Investing in a turnaround story is not for the faint of heart!

When it works, the rewards can be sweet -- as with the 76% surge in shares seen by AuRico Gold (NYS: AUQ) within eight months of my selecting the stock as my top pick for 2011. Along the way, AuRico acquired fellow turnaround story Northgate Minerals, yielding a 17% gain for my No. 2 pick last year. Silver Wheaton (NYS: SLW) has turned in a healthy 15-bagger performance since I pegged the stock's multiyear trough back in 2008, and I still think the stock could ultimately gain more than 150% from its present level. Time will tell whether my recent call for a reversal of fortunes at Kinross Gold (NYS: KGC) will bear fruit as well.

Although I've enjoyed some success selecting downtrodden stocks that were primed for a swift reversal of fortune, many of those transformations have proven excruciatingly slow in the making. As a value-oriented investor, I am generally content to wait it out, but that doesn't mean it's easy to do. Brigus Gold (ASE: BRD) in particular has given this Fool some new gray hairs while I awaited long-overdue improvement in its underground mining operations at the Black Fox mine in Ontario. When I visited the Black Fox complex last summer, I witnessed an all-out blitz of underground development activity to yield around a dozen production-ready stopes and bring the historically challenged operation back on its feet. As it turns out, an optimized mine plan now calls for some 30 prepared stopes (see below).

A pair of back-to-back announcements from Brigus this week first rallied the resolve of embattled shareholders, and then served them a hard dose of dollars-and-cents reality. On Tuesday, the company delivered very encouraging news on the operations front, confirming that underground ore grades are back under control after last year's painfully low-grade results. With its gaze still fixed on achieving 25,000 ounces of gold output per quarter upon a foundation of efficient and high-grade underground production, it's looking more and more as though 2012 is the year that Brigus Gold gets its operational house in order.

But on Thursday, Brigus announced a bought-deal financing of $15 million to $17.25 million that will add at least an additional 15.8 million units to a share structure that already has 270.6 million shares outstanding fully diluted. The offering was priced at $0.95 Canadian per share, or nearly a 9% discount to Wednesday's close on the Toronto exchange. Although I admit it's disheartening to see the shares dip back beneath $1 amid this dilutive offering, I nonetheless accept that the company's strategic operating plan to develop some 30 underground mining stopes at Black Fox will require development capital, and frankly nothing is more critical to the long-term interests of shareholders than the successful navigation of a fast-tracked path to steady-state, profitable production at Black Fox.

And as a long-term-focused value investor, particularly now that the company has begun to yield the high-grade underground production that this quality gold deposit is capable of delivering, I can't help focusing on the deep-value proposition here. With a market capitalization of $187 million, the shares hover just $42 million above the net present value of Brigus' oft-forgotten Goldfields development project in Saskatchewan. The still expanding Contact and 147 zones within the Black Fox complex will undoubtedly host a second mining operation, but nowhere are those assets even remotely reflected in the present stock valuation. Though my patience in awaiting the stock's turnaround has certainly worn thin, the recent achievements underground represent a major step forward, and I have every intention of holding my Brigus shares to enjoy the market's eventual celebration of steady-state production at Black Fox.

Looking for more ideas? Download The Motley Fool's special free report "The Tiny Gold Stock Digging Up Massive Profits." Our analysts have uncovered a little-known gold miner that we believe is poised for greatness; find out which company it is and why we strongly believe in its future -- for free!

At the time this article was published Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of AuRico Gold, Brigus Gold, Kinross Gold, and Silver Wheaton. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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