5 Gold Stocks to Watch in 2011 – Part 2

Old gold miners.

3. Centamin Egypt Ltd. (TSX: CEE)

When the world changes, the market changes. While financial concerns naturally take a backseat to those concerning human rights, the uprising in Egypt and subsequent demonstrations throughout Northern Africa illustrate that the two are inextricably linked. When the civil unrest that ultimately led to the unseating of President Hosni Mubarak began in Egypt the price of gold began to rise. It then continued to rally for five straight weeks.

Taken in isolation, this would have been good news from Centamin Egypt, a mining and exploration company founded in Australia in 1970 that subsequently listed on the London AIM and the TSX. But there was no way to isolate the rise in the price of gold from unnerving investors, who were no doubt concerned that the unrest in Egypt would disrupt operations at the company’s Sukari Gold Project, which is located in South Eastern part of the country. In a press release on February 24th, the company quelled at least some of these fears, noting that the project experienced “mild disruptions with port authorities and supply lines which led to some inventory levels being drawn down”.

While the the ousting of Mubarak does not guarantee complete political stability, it looks like a transition that may have been extremely disruptive did not result in the worst case scenario. Shares of Centamin Egypt are, for now, on the rebound as investors can once again focus on the potential of the Sukari project, which the company says will produce 6.2 million ounces of gold over a 15 year period annual cost of production will average US$425 per ounce.

4. European Goldfields Ltd. (TSX: EGU)

Part of the appeal of European Goldfields, a Whitehorse based miner that now counts London, England as its home, has always been political safety. Halfway through 2010, the company’s shares had already begun to percolate off 2008 lows, but when European Goldfields submitted the final Environmental Impact Study (EIS) for its project in Halkidiki in North-Eastern Greece, it shares began a rise that saw its stretch to an all time high of over $17 earlier this month. In a world of increasing geopolitical uncertainty, investors clearly like the fact that the company boasts 10 million ounces of gold reserves within the European Union.

Early in February however, shareholders of European Goldfields found out that bureaucracy is bureaucracy and sometimes mining regulations anywhere can seem like they are written in Greek – literally in this case. On February 24th, a Reuters report regarding the status of the company’s Greek permit rattled the nerves of some investors. Before European Goldfields could respond its stock had traded 4.5 million shares on the TSX and and shed $3.22 to close at closed at $11.18 on the day. When The Company halted its stock and issued a press release stating that the company had “not been officially notified by the Greek authorities that there is any issue regarding the permitting process or the timing of such” and that the “the final Environmental Impact Statement (“EIS”) conformed with all technical requirements under Greek and EU environmental legislation”. It appeared to be enough to calm the nerves of shaky investors. By March 1st the company shares had seemed to resume their upward trajectory, closing at $13.18. Perhaps investors had shaken off the permit scare to focus on the merits of the company, which has been winning environmental approvals in other parts of Europe.

5. Oceanagold Corporation (TSX: OGC)

On the surface, 2010 appeared to be a pretty good year for Oceanagold, a TSX listed Australian gold producer. The company reported record gold sales of $305.6-million, which was a 29-per-cent increase over 2009 and produced 268,602 ounces of gold at the average cash cost of $570 per ounce. The year also saw the company secure $115-million in equity financing for the development of the Didipio gold-copper project in the Philippines. Scratch the surface just a bit, however, and you’ll find that 2010 was a challenging year for Oceanagold.

CHR chair Etta Rosales and Commissioner Jose Mamauag said the commission’s finding is a “wake up call” to other mining companies operating in the Philippines.

Oceana’s experience at Didipio, located 250 km north of Manila, has been nothing short of a PR nightmare. As the company prepares construction of the project they have faced stiff opposition from international human rights groups, such as Oxfam Australia who say that local indigenous peoples are being forced off their land for the project. The opposition actually began in June, 2008 when local residents filed a complaint with the Phillipino Commission on Human Rights (CHR), accusing Oceana Gold Philippines of setting on fire and bulldozing off cliffs 187 houses in the village without a court order. Despite the affair, OceanaGold posted a record 2010 that saw the company earn $44.43 million, mostly from established mines in New Zealand, where the company has no such legal troubles. With shares of the company trading near historical highs, investors are clearly believing the company’s claims that it is moving forward with the project, despite an apparently leaked report from the CHR calling for the cancellation of its mining permit and affirmation from the press.

For 5 Gold Stocks to Watch in 2011 – Part 1: Click Here

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