Yamana Gold Inc. (USA) (AUY), Goldcorp Inc. (USA) (GG): Ignore ETFs, Look at Gold Miners

A very important metric to look at is the firm’s all in sustaining cash cost. This number shows just how much the company pays to keep its operations going, thus giving you a good idea its ability to endure market volatility. Including by-products, it has all in sustaining cash costs of $916 per gold equivalent ounce in the second quarter of 2013. With gold prices currently in the $1,300 per ounce to $1,400 per ounce range, the company has comfortable margins. This makes its dividend relatively secure, and helps to ensure that it will have enough cash flow to fund capital expenditures.

Goldcorp Inc. (USA) (NYSE:GG) is another gold miner, but its margins and costs make it a second rate investment compared to Yamana Gold Inc. (USA) (NYSE:AUY). While Yamana had all in sustaining costs of $916 per gold equivalent ounce in the most recent quarter, Goldcorp Inc. (USA) (NYSE:GG) had all in sustaining costs of $1,279 per gold equivalent ounce in the same period. The company is looking to cut costs across the board and bring its all in sustaining costs down to the $1,000 per ounce to $1,100 per ounce range in 2013, but it will still be above Yamana Gold Inc. (USA) (NYSE:AUY).

On the plus side, Goldcorp Inc. (USA) (NYSE:GG) realizes that lower gold prices may be the norm in the short term. It recently took a writedown on its Mexican Penasquito mine, but its debt load is reasonable with a total debt-to-equity ratio of 0.11. Its high all in sustaining costs make its dividend more risky than Yamana Gold Inc. (USA) (NYSE:AUY)’s, however.

Conclusion

Demand for gold jewelry, coins, and bars is quite strong. Gold’s recent price decline has spooked many investors, but other buyers have come up to the table. In the long run people continue to buy gold, and with a strong miner like Yamana Gold Inc. (USA) (NYSE:AUY) you can make a relatively stable investment in the sector. Goldcorp Inc. (USA) (NYSE:GG) is another company to consider, but for now its higher all in sustaining cash costs means that is safer to stick with Yamana.

The article Ignore ETFs, Look at Gold Miners originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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