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The Greatest Gold Stock in the World

By Christopher Barker - Updated Apr 6, 2017 at 7:35PM

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Top pick Northgate Minerals scores the most exciting gold deal of 2011.

I just put together my Top 10 Gold Stocks for New Money Now series, and already two of my very favorite picks in the sector are joining forces to build the newest dominant prospect among the mid-tier miners of gold.

On Wednesday, Northgate Minerals (AMEX: NXG) dove into its proverbial pot of gold with an all-stock offer to acquire Primero Mining (OTC: MNOCF). Primero shareholders will receive 1.5 Northgate shares for each Primero share and hold 31% of the pro forma Northgate. Goldcorp (NYSE: GG), with a 35.5% stake in Primero, will hold 11% of pro forma Northgate after voting its shares in favor of the deal. This is the most exciting gold deal I've seen since Primero's founding transaction about a year ago, so let me try to explain what I like so much.

Northgate Minerals had been temporarily stymied by a brief gap in its development pipeline, and it was staring down some slim production volumes at substantially elevated costs from its two Australian mines over the next several months. In the meantime, forward-looking Fools capitalized on the opportunity to position themselves for years of profitable mining from the Young-Davidson mine beginning early next year. As soon as the ink dries on this deal, Northgate will have filled its near-term production gap in one fell swoop -- and filled it in style with comfortably profitable gold and silver production from one of Mexico's truly legendary mines. With Primero's annual threshold of 3.5 million ounces of silver already delivered to stream-holder Silver Wheaton (NYSE: SLW) for 2011, Northgate will now enjoy lucrative spot-price exposure for 50% of silver produced through the remainder of the year.

Primero Mining had remained underappreciated, deeply undervalued, and even unknown to many U.S. investors since the company leapt onto the scene last year by acquiring Goldcorp's San Dimas mine. Since U.S. investors typically had to venture onto the Pink Sheets to access Primero's shares, I eagerly awaited a U.S. listing to enhance the stock's visibility. This deal accomplishes that feat in dramatic fashion! At the same time, Primero's president and CEO, Joe Conway -- revered within the industry for his leadership in building IAMGOLD (NYSE: IAG) into a mid-tier powerhouse -- will now lead Northgate Minerals as its new CEO through a targeted 72% pro forma production expansion within just two years! With increased capacity at San Dimas and Young-Davidson ramping up toward full production during 2012, Northgate expects to catapult from 320,000 pro forma ounces of gold in 2011 to 550,000 ounces in 2013.

Just this week I wrote the 7 Secrets to Profitable Gold Investing, where (here in Part 3 of the series) I discussed Primero's unrivaled outlook for exploration upside as a key factor behind the stock's No. 2 ranking within my most recent gold recommendations. Strangely enough, Northgate had previously earned the No. 2 spot within my Top 10 Gold Stocks for 2011 last December.

So what do you get when you combine my former No. 2 gold stock recommendation with my current No. 2 pick? Simply stated, and hands down, you get the premier investment vehicle for growth-hungry gold investors. That's right, this perfect pairing forces me to adjust my rankings once more, and place Northgate Minerals -- ahead of even the venerable Brigus Gold (AMEX: BRD) -- as my new No. 1 pick in the sector. Moreover, for a beautifully balanced arrangement of exposure to gold assets primarily located in the mining-friendly jurisdictions of Canada and Mexico, a Foolish trio of top-three gold stocks -- Northgate Minerals, Brigus Gold, and AuRico Gold (NYSE: AUQ) -- could collectively offer a perfect pairing.

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 all the companies mentioned: AuRico Gold, Brigus Gold, Goldcorp, IAMGOLD, Primero Mining, Northgate Minerals, and Silver Wheaton. 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's disclosure policy lives in a pot of gold at the end of a rainbow. 

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Stocks Mentioned

Wheaton Precious Metals Corp. Stock Quote
Wheaton Precious Metals Corp.
WPM
$33.83 (-0.29%) $0.10
Goldcorp Inc. Stock Quote
Goldcorp Inc.
GG
IAMGOLD Corporation Stock Quote
IAMGOLD Corporation
IAG
$1.40 (-0.71%) $0.01

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