Investment Comment Four picks that offer good value for those who

** bullish on gold ** It should come as no surprise that the recent rise in the price of gold and the strong showing by gold shares has moved many investors and observers into the bullish camp for gold. In recent research report, four analysts from Prudential-Bache Securities recommend for the longer-term-oriented investor four companies that represent the best values in the gold group.

The analysts are Richard M. Cohen and J. G. Richardson in Toronto and Nicolas C. Toufexis and John B. Rogers in New York. They emphasize their recommendations are intended for committed gold investors and speculators who recognize the inherent commodity risk in these shares.

The companies are Paul Penna’s Agnico-Eagle, U.S.-based Battle Mountain, Canadian-based Echo Bay and Placer Development. A core holding

The prospects for Agnico-Eagle are superb, say the anaylsts and they would use this stock as a core position in a gold portfolio. Its current cost of production is estimated at $131(US) per oz, which is substantially below the industry average of $180 per oz. Too, Agnico is in the midst of a major production expansion which is expected to increase production by one-third while maintaining extremely low production costs. The company is also involved in exploration and development on several projects that will allow it to continue to replenish its reserves.

A look at its gold division, which consists of two major holdings in Joutel, Que., sees proven and probable reserves of 1.3 million tons of 0.206 oz gold per ton at the end of 1985. “We expect the company to continue replacing reserves for the foreseeable future,” the analysts note.

In 1984 the Telbel mine shaft was extended from 2,800 ft to 4,000 ft and ore is now being mined from the deeper zones. The mill ore capacity has now been expanded from 1,200 tons per day to 1,800 tons per day which parallels with the deepening of the shaft.

Among Agnico’s holdings is a 38% interest in Dumagami Mines with a gold property in Quebec. Here recent exploration found some very high grade mineralization, including one drill hole that assayed 0.42 oz gold per ton over a width of 98 ft. Dumagami is now arranging for the financing to install 1,500 ton per day mill which the analysts estimate will produce between 55,000 and 60,000 oz of gold per year at a cash cost of $240(US) per oz. Two new min by 1988

The analysts favor Battle Mountain not only because of its relatively low price-earnings multiple, which is estimated at 29.6 this year, but also because it plans to bring in two new mines which will significantly add to gold production.

Right now the company derives all of its revenues and earnings from the Fortitude mine in Nevada which has reserves amounting to 7.3 million tons of 0.236 oz of gold per ton. This open-pit mine produced 222,000 oz of gold last year at a cost of $192(US) per oz. Gold production this year and next is estimated at 253,000 oz and 263,000 oz, respectively.

Operating costs are decreasing as the ratio of waste rock to ore declines. Operating costs are estimated to come in at $146 and $115 for 1986 and 1987, respectively.

Located about six miles from the Fortitude is the Surprise mine which is expected to be the first new mine on stream. Annual production is estimated at 20,000 oz at a cash cost of $220(US) per oz.

The second new mine, the Scott Lode in Queensland, Australia, is estimated to have annual production of 60,000 oz of gold at a cash cost of $115 per oz.

Total company production, including the new mines, is estimated to reach 344,000 oz in 1989, with a weighted average cost of production of $125(US) per oz. Dramatic production increases

Echo Bay has interests in three gold mines, the Lupin in the Northwest Territories, Round Mountain in Nevada and the Sunnyside in Colorado.

The company is now exploring the Lupin to depth. Proven and probable reserves at the end of 1985 amounted to 3.07 million tons of 0.34 oz gold per ton.

The analysts anticipate a major production increase at the Round Mountain open-pit mine, which the company operates and holds a 50% undivided interest.

In 1985 Round Mountain poured 139,000 oz. The analysts estimate that Echo Bay’s share of output will be 91,000 oz this year and next. “It is our belief that Echo Bay can now expand Round Mountain production by a factor of two to three which would add 90,000 to 180,000 oz of gold production to Echo Bay,” they say. Total capital costs for a doubling of production are estimated at $180 million(US) with operating costs estimated at under $200(US) per oz.

This expansion in production at Round Mountain increased Echo Bay’s annual gold production from 501,000 oz to 590,000 or even 680,000 oz. “Such an increase would make Echo Bay one of the most undervalued stocks in our universe,” they point out.

The Sunnyside mine should produce about 64,000 oz of gold per annum. “We don’t expect this mine to contribute to the bottom line in the short term. Rather the longer term potential will be recognized after further exploration and development,” they write.

The company recently announced it will buy Tenneco’s gold mining properties which include three open pit gold mines in Nevada and several exploration and development properties. This transaction is expected to close in November and will add about 40,000 oz of gold production this year and 150,000 oz of production next year. It will add one million ounces to the company’s proven and probable reserves. New Guinea mine potential

Placer’s major source of earnings comes from gold operations in Australia and the U.S. Its biggest source of incremental gold revenues is expected to be derived from extensive holdings in Australia and Papua New Guinea.

Placer owns 78.6% of Placer Pacific, which in turns owns 70% of Kidston open pit gold mine in Queensland, Australia. In 1985, Placer’s net interest in Kidston’s production was 145,000 oz at a cost of $100(US) per oz.

Other producing properties include its wholly-owned Golden Sunlight mine in Montana which produced 96,000 oz in 1985. Placer also produced gold at its Bald Mountain and Cortex Gold mines in Nevada, the Equity Silver mine in B.C. and the Marcopper mine in the Philippines. This year’s net interest in gold production is expected to be 330,000 oz.

By 1989, however, the company’s estimated net production could reach 452,000 oz with the putting into production of its 78.6%-owned Misima Island property.

The analysts note their estimates do not include production from Placer’s interest in the Porgera deposit, also in Papua New Guinea, or the Big Bell deposit in Australia. These could net the company an additional 200,000 to 400,000 oz of gold production per annum.