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Coeur d’Alene Mines Corporation (CDE), Allied Nevada Gold Corp. (ANV): Cost Inflation a Big Problem Globally – Stay Local

Given ample investment opportunities in the U.S., some of which appear to be true bargains, why invest anywhere else? A great example of a U.S. company to consider is Coeur d’Alene Mines Corporation (NYSE:CDE).

Coeur d’Alene Mines Corporation (NYSE:CDE) is primarily a silver producer but is also producing an increasing amount of gold. The company is trading at less than a 4x enterprise value/2014e EBITDA multiple. Despite having recently spent $300 million for the acquisition of a Mexican Silver developer, Coeur d’Alene Mines Corporation (NYSE:CDE) still has solid liquidity and is generating ample free cash flow.

Coeur d’Alene Mines Corporation (NYSE:CDE)’s operations are in the U.S. and Mexico. With Coeur’s strong balance sheet, it is one of the few companies in the position to make acquisitions. As the majors continue to actively reduce risk from operations in places like Africa, Coeur d’Alene Mines Corporation (NYSE:CDE) Mining stands out as an increasingly attractive acquisition target itself.

Allied Nevada Gold Corp. (NYSEMKT:ANV) is an interesting, albeit very high-risk, opportunity. 100% of the company’s assets are in Nevada. Allied Nevada Gold Corp. (NYSEMKT:ANV)’s stock has been under extreme pressure because the company is in the midst of a billion dollar expansion. Management budgeted for a $1,600 and $1,400 per ounce gold price in 2013 and 2014, respectively, when planning this expansion. With gold at $1,275 per ounce, Allied Nevada Gold Corp. (NYSEMKT:ANV) is coming up short on funding. As a result, the company raised $150 million at $10.75 per share two months ago. Today the stock is trading at $6 and change.

Still, there is a workable solution for Allied Nevada Gold Corp. (NYSEMKT:ANV). It will be forced to slow its expansion to conserve capital. Instead of a 2015 completion date, Allied Nevada Gold Corp. (NYSEMKT:ANV)’s new mill will probably be completed in 2016-17. While disappointing, this news appears to be priced into the stock price.


Major gold and silver producers followed an aggressive growth strategy for years. Despite rampant cost inflation and other growing problems such as resource nationalism, the majors continued to make acquisitions in far flung corners of the world. Gold prices are down by a third and silver by half since September 2011. The majors are in big trouble and are down 50%-65% from 52-week highs. Investors may benefit from looking at U.S. companies that are largely insulated from the headwinds facing the majors. Coeur d’Alene Mines Corporation (NYSE:CDE) Mining is a great company to look at. Allied Nevada Gold Corp. (NYSEMKT:ANV) is a very high risk name, but one to consider.

The article Cost Inflation a Big Problem Globally – Stay Local originally appeared on and is written by Peter Epstein.

Peter Epstein has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Peter is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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