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Morgan Stanley: Alacer Gold Corp. Low-Price Producer In Battered Field


Alacer Gold Corp. (OTC: ALIAF) is among the lowest cost producers in a field that's been battered by a long-term drop in prices, an analyst said recently.

The company operates a single gold mine in Turkey and its $320 million cash hoard represents about 40 percent of its market capitalization, according to Morgan Stanley's Stefan Hansen, who maintains an Overweight rating on the company.

Alacer is the only gold miner among a half-dozen followed by Hansen that he unreservedly recommends.

The outlook for a stronger dollar, higher interest rates and muted inflation add up to a bearish view for gold bugs, Hansen said.

Gold prices have fallen 36 percent from their 2012 peak of $1,800 an ounce while in the year to date, the metal is off 6 percent.

Against that backdrop, for investors bent on buying gold-related stocks, "equity selection is critical," Hansen said.

Gold miners as a group are down 8 percent year-to-date, and companies that protect cash flow from gold price volatility make the most sense currently, Hansen said.

Gold prices rose slightly this week, touching their highest level in three weeks on a weaker dollar and news that Russia was adding to reserves.

But gold miners' average cost per house have gained 6 percent in the past two years, even as their production has risen 9 percent. "That implies absolute operating costs are up 16 percent" over the period, Hansen said.

Higher cost producers "can provide short-term trading opportunities," that may arise on bad news regarding geopolitical conflicts and weak economic data, Hansen said.

Alacer closed Wednesday down 1.37 percent at $2.02 per share.


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