Which Is The Best Gold Company? Part 2

by: Arie Goren

In my previous post here, I compared the 12 most important gold miners whose stocks trade on the US markets, focusing on the Total Cash Costs of producing gold for each company. In this article I will analyze the gold reserves of each one of these companies: Barrick Gold (NYSE:ABX), Newmont Mining (NYSE:NEM), Gold Fields (NYSE:GFI), Kinross Gold (NYSE:KGC), Goldcorp (NYSE:GG), Yamana Gold (NYSE:AUY), Agnico Eagle Mines (NYSE:AEM), IAMGold (NYSE:IAG), Randgold Resources (NASDAQ:GOLD), New Gold (NYSEMKT:NGD), Golden Star Resources (NYSEMKT:GSS) and AuRico Gold (NYSE:AUQ).

The table below presents the gold production in 2011, the Proven and Probable Gold Reserves at the end of 2011, and the total cash costs for the first six months of that year. I also calculated the Reserves-to-Production Ratio; that can give us an idea of the number of years for which the actual reserves will be sufficient, if gold production will remain the same. All the figures were extracted from the companies' 2011 annual reports.

The table clearly shows that, among the biggest gold producers, Gold Fields, Kinross Gold and Goldcorp have the largest Reserves-to-Production Ratio; and that should be sufficient for more than 23 years of production with the actual rate. AuRico Gold has enough reserves for 40 years of production, but it is a relatively small producer: only 187,000 ounces in 2011. Barrick Gold has reserves for more than 18 years, and Golden Star Resources has reserves for less than 14 years.

Source: company reports; chart: Arie Goren

Source: company reports; chart: Arie Goren

The table below presents the Proven and Probable Gold Reserves, the Shares Outstanding of each company, and the Reserves per Shares-Outstanding ratio in thousands ounces per million shares. Since the price of the companies' stocks should also be taken into account, I calculated the ratio between the stock price and the Reserves per Shares-Outstanding; the lower this ratio is - the better.

The table shows that, among the biggest gold producers, Gold Fields has the lowest price to reserves per shares-outstanding ratio 0.12. Newmont Mining has a ratio of 0.28 and Barrick Gold has a ratio of 0.29. New Gold and Yamana Gold have the highest ratio: 0.72 and 0.74 respectively.

The table below presents the Total Proven and Probable Reserves in millions of ounces for each company according to different geographic zones. Since mines in North America are considered safer than for instance those in Africa, the percentage of reserves in North America were also calculated.

The table shows that, among the biggest gold producers, Barrick Gold has 42.2% of its reserves in North America and Newmont Mining has 37.4% of its reserves there. Randgold Resources has all its reserves in Africa and Gold Fields has most its reserves there.


Although Barrick Gold does not have the highest Reserves-to-Production Ratio, it has the largest total Proven and Probable Gold Reserves: about 140 million ounces, and 42.2% of its reserves are in North America. Barrick's Price per Reserves per Shares-Outstanding ratio is also quite good: 0.29. Therefore, I still believe Barrick Gold is the best choice among the gold mining companies, due to its low total cash costs, which is only $580 an ounce and due to its leading production capacity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.