I wrote previously about Newcrest Mining Limited (ASX: NCM) as a well managed large-cap ASX gold mining company on sale at a reasonable price. It is well positioned to profit from the high gold price while preparing for the eventual down cycle.
Here are 3 smaller gold mining companies from the S&P/ASX 200 (INDEXASX: XJO) that also check all the right boxes and deserve a place on your watchlist.
Northern Star Resources Ltd (ASX: NST)
Northern Star is deservedly the darling of the Australian gold sector. It won the coveted Dealer of the Year Award at the 2019 Diggers and Dealers mining forum for the acquisition of the Pogo gold mine in Alaska. Here Northern Star has exposed a new resource of approximately 1.5 million ounces, while reducing operating costs and increasing outputs.
The company purchased 50% of Kalgoorlie Consolidated Gold Mines (a.k.a The SuperPit) from Newmont Corporation (NYSE: NEM) for US$800 million, which included the rights to operate the mine. This will enable Northern Star to implement its approach to safety, operations and financial discipline.
The company declares December quarter earnings on 29 January and I expect the Northern Star share price to rise slightly on news from this event. With an annual compound share price growth rate of 83%, $10,000 invested in Northern Star in January of 2010 would be worth a near unbelievable $4.1 million by the start of January 2020 on share growth alone.
Northern Star’s share price has dipped slightly today, down 1.14% to be trading for $12.60 per share at the time of writing. Given the company’s performance over the past decade and how it has put capital to work, I believe this is a reasonable price.
Regis Resources Limited (ASX: RRL)
Regis Resources is a company that has been overlooked on the ASX. It has continually put in strong results year on year with an annual compound growth in earnings per share (EPS) of 16%, a very respectable 14% earnings yield and return on capital expended (ROCE) of over 20% for the past 3 financial years.
Regis is a conservatively managed company which uses capital very profitably. Two of its mines are in the world’s top 20 lowest cost gold mines and it has very low debt levels. The company’s December quarter results, published on 22 January, underlined the consistent performance of the company against operating plans and development of new production.
The Regis Resources share price has fallen by 5.17% in today’s trade and is currently trading for $4.40 per share. Given the strong fundamentals of the company, I believe this is a very reasonable price for the value Regis offers.
Evolution Mining Ltd (ASX: EVN)
Evolution is a well managed company with a 10-year compound annual EPS growth rate of 10.4%. High gold prices has helped it to achieve a very impressive earnings yield of 30.2% for FY19 and a FY19 ROCE of 11%.
However, Evolution is facing some serious headwinds. While the December quarter finished well, Evolution has two significant issues impacting production rates and costs.
First, the Mt Carlton orebody is going to take a 27% reduction in FY20 production rates and higher FY20 costs. Second, the NSW Cowal operations are threatened, but not yet impacted, by stage 3 water restrictions driven by the drought and the water needed for firefighting.
While unexpected, none of these issues are anywhere near fatal. It will still produce large volumes of cash and profits and in my opinion the market has overreacted. Gold mining is a very difficult business filled with bumps in the road and the company’s reaction underlines its expertise.
On the positive side, Evolution acquired Red Lake in Ontario Canada, a high grade long life orebody. It is also drilling at the Crush Creek project, located 30km south of Mt Carlton.
While founder Jake Klein still sits as the Executive Chairman and with gold entering into a bull market, the company will continue to be the capital compounding machine it has been for the past decade.
Evolution Mining shares are down 2.08% in today’s trade to $3.76 at the time of writing. In my view, Evolution is also on sale at a reasonable price for the value the company offers.
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Motley Fool contributor Daryl Mather has no position in any of the 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 Scott Phillips.