NEW YORK (TheStreet) -- Many investors turn to gold miners for operating leverage to gold's spot price, but they might be better off buying the physical metal instead.
Gold's spot price rose 0.9% in the first quarter while
Market Vectors Gold Miners ETF
, a basket of large cap miners, is down over 5%. Many analysts expect gold mining stocks to produce significant operating leverage to gold's spot price, sometimes as much as three to one. Simply put, investors pay more for an ounce of gold, miners' producing costs stay relatively unchanged, miners make more for the gold they develop, and their profits rise. However, the
SPDR Gold Shares
, a physically backed ETF which tracks gold prices, and the GDX tell a different story. Year to date in the first-quarter, the GLD has outperformed the GDX.
The GDX's top 10 holdings are the behemoths of the mining industry. The following pages show how these stocks have individually performed year to date in the first-quarter as gold prices continued to rise (source: Bloomberg).
: 16.56% of the GDX.
Barrick Gold is one of the largest mining companies in the world with 26 mines in operation with a market cap of $38.83 billion. Back in December when gold broke $1,200, the company unwound all its hedges to take advantage of lower costs and higher prices. As gold prices stagnated in the first quarter of 2010, the stock fell over 2%. Barrick expects gold production of 7.7 million to 8.1 million ounces in 2010, at lower cash costs than a year earlier. Barrick offers a 1.10% dividend and will report first-quarter earnings on April 28. Analysts seem relatively optimistic with 21 buy ratings and a price target which exceeds its 52-week high of $48.02.
: 12.47% of the GDX.
Goldcorp is a senior gold mining company with properties in North and South America. Goldcorp has a market cap of $28.42 billion and is reportedly one of the lowest-cost producers in the world. Gold production for the fourth quarter 2009 was 601,300 ounces at a total cash cost of $289 per ounce at the same time gold prices broke $1,200. Goldcorp has a dividend of 0.50% and will report earnings on April 28. Analysts have 17 buys, six holds and two sells on the stock with an average price target of $49.70, which is just slightly past its 52-week high of $46.24. In the first quarter of 2010, shares have fallen over 5%.
: 10.80% of the GDX.
Newmont mining is another large-cap gold and copper producer with a market cap of $26.44 billion. Newmont has proven and probable gold reserves of 91.8 million equity ounces in mines all over the world from the U.S. to Ghana. This is one of the few mining stocks with a positive year-to-date return of over 7 percent. Newmont seemed to profit quickly from rising gold prices bringing in $7.7 billion in revenues in 2009, a record for the company. Newmont is one of two gold mining companies in the S&P 500 Index. Newmont offers a 0.80% dividend yield and will report earnings on April 27. The stock has 12 buy ratings and a price target of $61.45 a share.
: 5.89% of the GDX.
AngloGold Ashanti is a gold producer primarily in South Africa with a market cap of $14.78 billion. AngloGold is one of the few large-cap gold mining companies that is still hedged. Although the company is furiously buying back its hedges, it still has 3.9 million ounces on its books. Hedges allow a gold production company to sell product at a set price, which can guarantee a certain profit if gold prices fall. When the spot price soars, hedging caps the company's earnings potential. According to the company's website, Anglo's hedge book is now less than a year's production and the company will continue to look for opportunities to de-hedge. AngloGold is expecting 2010 production to be between 4.5 and 4.7 million ounces at a total cash cost of $590 - $615 an ounce. The company has a 0.50% dividend but shares are still down 9% year to date. AngloGold only has six hold ratings and an average price target of $33.84. The stock is currently trading at $40.
: 5.64% of the GDX.
Kinross Gold was founded in 1993 and has grown to become a leading gold mining company with a market cap of $12.36 billion. Kinross's 2009 annual gold production was a record 2.24 million ounces and it has proven and probable reserves of 50 million ounces. Kinross has mines in North and South America as well as Russia. The company recently bought Underworld Resources, a junior Canadian explorer, as it tries to expand its project base and production capabilities. The company offers a 0.60% dividend yield and will report earnings in early May. Shares are down over 10% year to date, but the stock has 14 buy ratings and just two sell ratings with an average price target of $22.94.
Compania de Minas Buenaventura
: 4.88% of the GDX.
Compania de Minas Buenaventura is a gold and silver producer in Peru with a market cap of $8.44 billion. Buenaventura is Peru's largest publicly traded precious metal company and produced 424,731 ounces of gold in 2009 and 14.8 million ounces of silver. Net income in 2009 more than tripled from a year earlier from $153.3 million to $593.6 million or 2.33 a share. Buenaventura holds a 43.65% stake in Yanacocha which is Latin America's largest gold mine and, according to some reports, the most profitable in the world. During the first quarter, shares have fallen over 7% and analysts appear split over their value with four buy ratings, three holds and two sells. The stock has an average price target of $37.67, just $5 short of its 52-week high. Buenaventura offers a dividend of 1.80%.
: 4.69% of the GDX.
Agnico-Eagle Mines is a gold, silver, zinc and copper producer with operations in Canada and Finland as well as development properties in Mexico and the U.S. The company has a market cap of $9.14 billion and a dividend yield of 0.30%. Estimated gold production for 2010 is between 1 million and 1.1 million ounces at a total cash cost of $399 an ounce. According to the company's website, it's targeting between 20 million to 21 million ounces of reserves in the ground by the end of 2010. Analysts are split relatively evenly on the stock with 11 buy ratings, 11 hold ratings and an average price target of $67.62. Agnico will report earnings on April 29.
: 4.26% of the GDX.
Yamana Gold has gold production and development stage properties in Central America, South America and Mexico. The company has a market cap of $7.57 billion and pays out a 0.40% dividend yield. Yamana forecasts 2010 first-quarter gold production to be 240,000 gold equivalent ounce (Yamana treats silver as a gold equivalent) at a cash cost under $200. Yamana will report earnings in the beginning of May and analysts are positive on the stock with 17 buy ratings, only six holds and one sell. Shares have fallen over 13% YTD but the stock has an average price target of $14.36.
: 4.18% of the GDX.
Eldorado Gold is an international gold company with mines in Turkey and Brazil and has a market cap of $6.78 billion. Eldorado hopes to produce over 1 million ounces of gold annually by 2013. Currently, the company is expecting 2010 gold production to range from 550,000 to 600,000 ounces at a cash cost of $385 to $400 an ounce. Net income for 2009 fell to $102.4 million as compared to $163.7 million in 2008. The company will report first-quarter 2010 earnings on May 3. The company does not offer a dividend and is the biggest loser year to date out of the top 10, down over 14%. But the stock currently has 16 buy ratings as compared to six holds and one sell. The average price target is $15.54 a share which is close to the stock's 52-week high of $15.40.
: 4.09% of the GDX.
Randgold Resources is a gold producer and explorer based in Africa with a market cap of $6.72 billion. The company continues to explore and discover resources in Africa and in 2009 grew its proven and probable reserves from 8.87 million to 15.56 million ounces. The company recently increased its dividend by 30% after 2009 profits grew to $84.3 million from $47 million a year earlier. Randgold entered into a joint venture with AngloGold Ashanti at the Kibali project in the Democratic Republic of Congo where Randgold has a 45% interest and will manage the development. The company will report first-quarter earnings on April 30. The stock is down just over 2% year to date and has five buy ratings and three hold ratings with an average price target of $96.81.
Written by Alix Steel in New York
Alix joined TheStreet.com TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.