The Silver Pennies: An Investor’s Guide to U.S. Silver Stocks

The Silver Pennies:  An Investor’s Guide to U.S. Silver Stocks
By David Bond
The Silver Mining Journal 2005
123 pages.  $15.95

The Silver Pennies is a little book about a big, shiny subject – silver.  More to the point, it’s a book about the silver mining companies in Coeur d’Alene, Idaho.  During the 1990s there were as many as 130 mining companies registered in the area around Coeur d’Alene.  A few years later, only 30 companies remained.  And they weren’t doing much mining.  Because of depressed commodity prices, the others merged or vanished.

Then in 2003, the price of silver began to go up.  When that happened, mining picked up again in Coeur d’Alene.  The silver mines of Coeur d’Alene were ready for what David Bond – the author of the book – calls “the Silver Revolution.”

According to Bond, the Silver Revolution arrived because cell phones, medicines, water purifiers, microprocessors, automobiles, airplanes, rockets, and high-definition televisions don’t work without silver.  Which means silver is in demand.  And demand drives the price up.  For investors, this means opportunity.

After his brief explanation of the Silver Revolution, Bond moves on to “Geology and Mineral Deposits for Dummies.”  He furnishes a very basic and easy-to-understand lesson on geology.  The reader learns about Georgius Agricola, Leonardo da Vinci, and Nicholas Steno, all of who played a role in the evolution of the science of geology.  Bond does a remarkable job explaining the fundamentals of mining and mineral exploration.  Light is shed on some little known aspects of mining, many of which are revelatory.  For example, as a result of regulatory reforms, mining is “perhaps the cleanest resource business in the world.”  And as the author points out, evaluating the potential of mineral deposits is not only expensive but also time consuming.  “From the initial discovery, mining may begin in as little as 5 years, if all goes well.”  In some cases, “it can take up to 20 years or more until metals are produced.”

Essentially, the author provides one of the best primers on mining and mineral deposits available.  And it is all spelled out in just six pages.

The next section of the book is called “Evaluating a Silver Stock.”  Here, Bond discusses how silver companies are evaluated:  quantity of reserves, the number of ounces per share, the number of ounces divided by market cap, and leverage.  In Bond’s opinion, “comparing resources to reserves is an apples-and-oranges proposition.”  Another consideration in evaluating a silver company is how expensive is it “to extract silver from the muck at the mill?”  This question is answered by metallurgy.  Ore in the form of oxide or sulfide is easier to extract than more complex combinations of components.  And in mining, ‘easier’ is code for ‘a heck of a lot cheaper.’

As Bond points out, unless one has “advanced degrees in metallurgy, geology or geopolitics” it can be difficult to evaluate mining properties.  Thus, the average investor should rely on two factors:  location and management.  Regarding location, he believes the Coeur d’Alene Mining District fills the bill.  There is a large quantity of top-grade ore, which is accessible because of its shallow depth.  And as for management, Bond believes the simplest way to find out if the mine manager is any good is “to call them up and talk to them.”  And if possible, visit the mine and see what’s going on.  For Bond has no doubt that a good manager can take a mediocre mine and make it great.  Whereas a bad manager can cripple even a productive mine.

The next section of the book provides profiles of the active silver mining companies in the Coeur d’Alene Mining District.  Beginning with Alice Consolidated Mines and ending with Vindicator Silver-Lead Mining Company, Bond provides a snapshot of each company’s management, authorized shares, shares outstanding, market cap, and properties, along with a comment about the company’s pros and cons.  Included are bar graphs indicating each property’s 5-year price fluctuations and production volume.  Any investor interested in Pacific Northwest mining properties will find this information extremely helpful.

Bond also provides a list of Canadian Silver Penny mining companies.  He says these companies “offer exciting opportunities for enterprising investors.”  Those listed comprise “his favorites.”  He doesn’t go into any detail on these companies, but does provide their website addresses.  And he suggests contacting your broker for more information.

The final section of the book is an alphabetical listing of inactive mining companies in the Coeur d’Alene Mining District.  Anyone wanting to learn more about these inactive properties will find this list a handy reference tool.  Each company is listed according to its old name, its new name, its symbol, its reverse split stock ratio, and the date it became inactive.  This information is valuable because as the price of silver goes up, inactive mines are often revived.

Admittedly, The Silver Pennies has a narrow focus – the mines of the Coeur d’Alene Mining District.  This means the book will appeal to a specific group of investors, those interested in American silver mines located in the Pacific Northwest.  For those people, the book is a necessity.  For others, The Silver Pennies furnishes a compact and succinct handbook on the subject of silver mining.

On the Read-O-Meter, which ranges from 1 star (shoddy) to 5 stars (excellent), The Silver Pennies shines its way to 4 stars.

Tags: silver mining companies, silver stocks

Junior Mining Investor Book Review

Junior Mining Investor: 14 Natural Resource Experts Show You How to Invest Profitably in Emerging Gold, Silver, Platinum, Base Metals, and Uranium Mining and Exploration Stocks
By Kevin Corcoran
Corcoran Publishing 2007
202 pages. $22.95

The term ‘junior’ comes from the Latin word juvenior, meaning ‘young.’ And as used in the title of Kevin Corcoran’s book – Junior Mining Investor – it refers to “exploration and developmental mining companies.” These ‘junior’ companies are smaller than the so-called mining majors. The stocks of these junior companies are “too small and lack the trading volume big funds need to invest in. As a result, investors and speculators can get in and out without much difficulty and before the ‘general’ public catches on.”

Getting in and getting out, while making a profit is what Junior Mining Investor is all about.

Junior Mining Investor is not a cohesive text written by a single author. Rather it is a series of interrelated articles, which were written by 14 different mining-industry experts. Some of the experts write newsletters, others are hedge-fund managers, geologists, and stock analysts. Which means the reader is provided with a good overview of various topics directly related to mining investments.

And as Corcoran states in his introduction, junior mining stocks “are very volatile and with the opportunity to make outsized returns, comes the real possibility of losing some or all of your investment. For this reason, this sector should only be approached with speculative funds – not money you can’t afford to lose.”

In other words, although Junior Mining Investor targets individuals who want to enter the arena of investing in mining stocks, it is not meant for those who are new to the world of investing.

The first chapter, entitled ‘So You Think You Can Speculate,’ gets right to the point. Written by Dr. Russell McDougal, it spells out the realities of speculative investing. Speculative investing requires the right kind of temperament – one that loves risk – along with discipline, and knowledge. McDougal likens it to “chess, bridge and golf. It is an acquired skill and it can be a vocation or an avocation.”

Chapters 2 and 3, provide basic information for selecting silver and gold mining stocks. While on the contrary, chapter 4 gets down to the nitty-gritty. It was written by Kenneth Gerbino, who sets out ‘12 Guidelines for Buying Gold Mining Stocks.’ Gerbino gives common sense rules for winnowing through all the data available on mining stocks. His guidelines will aid investors in narrowing down their list of prospective stocks.

In chapter 6, Kevin Bambrough and Jean Francois Tardif offer ten tips for picking a uranium stock. And although the chapter is short, it is succinct. For example, in their first tip, the authors state that “one of the best indicators of a project’s potential success could be past ownership.” And they give a brief but important explanation of how infrastructure impacts a prospective uranium mine’s value. Which makes this chapter a ‘must read’ for potential investors.

Adrian Day wrote chapter 7, in which he discusses how to minimize risk in gold stocks. He presents two interesting ‘case studies.’ One for Altius and the other for Virginia Mines. Both studies provide a template for investors to apply to other mining stocks. By following Day’s prescription, investors can determine the pros and cons of other properties, and thus make informed decisions.

In chapter 8, Dr. Russell McDougal starts off by asking a pertinent question: “does the perfect resource exploration company actually exist?” His answer is, yes. He then goes on to talk about the three stages of resource explorers: start ups, exploration progress, and discovery. This information makes it possible for investors “to tap into the next nano-cap companies that will present a risk/reward ration that is difficult … to pass up.”

‘How Much Is That’ is the title of Chapter 9. Written by Brian Fagan, it presents – in great detail – how to translate the terms and numbers “used to describe mineral projects into a dollar value and equivalent stock price.” Patience and determination are necessary to work through the article, because it is quite technical. However, serious investors will find this information worthwhile.

One of the most interesting articles in Junior Mining Investor is chapter 15, wherein Dr. Richard S. Appel discusses what to look for in a mining company’s management team. Stock analysts always advise looking for companies with strong management, but no one ever explains precisely what that means. As Dr. Appel points out, “the single most important factor that can make or break even the best company is its ability to raise working capital.” There are two other vital factors, too. And Dr. Appel clarifies what they are. This is a great chapter!

The subsequent chapters discuss such varied topics as platinum investments, market capitalization, warrants, leveraging silver stocks, learning from mistakes, and mining ETFs. And each chapter – some short and some long – furnishes excellent information for investors. Admittedly, the chapters jump willy-nilly from subject to subject, but for the most part Kevin Corcoran has done an admirable job of maintaining the book’s integrity. Junior Mining Investor veers off course only occasionally. And even then, the side-trips are useful, adding to the reader’s store of knowledge. Knowledge will be beneficial in the future.

After reading Junior Mining Investor, it becomes clear that successful investing in mining properties demands not only money and a willingness to take a risk, but also tremendous study and erudition. It is not for the uninformed or faint-of-heart. Corcoran’s book goes a long way toward taking up the slack. For it provides factual and utilitarian material that any investor needs.

On the Rate-O-Meter, which ranges from 1 star (superficial) to 5 stars (pertinent), Junior Mining Investor qualifies for 4 stars.

Tags: junior mining, junior mining investor, silver mining companies, silver mining investments, silver stocks

Top 10 Worst Managed Gold and Silver Companies

In a previous article, I looked at the top ten best managed gold and silver companies—well, here are the bottom ten. Once again, the list was limited to gold and silver stocks that trade on major exchanges (no OTCBBs or Pink Sheets), and each company was graded on the basis of stewardship, financial management, and stock-market performance.

Without further ado, here is the list:

10. Northgate Minerals Corporation (Ticker: NXG)

Canada-based Northgate is a gold and copper miner. With operations in Canada as well as Australia, Northgate is projected to produce upwards of 400,000 ounces of gold in 2009. The stock has a $917.8 million market cap and trades on the American Stock Exchange.

Northgate’s management has been praised over the years by many analysts for making the best of a bad situation. The company’s primary mine is a low-grade property, and the fact that the firm has been able to turn profits for so long says something. However, the numbers don’t lie, and on a quantitative basis, Northgate’s management just isn’t getting the job done.

For instance, Northgate’s sales growth has compounded at an annual rate of just 10% over the past three years, versus a gold and silver company average of 21%. Last year’s earnings came in at $10.7 million, down from $39.4 million in 2007, and $106.7 million in 2006—things are headed in the wrong direction, and someone has to be held accountable.

NXG’s Management Grades
Stewardship: C-, Financial Management: C-, Performance: C

9. Goldcorp, Inc. (Ticker: GG)

Goldcorp has operations in Central and South America, the United States, Mexico, and its native Canada. In 2008, it produced 3.5 million ounces of gold and reported around forty-six million ounces of gold reserves. Goldcorp has a $31.1 billion market cap and trades on the New York Stock Exchange.

Goldcorp got a new CEO in 2009: Charles Jeannes. During his tenure, shares of Goldcorp have gone up by over 73%, which may sound good, but considering gold’s rise in the same time period, it’s actually very mediocre. The average gold and silver company, for instance, has seen its value increase by more than 167%.

It’s also a bit troubling that insiders own less than 1% of Goldcorp’s shares. The interests of management are not clearly aligned with those of shareholders, even if the company does have mostly independent directors and a separate CEO and chairman. Goldcorp’s financial management has been decent, but its stewardship and performance leave a lot to be desired.

GG’s Management Grades
Stewardship: D+, Financial Management: C+, Performance: C-

8. Golden Star Resources, Ltd. (Ticker: GSS)

Golden Star Resources is incorporated in Canada, headquartered in Colorado, and does most of its mining in Ghana, along the Ashanti Gold Belt. The company also has stakes in exploration properties in other African nations, such as French Guiana, Mali, and Suriname. Golden Star’s sub-$5 share price and sub-$1 billion market cap make it attractive to “penny stock” investors, but it trades on the American Stock Exchange (not over-the-counter or the Pink Sheets).

The big strike against Golden Star is its heavy use of debt. While a debt-to-equity ratio of 26% would be far from alarming in most industries, it is quite high for the precious-metals sector. The average gold and silver company has a debt-to-equity ratio of just 9.87%, and most of the best firms use no debt at all. It’s as if gold and silver—which backed our currency before the dollar became a debt instrument—are just incompatible with debt in every way.

It’s also troubling how insiders at Golden Star own less than 1% of their firm’s shares. Although the stock is up 327% over the past year, and management has been able to produce 49% compound annual sales growth for the past three years, the firm has been unprofitable three of the past four years and is projected to post a $90.6 million loss in 2009.

GSS’s Management Grades
Stewardship: D+, Financial Management: D-, Performance: B

7. Barrick Gold Corporation (Ticker: ABX)

Barrick Gold is the world’s largest gold producer. In 2008, it produced more than eight million ounces of gold and reported reserves of fifty million ounces. The company has a market cap of $41.8 billion and trades on the New York Stock Exchange.

Barrick’s hallmark throughout the extended bear market in gold was its hedging against gold. During this time, shares of ABX tended to go up when gold went down, and vice versa. Of course, this worked out well during the early 2000s when gold was in the $200 range. But as gold began its meteoric rise, Barrick’s management was caught unprepared, and thus, the stock has underperformed its peers. Now management has officially begun to “un-hedge,” but that’s more easily said than done, and analysts predict it will be years before Barrick is ever a pure play on gold.

Even though Barrick has begun to un-hedge, its stock performance over the past year has still continued to suffer from residual hedging. Thus, while the average gold and silver company has posted gains of 167%, Barrick is up just 56%. Insiders are basically unaffected by this, though, since they own just 0.25% of the firm’s shares. It’s also important to note that several key managers were poached by rival Gammon Gold (#6 on the best-managed companies list).

ABX’s Management Grades
Stewardship: D, Financial Management: C, Performance: C-

6. MAG Silver Corporation (Ticker: MVG)

MAG Silver is a silver exploration company focused on the Mexican Silver Belt. MAG has mining properties at seven locations and has conducted drilling and testing at each. As of yet, though, MAG has failed to turn a profit. In 2008, MAG posted a net loss of $5.5 million and is projected to lose another $10.6 million in 2009. In total, the firm has lost $18.7 million since 2002 and has yet to take in a single dollar in revenue!

In terms of cash flow, MAG burned through $15.2 million in 2008 and is projected to use another $20.4 million in 2009. As of the last quarter, the firm only has $28.4 million in cash left—down from a high of $61 million at the end of 2007. The majority of MAG’s assets are wrapped up in “other” long-term assets and “intangibles”—it only has $100,000 worth of property, plant, and equipment. The only good news is that MAG only has $1.1 million in short-term liabilities and no long-term debt.

Shares of MVG are up 22.32% over the past year, which is only slightly better than the S&P 500’s average, and far worse than the average gold and silver stock. Insiders own just 1.25% of the firm’s shares. MAG has a $286.5 million market cap and trades on the American Stock Exchange.

MVG’s Management Grades
Stewardship: C-, Financial Management: C, Performance: D-

5. Harmony Gold Mining Company Limited (Ticker: HMY)

Harmony Gold is the fifth-largest gold producer in the world. It has operations in Australia, Papua New Guinea, and South Africa. Last year Harmony produced 2.7 million ounces of gold. The firm’s ore resources are among the world’s largest, too, totaling more than 530 million ounces of mineral resources. Harmony is an un-hedged play on gold. It has a $4.64 billion market cap and trades on the New York Stock Exchange.

Harmony’s board of directors consists of nine members, two of whom are executives. Of the seven non-executive board members, though, only five are independent. Harmony practices voluntary affirmative action in appointing board members, considering race and gender in order to achieve an “acceptable balance.” It is certainly debatable if this has been effective.

Harmony’s management statistics are sub-par across the board. Its three-year sales growth rate is just 5% (versus an average of 21%). Return on equity is an anemic 0.6% (versus an average of 8.69%). Insiders own just 2.54% of the firm’s shares, and Harmony Gold’s stock is up only 33.21% over the past year, versus an average of 167.74%. Harmony also has considerable debt compared to other gold miners.

HMY’s Management Grades
Stewardship: C-, Financial Management: C-, Performance: D-

4. Hecla Mining Company (Ticker: HL)

Hecla Mining produces silver, gold, lead, and zinc. In 2008, Hecla acquired 100% of the Greens Creek from Rio Tinto, effectively doubling its silver production and making it a “silver stock” that also mines gold and other minerals. Hecla has a $1.5 billion market cap and trades on the New York Stock Exchange.

Hecla shares are up more than 170% over the past year, making it easily the best-performing silver stock on this list, but that’s still just slightly above average for gold and silver companies. Hecla’s 6% compound sales growth over the past three years is far below average. Insiders own only 0.44% of Hecla’s shares, and the firm uses nearly twice as much debt as the average among its peers.

From 2007 to 2008, Hecla swung from a $52.2 million profit to an $80.2 million loss. For 2009, Hecla is projected to post a $15.2 million loss. That’s an “improvement,” but hardly one to get excited about.

HL’s Management Grades
Stewardship: D, Financial Management: D, Performance: C-

3. Silver Standard Resources Inc. (Ticker: SSRI)

Silver Standard Resources searches for silver in Australia and North and South America. It holds stakes in many properties, but none of them are currently operating—Silver Standard is waiting for the price of silver to go up first. Silver Standard Resources has never generated a dime of revenue and has racked up losses totaling $43.9 million dating back to 1999.

In addition to generating no sales and no profits, Silver Standard also uses much more debt than the average gold or silver stock, with a debt-to-equity ratio of 27%. The firm has total liabilities of $183 billion and assets of just $145 billion, excluding property, plant, and equipment. Management has burned through $227.9 million in cash over the past two completed years and is projected to go through another $153.7 million in 2009. The firm only has $42.9 million cash on hand as of its most recent quarter, down from a high of $197.3 million at the end of 2006.

Silver Standard has a market cap of $1.54 billion and trades on the Nasdaq General Market.

SSRI’s Management Grades
Stewardship: D+, Financial Management: D-, Performance: D+

2. Agnico-Eagle Mines (Ticker: AEM)

Agnico-Eagle Mines explores for and produces gold in North America and Finland. The firm operates two mines in Quebec and the Finnish Kitilla mine. Other projects are in the works, and Agnico-Eagle has the capacity to produce slightly over one million ounces of gold each year. Agnico-Eagle Mines has a $9.77 billion market cap and trades on the NYSE.

Shares of AEM are up 65% over the past fifty-two weeks. While that would be great during a bearish or even modestly bullish gold market, the fact of the matter is that Agnico’s performance grossly lags that of its competitors. Worse yet, management has led the firm to a -10% three-year compound sales growth rate; undoubtedly one of the main reasons for the stock’s poor performance.

Insider ownership at Agnico-Eagle Mines is 0%. While the difference between a 0.5% ownership rate and a 0% ownership rate might seem insignificant—both are outrageously low—a 0.5% rate shows that at least some of the firm’s insiders have confidence in their own ability to generate a return. A 0% rate means that not even AEM’s own executives and directors—not one of them!—are willing to own shares. Even if they think the stock is headed lower, this is bad management: Part of management’s job is to instill confidence in investors, and at this task, AEM’s leadership has failed miserably.

AEM’s Management Grades
Stewardship: F, Financial Management: D+, Performance: D

1. DRDGold Limited (Ticker: DROOY)

DRDGold is a midsized South African gold mining and exploration company. In addition to three mines in South Africa, DRD also owns the Tolukuma mine in Papua New Guinea. The firm is un-hedged, has a market cap of $198 million, and trades on the Nasdaq Capital Market.

About the only positive thing to say about DRD’s management is that they’re suffering along with their shareholders: Insiders own 10.76% of the firm’s shares, which are up only 8.96% over the past fifty-two weeks. Not only is this a tiny fraction of the gold and silver group’s average, it’s significantly worse than the S&P 500’s average of 21.31%!

Over the past three years, DRD’s management has been able to “grow” sales at a compound rate of -1%. New CEO John Sayers will have to do better in order for the firm to survive. The previous CEO, Mark Wellesley-Wood, was at the helm as DRD’s market cap evaporated—even as gold soared to new highs! The board saw fit to pay Wellesley-Wood $1.5 million for the great service he did destroying shareholder value.

DROOY’s Management Grades
Stewardship: D, Financial Management: F, Performance: F

Tags: silver stocks, top ten, worst managed

Top 10 Best Managed Gold and Silver Companies

There are twenty-four gold and silver companies that trade on major American exchanges (the NYSE, the Nasdaq, and AMEX) and this article identifies the ten best-managed of the bunch. These are not the ten best-performing stocks of the past year, nor are they necessarily the ten best stocks to invest in for the future. There are a lot of elements that go into stock performance, and one that is commonly overlooked is managerial acumen. That, and that alone, is the focus of these evaluations.

The criteria used: I looked at each company’s three-year sales growth, return on equity, use of debt, fifty-two week stock performance, and insider ownership. I also looked more generally at each firm’s balance sheet, and made a non-quantitative assessment of its management and shareholder practices. In assigning letter grades, I compared gold companies to other gold companies, and silver companies to other silver companies, though in some categories, there wasn’t a distinct difference between the two.

With all that in mind, here is the list:

1. Mines Management, Inc. (Ticker: MGN)

Mines Management acquires, develops, and explores mineral properties in the United States, with the intention of producing silver and copper. The company’s biggest project is the Montamore property in Montana, which covers over 1,500 acres.

Mines Management’s officers and directors are heavily invested in their firm, owning over 20% of the company’s shares. This is by far the most of any major-index gold or silver firm. Over the past fifty-two weeks, management has increased shareholder value by close to 200%, nearly tripling the price of MGN shares from $0.91 to $2.64. Management has done this without taking on any new debt, and in fact, the firm has no long-term debt, and a debt-to-equity ratio of 0%. Mines Management’s balance sheet is very strong—the firm has $7.7 million in cash on hand and only $1.7 million in total liabilities!

Mines Management is a tiny micro-cap stock with a total market valuation of just $68.83 million. Its share price is under $5, but unlike most “penny stocks,” it trades on a major exchange—the American Stock Exchange—and not the Pink Sheets or OTCBB.

MGN’s Management Grades
Stewardship: A, Financial Management: A-, Performance: B+

2. Eldorado Gold Corp. (Ticker: EGO)

Eldorado Gold is a Vancouver-based gold-mining company with active operations in Brazil, China, and Turkey. Its CEO, Paul N. Wright, has been with the company since 1996 and has been chief executive since 1999. Mr. Wright has over a quarter-century of experience in developing and operating open-pit and underground gold mines, and his expertise has helped make investors big bucks. Over the past fifty-two weeks, Eldorado’s stock price has soared by more than 164%.

Eldorado’s management has grown sales by a compound average of 55% each of the past three years. The company’s return-on-equity last year was 26.4%—by far the highest of any gold company. The firm has no long-term debt and an impeccable balance sheet. For instance, its current assets alone ($299.1 million—$149 million in cash!) dwarf its total liabilities ($127.7 million).

Finally, insiders own 6.95% of the firm’s shares. This might not sound like a whole lot, but the average for gold and silver companies is only around 5%. Eldorado is a $5.33 billion stock that trades on the NYSE.

EGO’s Management Grades
Stewardship: B+, Financial Management: A, Performance: B-

3. Silver Wheaton Corporation (Ticker: SLW)

Silver Wheaton is a unique silver company. Rather than mining silver, Silver Wheaton obtains it through long-term purchase contracts. Thus, shares of SLW are an un-hedged, almost “pure play” on silver—maybe the next best thing to physical silver in your hand.

Silver Wheaton’s CEO is Peter Barnes. He’s one of the founders of Silver Wheaton and has been with the company since its inception in 2004. Prior to that, he was CFO of Wheaton River Metals. Barnes and the rest of Silver Wheaton’s management team are generally given high marks for their focus on increasing shareholder value by expanding the firm’s exposure to low-cost silver. Silver Wheaton insiders own over 10% of the firm’s shares, which are up more than 475% over the past fifty-two weeks. The firm also generates a pretty solid return on equity at 9.7%.

Silver Wheaton has a $5.46 billion market cap and it trades on the New York Stock Exchange.

SLW’s Management Grades
Stewardship: A-, Financial Management: C+, Performance: A

4. AngloGold Ashanti Limited (Ticker: AU)

AngloGold Ashanti is a gold-mining company based in Johannesburg, South Africa, though it has operations in ten countries on four continents. AngloGold Ashanti has twenty-one mines, a huge product pipeline, and an extensive world exploratory program. Its proven and probable reserves total 73.1 million ounces of gold.

Mark Cutifani took over as AngloGold Ashanti’s CEO in September of 1997. Prior to that, he had been the head of the firm’s global nickel business. Though the stock price fluctuated greatly during Mr. Cutifani’s early tenure, over the past fifty-weeks, he and the rest of management have been able to expand shareholder value by more than 120%. It’s also important to note that AngloGold insiders own 12.11% of their firm’s shares, which is a fairly large percentage for gold and silver companies. AngloGold Ashanti is also debt-free.

AngloGold Ashanti’s market cap is $16.29 billion and it trades on the NYSE.

AU’s Management Grades
Stewardship: A-, Financial Management: B-, Performance: B-

5. IAMGold Corporation (Ticker: IAG)

IAMGold explores for, develops, and mines mineral-resource properties all over the world, with a strong emphasis on gold. The company is considered to be among the top mid-tier gold miners, with annual production of nearly a million ounces a year. IAMGold is Toronto-based, though its operations are scattered throughout North and South America, as well as Africa.

IAMGold’s CEO is Joseph Conway. Mr. Conway began his career as an exploration geologist, so he definitely knows the business. Although insiders own just 2.3% of IAMGold’s shares, the firm still manages a B- stewardship rating due to its pro-shareholder policies like expensing of stock options and holding staggered board elections.

Regardless, IAMGold’s numbers are excellent. Management has increased sales at a three-year compound pace of 51%, and generated a 402.5% return for shareholders over the past fifty-two weeks. IAMGold has a $6.87 billion market cap and trades on the NYSE.

IAG’s Management Grades
Stewardship: B-, Financial Management: B-, Performance: A-

6. Gammon Gold, Inc. (Ticker: GRS)

Canada-based Gammon Gold mines and explores for both silver and gold in Mexico. It’s a relatively small producer with a market cap of $1.53 billion and 2008 sales of $212.5 million. Last year was Gammon’s first to turn a profit, swinging from an ’07 loss of $101.3 million to an ’08 gain of $30.2 million—that’s certainly a sign that management is on the right track. Over the past fifty-two weeks, shares of GRS are up more than 285%.

Gammon’s management team is very rich in experience. CEO Rene Marion took over in late 2007, and the former CEO, Russell Barwick, has stayed on as a member of the firm’s board of directors. Marion has more than two decades of experience in the mining industry and previously worked in Russia for Barrick Gold (Ticker: ABX). Gammon’s president, Fred George, has served in that capacity since 1997 and was named chairman of the board of directors in 2002.

GRS’s Management Grades
Stewardship: C+, Financial Management: C+, Performance: B

7. Buenaventura Mining Company Inc. (Ticker: BVN)

Buenaventura Mining Company—or Compania de Minas Buenaventura as it’s known in its native Peru—explores for, mines, and processes both gold and silver. Currently, Buenaventura operates seven mines and holds minority interests in several others, including a 43.7% stake in Yanacocha, which is South America’s largest gold mine. Buenaventura also mines copper, and has an 18.5% stake in Freeport-McMoRan’s Cerro Verde copper mine.

Roque Benavides Ganoza has been the president and CEO of Buenaventura Mining since early 2001, and has been with the company a total of thirty-two years. The Benavides family owns 27.5% of Buenaventura, which is a source of a bit of concern. But the company still gets high management marks, mostly due to its stellar return on equity, which came in at 28.5% last year. This is by far the highest among silver stocks, and even higher than Eldorado Gold’s 26.4%.

Buenaventura Mining Company trades on the New York Stock Exchange. It has a $10.1 billion market cap. Sales have increased at a compound rate of 10% per year for the past three years, and the stock is up more than 178% over the past fifty-two weeks.

BVN’s Management Grades
Stewardship: C, Financial Management: B, Performance: B-

8. Endeavour Silver Corporation (Ticker: EXK)

Like Gammon Gold, Endeavour Silver Corporation is a Canada-based exploration and mining company that operates primarily in Mexico. Unlike Gammon, Endeavour’s focus is on silver, though it does mine gold, too. In fact, the company used to be known as Endeavour Gold Corporation.

Endeavour gets its highest marks in the performance category. Though the stock has appreciated “only” 188% over the past twelve months—not exceptional for a silver stock—sales have increased at a compound rate of 45% over the past three years, which is by far the most of any silver companies. This sales growth should translate into stronger earnings in the future, and further stock appreciation.

Endeavour trades on the American Stock Exchange. With a sub-$5 share price and a market cap of just $225 million, it is both a “penny stock” and a micro-cap (albeit a fairly large one). With each distinction comes some added risk, but these risks carry the potential for greater reward.

EXK’s Management Grades
Stewardship: C, Financial Management: C, Performance: B

9. Kinross Gold Corporation (Ticker: KGC)

Kinross Gold is one of the ten largest gold producers in the world. Based in Canada, the firm has eight mines in Brazil, Chile, Russia, the United States, and Canada. The firm produced 1.8 million ounces of gold in 2008 and has reserves totaling approximately forty-five million ounces.

Kinross’s stats are a mixed bag: On the positive side, management has been able to increase sales by a compound annual rate of 38% over the past three years, and insiders own more than 10% of the company’s shares (a very high mark for a gold company). On the negative side, Kinross’s 5.1% return on equity is just average and its 37.18% stock-market gains over the past year are by far the lowest of any firms in the top ten (or the four runners up, listed below). A great balance sheet is management’s saving grace.

Kinross trades on the New York Stock Exchange and has a $13.5 billion market cap.

KGC’s Management Grades
Stewardship: C+, Financial Management: C, Performance: C-

10. Lihir Gold Limited (Ticker: LIHR)

Lihir Gold is a Papua New Guinea-based gold miner that was founded in 1995 to mine the Lihir Island gold deposit. Since then, the firm has expanded through acquisitions, the most notable one coming in June, 2008, when it purchased Equigold. Lihir has a $7.2 billion market cap and is a Nasdaq Global Select stock.

Lihir Gold added a lot of long-term liabilities in 2008 and burned through a ton of cash, but it still makes the list of the top-ten managed gold and silver companies—just barely. Companies that just missed the cut include Pan American Silver Corp. (Ticker: PAAS), Gold Fields Ltd. (Ticker: GFI), Yamana Gold (Ticker: AUY), and Coeur d`Alene Mines Corporation (Ticker: CDE).

What allowed Lihir to make the cut was its three-year compound sales growth of 42% and the 125% increase in shareholder value over the past fifty-two weeks. CEO Arthur Hood has been at the helm since 2005. His twenty-five years worth of mining experience is a plus, as is the fact that he’s the only non-independent member of Lihir’s nine-person board of directors.

LIHR’s Management Grades
Stewardship: C+, Financial Management: D+, Performance: C+

Tags: best managed, silver stocks

Top Ten Stock Picks for Metal Investors in 2008

With the declining dollar bouncing the price of gold and silver to historic heights, the year 2008 will most likely see the same trend continue. Many analysts see gold at $1,000 an ounce.

So, for the investors looking for some hot stock picks, follow a general rule for mining stocks, “for the most part, senior gold producer stocks have been the beneficiaries of gold’s move. Usually, majors begin to move then mid-tier, juniors and then finally explorer gold stocks rise,” notes Toby Hansen, who writes for SeekingAlpha.

1. Lihir Gold Ltd. (LIHR)
2. Barrick Gold (ABX)
3. Gold Corp (GG)
4. Newmont Mining (NEM)
5. Anglo Gold (AU)
6. Silver Wheaton (SLW)
7. Pan American Silver (PAAS)
8. Silver Standard Resources (SSRI)
9. Hecla Mining (HL)
10. Coeur d’Alene Mines (CDE)

Tags: silver stocks, stock-picks, top ten