Robert Hsu’s “Bullion Bull — Goose Island Gold”

By Travis Johnson, Stock Gumshoe, January 21, 2008

This one came in late last week in a flash email from Robert Hsu for his Asia Edge service — actually the ad was really for the commodities play that he tried to sell us a week or two back, which is written up here, but he added a little box teasing us about his latest flash buy alert.

And this one is a trifle out of left field for him — for this Asia Edge service he usually recommends “greater Asia” stocks, Taiwanese semiconductor firms, Filipino telecoms, Australian and Brazilian commodity firms that mostly ship industrial commodities to China. That kind of thing.

But this one has a little bit less of a direct “Asia” connection, at least as I read it. It’s a gold miner, and while there are plenty of gold mines in Asia this particular one is in Canada. Not sure what his full rationale might be, but certainly it’s true that the increase in the gold price in recent years has mirrored the rise of China and India, with some clear connections (India is one of the larger gold jewelry markets, gold is a hedge for Asians worried about the dollar, and many more).

Maybe he’s just scared to recommend anything else in this market environment. Hard to blame the guy.

I’ll quote Hsu’s whole teaser here, because it was so very short and part of a much longer message:

“I never recommend a gold mine. Mark Twain had it right when he defined a gold mine as a hole in the ground with a liar sitting on top of it. But in today’s issue of Asia Edge I’m breaking my own rule because I’ve found a gold mine that’s just tapped a vast “mother lode” of pure gold almost 2 miles long, beneath Goose Island in Canada. Now, bearing in mind Twain’s skepticism, I note with satisfaction that the mine just hiked its dividend by 50%!”

So … mine on Goose island, with a gold vein almost two miles long, with a dividend hike of 50%. What are we dealing with here?

Well, precious few gold miners — or any miners — pay regular dividends. And this one has been paying them for years, teensy tiny though they are.

Actually, it seems they pay a dividend just to make the point that they pay a dividend and therefore that they care about shareholders — I can’t see why else they would bother, since no one is buying this one for what is an extremely tiny dividend yield of .3%. And that’s the new, .18 cent dividend for this year, which is indeed 50% higher than the .12 cent dividend they paid in January of 2007 (the share price stands at about $55 at the moment).

Getting ahead of myself, though … the envelope, please!

According to my sleuthifying and the opinions of a few readers who sent this one in, the company we’re dealing with here is …

Agnico-Eagle Mines (AEM in both New York and Toronto)

This is no tiny miner, a far cry from the microcap speculations we often see teased in this space. AEM is not a get rich quick play (at least, probably not), since it’s a well-covered and very big gold miner that has resisted being bought out. This is a $7 billion company with several gold mines, and a very high PE of near 50 (forward) thanks to the fact that not all of their prospects are making money yet. I suppose that there’s always a possibility that they could get involved in the musical chairs game of mining company consolidation and get a big boost to their share price (or they could go out buying smaller companies), but otherwise this appears on the surface to be a big, well covered gold miner with some very nice prospects for mines that should be able to produce cheap gold. If you think gold is going higher, you’ll probably like it … if not, you probably won’t.

I’m no mining or commodities expert, however, and have not done any in-depth research on this particular company … and I know that each of my readers is packed with his or her own share of wisdom, so if your store of smarts happens to cover this area I’m sure we’d all be happy to hear from you.

Guesses and half-baked ideas are also welcome, of course.

Happy Investing, everyone.


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