3 bargain gold miners trading below book value

Value investors could do well out of these three bargain gold miners

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in gold mining major Newcrest Mining Limited (ASX: NCM) could be at bargain levels and represent prospective value for canny investors willing to take some risk.

That’s because at its current share price of $10.41 per share, the company can be picked up for less than the value of its net assets. With a market capitalisation of $7.979 billion and net assets of $10.274 billion (at 31 December 2013), Newcrest can be owned today at a price to book (P/B) ratio of 0.77.

Generally, a low P/B ratio would suggest that the company is not producing an adequate return on its assets, but could also suggests that investors do not have faith in the pricing of the assets, which for gold miners can fluctuate along with gold price changes, resulting in a level of uncertainty.

However Newcrest is forecasting a strong production result for FY 2014 and being among the lowest cost gold miners in the country, the return the company makes on its assets could quickly turn if the price of gold tracks upwards.

Another gold miner trading below book value is Silver Lake resources (ASX: SLR). At a current market cap of $211 million and net assets (at 31 December 2013) of $361.6 million the company’s P/B ratio is just 0.58 – not far off half the net asset value.

Silver Lake share have suffered after placing its Murchison Gold Operations into care and maintenance due to unsustainable production costs, but remains a potential producer.

However the lowest by far, with a P/B ratio of just 0.41, is Kingsgate Consolidated Limited (ASX: KCN). Shares in Kingsgate have dropped almost 85% in the last two years and are near all-time lows after reporting high group all-in sustaining costs for the most recent march quarter.

With a current market cap of $195 million according to Bloomberg, and reported half year 2014 net assets of $474 million, Kingsgate could be a bargain if it can fix its cost problems and produce a positive return on its assets.

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

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »