While gold mining is an interesting business, the mines, as investments, have other risks associated with them that gold itself does not (and opportunities, of course, as well). FOFOA has taught us that in the event of a quantum leap upwards in the price of gold that it seems unlikely that the nations where the gold mines re would allow the miners to reap "windfall profits" from a much higher price of gold. He believes that host countries would not have to nationalize the mines, it would be easier (and less confrontational of foreign capital and mining expertise) just to tax them much higher. So, he argues that gold itself is less risky and has a higher potential gain than the gold miners.
Nonetheless, a basic understanding of gold mining is useful in having a more complete overall understanding of gold. Gold miners produce over 2000 tonnes (1000 kg / tonne) each year, the only otehr "production" comes from recycling which accounts for some 500 tonnes (figures approximate).
I compiled the below table from various sources. The first group (11) are from wikipedia as the source of the "Big 10" (by market capitalization in 2013: http://en.wikipedia.org/wiki/Largest_gold_companies), there listed as well with asterisk is Agnico-Eagle, which was number 10 in 2010 and which 24hgold.com still lists as tenth largest. Ticker symbols and P/E Ratios came from Barron's, Bloomberg and marketwatch.com. Gold reserves came from 24hgold.com. Note that gold mining is BIG BUSINESS, the total market caps of the all of the below (ex. FCX and Norilsk -- as they mainly produce other metals) is over $132 billion.
There is some subjectivity (as well as probable errors) below, as the information I gleaned was sometimes contradictory. I chose companies that were LARGE, that "I had heard of", that had operations in Peru, that American investors (in most cases) could easily buy shares of, and one or two other criteria. But, even with some subjectivity as well as likely small errors, there are certain key things that jump out, especially the current losses being suffered by most of the miners...
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Freeport McMoran (FCX) and Norilsk Nickel mine other metals that are worth more than the gold -- hence their large market caps (worth over $30 billion each). Norislk is a big player in platinum and palladium, whicle Freeport McMoran mines a lot of copper. FCX currently runs the largest gold mine in the world, the Grasberg mine in Irian Jaya (Indonesia), which has occasional shutdowns due to local unrest there.
Polyus Gold is a Russian company with BIG mines in Siberia and the Russian Far East. They mine 1.5 million oz per year and have the third largest reserves of any gold company. I would mention in passing that both Russian companies (Polyus and Norilsk) have low market cap vs. gold reserves, this would be so because of the risky nature that investors view see (rightly, IMO) of assets in Russia...
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Related (because so many gold miners are losing money) would be the whole complicated issue of cost per ounce mined of gold.
The most commonly reported such cost is the "cash cost" (still not well-defined in common use). These figures are often at 24hgold's analysis of each company. These costs are typically around $560 - $900 per ounce. Then why are the miners losing money now? Because their TOTAL COSTS are so high. Eavan Moore writes a fine article in American Hard Assets (of Sept / Oct 2013, reviewed here:
http://robertmixblog.blogspot.com/2013/07/review-of-american-hard-assets-issue-no.html
Moore writes that if you look at all costs, that would work out to $1250 - $1500 per oz depending on the mine. So the losses among the gold miners above now seem much easier to understand. These other costs (beyond the cash costs) include things like overhead, exploration & permitting costs, cost of capital and many others. Eavan Moore's article is very informative and highly recommended.
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Bottom line for me? Because I rarely speculate (I almost always lost money on speculating so no longer do it, much...), I would rather have the safest investment and the one offering a likely huge jump in value: physical gold.
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