As Foolish analyst/writer Mike King covered on Tuesday, Resolute Mining Limited (ASX: RSG), Beadell Resources Ltd (ASX: BDR), St Barbara Ltd (ASX: SBM), and Northern Star Resources Ltd (ASX: NST) all gained more than 5% in recent days.
One company overlooked in Mike’s article was smaller miner OceanaGold Corp (ASX: OGC), which posted an impressive first-quarter report this morning and could see its own price soar later today.
With very low production costs and US-denominated dividends from its major mines in the Phillipines and New Zealand, OceanaGold is likely to enjoy increased attention from investors as the Australian dollar weakens in future months.
Here are some of the highlights from the report:
- Produced 91,000 ounces of gold and 6,100 tonnes of copper in the quarter
- Philippines All-In Sustaining Costs (AISC) of $630 per ounce, excluding the benefit from copper sales
- New Zealand AISC of $913 per ounce
- Ended quarter with $59.6 million in cash and $45 million in debt
- However profits were 59% lower than first quarter 2014, on the back of lower sales
While profits have fallen, good cash-flow and a reduction in debt are positive developments for OceanaGold, which has one other appealing feature: It looks very cheap.
OGC shares trade on a Price to Earnings (P/E) multiple of just 5.5.
That’s substantially lower than the competition, with Newcrest and Northern Star shares going for a staggering 25 and 26 times earnings, and Beadell Resources changing hands for 13 times earnings.
By rights mining companies should trade a little below the ASX average as a result of the higher risks posed by commodity prices and continued exploration and development expenditure, but OceanaGold is one of the cheapest profit-making, dividend-paying companies I’ve ever seen.
While the future outlook for commodities is uncertain, Aussie gold miners are raking in the cash and OceanaGold could be a reasonable purchase for a risk-tolerant investor.
Despite the potential upside however, there’s one cheap company I’d be buying before OceanaGold, or indeed any gold miner.
Where to invest $1,000 right now
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*Returns as of February 15th 2021
Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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