These 2 Deep-Value Commodity Stocks Have at Least 50% Upside

As the major indexes post multi-year highs, many investors credit the invisible hand of the Federal Reserve.

The Fed's pump-priming quantitative easing (QE) has acted as a key source of liquidity for a range of investment classes, from small-cap stocks to junk bonds to the leading blue chips.
The Fed's moves were also expected to boost various commodities -- and the stocks that are pegged to them -- but this entire asset class has started to lag stocks by a widening margin in recent quarters. The still-slow global economy is just one of factors affecting them.
But as the global economy stirs to life, demand for commodities could strengthen, boosting pricing. Here are two commodity producers that have fared badly in recent years, but now hold deep value and upside when the global economy firms up.
Barrick Gold (NYSE: ABX)
This is the world's largest gold producer in terms of production and market value, and is a poster child for the key issue plaguing the gold-mining sector: Rising costs.
In 2009, Barrick mined gold (on a cash basis) for less than $500 an ounce -- this figure is expected to exceed $630 an ounce this year. In light of the drop in gold prices, from about $1,900 an ounce in the summer of 2011 to a recent $1,575, Barrick's profit margins have steadily narrowed. That helps explain why shares hit fresh two-year lows with each passing week.

Yet thanks to a series of new lower-cost mines that are gearing up for production, Barrick's mining costs are finally set to reverse course as we head into mid-decade. Merrill Lynch's analysts see Barrick's mining costs falling below $600 an ounce by 2015. Assuming gold prices remain constant, Barrick's margins and operating cash flow will likely begin to rebound. (Every $50 per ounce in gold prices in either direction is expected to have a $350 million effect on annual cash flow).  (more)Please bookmark us