As gold ascends above $1060 and looks poised to challenge $1100, gold bugs the world over are convinced that the next great leg of the gold bull is already upon us. And while there may be good reason to celebrate the move, for those holding gold stocks the celebrations have become downright bacchanalian.
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The reason for the great returns among the miners is that gold companies are leveraged to the price of gold. If, for example, it costs $400 to extract an ounce of gold from the earth and gold is trading at $500, the company's profit is $100. But if the price of gold should rise by 20% from $500 to $600, the miner's profit rises by 100% (from $100 to $200).
Below we list several leveraged precious metals miners who've seen outsized returns as gold has appreciated over the last six months.
Old Time Miners
Hecla Mining Co. (NYSE:HL) is a silver miner and one of the oldest diggers still operating. With a history that dates back to 1891, Hecla has been active in North America, Mexico and most recently Venezuela.
The company has also been one of the best performers in the precious metals sector over the last six months. With the price of silver appreciating by 40% over that time, Hecla has managed a gain of 125%. Short interest on the shares is also running at approximately 14%, leaving some to speculate that there still could be some surge left in the stock if gold and silver continue to rise and the shorts are forced to cover.
Hecla also has a convertible preferred share (NYSE:HL-C) that is up over 157% in the last half year.
Platinum Company Runs Deep
Stillwater Mining Co. (NYSE:SWC) is a U.S.-based platinum and palladium producer whose stock has appreciated by nearly 80% in the last six months and by a full 340% since it bottomed in November of last year. The company's operations are focused on two mines in Montana.
Standard & Poor's claims the company will barely notice the recent cancellation of a major supply contract with embattled car manufacturer General Motors.
More Mines!
Mines Management Inc. (AMEX:MGN) stock is up 87% in the last six months. The company is primarily involved in acquiring rights and exploring for viable mineral properties, particularly silver and its related base and precious metals. Mines Management's efforts are currently focused on claims in Montana and Washington State.
Minco Gold Corporation (AMEX:MGH) has risen by 110% in the last six months and better than 450% since bouncing off 52 week lows set this time last year. The company explores for gold in Western China and Mongolia. (For more, check out the Midas Touch For Gold Investors.)
The Wrap
Leverage is a gold investor's best friend - along with a rising price for bullion. And so long as the precious metals continue to move higher, the above listed stocks should continue to be valued dearly by players in the mining market. (For further reading, check out Getting Into The Gold Market.)
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