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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