The market prices for gold mining companies are very compelling, even for value investors who do not wish to speculate on precious metal prices. Stock investors can capture attractive gold miner valuations at current market prices and can elect to either accept exposure to gold as a benefit to a diversified portfolio, or they can hedge out exposure to gold prices using put options. Either as a pure value play or as a value play with a gold kicker, going long gold miners is an attractive strategy.

Gilded Value

Gold mining industry stocks have declined in price and are currently trading at attractive valuations. Goldcorp (GG), Kinross Gold (KGC), IAMGOLD (IAG), and El Dorado Gold (EGO)are attractive value buys at today’s prices.

Kinross Gold trades at a discount to the book value of its equity, which is a steal for a company with assets like gold that have appreciated beyond the cost of their original acquisition. Alternatively, IAMGOLD is clearly a value buy on the basis of a low price-to-earnings multiple.

Goldcorp and El Dorado Gold are attractive gold plays because they are low-cost producers of gold. Goldcorp’s forecasted 2.60 Moz production (pdf) for 2012 is expected to incur $250-270 in cash costs per ounce as a byproduct and $550-$600 in cash costs as a co-product. Similarly, El Dorado Gold forecasts 730,000-775,000 ounces of gold produced in 2012 with estimated cash operating costs between $430 and $450 per ounce.These costs are low by industry standards and are clearly lower than prevailing gold prices which are currently between $1600 and $1700 per ounce.To continue reading, click here.