Resource Investor ArticlePrecious Metals Stocks Remain Bargain Priced

Gold miners have woefully underperformed the precious metals in the past year, as evidenced by the unbelievable high level of the Gold/XAU Ratio, a popular relative valuation metric. This is even doubly true for the junior miners, whose performance has been relatively weak compared to that of the senior golds (such as Barrick [NYSE:ABX; TSX:ABX], Agnico Eagle [NYSE:AEM; TSX:AEM] and Kinross [NYSE:KGC; TSX:K]) that dominate the XAU index. As the ongoing problems continue to emerge in various sectors of our financially-dominated economy, the precious metals sector will continue to prove its status as the ultimate safe haven.

While the relatively high price of gold has led to cautious trading in the gold miners, investors who buy into some of the value-priced juniors at this stage will be snapping up the type of bargains not seen since the mini meltdown of May 2005.

Several are our favourite stocks with terrific asset bases are priced to move, including Aurizon Mines [AMEX:AZK; TSX:ARZ], which has a solid set of producing properties in a friendly Canadian jurisdiction (read RI’s previous coverage).

Northgate Minerals [AMEX:NXG; TSX:NGX] is another that presents a compelling bargain under $3. After years of being a deadweight with a copper multiple, Northgate’s astute management team has made a solid (and bargain priced) acquisition of Perseverance Corp’s gold projects in Australia and continues to show positive results at its developing Young-Davidson property. The new Northgate will be heavily leveraged to gold, and still has potential option value upside if the boondoggle known as Kemess North ever develops into something tangible.

For the first time in a long time, analysts are actually starting to rate Northgate a ‘buy’ – and while we take those ratings with a grain of salt, it does show that sentiment is turning around on the stock. Northgate currently has an insanely low all-in per ounce in-situ multiple for a producing miner – at last glance it was being valued at something in the neighbourhood of $90/ounce.