Which Precious Metals Stock Is Right for Your Portfolio?

Precious metals are alluring, but will they add value to your portfolio?

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The Motley Fool

Despite industry risks, precious metals do provide an opportunity for investors to buy shares of quality companies with years of experience in the industry employing focused strategic plans. Here are five companies mining four different precious metals.

1. Gold

Goldcorp (TSX: G)(NYSE: GG) expects to commence production at a number of mines this year. Last month the company announced that it restarted operations at its Los Filos mine in Mexico. It restarted operations after reaching a new five-year occupancy agreement with the Carrizalillo Ejido.

Furthermore, Goldcorp is receiving kudos for quitting its Osisko Mining (TSX: OSK) bid. Bloomberg recently reported that Catherine Raw, co-manager of BlackRock’s $7.5 billion World Mining Fund, said that the company’s decision not to raise its bid “does show a sign of discipline.” Speaking of the industry she said, “there is more discipline then we have seen previously.”

Goldcorp has paid out a monthly dividend since 2003. In May, it declared its fifth monthly dividend payment for 2014 of $0.05 per share.

While net earnings were down in Q1 2014, Kinross Gold (TSX: K)(NYSE: KGC) did have increased production and managed to reduce costs, vital in the precious metals mining industry. It had production of 664,690 gold equivalent ounces, versus 648,897 ounces in Q1 2013. The production cost of sales was $727 per Au eq. oz., versus $729 in Q1 2013, and all-in sustaining cost was $1,001 per Au eq. oz. sold, versus $1,030 in Q1 2013.

Kinross is focusing on financial discipline and operational efficiencies. The company’s concentration on fundamentals is reducing capital expenditures. Its capital expenditures for the year 2012 were $1.9 billion. Its capital spending for 2013 was $1.26 billion. For 2014, it forecast capital expenditures of $675 million.

2. Silver

For Q1 2014, First Majestic Silver (TSX: FR)(NYSE: AG) had silver equivalent production increase to a record 3,631,672 ounces. This represents an increase of 6% versus 3,421,161 ounces in Q4 2013.  Silver equivalent production increased by 33% versus Q1 2013. This was mainly because of higher production from the start-up of the new Del Toro silver mine in Zacatecas, Mexico.

First Majestic owns 100% of Del Toro, which started production in Q1 2013. It is the company’s fifth producing silver mine. The company has invested over $150 million at Del Toro, its largest investment in a single project so far.  Eventually, the expectation is that the Del Toro mine will become First Majestic’s largest silver producer.

3. Platinum

Platinum Group Metals (TSX: PTM)(NYSE: PLG), together with its joint venture partners, made a new discovery at the Waterberg deposit on the North Limb of the Bushveld Complex in South Africa. This discovery consists of two separate projects: the Waterberg Joint Venture and the Waterberg Extension. Platinum Group is concentrating on the construction of the Waterberg JV Project 1 platinum mine.

In early March, the company announced new drill intercepts of the thick “Super F” “3E” platinum, palladium, and gold mineralization. This extends the Waterberg deposit. It also announced a new discovery 16 kilometres north from the Waterberg Joint Venture in the northern part of the permit area. On February 14, 2014, Platinum Group announced a positive independent Preliminary Economic Assessment for the Waterberg JV Project. The PEA’s recommendation is that the project advance to the pre-feasibility stage of development.

4. Palladium

North American Palladium (TSX: PDL)(NYSE: PAL) has its Lac Des Iles palladium mine northwest of Thunder Bay, Ontario. In Q1 2014, the LDI mill processed 516,511 tonnes of ore at an average palladium head grade of 3.3 g/t palladium, and recorded a recovery rate of 84.5%, which is a record.

Phil du Toit, President and CEO, said: “During the first quarter we made significant improvements across our operations. Key metrics including underground production, mill recoveries, average palladium grades, and ounces of payable palladium produced were all in line with or ahead of our full year guidance.”

North American Palladium notes that it has considerable exploration potential near the LDI mine. It has identified several growth targets. It is involved in an exploration program targeted at increasing its palladium reserves and resources.

Precious metals attract mining companies and consumers alike. The allure for shareholders is the potential new discoveries these companies make and their strategic plans in place for growth and operational efficiency. Consider these companies as possible additions to your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Michael Ugulini has no positions in any of the companies mentioned in this article.  

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