Gold Stocks Steady, Gold Rises to $1,644

GOLD STOCKS NEWS – Gold stocks in Canada were mixed on Monday as the S&P/TSX Global Gold Index inched higher by 0.02% to 380.72 in afternoon trading. Gold stocks in the U.S did not trade on Monday, as the equity markets were closed for the Dr. Martin Luther King Jr. holiday. As such, the Market Vectors Gold Miners ETF (GDX) – the world’s largest gold stocks ETF – remained at Friday’s closing level of $54.05 per share. The stability in Canadian gold stocks came as gold futures rose $13.50, or 0.8%, to $1,644.30 per ounce.

The gold stocks sector is coming off its first stretch of consecutive weekly gains since early November, as the GDX has climbed 5.1% thus far in 2012. The rebound in gold stocks followed a particularly disappointing year, however, for the GDX. Despite a 10.1% gain in the spot price of gold in 2011 – its 11th straight annual gain – the gold stocks ETF tumbled 16.6% amid broad-based liquidation in precious metals equities.

The vast majority of large-cap gold stocks – which are the principal components of the GDX – have been unable to provide investors with the gold price leverage exhibited during prior gold bull markets. Two of the most noteworthy examples of this underperformance have been Canadian-based miners Agnico-Eagle Mines (AEM) and Barrick Gold (ABX). In 2011, shares of AEM and ABX dropped 52.1% and 14.0%, respectively. Even Goldcorp (GG) – one of the best performing large-cap gold stocks last year – fell 2.9%.

In contrast to their larger peers, many small- and mid-cap gold stocks have provided investors with enhanced gold price leverage during previous bull markets in gold. One key reason for this trend has been the superior growth potential of many gold exploration and development companies. One emerging gold Company focused on generating signficant growth is West Kirkland Mining (WKM.TSX), which has considerable mineral rights positions in the Kirkland Lake area of Ontario, Canada and in North Eastern Nevada.

This morning, West Kirkland reported a drilling update on its Cunningham property in Kirkland Lake, Ontario. The Company noted that it drilled an additional 18 holes representing 3,345.5 meters on the Cunningham property, and ten holes had intercepts greater than one gram-meter. Furthermore, the intercepts confirm a three dimensional gold bearing target in classic Kirkland Lake style where further drilling will be implemented to map the best grade-thickness.

Highlights of the results included intercepts of 7.85 grams per tonne (g/t) of gold over 0.80 meters in Hole KC1184, 20.10 g/t over 1.00 meters in Hole KC1186, 17.80 meters of 1.25 g/t Au in Hole KC1187, and 2.00 meters grading 3.69 g/t Au in Hole KC1194. The Company noted that based on the encouraging results, it intends to drill approximately 15,000 meters of core on its Kirkland Lake properties in 2012.

Due in part to the progress it has made since going public in 2010, West Kirkland has garnered attention from a myriad of institutional investors seeking leverage to the gold price from small-cap companies in the sector. Notable firms have acquired considerable stakes in WKM.TSXV include Front Street Investment Management, RBC Asset Management, and The K2 Principal Fund.

In Monday afternoon trading, two of the best performing large-cap gold stocks in Canada included AuRico Gold (AUQ.TSX) and Kinross Gold. AUQ.TSX climbed 2.4% to C$8.98 per share and K.TSX rose 1.9% to C$13.15 per share.