Well, it was technically last week that I bought shares in ASX gold miner Newcrest Mining Limited (ASX: NCM), but our squeaky-clean trading rules here at the Fool mean I can only discuss it today.
That's right, I bought shares in Newcrest – the ASX's largest gold mining company – for a little below what the share price is today.
Now I don't normally invest in resources companies or gold miners. These companies are what's known as 'price-takers' – meaning they have no control over the price they can sell their own products at.
Normally, I prefer companies that are price setters – just think about what kind of company Apple would be if it had to sell iPhones at a smartphone market average price.
But for Newcrest, I've made an exception.
What's attractive about Newcrest?
Firstly, Newcrest has some of the largest gold reserves in the world (at around 54 million ounces) and also has one of the lowest costs per ounce of extraction (at US$738 per ounce from the latest annual report). The company estimates its current reserves will last approximately 22 years at current production rates.
Newcrest's Cardia and Lihir gold mines are amongst the best in the world and it has also been expanding its exploration and acquisitions of new projects recently.
Now for some quick maths. If Newcrest has 54 million ounces of gold in its reserves, that would equate to a value of US$88.88 billion ($134.73 billion) based on today's gold price. Newcrest currently has a market capitalisation of $21.60 billion.
Even if you took into account the cost of extracting each of these ounces, Newcrest's gold pile would still be worth US$49.03 billion ($74.32 billion).
So I think I got pretty good value for money on this one.
I also think it's likely that the gold price will experience significant upward pressure over the coming months. Considering the volatility of the global share market and the spread of the coronavirus, the conditions seem ripe for renewed interest in gold.
It's a position that will also hopefully act as something of a hedge to my other shares and provide some protection if there are any further drops in the share market.
Foolish takeaway
I'm not normally an investor who dabbles with hedging and gold miners, but I hope that my (still relatively small) Newcrest position was a solid value play and one that will also give my portfolio some insulation during these volatile times.
