Which of these companies makes about a $500 margin on every ounce of gold it sells, giving it a better cost structure than 80% of firms in the industry?
 
A.) Newmont Mining (NEM)
B.) Barrick Gold (ABX)
C.) Goldcorp Inc. (GG)
D.) Kinross Gold CP (KGC)
E.) AngloGold Ashanti (AU)
 
Published: December 29, 2008

The correct answer is      (B.)  Barrick Gold (ABX)

Barrick Gold is the world's largest gold mining firm with annual production of over eight million ounces and total reserves of around 125 million ounces. With a cash cost of production at about $318 per ounce, ABX currently has a $500 margin on every ounce of gold it sells -- that's in the top 20% of firms in the industry.

ABX's debt position is also among the best in the gold mining industry. The company's debt-to-equity ratio is less than 30% compared to an industry average of more than 70%. And the company has $1.75 billion in cash on the balance sheet. Unlike many of its smaller competitors, ABX won't struggle to finance its projects.

ABX has three major gold production projects due to go into production over the next three years: the Buzwagi project in Tanzania, the Cortez Hills project in Nevada, and the Pueblo Viejo project in the Dominican Republic. All told, ABX's share of these three projects is around 1.85 million ounces of production per year. Considering that the company's existing output is eight million ounces per year, these projects offer significant growth potential and translate to a long-term growth rate of +12% for ABX, among the highest rates of projected growth of any gold-mining firm.

Given that ABX is set to increase production significantly over the next few years from mines with low operating costs, the stock could be a good buy for investors looking for exposure to the gold market -- a market that, in this economy, is especially attractive because it is seen as a hedge against uncertainty and crisis. In fact, according to the World Gold Council, the demand for gold has soared to record levels.

With these points in mind, StreetAuthority editor Paul Tracy and his staff went in search of ways to play the strength in gold and the potential for a rebound in badly battered gold mining shares. In his most recent issue of the Market Advisor newsletter, Paul takes an in-depth look at today's gold market and offers his best picks in gold funds and mining-company stocks that look particularly well-placed to benefit from current gold prices. To see Paul's picks, and to learn more about the Market Advisor newsletter, please visit this link.

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