After years of battling it out with environmentalists over its plan to mine gold in the mountains of Transylvania, Gabriel Resources might actually have a chance to become a viable working mine. True, the environmentalists haven't gone away, and the company is still waiting for approval from Romanian authorities. But some analysts are starting to think Gabriel's prospects are looking better with each day, and the company's steadily rising share price is reflecting that belief.
Canaccord Adams analyst Jim Taylor recently raised his one-year target price on the stock to $6.05 from $5.20, after hiking the firm's “peak gold price” scenario to US$750 per ounce from US$650. Gabriel, with an 80% stake in the Rosia Montana gold deposit in Romania, recently completed a $156-million equity offering at $4.35 a share. Analyst John Hayes at BMO Capital Markets says construction on the project could begin by late 2007, with gold being produced commercially at the mine starting sometime in 2010. Taylor acknowledges that sorting out the permitting issues, along with acquiring residential properties where Gabriel initially plans to construct its mine, could stand in the way of the company's progress. Domestic political issues could also impede the pace of the regulatory process. Still, Taylor says “increased gold price forecasts more than offset the negative impact of the previously announced delays to the project development schedule.”
Taylor has a Buy rating on Gabriel shares, which now trade at about $4, and his target implies an upside of more than 50%. The steady rise of the stock, which traded as low as $2.50 in spring 2006, reflects the growing belief that the Rosia Montana project, Gabriel's first, will eventually overcome opposition. There's also a chance that Gabriel, which is 20% owned by Denver-based Newmont Mining Corp., may one day be a potential takeover candidate, perhaps providing investors with an even more golden opportunity to strike it rich.
