On the other hand, Copper production increased from 35 million lbs. in the first quarter of 2012 to 38 million lbs. in the first quarter of 2013. To fortify copper production, Newmont Mining Corp (NYSE:NEM) authorized the full funding required for the completion of the Phoenix Copper Leach project in Nevada in April 2012. Capital cost is anticipated to be between $170 million and $215 million, out of which $106 million was already spent by March 2013. The project is expected to start production by the end of 2013, generating value from what is currently thrown away as waste material.
The Phoenix copper project is expected to produce approximately 20 million lbs. of copper per year for the first five years. Due to these developments in copper production, Newmont has raised its revenue growth estimation of its copper production from 6.2% in the first quarter to 10.1% in second quarter of 2013.
Safe investment owing to new growing mines
Barrick Gold Corporation (USA) (NYSE:ABX) makes money from the spread, or difference, between the price of gold and cost of production. Barrick’s production cost for the first quarter of 2013 was $561/ounce. With two new projects, Pueblo Viejo and Pascua Lama, the company expects gold production at a much lesser cost. Pueblo Viejo’s cost of production to operate is currently at $325/ounce. The Pascua-Lama mine, commencing in the middle of 2014, is expected to produce gold at an even lesser cost than Pueblo Viejo’s.
In 2006, Barrick Gold Corporation (USA) (NYSE:ABX) got approval from the environmental authority in Chile to construct Pascua Lama, a gold mining project in Vallendar, Chile. Barrick spent $4.8 billion by the end of first-quarter 2013 for the project. Though the project faced environmentalists’ litigation earlier, in May 2013, Barrick reported that it had received a resolution from Chile’s Superintendent of Environment that requires the company to complete Pascua Lama’s water management system in accordance with the project’s environmental permit.
The project will create 5,500 jobs during its construction stage in 2013 and is expected to produce 1,660 jobs annually over 25 years of operation. This will help in decreasing the current unemployment rate of 18% in Vallendar. The project is expected to produce 800,000 – 850,000 ounces of gold annually over the next five years. This production will cause the company’s EBITDA to rise from $5.8 billion in first quarter of 2013 to $6 billion by the end of 2014.
The Pueblo Viejo mine began production at the end of 2012. It expects to operate at $325/ounce, which is quite low, when the company’s overall cost of operation was $561/ounce for the first quarter of 2013. To appreciate the significance of Pueblo Viejo, Barrick Gold Corporation (USA) (NYSE:ABX) raised its capex to $8.5 billion, from an initial estimate of $3 billion. The company produced a total of 7.4 million ounces of gold in 2012. Barrick expects to produce 800,000 – 850,000 ounces of gold annually from this mine, adding to its growing production level.
Pueblo Viejo is estimated to generate income of more than $7 billion during its first 25 years of operation. Recently, Pueblo Viejo reached an agreement with the Dominican government. The agreement shows the government receiving around $2.2 billion over the period. Hence, the mine proposes growth for both the company and the government.
Conclusion
Goldcorp Inc. (USA) (NYSE:GG) is developing its mine in Red Lake, Canada and Cerro Negro, Argentina. The company has profitably bet on Canada and Argentina for long-term growth.
On the other hand, Newmont is trying its hand in the burgeoning Ghana market with its Akyem mine and copper segment.
Barrick Gold Corporation (USA) (NYSE:ABX) is following Goldcorp’s steps and bidding for new mines, Pueblo Viejo and Pascua Lama, for proliferating growth.
So, I recommend a buy for all these stocks.
Madhu Dube has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Gold Companies for Golden Returns originally appeared on Fool.com and is written by Madhu Dube.
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