Which major gold miner offers investors the most bang for their buck? Well, that depends on which metric you use to measure value, but one metric I like to look at is miner's proven & probable gold reserves in relation to its market capitalization. This statistic offers investors a quick glance at how much the market is valuing each ounce of gold on a miner's mineral reserve report. To make comparisons amongst gold miners more relevant, we're only going to focus on Proven and Probable gold reserves, as inferred, indicated, and measured reserves may not even exist. So which gold miners offer the best value in terms of reserves? Let's find out.
1. Barrick Gold Corporation (ABX)
|Market Cap: 32.77B|
|Proven/Probable Gold Reserves: 139.9 Million ounces|
Market Cap / Gold Reserves: ~$234.10
With Barrick Gold being valued at $234.10 per OZ of gold in reserves, the company certainly looks cheap. This is especially true since Barrick Gold holds significant reserves of Silver (1.07B oz) and Copper (12.7B pounds) as well. Barrick was able to mine 7.7 million ounces of gold in 2011 at a net cash cost of $339 per ounce and expects net cash costs of $460-$550 per ounce in 2012. Cash costs on a co-product basis was $460 per ounce in 2011.
2. Goldcorp Inc. (GG)
|Market Cap: 29.18B|
|Proven/Probable Gold Reserves: 64.49 Million ounces|
|Market Cap / Gold Reserves: ~$452.47|
At a valuation of $452.47 per OZ of gold reserves, Goldcorp certainly looks a bit more expensive than Barrick Gold. Do keep in mind though, that like Barrick, Goldcorp has significant Silver (1.177B oz) and Copper (5.4B pounds) reserves. One reason that the market is valuing GoldCorp's reserves at higher multiple is because it's one of the lowest cost producers in the world with a net cash cost of $223 per ounce of gold mined in 2011. The company expects cash costs to hit $310-$340 in 2012.
3. Newmont Mining Corp. (NEM)
|Market Cap: 21.94B|
|Proven/Probable Gold Reserves: 98.75 Million ounces|
|Market Cap / Gold Reserves: ~$222.18|
At a valuation at $222.18 per OZ of gold reserves (pdf), Newmont Mining is one of the cheapest large-cap gold miners. The company also has significant Silver (195M oz) and Copper (9.7B pounds) reserves. Total cash costs per ounce of gold mined in 2011 was $591.
4. AngloGold Ashanti Limited (AU)
|Market Cap: 12.94B|
|Proven/Probable Gold Reserves: 75.6 Million ounces|
|Market Cap / Gold Reserves: ~$171.16|
At a valuation of $171.16 per OZ of gold reserves (pdf), AngoGold Ashanti is remarkably cheap compared with other miners. Unlike most other miners, Gold sales account for most of AngloGold's revenues (~98%). This means the company has no meaningful Silver or Copper reserves. Total cash costs per ounce of gold mined in 2011 was $728.
5. Kinross Gold Corporation (KGC)
|Market Cap: 8.79B|
|Proven/Probable Gold Reserves: 62.57 Million ounces|
|Market Cap / Gold Reserves: ~$140.48|
At a valuation of $140.48 per OZ of gold reserves (pdf), Kinross Gold is the cheapest major gold miner in terms of reserves / market cap. The market is valuing the company's reserves at a significant discount to peers because Kinross overpaid for its $8B 2010 acquisition of Red Back Mining Inc. and had to write down its value by $2.49B 17 months later. On top of its significant gold reserves, Kinross has Silver (84.87M ounces) and Copper (1.444B pounds) reserves as well. Cash costs per ounce of gold mined stood at $596 for 2011.
6. Yamana Gold Inc. (AUY)
|Market Cap: 11.03B|
|Proven/Probable Gold Reserves: 17.038 Million ounces|
|Market Cap / Gold Reserves: ~$647.38|
At a valuation of $647.38 per OZ of gold reserves, Yamana Gold is one of the most expensive major gold miners out there. The market is likely assigning a higher value to Yamana's reserves as the company has done a remarkable job at keeping its costs down. Net cash cost per oz of gold production was an incredible $50 for 2011. The company also has significant Silver (82.94M ounces) and Copper (2.569B pounds) reserves.
7. Randgold Resources Limited (GOLD)
|Market Cap: 8.22B|
|Proven/Probable Gold Reserves: 16.28 Million ounces|
|Market Cap / Gold Reserves: ~$504.91|
At a valuation of $504.91 per OZ of gold reserves, Randgold Resources is one of the more expensive larger-cap gold miners. Like AngloGold Ashanti, Randgold is strictly a gold miner with little exposure to other metals. The company's cash cost of gold production in 2011 was $641 per oz.
7. Newcrest Mining Ltd. (NCMGY.PK)
|Market Cap: 18.84B|
|Proven/Probable Gold Reserves: 79.1 Million ounces|
|Market Cap / Gold Reserves: ~$238.18|
At a valuation of $238.18 per OZ of gold reserves (pdf), Newcrest Mining is yet another cheap mega-cap gold miner. The company has Silver (59.4M ounces) and Copper (1.87B pounds) reserves as well. Newcrest is Australia's largest gold mining company and has a cash cost of A$493 per oz.
Market cap / gold reserves is simply one metric to look at when evaluating a gold mining company, but If the price of gold continues its 10-year upward trend, I suspect that companies like Kinross and Anglogold Ashntai, which have huge gold reserves, will outperform their peers, even if their cost of extraction is higher. As is, I feel that the larger-cap gold miners offer tremendous value at today's prices.
Disclosure: I am long KGC.