Australia's got some of the biggest deposits of natural resources worldwide. From coal and iron ore to gas and gold, we've got it all.
It's no wonder why some of our greatest investors do a lot of their bidding in the resources sector. Going beyond the 'usual suspects' such as BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO), there's a number of outstanding investment prospects you need to know about.
In the gold sector you want a lot of reserves coupled with low-cost production. Modest costs are derived from easily accessible, high-grade deposits. In addition, experienced management and balance sheet flexibility, is essential for risk-averse investors.
Two companies which exemplify these characteristics are Northern Star Resources (ASX: NST) and Newcrest Mining (ASX: NCM). Coincidently, they are forecast to be Australia's largest gold producers in coming years.
Northern Star
Northern Star Resources' share price is going from strength to strength. It has utilised its superior balance sheets to act acquisitively, when the gold price fell at its fastest pace in 30 years, during 2013. In late 2013, it acquired two West Australian mines from Barrick Gold Corp (NYSE: ABX) and, very recently, the huge Jundee mine from Newmont Mining Corp (NYSE: NEM).
The acquisitions will make Northern Star Australia's second largest gold producer, with expectations of 500koz in FY15. Some investors may be looking at Jundee's reserves of only 411koz and be thinking to themselves "It's about to run out!" Northern Star has an experienced management team (especially in these types of situations) and have paid a price which, I believe, is potentially very rewarding for the company. With boosted production, a generous dividend and seasoned managers at the helm, Northern Star presents itself as a compelling long-term buy.
Newcrest Mining
Over the past 3 years, Newcrest Mining has been at the opposite end of investors' sentiment, who have sold down the shares significantly. It's one of my biggest regrets of 2013, because I'm kicking myself for not realising its potential to rebound sooner than I did.
Newcrest has a huge amount of reserves (around 78 million ounces of gold, 12 million tonnes of copper and 88 million ounces of silver) and is hoping to produce 2.3 million ounces of gold in 2014 alone. Having enormous high grade deposits which are geographically diversified, has allowed Newcrest's management to respond to the fall in gold prices with relative flexibility. As such in the December quarter, Newcrest had an All-in sustaining cost of only $921 per ounce. Newcrest is definitely one of Australia's premier gold miners.
