Thursday, April 15, 2010

Dirty Little Secret of Gold Companies

With the extraordinary run of gold prices, and what looks like a gold bull run which will go on for years, a number of "gold companies" have been communicating in a manner which doesn't reflect what the company actually is.

Does the company have a variety of precious metals they mine? Many do, yet they continue to market themselves as "gold companies," when in many cases gold isn't the primary metal that is mined by them.

Major mining companies which have fallen into this practice include Goldcorp (TSE:G) and Barrick Gold (TSE:ABX), which most investors consider primarily gold mining companies, when in fact they have numerous metals they extract from the ground.

Under normal conditions this would be a positive to have a variety of revenue sources, but in the age of the gold bull run, solely focusing on gold posititions them stronger in the mind of investors and the market.

Just keep in mind when evaluating gold mining companies, that most aren't solely gold miners, and research how many other metals they mine and the percentage of that in relationship to revenue and profits. You don't want to fall asleep at the wheel thinking you're strong in gold by investing in a company that may only be a gold mining company in name, but in fact is a metals mining company with gold as one of the various metals they generate revenue and profits from.

Who are some of the real gold mining companies in the world, as measured by almost completely mining gold? They would include Harmony Gold (NYSE:HMY), Kinross (NYSE:KGC), Lihir (Nasdaq:LIHR), Gold Fields (NYSE:GFI) and AngloGold Ashanti NYSE:AU), among others.

While these mine other metals, their primary source of revenue and profits is gold. All of this can change as they bring new projects online, but for now, they are the more pure plays in the gold mining industry.

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