Goldcorp Inc. (USA) (GG), Newmont Mining Corp (NEM): Don’t Be Scared of Write-Downs From These Gold Companies

Half of the gold production was sold in June, when the gold prices were at their lowest levels. This affected the results and has led to an earnings’ miss. The company has reported adjusted earnings of $0.14 per share, while the analysts were expecting earnings of $0.23 per share. Goldcorp Inc. (USA) (NYSE:GG) continued to battle costs. It has reduced projected 2013 capital expenditures by $200 million to $2.6 billion.

Newmont Mining Corp (NYSE:NEM) generated $293 million of cash flow. Capital expenditures were down 29%, in line with the industry trend. Although Newmont Mining Corp (NYSE:NEM) has $6.7 billion of debt on its balance sheet, the schedule is easy. The company has to pay $50 million this year and $585 million in 2014. The next big repayment of $580 million is due in 2017. The cash position looks solid, with $1.25 billion of cash and $3 billion of available revolver credit capacity.

Bottom line

Goldcorp Inc. (USA) (NYSE:GG) trades at an 18.91 forward P/E, at a premium to the two other companies. This reflects the company’s success in financial discipline as well as low debt level. In my opinion, Goldcorp is well positioned to grow when the prices recover.

Newmont Mining Corp (NYSE:NEM) trades at a 12.85 forward P/E. The debt schedule is easy, and I think that the stock is over-punished. Both companies executed well in the second quarter. If you are bullish on gold, both stocks are a must-have in your portfolio.

Barrick Gold Corporation (USA) (NYSE:ABX) is one of the most beaten gold stocks. The uncertainty about Pascua-Lama weighs on the company. The stock trades at a 6.50 forward P/E and is very speculative right now. I would not advise to bet on Barrick unless you have high risk tolerance. It is difficult to say, what kind of Pascua-Lama write-down is already priced into the stock. If it comes worse than expected, the shares might take a dive.

The article Don’t Be Scared of Write-Downs From These Gold Companies originally appeared on Fool.com is written by Vladimir Zernov.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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