Compania de Minas Buenaventura SA (NYSE ADR: BVN, Stock Forum) is the largest publicly-traded precious metals company in Peru.
As such, it stands to profit handsomely from the record high gold prices we're now seeing on a daily basis.
Gold prices hit another intraday record Wednesday topping $1,801 on the Comex division of the New York Mercantile Exchange (NYMEX). Gold prices rose to new record highs on both Monday and Tuesday as well.
Indeed, gold has been on a bull-run since 2007, but Standard & Poor's U.S. credit rating downgrade and the escalating sovereign debt crisis in Europe have the yellow metal continually testing new highs.
For instance, the European Central Bank (ECB) on Tuesday was forced to intervene and buy Italian and Spanish bonds as yields ticked higher. The cost for Italy to continue to issue new public debt, or even to roll its current pile, had reached the same levels that caused Greece, Ireland and Portugal to seek government support.
It's important to note that fear stemming from European and U.S. debt isn't just pushing individual investors into precious metals. It's also driving central banks around the world to flee fiat currencies for hard physical assets - especially gold.
Indeed, global gold sales are climbing as more countries stock up on the yellow metal.
South Korea spent more than $1 billion over the past two months on its first gold purchases in more than a decade, doubling its national holdings. The Bank of Korea said even though prices have already hit historic highs, it was the right time to diversify its foreign reserves.
"South Korea's central bank seems a little late to the party, but gold investors should continue to expect price support as central bankers around the world are underinvested in the yellow stuff," Sean McGillivray, head of asset allocation at Great Pacific Wealth Management, told Reuters.
You know it's bad out there when central banks are buying gold at record highs, with expectations that other central banks will be adding to their own hoards as the risk of continued devaluation of the U.S. dollar continues.
With gold heading for new highs, it's time to buy Compania de Minas Buenaventura SA.
Compania de Minas Buenaventura SA
There are four key factors strengthening the outlook for Compania de Minas Buenaventura SA:
- The company has great fundamental growth.
- It gets more than 70% of its revenue from the precious metals market.
- It generated a 3% increase in second-quarter gold production.
- And it has no hedges.
The company, headquartered in Lima, Peru since it started operating in 1953, currently enjoys amazing fundamental growth in its key markets due to the bull-market conditions for both precious and selected base metals.
It owns a 43.65% stake in Yanacocha, Latin America's largest gold mine and most profitable in the world, and is also involved in the production of silver, copper, zinc and lead.
The metals-price surge and increased sales in gold and copper helped push Buenaventura's second-quarter net income to $204.2 million, up 83% from the same quarter in 2010. Total second-quarter revenue was $343.3 million - up 52% from the same period a year before - with 70% generated from precious metals. The company generated $1.4 billion in revenue in the last twelve months.
Buenaventura boosted gold production in the second quarter due to the up-tick in global gold demand. It increased gold production 10% from the same quarter last year, and raised silver production by 11%.
The company also has zero hedges, meaning it can capture the full upside move in metal prices and then focus its capital on new-project development.
Buenaventura has a market cap of $10.27 billion, with an enterprise value of $9.97 billion once net cash and debt are taken into account.
Compania de Minas Buenaventura SA pays a 1.5% dividend, which on a yield basis should increase as the U.S. dollar drops over the longer haul. The stock Wednesday fell 90 cents, or 2.18%, to close at $40.46 a share.