It hasn’t been a great start to the day for shareholders of gold miner Medusa Mining Limited (ASX: MML). In early trade its shares have sunk 15% to 45 cents.
The reason behind today’s decline is a production revision released after the market closed yesterday. As you might have guessed, that revision was not a positive one.
Previously management had targeted production of between 105,000 to 115,000 ounces of gold with an all-in sustaining cost of US$1,000 to US$1,100 per ounce.
With the spot gold price fetching US$1,191 an ounce currently, margins were already extremely tight for Medusa.
But due to issues at its mine and subsequent higher mine-shaft maintenance requirements, production will now be lower and costs higher.
Management has revised full year production to between 85,000 to 95,000 ounces of gold with all-in sustaining costs of between US$1,250 to US$1,350 per ounce. It now costs Medusa more to pull gold out of the ground, than it can sell that gold for on the spot market.
This is nothing short of a disaster for the company and I can’t say I’m surprised to see investors head to the exits in their droves this morning.
Whilst I wouldn’t be in a rush to invest in any of the gold miners at this point in time, investors that do want exposure to gold might be served well with investments in Resolute Mining Limited (ASX: RSG), Newcrest Mining Limited (ASX: NCM), or St Barbara Ltd (ASX: SBM).
These three low-cost gold miners have all-in sustaining costs of close to US$800 an ounce, meaning they remain highly profitable following the sharp drop in the gold price since November.
But with gold prices tipped to fall as rates rise in the United States, I would suggest investors grab hold of these hot growth stocks instead. I believe each has enormous growth potential and can be bought at a good price today.
This company’s dividend is almost the stuff of legends. Its reliable cash flows support a high payout ratio, and the company’s stash of franking credits are the cherry on the top of the dividend cake. Based on the last 12-months of dividends, shares are offering a fully-franked 6.5% yield, which grosses up to a whopping 9.3%, when those franking credits are included.
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Motley Fool contributor James Mickleboro 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.