting its stride after a major two-year overhaul. Production is rising, and costs are impressively low at $437 per gold equivalent ounce (GEO). A preliminary economic assessment (PEA) for the Guadalupe y Calvo property is due in a few weeks, and an updated resource estimate is slated for February 2011. Either of these could jumpstart Gammon's momentum.
After Capital Gold's board rejected a competing offer from Timmins Gold, Gammon is likely to win its bid for this promising gold producer, immediately adding 65,000 ounces of gold to 2011 production. Capital Gold's two compelling exploration properties, furthermore, bolster Gammon's long-term development pipeline considerably.
To be sure, Gammon has displayed a consistent knack for over-promising and under-delivering that rightly accounts for the stock's failure to track metal prices higher over recent years, but I believe the depth of the stock's multiyear dive has likewise failed to recognize the inherent buoyancy in this particular submarine. I have employed similar methods to highlight the unwavering value in shares of Yamana Gold
The way I see it, anyone can latch on to gold and silver's obvious momentum leaders like Fronteer Gold
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Coeur d'Alene Mines, Fronteer Gold, Gammon Gold, Hecla Mining, Northgate Minerals, and Yamana Gold. The Fool owns shares of Northgate Minerals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.