Motley Fool Australia

Could these gold miners be a bargain right now?

The gold price has risen for three days in a row, adding another 1% overnight to hit US$1,273.51 an ounce, as concerns rise over unrest in Iraq and equity markets continue to fall.

Now could be the perfect time to have a closer look at some of Australia’s largest gold miners…

Newcrest Mining Limited (ASX: NCM), Australia’s largest gold miner, recently confirmed that it expects to be cash-flow positive in the 2015 financial year. Gold production is expected to be between 2.2 to 2.4 million ounces in 2015, similar to this financial year’s production of 2.3 million ounces. The company says it expects to generate $100 million in free cash flow this year, helped by falling production costs – in the December 2013 quarter, Newcrest had all-in sustaining costs of US$857 an ounce – falling capital expenditure and all-in costs at Cadia Valley of an amazing US$233 an ounce.

But the miner has several issues including what to do with its biggest mine, Lihir, which is struggling to remain cash flow positive, and Newcrest faces the prospect of having to spend another $1.3 billion developing it. With that major issue and US$4.7 billion in debt, Newcrest is probably one to watch from the sidelines for now.

On the other hand, we have Australia’s newest, second-largest gold miner, Northern Star Resources Ltd (ASX: NST). The company expects to produce 550,000 ounces next financial year, having recently purchased producing Australian mines from Newmont and Barrick Gold at what appears to be cheap prices. Paying a fully franked dividend yield of 3.5%, Northern Star is definitely one for the watchlist.

Regis Resources Limited (ASX: RRL) has seen its shares fall 36% in the past month, after the company reported a massive drop in its full year production forecasts thanks to major rainfall and flooding at its Duketon mine site. Whether this will affect next year’s production is anyone’s guess, and I’d be sitting on the sidelines for now.

Silver Lake Resources Limited (ASX: SLR) recently reconfirmed its guidance for between 205,000 ounces to 220,000 ounces of gold production this financial year. But with its Murchison operations placed on care & maintenance this quarter, production next year will solely be sourced from several mines at Mount Monger. With no debt, and $41 million in cash and bullion on hand, I’ll be hanging onto my shares in Silver Lake for now.

Of the four miners above, Northern Star looks the most interesting at current prices.

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Motley Fool writer/analyst Mike King owns shares in Silver Lake Resources. You can follow Mike on Twitter @TMFKinga

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