Tag - GBN

Gold has been the most intoxicating of commodities dating back to antiquity: it has started wars, inspired exploration, exulted great love affairs and toppled regimes. It’s most revered application, though, has been as a store of value and exchange medium, especially during tumultuous times.  In modernity, thanks to modern portfolio theory, that application has morphed into portfolio diversifier: gold and most stocks tend to be lowly correlated, so gold reduces a portfolio's volatility. 

And, of course, gold is valued as a stand-alone investment, though one difficult to value.  Any cash-generating asset, like a stock or a bond, is worth its expected future cash flows discounted to the present, but gold doesn't generate cash. On the contrary, gold is a cash consumer because of storage, insurance and opportunity costs; therefore, investors might consider a more liquid form of ownership, such as a gold-mining stock. 

On that front, we like Vancouver-based Great Basin Gold Ltd. (AMEX: GBN), like most gold mining stocks, performs a dual role for investors, first as a gold proxy and second as equity investment.

Great Basin specializes in acquiring, exploring and developing gold and silver deposits, focusing on two primary projects: the Hollister Project on the Carlin Trend in Nevada, where an underground exploration and development program is underway on a portion of the property called the Hollister Development Block, and the Burnstone Gold Project in the Witwatersrand Basin in South Africa.

Great Basin is considered a “junior” exploration company (at least in industry patois) because it holds advanced development projects, but doesn't actually produce any substantive gold at the moment.

The sector with the Midas touch these days is gold, the price of which on Tuesday climbed to a 28-year peak of around $825 an ounce for December delivery on the New York Mercantile Exchange.

Gold prices are cyclical and typically rise during periods when the dollar is weak, inflation fears are high and geopolitical tensions are escalating.

Gold’s ascent in 2007 reflects the current economic and political climate, characterized by a declining U.S. dollar, heightened Iran and Iraq tensions, skyrocketing crude oil prices and financial institutions eager to increase their gold stockpiles on any price weakness.

With gold prices nearing record highs, junior gold mining companies such as Great Basin Gold Ltd. (AMEX: GBN) and Aurizon Mines, Ltd. (AMEX: AZK) are becoming increasingly attractive. Both are Canadian mining companies that trade on the Toronto and American Stock Exchanges. Their operating results are reported in Canadian rather than U.S. dollars. 

Great Basin Gold has mining assets in two of the world’s richest gold regions—the  Witwatersrand Basin in South Africa and the Carlin Trend in Nevada. The company’s Hollister property in Nevada has an indicated resource of two million gold equivalent ounces, with production expected to commence in 2008 at 150,000 ounces per year and continue for six years. Gold resources associated with the company’s Burnstone mine in South Africa are estimated to exceed seven million ounces. Feasibility studies indicate that the Burnstone mine is capable of producing 254,000 ounces of gold annually for 19 years. Production from the Burnstone mine is slated to begin in 2009.

While not currently generating revenues, Great Basin Gold has a strong balance sheet, with cash and equivalents of approximately $100 million and no debt to support its development activities. The company recorded a net loss of $17.7 million, or $0.13 per share, in the first six months of 2007, up from $1.1 million, or $0.01 per share, in the same period last year, as a result of increased spending on exploration activities.