Cymor Says: Detour Gold Corp (TSX:DGC) Is a Steal! Here?s Why

By Munknee
Published: Today by RssFeed

The price of gold one year ago was under $1,550/ozt and, while the price has been quite weak lately, it remains above those lows yet the price of gold producing companies has plummeted. Detour Gold Corporation (DGC) is such a company, down 42% in spite no significant negative event to account for it other than the general disfavor of gold stocks. If you are looking for a stock that is a steal, Detour Gold*is such a stock. Let me explain why.

So says Larry Cyna (www.cymorfunds.com) in edited excerpts from his original article entitled Cymor Stock Picks – Detour Gold Corporation.

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Cyna goes on to say in further edited excerpts:

DGC is producing gold, and is in position to become Canada’s largest operating gold mine. Its shares were trading on October 5th, 2012 at*$28.67…As recently as 30 days ago (March 2013), brokerage firms were putting price targets ranging around of $47 share. Yahoo Finance currently has an average 1 year target of $36/share. In spite of all that just six months later*(last Friday, April 5th, 2013)*Detour Gold closed* at $16.60/share! Yes, $16.60/share or down 42.1%. Go here for the latest price.

Remember what Baron Rothschild said - “Buy when there is blood in the streets”.* Remember what Warren Buffet said - “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”. This is an ideal time to follow these tried and true rules of investing.

Some Background on Detour Gold Corporation

• The company’s primary focus is the successful ramp-up of its flagship asset – the Detour Lake Mine, located in the mining-friendly territory of northeastern Ontario, Canada.
• With more than 15.6 million troy ounces in current reserves, and with a projection of*reserves exceeding 20 million ozt upon further exploration of*its massive land position, it is on track to become Canada’s largest operating gold mine.
• When fully operational,*the company*expects to produce 650,000 ozt gold annually with a projected total cash cost of $749/ozt. If the price of gold stays at its current level of $1,550 per ozt, this means an annual cash profit of about $520,000,000, or about $4.50 per share before expenses.
• The company has a market cap of just under $2 billion with approximately 120 million shares outstanding (pre-dilution). 30 days ago, the*Detour Gold*had a market cap of $3 billion, now under $2 billion. (These are bargain days for this stock!)
• As at December 31, Detour Gold*had $226 million cash on hand, almost $2 cash on hand for every share outstanding.

Management Strategy

Most senior gold producers have a strategy of watching junior gold exploration companies develop their assets, and when the asset is proven sufficiently, the senior producer buys the asset. They don’t mind paying enormously inflated prices as long as they know the asset is real and increases their reserves and production.

Unfortunately,*such a*policy has proven less than satisfactory for most acquisitions. Whether it be:

• a) Barrick Gold Corp’s (ABX) $3 billion write-down on a Zambian mine it bought in 2011,
• b) Kinross Gold Corp’s (K), $3.09 billion write-down*on an African mine (the Tasiast gold project,)*acquired in 2010, or
• c) Rio Tinto’s acquisition of Ivanhoe Mines in Mongolia which now looks to be in a spot of trouble,

the traditional route of growing a gold mining company is fraught with difficulty.

Detour Gold, on the other hand, asserts that:

1. it has a wonderful asset,
2. it will develop that asset,
3. it will explore surrounding territory for increasing that asset, and
4. it will not venture afield.

It is a refreshing attitude among the gold producing companies.

Cautions

If there is a caution, it is where the price of gold will be in the future. Many pundits project further future weakness, while just as many analysts project a striking and dramatic price increase. People who remember the last great gold price spike in the 1980?s to $800/ozt gold, remember a dramatic fall to $250 shortly thereafter. We think the price will moderate to above $1,200 /ozt gold, which would still leaves this company very profitable….

Conclusion

[In our opinion, the recent detour in the price of Detour Gold is just that - a detour. We think the company has major potential to turn the corner on to an open road down the highway to much a*higher stock price in the near future.]

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

http://www.gold-speculator.com/munknee/84492-cymor-says-detour-gold-corp-tsx-dgc-steal-here-s-why.html