TGR: Please tell us about another name.

PK: We hold Timmins Gold Corp. (TMM:TSX; TGD:NYSE.MKT), a small producer whose San Francisco mine is in Mexico. The company had record gold production last year, a 27% increase year over year (YOY). It is expanding its crushing capacity, which should allow for another 25–30% growth in 2013. For a small producer, its P/E is 10.5, and its forward P/E is 7. It has a $28M cash balance and roughly $20M in debt. Timmins is very well run. It is a smaller producer with a great future.

TGR: Timmins looks to be a company that would benefit from a change in market sentiment. Do you think the market is already factoring in last week's news that the Mexican government may raise taxation rates and royalties on mining operations?

PK: That is possible, but the Mexican government understands what it is doing. Gold production is growing fast there.

On raising taxes and royalty rates, Mexico will be the rule, not the exception. We expect to see this everywhere. Governments are hungry for income. If gold continues to rise, these companies will be increasingly profitable. This rise in taxes will have only a temporary dampening effect; it will not hurt the bull market in any way.

TGR: What will Timmins do with its cash flow?

PK: Timmins is expanding its crushing capacity, drilling off and expanding its resource. I believe that as the company was drilling off and delineating more ounces, its finding costs were $10/oz—an incredible return. Its exploration program is relatively aggressive, but the company also is confirming the gold in higher confidence categories.

http://www.theaureport.com/pub/na/15109