8 Mining Stocks to Watch

NEW YORK (TheStreet) -- Stillwater Mining (SWC), Hecla Mining (HL), Richmont Mines (RIC), Brigus Gold (BRD) and Golden Minerals (AUMN) are among eight mining stocks with potential upside of 49% to 197%. Being analysts' favorites, most of these stocks have no sell ratings.


8. Richmont Mines ( RIC) engages in the acquisition, exploration, operation, financing and development of mineral properties. The company currently produces gold from its Island Gold and Beaufor mines and expects to launch production at its Francoeur mine by mid-2011, augmenting total annual production to 100,000 ounces of gold.

During the first quarter 2011, the company reported earnings of $8.7 million, or 28 cents per share, compared to $1.8 million, or 7 cents per share, in the year-ago quarter. Revenue soared 32.4% to $26.4 million from $20 million in the first quarter of 2010. Moreover, gold sales stood at 19,234 ounces at an average selling price of $1,389 versus gold sales of 15,841 ounces at an average selling price of $1,116 in the prior year's quarter.

At the end of March 2011, cash and cash equivalents totaled $47 million, up 18% from the Dec. 31, 2010 level of $40 million. While this includes $3 million obtained from the sale of the Valentine Lake property, the company achieved this despite a capital expenditure of $8.6 million and exploration and project evaluation investments made during the quarter.

The company announced a significant increase in the estimated resource base for the Wasamac property during the first quarter of 2011 and plans to complete an additional 35,000 meters of drilling on the Wasamac property in 2011, with the objective of expanding overall resources and defining the parameters for completing a scoping study by the end of 2011.

Of the three analysts covering the stock, 67% recommend a buy and the remaining rate a hold. The stock has no sell ratings. On average, analysts foresee 48.6% upside to $9.73 from current levels.

7. Brigus Gold ( BRD) engages in gold mining, extraction, processing, as well as exploration and development. The company owns Black Fox, an open-pit and underground mine and mill located near Matheson in the Province of Ontario, Canada.

For the first quarter ended March 2011, the company reported 22.9% year-over-year decrease in revenue to $13.6 million from $17.6 million, as lower gold sales more than offset higher average selling prices. Gold sales declined 36.7% to 10,003 ounces from 15,796 ounces during the first quarter of 2010 because the Black Fox mill processed lower grade ores, averaging 1.67 gm per tonne (gpt) compared to 2.68 gpt in the year-ago quarter. Average realized gold price rose 54.8% to $1,356 per ounce from $876 per ounce.

The company swung to a net income of $2.8 million, or 2 cents per share, compared to a loss of $1.8 million, or 3 cents per share, driven by a gain on the fair value adjustment related to equity-linked financial instruments of $6.5 million, compared to a gain of $2 million in the same quarter last year.

The company strengthened its balance sheet by repaying the balance $22 million on the Black Fox property and raised $50 million from the issuance of senior unsecured convertible debentures.

Brigus recently announced that exploration drilling on the southern part of the Black Fox complex continues to return excellent gold assays over significant widths within the new 147 gold zone (147 Zone), including 3.96 gpt over 50 metres that included 6.82 gpt over 20 metres.

Going forward, the company projects production of approximately 73,000 to 80,000 ounces of gold at a cash cost of $575 to $625 in 2011. The Black Fox mine is expected to produce between 16,500 to 18,000 ounces of gold in the second quarter of 2011.

Two analysts covering the stock rate it a buy. The stock has no sell ratings. On average, analysts estimate 62.3% upside to $2.56 in value from current levels. The stock has gained 8.2% in the last one month.

6. North American Palladium ( PAL) engages in the exploration and mining of palladium, platinum, gold and certain base metals. The company owns two mines and various mineral properties. It operates in three segments: palladium, gold, and corporate and other.

For its first quarter ended March 2011, the company reported a narrower loss of $10.3 million, or 6 cents per share, compared to $18.4 million, or 14 cents per share, in the year-ago quarter. Revenue for the period increased to $36.7 million from $7.9 million, as the company commenced production of metals such as palladium, platinum, nickel and copper.

As of March 2011, the company had net working capital of $163.3 million and a cash balance of $100.1 million versus $169.6 million and $75.2 million at the end of Dec. 2010, respectively. Furthermore, it had no long-term debt. During the quarter, the company invested $3.8 million in exploration activities at its palladium operations ($1.9 million) and gold operations ($1.9 million), and $41.1 million in development expenditure.

The company recently released an updated mineral resource estimate for the Offset Zone at its Lac des Iles ("LDI") palladium mine. Measured and indicated resources total 14.5 million tonnes (up 68%) containing 2.5 million ounces of palladium (up 41%).

Of the 11 analysts covering the stock, 73% recommend a buy, while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts foresee 63.7% upside to $5.96 from current levels. The stock has gained 4% in the last one month.

5. Stillwater Mining ( SWC) engages in the development, extraction, processing, refining and marketing of palladium, platinum and associated platinum group metals (PGMs). The company conducts mining operations in Montana at the Stillwater Mine near Nye, and the East Boulder Mine near Big Timber.

Stillwater reported net income of $36.2 million for 2011 first quarter, or 34 cents per share, on revenue of $170.1 million. This compares to net income of $13.4 million, or 14 cents per diluted share, on revenue of $133.5 million during the first quarter of 2010. Both the Montana mines produced 131,200 ounces of palladium and platinum during the quarter, representing a year-over-year increase of 1.7% and 8.3% sequentially. Average realized price per ounce (palladium and platinum combined) stood at $994 per ounce, up 54.3% year-over-year.

As on March 31, 2011, the company's available cash and cash equivalents (excluding $35.1 million of restricted cash) totaled $43.3 million, up $24 million from Dec. 31, 2010. Furthermore, operating cash flow increased 13.8% to $33.9 million from $29.8 million.

Of the four analysts covering the stock, 75% recommend a buy and the remaining rate a hold. There are no sell ratings on the stock. On average, analysts foresee 64.9% upside to $31.50 from current levels. The stock has gained 3.9% during the past one month.

4. Thompson Creek Metals ( TC) has two operating molybdenum mines, a copper-gold mine under construction, a stand-alone metals roasting facility, and a range of metal properties under various stages of exploration. The company's operations are all located in the U.S. and Canada.

For the first quarter ended March 2011, the company reported non-GAAP adjusted income (excluding non-cash unrealized gain on warrants) of $62.9 million, or 36 cents per share, compared to $25.6 million, or 17 cents per share, in the year-ago quarter. Revenue stood at $206.7 million, up 62% year-over-year from $127.8 million as molybdenum production hit a new quarterly record of 10.3 million pounds, up 25% from 8.3 million pounds in the first quarter of 2010.

On the balance sheet front, cash and cash equivalents reduced 4.1% to $303 million from $316 million at the end of Dec. 2010. Total debt for the quarter was $20.5 million, compared to $22 million as of Dec. 2010. Lastly, cash flow from operations was $76.6 million, up 200% year-over-year from $25.6 million.

Going forward, total molybdenum production is expected at 28 to 32 million pounds (from the earlier guidance of 30 to 33 million pounds) during 2011. Production from the Thompson Creek mine is estimated at 22 to 24 million pounds and from the Endako mine at 6 to 8 million pounds.

Of the 15 analysts covering the stock, 80% recommend a buy and the remaining rate a hold. There are no sell ratings on the stock. On average, analysts foresee 68% upside to $15.74 from current levels.

3. Hecla Mining ( HL) is engaged in discovering, acquiring, developing, producing, and marketing silver, gold, lead and zinc. The company is organized into two segments: the Greens Creek and Lucky Friday units.

During the first quarter 2011, the company's earnings more than doubled to $43.3 million or 15 cents per share from $21.8 million or 7 cents per share in the year-ago quarter as a result of a 70.7% increase in revenue to $136.4 million from $79.9 million in the first quarter of 2010. Revenue growth was driven by higher metal (silver, gold, lead and zinc) prices. In terms of volumes, silver sales increased 15.7% to ~2.4 million ounces, compared to volume declines across gold, lead and zinc.

As of March 2011, cash and cash equivalents soared to $321.7 million from $116.3 million at the end of March 2010 as cash flow from operating activities more than tripled to $60.9 million from $17.8 million.

Hecla reiterated silver production guidance in 2011 which will range between 9 and 10 million ounces. Also, the company forecasts total cash cost per ounce to be approximately zero dollars of silver produced, net of by-product credits, based on $1,350 per ounce of gold, and $1.05 per pound of lead and zinc.

Of the nine analysts covering the stock, 44% recommend a buy on it, while 33% rate a hold. On average, analysts foresee 71.7% upside to $12 from current levels.

2. Silver Wheaton ( SLW) is a mining company, which generates its revenue primarily from the sale of silver. The company operates in nine business segments: the silver produced by the San Dimas, Zinkgruvan, Yauliyacu, Penasquito, Cozamin, Barrick and Other mines, the gold produced by the Minto mine and corporate operations.

During the first quarter 2011, the company reported revenue of $158.2 million, up 84% from $85.9 million in the comparable quarter of last year. The company sold 4.9 million equivalent silver ounces at an average realized price of $32.24 per ounce compared to 5 million ounces at an average price of $17.20 per ounce in the first quarter of 2010.

At the end of March 2011, cash and cash equivalents stood at $564.1 million, up 31.6% from $428.6 million at the end of Dec. 2010. Also, cash generated from operating activities increased more than doubled year-over-year to $127.2 million from $57.6 million.

The company announced an inaugural quarterly cash dividend of 3 cents per common share (12 cents per common share, annually). The initial dividend of 3 cents was distributed on March 30, 2011.

Of the 13 analysts covering the stock, 85% recommend a buy while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts estimate 73.8% upside to $52.47 in value from current levels.

1. Golden Minerals ( AUMN) owns and controls a diversified portfolio of exploration projects with potential district scale properties in Latin America. The company's project pipeline is defined as feasibility and advanced exploration. El Quevar (Argentina) is the most advanced project under the feasibility stage. The Zacatecas project (Mexico) is under the advanced exploration stage, and the five exploration stage projects are Atlas, Chavin, Cochabamba, Jehuemarca and La Pinta, in Argentina, Mexico, and Peru.

During the first quarter ended March 2011, Golden Minerals recorded a net loss of $15.9 million ($1.08 per share), including $8.7 million expenses related to the El Quevar project, $3.7 million as exploration costs and $2.2 million as administrative overheads. At the end of March 2011, cash and cash equivalents stood at $104.3 million.

During April 2011, the company provided an update on the progress of underground development drifting at the El Quevar project and also announced additional high grade intercepts at holes drilled on the El Quevar Yaxtché deposit. The company has completed approximately 430 meters of development drifting at El Quevar at an elevation of 4,774 meters, and has advanced approximately 200 meters along strike in the central Yaxtché zone.

For the remainder of 2011, Golden Minerals expects to spend approximately $40-$48 million to fund ongoing exploration drilling, underground drifting, and related technical engineering and project assessment at the El Quevar project to confirm the mine model and further define the extent of the resource. In addition, it expects to spend approximately $12 million to fund exploration activities and property holding costs including the drilling of two targets in Argentina, three in Peru and four in Mexico.

All the four analysts covering the stock recommend a buy. There are no sell ratings on the stock. On average, analysts estimate 197% upside to $55.86 in value from current levels. The stock has gained 10% in the last one month.

>>To see these stocks in action, visit the 8 Mining Stocks to Watch portfolio on Stockpickr.

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