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HMY and WHT

 
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arthur
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PostPosted: Fri Dec 31, 2004 7:02 pm    Post subject: HMY and WHT Reply with quote

December 31, 2004

.. and in Harmony with Harmony

Ivan Martchev, editor of Wall Street Winners, specializes in growth investing and portfolio risk management. He is also a noted authority on natural resources - the area from which he draws his Top Pick for 2005 - Harmony Gold Mining.

"Harmony Gold Mining (HMY NYSE) is a major South African gold producer in the midst of a hostile takeover bid for another South African gold miner Gold Fields, which is actually a larger company. Meanwhile, Harmony has declined about 50% from its high hit earlier this year, while gold bullion is up marginally in 2004. How come we have such a huge divergence? Harmony pays its costs in South African rand and sells its gold in US dollars. The rand has been rallying massively against the dollar at a faster rate than gold prices have been rising.

"I believe that South African mining stocks are the best value in the gold universe right now. The rand is unlikely to continue to rally forever against the dollar and recent activity on the interest rate front in South Africa suggests that we are close to a peak for the rand. Also, Harmony and many other South African miners have diversified their operations outside of South Africa to manage their rand exposure. Buying Harmony here is a case of buying when there is ‘blood on the streets.’ In my view, the stock can decline to $7.50 or so from here, where there is multi-year support. Upside in my view is easily doable to about $13-$15 in 2005."

December 31, 2004

On a River of Gold

Frank Holmes, CEO of US Global Investors, is widely recognized as one of Wall Street's leading authorities on global natural resources. His Top Pick for 2005 is a firm involved in a merger that will create "the lowest cost gold producer in the world."

"Our top pick for 2005 is Wheaton River Minerals (WHT AMEX). The company is the least expensive gold producer in our universe of mid-cap gold stocks based on several important metrics. First, we note that few companies in this sector have free cash flow and Wheaton River is building it quickly. Second, Wheaton River's cash flow multiple is one-half of the average gold stock.

"Third, Wheaton River's earnings multiple is at the lower end of its peer group yet it has the strongest growth profile in reserves, cash flow, and new production. Fourth, we would add that Wheaton River Minerals is in the process of being taken over by Goldcorp and the combined entity will be the lowest cost gold producer in the world at $70 per ounce, whereas the average for other gold mining stocks is $280 per ounce. The combined entity would have production of 1.1 million ounces growing to 1.7 million ounces in 2007."
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