This Extremely Low-cost Gold Junior Miner Continues to Grow Production

While investors have many things to worry about, one is the additional monetary stimulus, or money printing, that is occurring around the globe. The U.S. Federal Reserve has taken on unprecedented levels of monetary easing to try and reflate the economy. The end result of money printing is usually the devaluation of a country’s currency. A lower currency means more exports—an attempt to stimulate this economy out of the hole that is the current recession, at the expense of inflation.
The problem with a falling dollar is that your wealth evaporates. You might not notice at first, but in the world economy, you can buy fewer “goods,” which means you are relatively poorer than had the dollar moved up. What this also means is that commodities like gold and precious metals, priced in U.S. dollars, go up in value. How can you make money off this phenomenon? I would suggest looking outside of the U.S. for companies listed on other exchanges, like Canada, that are involved in gold and other precious metals.
One area where there is significant value is in junior mining companies involved with gold. Gold junior mining companies have been undervalued for some time, but I think that spread will close. If you think that the prices of gold and other precious metals will continue to stay high for some period of time, then looking to junior mining companies will give you more of a push up when their true value is realized. While there can be more risk, there are also large rewards in gold junior mining companies.
Investing in gold junior mining companies that trade in other stock exchanges would be a great strategy if the U.S. dollar were to decline, and gold were to keep rising. One of the gold junior mining companies that appear to be quite interesting is Nevsun Resources Ltd. (NYSE/NSU, TSX/NSU). Nevsun is one of the gold junior mining companies extracting precious metals in East Africa.
The company expects to produce three 280,000-300,000 ounces of gold for the full year 2012. This is one of the junior mining companies with extremely low-cash costs, as they reported a cost of $253.00 per ounce of gold in the second quarter. Copper production is also set to begin in the middle of 2013. (Source: Nevsun Resources, Corporate Presentation, October 2012.)
For the third quarter that ended September 30, 2012, Nevsun reported total production of 98,000 ounces of gold. This is an increase from the 87,000 ounces of gold produced in the second quarter, and 82,000 ounces of gold produced in the first quarter. (Source: Press Release “Nevsun Announces Q3 Gold Production of 98,000 Ounces”, October 9, 2012.)
When junior mining companies like Nevsun can continue increasing gold production while keeping costs low, this is a great long-term positive for the company.

 Chart courtesy of www.StockCharts.com

The stock has had a nice move, with the share price now trading just below $5.00, I brought Nevsun to the attention of my readers when it was trading at approximately $3.73. With a 26% return in just over two months, that is extremely impressive. This precious metals miner is currently sitting at just below a resistance level that is quite significant. If you were able to pierce above it, we could see substantial upside potential. Conversely, considering the large move it has already made, a break below support would indicate that a pullback is likely, with a high probability to approximately the 200-day moving average, in my opinion.
While many gold junior mining companies have had strong moves recently, this company also offers some interesting possibilities, not the least of which is the fact that it trades in Canadian dollars, if one invested through the Toronto Stock Exchange. If the U.S. dollar were to decline, this would make an investment in Canadian dollars that much more advantageous. There are always risks associated with gold junior mining companies, and one must conduct extensive due diligence before any capital is to be invested.