Can These 4 Gold Stocks Weather Tough Times?

Michael Teague |

It would not be much of a stretch to advance the thesis that gold is having a turbulent, if not violent year after over a decade spent in bull-market conditions.

The reasons for this are ultimately tied to the uncertainty over the Federal Reserve Bank's timing for its expected draw-down of $85 billion monthly in bond and asset purchases. Subsequent to last week's FOMC meeting, the price of the yellow metal got a huge boost, climbing back over $1,300 per ounce as the central bank announced a very unexpected delay to the 3rd round of quantitative easing. But the celebration was short-lived, and came to a rather abrupt halt when James Bullard, the President of the St. Louis Federal Reserve bank told a Bloomber TV interview that the taper expected on Wednesday could just as well be announced at the same time next month.

The conditions for the precious metal this year have made it a rough one for gold mining companies as well. The following stocks have had a rough year, which in this instance can be measured by relatively high debt/equity ratios (over 0.5), indicating potential financial burdens on the horizon. Furthermore, 3 of these 4 stocks have negative return on equity (ROE) ratios, which could reflect that the company is not investing what capital it has in the most effective manner.

There is, however, one bright spot for these stocks, in the price-to-cash ratio. A P/C ratio greater than 1 is a potential indicator that, for the time being at least, there is enough cash around to keep operations going.

Barrick Gold Corporation (ABX) -
Market Cap: $18.65 billion
Debt/Equity: 1.17
Price/Cash Ratio: 7.7
Return on Equity: -49 percent

The Canadian miner is the second-largest in the industry, and has suffered tremendously so far this year. Shares are trading for $18.60, a loss of about 46 percent so far in 2013. All the same, the stock has an average analyst rating of "hold," and is managing to maintain a dividend yield of 1.07 percent.

 

Newmont Mining Corp. (NEM) -
Market Cap: $14 billion
Debt/Equity: 0.60
Price/Cash Ratio: 7.45
Return on Equity: -5.10 percent

Newmont is the third-largest company in the industry, just behind Barrick. The Canadian firm has also had a rough 2013, with shares currently trading for $28, down almost 40 percent. The stock still manages an analyst rating of "hold," and the company feels comfortable returning dividends at a rate of 3.5 percent.

 

AngloGold Ashanti Ltd. (AU) -
Market Cap: $5 billion
Debt/Equity: 1.1
Price/Cash Ratio: 12.10
Return on Equity: -38.50 percent

Though not as big as its peers, the South African miner is also an industry leader that has labored to make it through the year. Shares are currently trading for $13, having shed almost 60 percent of their price so far in 2013. The stock still garners an average rating of "hold," however, and offers a dividend of 1.6 percent.

 

Allied Nevada Gold Corp. (ANV) -
Market Cap: $452 million
Debt/Equity: 0.75
Price/Cash Ratio: 1.8
Return on Equity: 6.4 percent

The American gold miner is not as big as its peers on this list, but has had a similar year. Shares are trading for $4.65 each, down nearly 30 percent in 2013. Furthermore, Allied offers no dividend, and has an average analyst rating of "sell."

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ABX Barrick Gold Corporation 15.45 -0.47 -2.95 15,558,354
AU AngloGold Ashanti Limited 10.67 -0.41 -3.70 3,786,872
NEM Newmont Mining Corporation 32.79 -1.08 -3.19 9,196,191
SGBX null n/a n/a n/a 0

Comments

Emerging Growth

MGX Minerals Inc.

MGX Minerals is a diversified Canadian mining company listed on the Canadian Securities Exchange. MGX is engaged in the acquisition and development of industrial mineral deposits in western Canada that…

Private Markets

Dropbox, Inc.

Dropbox is a service that allows their users to bring all photos, docs, and videos anywhere, and share them easily. Any file saved to Dropbox will automatically save to all…

Initial State

Initial State is an Internet of Things (IoT) data analytics & data management platform company. We turn sensor and event data into information that matters by making it easy to…