Originally published by Chamber of Merchants
Here we are almost 1/4 way through 2017 and while March has been a down month so far. The miners continue to outperform on the year. With the recent rise in the AUD gold price coinciding with the decline in Aussie gold companies, I thought it may be a good idea to revisit the fundamentals…. (how much money they make!)
Below are my 5 favourite gold miners currently. I have been moving funds away from Northern Star Resources Ltd (AX:NST) and moving them into Ramelius Resources Ltd (AX:RMS) and Blackham Resources Ltd (AX:BLK) looking for more growth opportunities. While I consider NST to be the #1 gold stock on the ASX, it has becoming a little boring to hold, I would like to see more of an Evolution type business with all that free cash.
Below are the 5 companies which I have listed the costs, profit and revenue based on the numbers in their latest quarterly. For Blackham I have used 120kozpa and also 200kozpa for the future. The gold price I have been conservative with an average of $1600 AUD, currently at $1634.
As you can see the larger cap companies are trading for about 2-3x sales while BLK and RMS are trading near 1x sales. Why is this the case? Gold sentiment is still in the toilet.
As an investor who has been in NST since 90c, RSG at 60c and BLK at 20c would I still buy at these levels? Absolutely – and I am on pullbacks like this week.
While gold in Australian dollar terms slowly rises and the shares get sold off because of USD sentiment, that is the time to strike.
Here are the numbers…
With the cash generating abilities of the above companies and many more on the ASX, how long can the stock prices remain this low? I’m betting not that much longer as long as the AUD gold price remains at elevated levels and sentiment slowly changes.
Edit: I forgot to add the cash positions which make them even more of a bargain. Northern Star Resources Ltd (AX:NST) – $300M in cash and bullion. Resolute Mining Ltd (AX:RSG) $280M in cash investments and bullion. Ramelius Resources Ltd (AX:RMS) $95M in cash and bullion.
Evolution Mining Ltd (AX:EVN)has debt but paying it off quickly. Blackham Resources Ltd (AX:BLK) just raised capital and should be net cash positive by the end of the quarter.
The Speculator