Placer Dome (PDG.TO) Buy, Sell or Hold

Placer Dome (PDG.TO)

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DON'T BUY

A good company, but he prefers Barrick (ABX-T). Not as much transparency as there is in Barrick. Barrick has a bunch of projects on the go that will move production from 5 to 7. Barrick also has several mines which he thinks are going to have a growth profile.

COMMENT

Caller: Bull on gold. Sells PUTs out about 1.5 years on senior golds such as Placer (PDG-T) Barrick (ABX-T) or Newmont (NEM-N), and prepared to have the stocks sold to him at that price. Good idea? Answer: Great idea. Options on gold stocks are about the 4th decile in terms of their price (probably twice as expensive as options on the TSX (X-T) to give some perspective). This will give you a decent premium.

BUY

Nearing the bottom in the correction of the mining shares, but still may have a little way to go. Placer Dome is still biting the old bug of being a hedger and failing on certain areas, particularily in Venezuela. Like its peers, very close to getting to very good value levels. Any lower, he would be a buyer. Not a bad time to start looking.

DON'T BUY

Doesn't own any golds. Feels all gold stocks are over priced.

BUY

Doesn't have as much visibility in the next couple of years. Doesn't see where the extra volume is going to come from. Very well run company. At this price, it becomes very compelling.

WEAK BUY

Owns both Placer Dome (PDG-T) and Barrick (ABX-T), but right now prefers Barrick which has the best growth profile amongst the majors. Hedges are still costing them a little bit but investors are starting to look that over a little bit. Barrick has falling costs and rising production, but that's not the case with Placer Dome. Drop in price is starting to represent some value.

WAIT

Keep a close eye on golds. His sector model indicates they are pretty sold out. Wait for buying to come back into the market. US$ has been strengthening against the Euro and there's been a very tight correlation with gold to the US$. Look for 1) stocks to rally along with the gold price and 2) gold starting to trade independently of the US$. Prefers Goldcorp (G-T) which has moved to a multi-asset company.

WATCH

In this environment, he's very wary of mining companies with hedge books because he believes the US$ gold price is going much, much higher. On the other hand they've made a discovery in Cortez Hills in Nevada. One of the most significant gold discoveries in the last 10 years and it's growing. Keep an eye on the hedge book and the quarterly financial statement.

TRADE

Likes the outlook for gold. Prefers Barrick Gold (ABX-T) as their prospects can be better assessed with the new mines and areas coming on. Placer Dome (PDG-T) doesn't have quite as robust a future for potential production going forward. Haven't assessed this one for what price he would be willing to buy.

BUY

Sold as they were disapponted in their earnings which were down because of high energy costs. Has a really nice suite of exploration properties. Is probably trading at net asset value now, it's out of favour, people don't want to talk about it anymore, so it may be time to slip in a buy some.

PAST TOP PICK

(A Top Pick Nov 30/04. Down 26%.) Went up and then came back down. Came down with the price of gold, but there are some problems with their South Africam mining operations. Feels gold is going to be $500 plus. Good price.

BUY

Had a fairly big correction. The one good thing is that he thinks their days of being a major hedger are over. If you feel that gold will be going to $500 and that metals aren't going to go too much lower it's attractive on pull backs like this.

WAIT

Did a share issue before they told people that things weren't as good as last year. Disappointed a lot of investors. Thinks it's a good value here. Wait until it stops going down before buying.

HOLD

Gold has had an excellent move in the leg 3 of the bull market which ended in about December last year and now having a bit of a correction. Expects gold will become active again this summer. Placer is having a bit of a problem here, but it should find support around the $18 zone.

DON'T BUY

Would rather own the bullion as a more conservative way to play gold. Would probably look at streetTRACKS Gold E.T.F. (GLD-N).

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Placer Dome (PDG.TO)