Exeter: "Upside potential measured in a several fold return or better"

In a jittery stock market, the only gold stocks that investors should own are companies that really do have the goods.

This is the consensus view among various gold investment industry commentators and analysts.

In particular, ‘advanced stage’ gold development stocks offer the best bets for speculative investors, argues Al Korelin. He is the publisher of the Korelin Economics Report, a longstanding radio show that covers politics and business news, with a particular focus on the mining investment sector. By definition, advanced stage gold companies have sufficiently defined deposits to clearly demonstrate the size and potential viability of their deposits.

“Just like gold producer stocks, development stocks are also a pretty safe bet in this market,” Korelin says. “Right now I’m most comfortable with companies that are exploring to enlarge an existing asset, as opposed to the ones that are exploring to find an asset.”

Better still are companies that have sizeable enough gold assets to be takeover targets for mid to large sized gold producers, he adds. Especially as the world’s biggest, deep-pocketed gold miners are scrambling to replenish dwindling inventories. And the easiest way to do that is to gobble up much smaller would-be producers that own sizeable gold projects.

“A particularly good example that’s a pretty safe bet is a company that has a significant discovery like Exeter Resource” Korelin says.

Exeter Resource Corp. (TSX: T.XRC) (NYSE-A: XRA) is advancing the Caspiche gold-copper discovery in northern Chile’s prolific Maricunga gold belt (where over 100 million gold ounces are defined). This veritable monster, which is still growing in size through new drilling, already weighs-in at 24.3million ounces gold, making it the second largest of its kind in Latin America.

Only the nearby Cerro Casale gold mine in-the-making edges Caspiche in size. Jointly owned by global gold mining powerhouses, Barrick Gold (TSX: T.ABX) (NYSE: ABX) and Kinross Gold Corp. (TSX: T.K) (NYSE: KGC), it hosts 26.4 million ounces of gold.

‘The bigger the better’ is a sentiment that is also echoed by Marshall Berol and Malcolm Gissen, who manage the San Francisco-based Encompass Fund. This small mutual fund, which has a heavy weighting in mining equities, was ranked as the top performer in 2009 among 722 global equity funds that are tracked by Morningstar, a financial sector ratings agency.

“Every year, just to stay even from a revenue and cash flow standpoint, major mining companies need to acquire large undeveloped gold deposits with a lot of ounces in the ground to replace their mined-out reserves” Berol says. “And it’s increasingly difficult to find large gold discoveries. There really aren’t that many left anywhere in the world.”

“So the few junior mining companies that have made those larger discoveries are the ones that are going to be extremely attractive takeover targets for the large miners,” he adds. “One of those companies for example is Exeter Resource.”

“The company’s Caspiche project is an exceptional resource that sits right between one currently producing gold mine and another deposit that’s moving towards production, both of which are owned by major gold companies,” Berol adds. “So it seems to us that a logical progression is that some major gold producer is going to buy out either Exeter or the project.”