As far as gold miners go, Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) are very different. Newcrest is the long established giant which has been beaten down in share price, while Northern Star is the smart and nimble upstart with an aggressive growth profile.
But which company could help you strike gold in the years to come? Here are three key points of comparison for the decision.
Costs
For the most recent September quarter Northern Star had all-in sustaining costs (AISCs) of $1,043 per ounce. This was up slightly on the $1,032 per ounce for the June quarter and included a non-cash accounting adjustment of $50 per ounce for amortisation.
At $864 per ounce Newcrest is the clear winner, cutting costs 5.3% over the June quarter with help from lower sustaining capital requirements and a lower AISC per ounce at the company's Cadia Valley operations.
Debt
Volatile gold prices make low debt levels an essential condition of a good gold miner. Low debt means less risk of being unable to meet interest payments if the price of gold falls and cash flow suffers. This can in turn affect a company's credit rating and thus the interest rate the company pays on its debt.
In 2013 Newcrest mining's net debt ballooned to $4.14 billion and combined with a massive reduction in the company's equity from write downs, gearing jumped from 12.5% to 29.5%.
Despite reducing actual debt levels in 2014, gearing has again crept up in 2014 due to further equity reductions and now sits at 33.8%.
This compares to Northern Star's miniscule and highly preferable 2.97%, supported by strong operating results throughout 2014.
Growth
In an effort to preserve cash, Newcrest slashed capital expenditure in the 2014 financial year from $2.38 billion to $0.84 billion, shelving some short-term growth projects. Capital expenditure is expected to be lower again in FY15 at up to $740 million. However the company retains options to expand many of its current operations should the price of gold support doing so.
Meanwhile Northern Star's systematic purchase of mines from Barrick Gold Corporation (NYSE: ABX) has transformed the company into Australia's second largest ASX-listed gold miner. With the mines now contributing to ongoing production, Northern Star's focus is on extending mine life rather than seeking out potentially risky acquisitions.
Northern Star grew gross profit 41% in 2014 and is on track to continue growing with its new additional mines.
Strike gold with…
Both gold miners continue to do a solid job of battling on against falling gold prices. However Northern Star's low debt profile and smart strategic acquisitions will help it continue to add growth going forward and it would be my pick of the two companies.
