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3 companies set to win from rising gold prices

Reported by Regan Pearson, The Motley Fool.
Monday, February 17, 2014
Topics in this article:
Asx,Newcrest Mining,Northern Star Resources Ltd,Silver Lake Resources Limited
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Despite bearish analyst forecasts in late 2013 for the year ahead, the price of gold has held its ground or risen so far in 2014. Since January the precious metal has pushed up 7.6% to US$1,318 per ounce. This has been put down to everything from weak jobs in the US, strong growth in China and even, bizarrely, the weather.

Regardless, if the price of gold continues its recovery there could be some big money to be made on gold mining companies which still have a long way to go to recover themselves. The following three companies could be in prime positions to profit:

Silver Lake Resources

Silver Lake Resources Limited (ASX: SLR) got hit particularly hard when gold started falling, dropping as much as 86% from its 52-week high of $2.57 to a low of just $0.35. Even if you factor in that the price of $2.57 may have been overly enthusiastic, at the current share price of $0.71 there is plenty of room to rise if Silver Lake reports a strong half-year performance.

The company should be in its prime. Production has risen more than 138% in the last three full financial years and reserves have also been significantly increased.

Northern Star Resources Ltd

Shares in Northern Star Resources (ASX: NST) have recovered strongly over the last few months from their low of $0.53 to $1.07 today. Also, the company's well timed purchase of three Barrick Gold Corporation (NYSE: ABX) mines makes it a business which could win big from both increased production and higher valued assets if the price of gold rebounds.

Newcrest Mining Limited

Newcrest Mining (ASX: NCM) last week announced its first half-year report since the price of gold plummeted and it showed surprising resilience. Newcrest will report a statutory profit of just $40 million for the half year, down 87.6% from the prior period, however EBIT were down just 14% at $404 million and the company is forecasting a strong second half.

Shares in Newcrest closed last week at $11.05 and are still well down on the company's 52-week high of $22.94.

Foolish takeaway

There is no guarantee the price of gold will keep up the pace it has set so far in 2014, or even that it will continue to go up. However if it does, there is still time to profit from these three big gold miners.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

23/11/2014 08:12Sydney, Australia. 23 November,2014
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