People invest in gold for a number of reasons including as a safe haven asset in times of uncertainty and as a hedge for inflation.
Although I have never personally been interested in investing in the precious metal, I can understand why some investors choose to do so.
As a result, I thought it would be interesting to see how the most popular ASX gold miners compare to one another.
Since gold miners have no control over the price they receive for their gold, I have decided to compare them based on the one variable they can influence – operating costs.
Here is what I have found:
| Company | Market Cap | Most recent AISC* (US$) | Forecast Annual Production Guidance | 10-Year Avg Shareholder Return |
|
Newcrest Mining Limited (ASX: NCM)
|
$18.4 billion | $770/ounce | 2,475,000 ounces | 1.7% |
|
Evolution Mining Ltd (ASX: EVN)
|
$4.2 billion | $637/ounce | 830,000 ounces | 11.0% |
|
|
$2.9 billion | $770/ounce | 500,000 ounces | 50.4% |
| $2.7 billion | $708/ounce | 405,000 ounces | 18.2% | |
| $1.7 billion | $713/ounce | 315,000 ounces | 14.6% | |
| $1.4 billion | $646/ounce | 370,000 ounces | -1.4% | |
| $850 million | $827/ounce | 325,000 ounces | -0.4% | |
| $830 million | $1132/ ounce | 300,000 ounces | 9.6% |
Source: CommSec
*AISC = All-in Sustaining Costs
With the current spot gold price trading around US$1,280/ounce, it is pretty clear that most of the major ASX gold producers are enjoying extremely strong operating margins right now.
However, Evolution Mining and St Barbara appear to be the two best placed gold miners to withstand a potential downturn in gold prices as they currently enjoy the largest operating margins.
On the flipside, Saracen Minerals and Resolute Mining can be expected to be the biggest winners if the gold price tracks higher from here as they will enjoy the biggest percentage margin gains from the miners listed above.
Foolish takeaway
It is nearly impossible to predict where the gold price is going to next, but investors who want to invest in the sector should consider the lowest cost producers as their first option. These miners will have the ability to withstand prolonged periods of low prices and will also have the financial strength to pick up distressed assets at bargain prices.
