A Tiny Gold Miner With Big Profit Potential

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Where Can You Turn $300 Into $1.3 Million Right Now?

Our own small-company specialist, Robert Morris, has found a way to 'sniff out' tiny penny stocks on the verge of a major breakout.  And the timing for this has never been better.

You see, the system takes advantage of an obscure SEC regulation that sends penny stock prices through the roof.

We've seen some stocks gain 852%... 5,450%... even 17,496% in no time flat.

Click here for the details...
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Gold represents the best protection an investor can get from round the clock money printing by central banks.  It's no secret the easy monetary policies of the Fed and other central banks risk unleashing runaway inflation.

And nothing holds its value during periods of rising inflation better than gold.

However, with gold prices having moved into record high territory, the precious metal is not the bargain it once was.  Even diehard gold bull Jim Rogers isn't buying more gold at these levels.  He recently said he would look to buy gold (and silver) only on dips.

Fortunately, there's another way to play the long-term bull market in gold.  A way that offers better value for your investment dollars.  Of course, I'm talking about gold mining stocks.

Take a look at the following chart...


As you can see, gold miners (the gray line) as measured by the Market Vectors Gold Miners ETF (GDX) are down 18% from their early April highs.  And they're down nearly 15% year to date.

In contrast, gold prices (the black line) have been moving steadily higher since late January.  Year to date, gold is up over 5%.  And the precious metal is more than 14% higher off the January lows.

Clearly, we've seen a divergence emerge between the price of gold and the shares of gold mining companies.  A divergence which I believe offers investors a rare opportunity to pick up gold miners at a nice discount compared to gold bullion.

The question for investors then is how to play this coming trend.

The easiest way of course is to buy shares of a gold miner exchange traded fund.  You have two to choose from.  You can gain exposure to the large cap gold miners through GDX.  And you can play the small-cap gold miners through the Market Vectors Junior Gold Miners ETF (GDXJ).

Either one of these ETFs will provide broad exposure to the gold mining industry.

But ETFs aren't the only way to play the coming rally in gold miners.  There is another way that could provide even bigger potential profits.

You can buy shares of companies engaged in the exploration and development of gold mining properties.  These small, speculative firms aren't yet producing any gold.  But some of them have huge production (and profit) potential.

Plus, if you buy in during the development phase, you can pick them up at bargain basement prices.  Then when they start producing, you should be laughing all the way to the bank.

One gold exploration company caught my eye recently... it's Canadian gold miner, Gabriel Resources (TSX: GBU).  Now, these shares are only available on the Toronto Stock Exchange.  But if you can buy them, you stand to make gobs of money down the road.

Here's the story on this exciting company...

GBU is currently preparing to develop their 80%-owned Rosia Montana gold project in Romania.  Rosia Montana is a small village in the mountains of Western Romania, and the site of gold deposits believed to be the largest in all of Europe.

According to the latest data, Rosia Montana's measured and indicated resources stand at 14.6 million ounces of gold and 64.9 million ounces of silver.  The estimated cost to develop the project - including interest, financing, and corporate costs - is about $1 billion.

But here's the best part...

The project is expected to produce 626,000 ounces of gold annually during the first five years of operation.  And total cash costs of production are estimated at just $272 per ounce.

What's more, the project is expected to produce 500,000 ounces of gold per year over its 16 year mine life.  And the average cost of production is estimated at just $335 per ounce.

Based on these figures, GBU is nicely undervalued at current prices.

Let's assume GBU is able to sell their gold at a conservative price of $1,000 per ounce.  At that price, GBU is poised to reap a profit of $665 for every ounce of gold they sell.  Over Rosia Montana's 16 year mine life, that works out to profits of over $5 billion.

With a market cap of just over $2 billion currently, GBU clearly has big upside potential.  In fact, you can grab these shares now at more than a 50% discount to the value of GBU's interest in Rosia Montana.

And don't forget, gold prices are heading higher.  GBU could very well earn higher average prices for their gold in the years ahead.  But even at just $1,000 per ounce, GBU stands to make a fortune.

Take a closer look at GBU for your own portfolio.  This speculative gold mine developer is a great bargain at current prices.  And these shares could easily turbocharge your portfolio's returns for years to come.

•  Auto Parts (+2.9%)

Shares of auto parts companies have been the best performers over the past month.  Many auto parts suppliers have reported record profits in recent quarters.  And investors are flocking to companies focusing on the environmental/fuel economy theme.  The three best performers in the industry are Chisen Electric (CIEC), Clean Diesel Technologies (CDTI), and BorgWarner (BWA).
 

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