Money manager Adrian Day looks at three resource companies with recent developments and examines how those developments affect the companies and whether the stocks are good buys.
Nevsun Resources Ltd. (NSU.NY, 2.90) has good and not-so-good news. Bisha, its mine in Eritrea, has achieved commercial zinc production, with completion of the zinc expansion, like the original mine and the copper circuit, completed within time and under budget. This is a strong record for any mining company. The bad news, however, are metallurgical problems that have reduced the value of the ore. Nevsun hopes to solve the problem by the end of the year, and in the meantime is also mining some gold from its stockpile to partially make up for the revenue shortfall. But the uncertainty has weighed on the stock price.
The company also announced continued very strong drill results from the Cukaru Peki deposit in Serbia, recently acquired with the purchase of Resource Minerals. Nevsun has strong cash flow, solid balance sheet and pays a market-beating dividend. The Reservoir addition provides diversification away from Eritrea and excellent potential. The metallurgical problems, while important, will likely be resolved with trial and error. If we did not own Nevsun, we’d be looking at buying, at least on further pullbacks.
New CEO outlines company strategy
Goldcorp Inc. (GG.NY, 15.38) said that the Eleonore deposit, acquired from Virginia, is now outperforming expectations, following its start-up issues. After several acquisitions, of which Eleonore was just one, Goldcorp is now “in harvest mode,” according to new CEO David Garofalo in a recent meeting I had with him.
His goal is to maximize the value of operations and increase profitability, and is less concerned with production growth. The company no longer has a grassroots exploration team, with a focus on …read more