2 overlooked gold miners thriving on lower gold prices

A ‘great gold mining company’ may seem like an oxymoron to many investors at the moment, but that doesn’t mean that all gold miners should be equally written off.

One gold miner which has been exhibiting many of the signs of a quality company in the last six months has been Northern Star Resources Ltd (ASX: NST). Northern Star caught the attention of many investors when it stepped up twice and bought gold mines off a desperate Barrick Gold Inc  (NYSE: ABX), taking advantage of its strong balance sheet and a desperate seller.

Northern Star also has a history as a low cost gold producer and the company’s share price was quickly pushed up to reflect the positive future potential. Shares have risen an outstanding 45% so far this year.

Two companies that may have been overlooked by investors however are Newcrest Mining Limited (ASX: NCM) and Beadell Resources Limited (ASX: BDR). Like Northern Star, the two companies are also on the front foot with low production costs and positive production outlooks.

For the most recent March quarter, Beadell had one of the lowest All-In Sustaining Costs per ounce at $937; 5% lower than Newcrest Mining on $988.

At earnings of $0.15 per share, Beadell currently trades at just 4.4 times full year FY13 earnings, suggesting little expected growth. However production in 2014 is forecast to be up to 20.5% more than the 180,000 ounces produced in 2013. On top of this, the average realised price achieved in 2013 ($1,468 per ounce) is not far above the average price received in the most recent March quarter of $1,380.

Newcrest shares have clawed back 21% so far this year, but have dropped 17% since March, despite the announcement of a positive quarter. Costs rose 7% and production dropped, but Newcrest achieved its objective of being cash flow positive at a gold price of $1,450 per ounce and remains on track to hit the top of its guidance range of 2.0-2.3 million ounces.

Foolish takeaway

Low cost gold miners remain the most likely to thrive in the new low gold price environment. Newcrest Mining and Beadell Resources are two of the lowest producers around and still appear to have been overlooked by investors given their potential to achieve a return for investors.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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