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NovaGold: A favorite junior


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by Nathan Slaughter, editor Street Authority Investor Update

Betting on junior mining companies can be just like hunting for gold -- they don't always pan out. But when they do, get ready for a big payday. Right now, one of my favorite junior miners is NovaGold Resources (NG).

NovaGold is a $2 billion Canadian mining stock with an ownership in Alaska's Donlin mine -- the creme de la creme of gold mines containing one of the largest known undeveloped gold deposits in the world.

All told, NovaGold is sitting on roughly 19.7 million ounces of proven gold reserves. With a market cap of $1.7 billion, that means the market is pricing that gold at just $86 per ounce (1.7 billion/19.7 million).

For perspective, the average development stage gold company trades at $125 per ounce, the average junior producer sells for $355 per ounce, and intermediate producers typically garner $390 per ounce.

Of course, that discount only exists because NovaGold is still a few years away from production and a lot can happen between now and then.

Once NovaGold graduates from developer to producer, there's no reason it shouldn't fetch the same $355 per ounce as the rest of the group.

If so, NovaGold's 19.7 million ounces of gold would be worth roughly $6.9 billion -- versus a current market cap of $1.7 billion.

Patient investors who buy the stock and then file it away for the next few years could easily double or triple their money, even without any increase in the price of gold.

Learn more about this financial newsletter at Street Authority Investor Update.

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