To say that gold and gold mining stocks have been tricky to trade in 2011, would be an understatement. When gold prices soared from $1505 per ounce to $1860 between July and August, above and beyond the already-hot pace at the time, most everyone on the sidelines finally started to pile in.
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Of course, the timing of those entries ended up being impeccably bad, as gold wound up hitting lows around $1650 per ounce, a month later, an 11% tumble after the 23% run up; it's doled out a partial recovery, in the meantime.
While the volatile swings have led to sheer misery for a lot of folks who have decided to start dabbling with the likes of the SPDR Gold Trust (NYSE:GLD) and the Market Vectors Gold Miners ETF (NYSE:GDX), that pain has also offered a valuable lesson for traders and investors of all experience levels. That is, even when you're talking about gold stocks, the wisest course of action is to find a quality name, buy it, and leave it alone; let time do the work for you, to score the big gain. (For related reading on gold, see Gold: The Other Currency.)
It can be easier said than done, when you're talking about the most precious of all metals. However, it is doable and it's equally possible to sleep at night, while doing so. The trick is to find the names that aren't so popular, or heavily-watched, that the trade is crowded, like Barrick Gold Corporation (NYSE:ABX) may be, yet aren't so small and unproductive that they may not be around a year from now.
With that as the backdrop, here are three mid-sized gold names that are solid opportunities, but stocks you're not going to have to fight or overpay for.
MineFinders Corp. Ltd. (AMEX:MFN)
At a market cap of $1.2 billion, MineFinders Corp. is in that proverbial sweet spot where few are familiar with it, but it's solid enough to stay afloat through turbulence. More than anything though, MFN is attractive because it's profitably producing gold.
One of the key criticisms of MineFinders is that it's a one-trick pony; that it only has one mine, its Dolores site in Northern Mexico. It's not an unfair worry, but it's also not the whole story. Two other sites are currently being developed: La Bolsa and La Virginia. Given its long-term success with just Dolores, investors can have faith that the other two will bear commensurate fruit, and do so for a few years.
Brigus Gold Corp. (AMEX:BRD)
Brigus Gold Corp. is tiny, at only $273 million, and worse, it's not profitable, so it definitely falls on the speculative side of the spectrum, even by gold-mining stock standards. It is producing, though, and ramping that production up. What makes this name so curious is that it's actually danced with profitability in recent quarters, not that a miner has to be profitable for the stock to go higher. Tacking on the potential of the Goldfields development project in northern Saskatchewan, which could be worth a total of $300 million to Brigus, may well get it over that hump. (For related reading, see The Gold Showdown: ETFs Versus Futures.)
AuRico Gold Inc. (NYSE:AUQ)
This Toronto-based gold miner has also focused its development in Mexico, though the recent acquisition of Northgate Minerals gives the miner five operating mines and one more very close to reaching production, by the end of Q1, 2012. The immediate impact that the acquisition will have on the books is still unclear, as AuRico was profitable, but bought a marginally unprofitable company. Based on its consistent profitability, odds are strong that AuRico Gold will be able to cultivate profits from Northgate's assets.
The Bottom Line
While it might be tempting to buy and sell as prices rise, some stocks benefit more from a little patience. Gold has the ability for a great payoff, if you can get in at a decent price and hang in, to watch it climb.
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At the time of writing, James Brumley did not own shares in any of the companies mentioned in this article.