The Best Gold Stock Now

There is no doubt that investors form a group to gold like a protection hedge in the course of period of political plus/or else economic distress and instability. Plus up until recently, the economic background was about as poor the way it could obtain. In addition, using the printing presses now running overtime to finance ambitious government spending, a weaker dollar and runaway inflation might be on the horizon.

Instead of simply investing in physical gold, investors who actually need to protect their portfolios have to check out gold miners. My perfect favorite miner is Goldcorp (NYSE: GG), founded out of Vancouver, Canada. It is one of world's largest plus developing gold producers. The rigid operates approximately a dozen mines, the majority of that are located in Canada, Mexico as well as Central America. Those places contain more than forty five million ounces of verified plus probable gold reserves, along with 1.2 billion ounces of silver and large amounts of copper, lead plus zinc.

What Makes Goldcorp the Finest Gold Play Out There? Like every commodity producers, Goldcorp has zero pricing power and easily must believe whatever the marketplace is ready to pay. On that front, the company isn't different than its rivals. However, there are other things that come into play...

While trying a possible investment during this sector, there is 5 major questions that could be asked:

1) How much gold is the company sitting on?
2) Is its reserve base dwindling or rising?
3) Place where the mines located?
4) How to find its extraction expenses?
5) And is production hedged or unhedged?

Let us begin from the initial. With forty five million ounces ahead of you to get dug up, Goldcorp is the perfect size -- big enough to have trustworthy income, but still quick adequate for upcoming production growth to actually add up.

Better still, as a few companies are facing a decreasing supply, Goldcorp is fast changing anything gold it digs up. In fact, reserves has grown-up steadily larger for 5 consecutive years.

Next, it pays to consider where a firm's mines as well as exploration projects are located -- those in specific areas of Africa, let's say, carry significant geopolitical risk and stifling workers costs. Fortunately, almost three-fourths of Goldcorp's reserves are in stable NAFTA nations.

Certainly, cost is arguably an important of variables. Clearly, if all producers are salaried identical rate for their gold, then a winners are those who be capable of dig it up for less. There too, Goldcorp arrives out ahead of pack.

In fact, this company can get gold over the ground to market for a total cash cost of just $305 for each ounce. Others such as Western Goldfields (AMEX: WGW) and Anglo Gold (NYSE: AU) pay nearer to $500 per ounce. As the low-cost producer, Goldcorp rakes in much fatter gains for each ounce purchased -- and it'll vend over 2.3 million ounces this year.

Finally, a few companies choose to protect their production, that may protect against falling costs, but tends to put a ceiling on profits while gold is growing. Goldcorp is unhedged, which means this company will be fully leveraged plus profit the maximum profit as of more powerful bullion.

By passing all five tests with flying colors, Goldcorp is clearly the industry's top-positioned senior gold producer. Goldcorp has come a long way in a short period of time. Just a few years past, this company simply owned a single quarry, although that exact location (Red Lake) remains the largest gold mine in Canada plus the world's richest when it comes to ore concentrations. But latest acquisitions contain transformed Goldcorp into a major player.

From 2004, revenues hold soared 13-fold, jumping from less than $200 million to nearly $2.5 billion. Over that same period, profits, money flow plus gold reserves are up +107%, +149%, plus +251% respectively, on a per-share basis. However Goldcorp's best days are still ahead.

There is really simply 2 ways for any gold producer to boost revenues: sell more gold or obtain the greatest value for it. I think we'll see a mixture of both, but let us concentrate on one aspect that Goldcorp can control -- production rates.

Over the previous three years, Goldcorp's reserves have over 3-times more, climbing from less than fifteen million to greater than forty five million ounces. Meanwhile, this company can also be approaching ahead with 5 development projects that will approach online over the following few years. More promising is Mexico's Penasquito quarry, individual of major precious metals discoveries in all North America. The location has over seventeen million ounces of gold and more than one billion ounces of silver, as well as commercial production is slated to begin next January.

Thanks partially to the current and also further projects in pipeline, Goldcorp's future production growth will greater than twice that referring to competitors like Barrick (NYSE: ABX) along with Newmont (NYSE: NEM).

In fact, administration is going to raise yearly production over 2.3 million to 3.5 million ounces within the next five years. That +50% surge is unrivaled in industry tending to lead to superior growth rates for shareholders.

Goldcorp has very cheap costs approximately (using a gain margin of $630 for each ounce sold) and by far the industry's strongest growth report. And, it also offers a standard net positive cash balance, with from $260 million in cash on the books and 0 debt.

I'm convinced the ingredients are locate for the company to mix out sustainable money flows of $1 billion annually from the next 5 years. In time, the shares should rebound back at least to lower $50s, which means upside potential around +50% over here.

All this government spending may gradually but certainly drag us out of the uncertainty plus inflation wouldn't be far behind. But when stuff get worse, gold will still do well. Not surprisingly, gold was the only best performing asset class in 2008. Gold spot prices have in recent times leaped before future costs (an remarkable event generally known as backwardation) for the first time ever. This can be a mirrored picture of increasing current demand for physical gold and widely interpreted like a prelude with a stronger upward move.

Aside from these near-term catalysts, you will find reasons to be bullish longer-term as well. Firstly, the world's four hundred commercial gold mines only produce about 2,500 tons of metal per year, but the world makes use of over 3,500 tons. Plus whereas production has steadily shrunk since 2001, demand continues growing (there's even signs that numerous central banks are looking to increase their gold reserves).

Understand, even on spot rates over $1200 an oz, gold remains to be sitting on just half the extent reached over the last boom in early Nineteen Eighties -- when it spiked to $2,186 in curent money. Earlier, individuals could not sell their jewels plus other gold quick enough. Now around, it is just the substitute -- buying is so quick that widespread retail shortages have been reported.

If you are looking to amplify your contact with increasing gold prices, why don't you go right to source? When gold prices are on the move, shares of gold producers such as Goldcorp usually act like bullion on top of steroids.

By: Mark Nicholas

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