7 Mining Stocks Analysts Expect to Soar

NEW YORK (TheStreet) -- Keegan Resources (KGN), Augusta Resource (AZC) and Seabridge Gold (SA) are among seven junior mining stocks that could see significant gains in the coming 12 months, according to analysts polled by Bloomberg.

Global mining mergers and acquisitions saw a flurry of activity in the first two months of 2011, and a recent report by PricewaterhouseCoopers estimates that M&A activity will grow significantly this year. The report predicts that there will be plenty of takeovers in the junior mining space as developed countries seek to secure supply amid concerns of China's market concentration.

Junior miners outperformed senior gold companies in 2010, with a 61% increase for the Junior Gold Miners Index compared with 30% for the Gold Miners Index.

Analysts expect these seven junior mining stocks to generate lucrative returns for investors over the next 12 months. Based on analysts' price targets, these stocks have potential upside of 28% to 190%.

7. Taseko Mines ( TGB) is a Canada-based junior mining company that operates the Gibraltar Copper Mine. The company is engaged in the exploration of its 100%-owned Prosperity Gold-Copper Property, Harmony Gold Property and Aley Niobium Property.

Taseko Mines will soon launch the third phase of modernization at Gibraltar Mine, Canada's second-largest open-pit copper mine. The company plans to increase productivity and reduce costs at Gibraltar, and continue exploration and development at its other projects. Meanwhile, with Gibraltar being the only revenue-generating mining operation, the company plans to increase annual copper production by 60 million pounds.

The following are the three exploration and development stage projects promising future growth. The Prosperity Project has mineral reserves of almost 7.7 million ounces of gold and 3.6 billion pounds of copper. Construction is expected to start in the first quarter of 2013, and production is expected to begin in 2015. Aley Project is in the exploration stage with 23 holes drilled in 2010, indicating potential resources of 230 and 430 million pounds of niobium. In 2011, drilling will continue with the feasibility study commencing at the end of the year. The Harmony Project, which seeks to enter the prefeasibility stage in 2011, has almost three million ounces of gold in resources.

Of the 11 analysts covering the stock, 45% rate it a buy while 45% rate it a hold. On average, analysts surveyed by Bloomberg expect the stock to reach $7.57 in the next 12 months, 28% higher than recent levels.

6. NovaGold Resources ( NG), a precious metals company, explores and develops mineral properties in Alaska, the U.S., British Columbia and Canada. The company has a major focus on gold properties, but it also has interests in copper, silver and zinc. The company's major assets are Donlin Creek, Galore Creek and Ambler. NovaGold has 50% stakes in Donlin Creek and Galore Creek.

The company holds 17.3 million ounces gold reserves -- 8.2 million ounces measured and indicated, and 4.5 million ounces as indicated. For its fiscal year ended Nov. 30, 2010, NovaGold's cash and cash equivalents more than tripled, to $151.7 million, from 2009 levels.

Going forward, an estimated $41 million budget for 2011 has been approved for the Donlin Creek Project, 50% of which will be by NovaGold. Similarly, for the Galore Creek, Ambler, and Rock Creek Projects, respective budgets of $12.3 million, $10 million and $8.5 million have been approved. The company expects to announce noteworthy results from the studies at Donlin Creek and Galore Creek in 2011.

NovaGold recently entered into an agreement with Nome Gold Alaska to sell its alluvial gold properties, through its wholly owned subsidiary Alaska Gold Company. These prospects consist of 11,500 acres of fee-simple U.S. patented mining claims near Nome, Alaska. Nome Gold will pay Alaska Gold $21 million in three tranches and also issue a letter of credit for $4 million as an environmental reclamation bond.

Of the five analysts covering the stock, 40% rate it a buy while the remainder rate it a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average of 30%, to $16.58, in the coming 12 months.

5. Augusta Resource ( AZC) acquires, explores and develops natural mineral resource properties. The company's material property is the Rosemont copper property located in Arizona. Primarily a copper mining project, the Rosemont property also has appreciable amounts of molybdenum and silver by-products. Rosemont is expected to produce 221 million pounds of copper per year, accounting for almost 10% of U.S. copper output.

Canada-based base metals miner, Hudbay Minerals, has raised its stake in Augusta Resource to 14.3% through the purchase of 5.4 million shares for $21.9 million. Overall, Hudbay now holds 20.2 million shares of Augusta from the earlier 14.8 million. The acquisition was mainly to fund Augusta to develop its Rosemont copper-molybdenum project.

A Toronto-based firm is reportedly raising its investment in Rosemont mine to $51 million from the earlier $30 million. Silver Wheaton paid Augusta $230 million to acquire 100% of the life of mine silver and gold production from Augusta's Rosemont copper project in Arizona, which increased attributable reserves of Silver Wheaton by approximately 7%.

All six analysts covering the stock rate it a buy. Analysts polled by Bloomberg foresee it gaining an average of 36%, to $6.79, in the coming 12 months.

4. Keegan Resources ( KGN), an exploration-stage natural resource company, acquires and explores mineral resources in West Ghana, Africa. The company's principal and material properties consist of the Asumura Property and the Esaase Property (3.23 million ounces of gold indicated resources), both in West Ghana. The company also holds a portfolio of other Ghanaian gold concessions in various stages of exploration.

Currently, Keegan is focused on advancing a prefeasibility study on its Esaase Gold Project and expects to report results in the first half of 2011. After completing a financing deal recently, led by Canaccord-Genuity and Clarus Securities, Keegan has accumulated $234 million in cash.

Keegan Resources recently bought the 10.4 square kilometer Dawohodo prospecting concession from a private Ghanaian company for $1.1 million. The company plans to start surface exploration on the property in preparation for exploratory drilling, enhancing prospects for the development of the Esaase gold deposit project.

All five analysts covering the stock rate it a buy. Analysts polled by Bloomberg expect the stock to gain an average of 48%, to $12.70, in the coming 12 months.

3. Extorre Gold Mines ( XG) is a Canada-based company focused on advancing the Cerro Moro Project in Argentina. The Cerro Moro gold-silver project in Santa Cruz Province is 100% owned by Extorre with the Santa Cruz Government Mining Company, Fomicruz S.E., entitled to a 5% interest, on completion of mine permitting.

The company's cash balance stood at $47.4 million at the end of Dec. 31, 2010, compared with $478,100 in 2009. The company recently announced that drilling is underway at its Union Domes gold project and at its Cerro Puntudo silver project in Santa Cruz Province, Argentina. Late February, the company announced the results of its reconnaissance drilling on the Falcon property, stating that four of the five initial holes have intercepted broad zones of gold-silver mineralization.

Malcolm Gisse, manager of the Encompass Fund, says that of the many gold and silver miners, Extorre Gold is prominent as the grade of its gold is very high. Extorre's Argentina mine has well-developed infrastructure making it an attractive target acquisition to other gold mining companies.

Of the eight analysts covering the stock, 63% rate it a buy while the remainder rate a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average of 52%, to $8.40, in the upcoming 12 months.

2. PolyMet Mining ( PLM), a development-stage company, explores and develops natural resource properties. The company's sole mineral property is the NorthMet Project, a polymetallic deposit located in the established Mesabi mining district in northeastern Minnesota. The NorthMet property extends across 25.9 square miles comprising of two areas: the NorthMet mine site, which totals 6.5 square miles of leased mineral rights; and the Erie Plant site.

The company reported cash and cash equivalents of $4.9 million as of Oct. 31, 2010, compared with $2.9 million in the year-ago period. PolyMet recently announced the closure of the first tranche of its earlier announced private placement with Glencore through the issue of five million common shares at $2 per share, accumulating gross proceeds of $10 million. Glencore currently owns $35 million in common shares and $27.6 million in debentures.

The company recently announced that it has simplified the metallurgical process at its NorthMet copper nickel and precious metal project and plans to build the project in two phases: producing and marketing copper and nickel concentrates in the first phase; and processing the nickel in the second phase.

Both analysts covering the stock rate it a buy. Analysts polled by Bloomberg expect the stock to gain an average of 152%, to $4.99, in the coming 12 months.

1. Seabridge Gold ( SA) is a mineral exploration company engaged in acquiring projects in North America with gold resources.

Seabridge Gold is advancing two Canadian gold projects toward feasibility status: the KSM project located in northwestern British Columbia; and the Courageous Lake project located in the Northwest Territories. The latest available update shows measured and indicated gold resources at the KSM project at 45.3 million ounces and an additional 14.5 million ounces classified as inferred resources. Similarly, measured and indicated gold resources at Courageous were 90.2 million ounces and inferred stood at 63.0 million ounces.

For the first nine months of 2010, the company's cash and cash equivalents stood at $3.6 million, compared with $338,277 in the year-ago period. Canada-based Calico Resources recently revealed that it intends to buy the Grassy Mountain Project owned by Seabridge. Under the terms of the agreement, Calico will issue two million shares after the execution of a definitive agreement. Furthermore, four million shares will be issued on the first anniversary of the execution of the agreement and eight million shares will be issued when the project receives permits for the construction and operation of a mine.

Both analysts covering the stock rate it a buy. On average, Analysts polled by Bloomberg expect the stock to gain 190%, to $90.10, in the coming 12 months.

>>To see these stocks in action, visit the 7 Mining Stocks Analysts Expect to Soar portfolio on Stockpickr.

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