Newmont Mining Corp (NYSE:NEM) tried to pay $0.35/share in constant dividends since late 2011 and increased it once on March 2013, up to $0.425/share. This move turned out to be unsustainable, and the company ended up lowering the payout by 29% to $0.25/share. Still, at $0.25/share and with a forward yield above the 3% threshold, the company’s dividend remains attractive.
New Gold: Well-protected against further gold price decreases
New Gold Inc. (USA) (NYSEMKT:NGD) is yet another example of a miner that has been severely punished by the uncertainty of gold prices. But with a diversified development portfolio (in Canada and Chile) growing production, and with active mines in Canada, Mexico, the United States and Australia, this company offers probable reserves of 7.8 million ounces of gold for a very small level of geopolitical risk. Notice also that the number of probable reserves has grown more than 50% since 2008.
And although gold prices keep decreasing, New Gold has admirably managed to sustain an EBITDA margin as high as 31%. Even better, revenue grew 6% this year, thanks to increased production.
The secret? New Gold seems to have a very efficient cost structure. For each ounce of gold it produces, it is said to obtain a net margin of $319-$469. That should be enough to keep New Gold profitable even if gold prices reach the $1,000/ounce level.
Barrick: Strong production and safe reserves
Barrick Gold Corporation (USA) (NYSE:ABX) has been the most punished gold miner so far. But after losing almost half of its market cap, adjusting its cost structure, and taking an $8.7 billion impairment charge in the latest quarter, mainly due to a massive writedown of the Pascua-Lama development project, Barrick Gold Corporation (USA) (NYSE:ABX) seems to be recovering. The latest earnings call came in with EPS of $0.66, 18% above the consensus estimate of $0.56.
Keep in mind that Barrick Gold Corporation (USA) (NYSE:ABX) may have lost half of its market cap, but it still keeps its diversified portfolio of mines intact. With Bald Mountain and Marigold in the U.S., Pierina in Peru, Buzwagi in Tanzania, and promising cost-efficient projects on the way (Pueblo Viejo Project), Barrick Gold Corporation (USA) (NYSE:ABX) will definitely see better times in the medium-run.
Final Foolish thoughts
It has been a terrible year for gold companies. However, the weakness in gold prices won’t last forever.
Now, the upside of lower gold prices is that it makes it easy for investors to see which companies are better prepared for tough times. And as prices normalize to levels similar to the pre-crisis period, we will find more than one interesting investment opportunity, simply because the market has punished gold miners way too much and because some still remain profitable despite the adverse circumstances. These could be strong buys. After all, tough times don’t last, but good companies do.
The article When the Price of Gold Bottoms Out, Which Miners Will Rise? originally appeared on Fool.com and is written by Adrian Campos.
Adrian Campos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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