Barrick Gold Corporation (USA) (ABX), Yamana Gold Inc. (USA) (AUY): Time to Buy That Falling Golden Knife?

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On the negative side, 16% of Yamana Gold Inc. (USA) (NYSE:AUY)’s 2012 production came from Argentina. This country recently nationalized a number of oil and gas assets and it could do the same in the mining sector. As Yamana Gold Inc. (USA) (NYSE:AUY)’s mines in the stable nation of Brazil come online, the firm’s level of geopolitical risk will gradually decrease. With an expected 2013 all-in sustaining cash cost to come in below $800 per gold equivalent ounce, Yamana Gold Inc. (USA) (NYSE:AUY)’s profits are more secure than Barrick Gold Corporation (USA) (NYSE:ABX)’s.

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is an interesting company. Copper is its main product with gold coming in at a distant second. When calculating its expected 2013 average unit net cash costs of $1.35 per pound, it uses copper as its base unit. With August, 2013 copper futures around $3.22 per pound, the company should be able to maintain acceptable margins. Recently it has also bought some oil and gas assets to diversify out of the mining industry.

The copper market is not expected to do much better than gold over the short term. In 2013 a production surplus of 460 thousand tonnes is expected. On the positive side, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s Indonesian ore grades are expected to increase in 2013.

The company has little debt with its total debt to equity ratio of just 0.20. Its diverse operations and interests outside of the gold market help it to maintain profits and earnings. With a profit margin of 22.1% and return on investments of 18.9%, the company is more profitable than Barrick Gold Corporation (USA) (NYSE:ABX) or Yamana Gold Inc. (USA) (NYSE:AUY).

Conclusion

The price of gold is falling and highly indebted companies like Barrick Gold Corporation (USA) (NYSE:ABX) may get stuck between a rock and a hard place. When Europe’s debt crisis returns to the front page, Yamana Gold Inc. (USA) (NYSE:AUY) will be a good gold miner to consider with its low debt and relatively low all-in sustaining cash costs. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) diverse operations provide more stability and security. Overall, it is the best option for risk-averse investors who don’t want to try and guess tomorrow’s gold price.

The article Time to Buy That Falling Golden Knife? originally appeared on Fool.com is written by Joshua Bondy.

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