Thursday, February 9, 2012

Brigus Gold - 2012 should make investors very happy

Brigus Gold Corp (TSX - BRD) (AMEX - BRD)

is a mid-tier gold producer operating in several jurisdiction including it's producing Black Fox Mine complex near the prolific gold region of Timmons, Ontario, Canada.

Unusual for such a company is that it's head office is in Halifax, Nova Scotia.  Brigus has a very solid management team with many years of experience amoug them in in the field of gold mining. They are fucused on building shareholder value through the further development of the Black Fox mine and their Goldfields property near Uranium City Saskatchewan.

Brigus expects to produce 100,000 oz in 2012 and is planning to double production in the next few years to 200,000 oz.  Proven and probable reserves now total over 2,000,000 oz and with new discoveries, this number will grow.

Current Market cap is 200m with 196m shares outstanding and the shares traded today at a low of $1.02 per share. Cost of production  will average $700 per oz in 2012.  Having regard to all of the numbers given by Brigus Gold in their January investor presentation, their resource base is only being valued by investors at $117 per oz.  That, my friends, is such an extreme under-valuation of those resources that it borders on the ridiculus.

Brigus has recently made agreements to option off it's mine holdings in Mexico so as to free up cash (currently $19.1M)   for development of it's core assets at Black Fox and Goldfields. Current debt is $50M

The price of gold has spiked in recent months and a number of expert analysts expect the price to go as high as $2200 this year.  Over the past year, the share price of gold miners has not kept pace with the price of bullion. In fact, it has declined during that time. History tells us that this divergence between bullion prices and gold miners will correct itself and when it does, it will happen very quickly. Mid-tier miners such as Brigus and Sangold will lead this charge, in my humble opinion.

Large gold producers, with their eye on the bottom line, often increase their resource and production base by buying mid-tier miners such as Brigus Gold and San Gold (another one of our favourites) At these very low valuations, this makes Brigus a diamond in the rough so to speak.

Institutional investors:  Sprott Asset Management, LLP; Van Eck Associates Corporation; Wellington Management Company, LP; Baker Steel Capital Managers, LLP; Oppenheimer Funds, LLC; Hale Capital Partners; RBC Precious Metals; BlackRock Financial Management; Earth Resources; and Waterton Resources

Recently Sprott upped their position by 5M shares to 20M shares or approx 10% of the company.

The Motley Fool has made Brigus one of their top three picks this year and give it 4 stars.

Analyst coverage:

Kerry Smith, Haywood Securities
Richard Gray, Cormark Securities
Steve Willis, Casimir Capital
Jeff Wright, Global Hunter Securities, LLC
Michael Starogiannis, Fraser Mackenzie

EPS Consensus Expectations

Q4 2011Q1 2012Q2 2012Q3 2012
Current Mean (as of 2/9/2012)$0.02$0.05$0.08$0.09
Standard Deviation (Current Mean)
Previous Mean$0.03$0.05$0.08$0.09
Low Estimate$0.00$0.04$0.07$0.07
High Estimate$0.03$0.06$0.08$0.10
Number of Brokers Estimating2222

As you can see, the EPS consensus expectation between Q4 2011 and Q3 2012 indicates a growth estimate of profits above 350%.  These are very strong numbers.

Over the past week we have doubled down on our holdings of Brigus Gold.  We expect to be well rewarded during 2012.  They say patience is a virtue. If you are currently holding Brigus Gold shares, good for you.  If you are not, maybe you should be.

Happy investing.

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