We like Rio Alto Mining Ltd. (RIO:TSX.V; RIO:BVL), and Timmins Gold Corp. (TMM:TSX; TGD:NYSE.MKT) and Lake Shore Gold Corp. (LSG:TSX) are some of our bigger positions.
Timmins had another great quarter. It recently fended off a move by Sentry Investments to take over the board. In my view, Sentry only wanted to sell it. CEO Bruce Bragagnolo did a fantastic job during that struggle. He does not come from a mining background but he runs that company better than most people I see in the mining industry. At around $2/share, Timmins either buys something else, which it needs, or gets taken out. On a pullback, it's a great buy, even if you only want to speculate on a takeout.
TGR: The rumor is that Argonaut Gold Inc. (AR:TSX) is going to make a bid for Timmins Gold. Your thoughts?
BP: I know the rumor, but I am not so sure about Argonaut, if I look at its stock price. Everybody's darling has fallen quite a bit. This may not be the right time for it. But of course there's a chance of a takeover by other companies. There are certainly a few sniffing around. In general, Timmins would be a nice fit at 120,000–130,000 ounces (120–130 Koz) gold annually. It would have to be a company where adding 120–130 Koz significantly increases its production profile and also the region has to make sense. Timmins probably can't lower its all-in costs much more but it has some healthy margins at the moment and even more if the gold price rises. Even at $1,300/oz gold, Timmins added another $11M to the cash balance last quarter. I think management is building up the cash to find a good takeover target itself; Timmins appears to be very selective, and that's probably because there are not many options out there that make sense.
http://www.theaureport.com/pub/na/chris-thompson-gold-and-silver-miners-that-can-make-money-now
http://www.silverstrategies.com/story.aspx?local=0&id=48303
