Is gold the new coal? Gold traded Monday morning at $1,103.60 per ounce, about $80 an ounce below its price of five years ago. That is about 6.7% lower. Thermal coal was priced at about $41 a ton on Friday, down about 33% from its level in July of 2010. Gold’s drop is no threat to coal yet, but as with the coal producers, there are going to be winners and losers in the gold mining business.

The top five gold miners by market cap are Goldcorp Inc. (NYSE: GG) with a market cap of around $10.9 billion; Newmont Mining Corp. (NYSE: NEM) at $9.8 billion; Barrick Gold Corp. (NYSE: ABX), $8.5 billion; Randgold Resources Ltd. (NASDAQ: GOLD), $5.5 billion; and Agnico Eagle Mines Ltd. (NYSE: AEM), $4.97 billion. All traded down by around 5% to 10% Monday morning.

Goldcorp traded down 7.8% at $13.54 in a 52-year range of $13.37 to $29.65. The low was set earlier in the morning. Over the past five years, Goldcorp’s shares have dropped just over 66%. The forward price-to-earnings (P/E) ratio for 2016 is 19.31 and the price-to-book ratio for the trailing 12 months is 0.71. As of the end of June, short interest in the stock totaled 11.62 million shares, about 1.4% of the total float. The consensus price target on the stock is $23.79, implying potential upside of 75.7%.

Newmont traded down about 9.6% at $18.72, in 52-week range of $17.60 to $27.90. Over the past five years, Newmont’s stock has dropped about 68.5%. The forward P/E ratio for 2016 is 15.5, and the price-to-book ratio for the trailing 12 months is 0.99. As of June 30, short interest in the stock totaled 9.3 million shares, about 1.8% of the total float. The consensus price target on the stock is $27.25, indicating potential upside of more than 45%.

Barrick traded down 9.6%, at $7.95 in a 52-week range of $7.82 to $19.36. The low was set Monday morning. Barrick’s stock is down more than 80% in the past five years. The forward P/E ratio for 2016 is 10.51, and the price-to-book ratio for the trailing 12 months is 1.01. As of the most recent settlement date, short interest in the stock totaled 13.61 million shares, about 1.2% of the total float. The consensus price target is $13.46, implying potential upside of around 72%.

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Randgold traded down about 3.4%, at $59.50 in a 52-week range of $58.00 to $89.18. The forward P/E ratio for 2016 is 18.73, and the price-to-book ratio for the trailing 12 months is 1.82. As of mid-June short interest in the stock totaled about 641,000 shares. The consensus price target on the stock is $92.72, implying a potential upside of more than 58%.

Agnico Eagle traded down about 7.7% to $23.22, in a 52-week range of $21.65 to $42.41. The forward P/E ratio for 2016 is 28.68, and the price-to-book for the trailing 12 months is 1.32. As of the end of June short interest in the stock totaled 2.27 million shares, about 1.1% of the total float. The consensus price target is $37.78, implying potential upside of nearly 63%.
There are really only two metrics that matter to gold miners: the price of gold and the all-in cost to get it out of the ground. As prices have fallen, the miners’ only choice has been to chop costs. That has helped some, but anyone who thinks any of these miners can reach those implied gains over the next 12 to 18 months is likely also a born gold-bug who sees a disaster around every corner that demands a hoard of gold to manage.

At some point the gold mining industry will have to consolidate. Whether that happens through mergers or asset sales and bankruptcies is all that is left to watch for.

One measure of survivability could be gold reserves. Of the five companies examined at here, Newmont sports the largest total with more than 83 million ounces, but Newmont’s total is second overall to Harmony Gold’s nearly 96 million ounces. Barrick is second (third overall) with just over 80 million ounces. Goldcorp claims 23 million ounces of reserves, Agnico Eagle claims reserves of more than 18 million ounces, and Randgold’s reserves total around 11 million ounces.

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As the value of gold reserves diminishes with the price of the yellow metal, the best positioned companies to survive are those that have both cash and enough credit to make an acquisition. Here is a quick look:

Randgold, as of December 31, 2014, had about $21 million in cash, cash equivalents and short-term investments. Long-term debt totaled just over $55 million.

Barrick, as of December 31, 2014, had about $2.7 billion in cash and equivalents and long-term debt of $12.75 billion.

Newmont, as of the same date, had about $2.5 billion in cash, cash equivalents and short-term investments. Long-term debt totaled $6.48 billion.

Goldcorp, as of the same date, had about $583 million in cash, cash equivalents and short-term investments. Long-term debt totaled $3.52 billion.

Agnico Eagle, as of the same date, had about $271 million in cash, cash equivalents and short-term investments. Long-term debt totaled $1.32 billion.

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Of the three largest miners, Barrick’s position is the most precarious. The company has sold off assets, and a rumored merger with Newmont has gone nowhere. Add to that the difficulties Barrick is having with its Pascua Lama mine on the border of Chile and Argentina, and the company’s headwinds are even stiffer.

Newmont recently announced an acquisition of the Cripple Creek mine in Colorado from AngloGold Ashanti for $825 million. This appears to have been a very shrewd move by Newmont because production will rise at a lower all-in cost per ounce. That could help Newmont wait out the downturn in the commodity gold price.

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