A look At Some Gold Stocks – SBM, NCM, GOR, KLA

  • September 22, 2019 08:15 AM AEST
  • Team Kalkine
A look At Some Gold Stocks – SBM, NCM, GOR, KLA

Gold price have seen a phenomenal upward movement in the past, despite the economic downturns due to recession-like scenario or financial crises in economies. Hence, investors can safeguard their portfolio against unforeseen shocks by including gold in their portfolios. Gold price has been volatile in the short term but has retained its value over a long period of time. Investing in gold enables the investors to hedge against inflation, as gold prices often move opposite to the dollar. Since gold often moves opposite to the stock markets, investors can diversify their portfolio by adding gold to balance their portfolio in times when the market goes down.

St Barbara Limited

St Barbara Limited (ASX: SBM) is primarily engaged in mining and sale of gold, mineral exploration and development.

Financial Highlights: In FY19, the company reported production of 362k oz at an All-in Sustaining Cost of A$1,080 per ounce. The period was characterised by record production and cash flow from Simberi operations and continued successful deep drilling and exploration at Gwalia. During the year, the company reported a net profit after tax amounting to A$144.16 million, as compared to A$226.99 million in prior corresponding period.

Group Results (Source: Company Reports)

Leonora Operations: Total sales revenue for Leonora operations stood at $392.68 million, as compared to prior corresponding period (pcp) revenue of $461.26 million. Gold sales were reported at 222,625 ounces, in comparison to sales of 271,141 ounces in pcp. During the year, gold production from Gwalia mine was lower than previous year due to lower ore tonnes mined and lower grade.

Simberi operations: Strong performance was reported across the operations, with the company setting a new record of production and cash. Total sales revenue from the operations amounted to $257.64 million, as compared to $217.94 million in prior corresponding period. Gold sales for the year stood at 145,819 ounces, as compared to 129,815 ounces in FY18.

FY20 Guidance: In FY20, gold production from Gwalia and Simberi is expected to be in the range of 310,000 – 335,000 ounces. AISC for the year is expected to be in the range of $1,250 - $1,350 for an ounce. Sustaining capital expenditure for the year is expected to be between $59 million - $70 million. FY20 exploration expenditure is expected to be between $20 million - $28 million.

Stock Performance: The stock of the company generated negative returns of 18.26% over a period of 1 month. The stock closed at a market price of $3.100, up 3.333% on 20 September 2019 and has a market capitalisation of $2.09 billion.

Newcrest Mining Limited

Newcrest Mining Limited (ASX: NCM) is engaged in exploration, mine development and sale of gold.

FY19 Highlights: In FY19, the company reported gold production of 2.49 million ounces, at the lowest reported annual All-in Sustaining Cost of $738 per ounce. Copper production during the year stood at 106 kt, up 36% on prior corresponding period production of 78 kt. Free Cash Flow for the year witnesses a rise of 34% at $804 million with all operations being free cash flow positive. Net debt for the year was reported at $395 million, down 62% from the net debt as at 30 June 2018.

EBITDA for the year stood at $1,670 million, up 6% on prior corresponding period EBITDA of $1,565 million. Adjusted EPS for the year stood at $0.73 per share, up 22% on pcp value of $0.60 per share.

FY19 Results Summary (Source: Company Presentation)

Strong Financial position: During the year, the company’s net debt to EBITDA reduced to 0.2x, from 0.7x in the previous year, indicating that the company’s operations are generating enough revenue to earn profits. Gearing ratio of the company reduced to 4.9% in FY19, from 12.2% in the prior corresponding year. The company’s dividends have shown an upward trend over the period covering FY16 to FY19, with dividends for both the years amounting to US$0.075/share and US$0.22/share, respectively.

Updates on Operations:

  • Cadia Operations: The company reported record gold and copper production across the Cadia operations with record low annual AISC per ounce. During the year, production exceeded the guidance provided.
  • Lihir Operations: The company achieved the 15mtpa sustainable mill throughput target in the June quarter and reported fourth consecutive year of generating free cash flow greater than $300 million.
  • Telfer Operations: Gold production for the operations increased 6% YoY, due to strong improvement in recovery.
  • Gosowong Operations: Year on Year results for the operations were impacted due to declining grade, with production declining from 251 koz in FY18 to 190 koz in FY19.

Stock Performance: The stock of the company generated returns of 39.37% over a period of 6 months. The stock closed at a market price of $35.960, up 2.304% on 20 September 2019 and has a market capitalisation of $27.01 billion.

Gold Road Resources Limited

Gold Road Resources Limited (ASX: GOR) is engaged in mineral exploration and development of the Gruyere Project in Western Australia.

Gruyere Project in Western Australia (Source: Company Reports)

Shareholding: The company recently updated that Bank of America Corporation became a substantial shareholder with 5.86% of the voting power.

Yamarna Exploration Update: The company reported positive diamond and reverse circulation assay results from its recent exploration programmes. The company completed targeted bedrock drilling for the Yaffler South prospect, delivering high-grade results demonstrating benefit of good geological work. The results confirmed the prospects of the Southern Project Area that will remain a priority exploration project for the company. Drilling at Gruyere revealed mineralisation below the current reserve.

Highlights of Half Year Ended 30 June 2019:

  • At the end of June 2019, the first gold pour from the Gruyere Project Carbon-in-Leach (CIL) circuit delivered 1,138 ounces of gold.
  • The project achieved an outstanding safety performance of 3 million construction hours without a loss time injury.
  • Construction of the Project remained within the Final Forecast Capital cost estimate of $621 million and JV support cost of $35.8 million.
  • During the six months period, the company completed its year-long Yamarna exploration process.
  • Exploration activities during the period was centred on Milestone 3 targets in the Southern Project Area. They were also focussed on Milestone 2 targets in the Northern Project Area.
  • In the June quarter, the company earned a 51% interest in the Lake Grace Joint Venture from Cygnus

Financial Highlights:

  • During the period, loss before income tax stood at $23.7 million, as compared to $10.8 million in prior corresponding period.
  • At the end of the period, cash and cash equivalents were $63.3 million, compared to $44.0 million as at 31 December 2018.
  • Capitalised mineral exploration and evaluation expenditure stood at $15.6 million.

Stock Performance: The stock of the company generated returns of 36.84% over a period of 6 months. The stock closed at a market price of $1.305, up 0.385% on 20 September 2019 and has a market capitalisation of $1.14 billion.

Kirkland Lake Gold Ltd

Kirkland Lake Gold Ltd (ASX: KLA) is a gold mining company operates in development and exploration of gold across Canada and Australia. The business operates in two projects namely the Fosterville Mine in the state of Victoria, Australia and the Macassa Mine in Northern Ontario.

Recently, the Board of Directors announced a dividend of USD 0.04000000 for each ordinary share held, payable on 11 October 2019.

Operations Highlights: As per the recent company update, KLA posted operational updates from underground exploration at Macassa Mine, Ontario. The highlights are summarised as follows.

  • The company reported 71 drilled holes at 29,207 m east while the west reported drifts at a level of 5300-feet.
  • The company will continue operation for the above drilling for the rest of FY19.
  • The company reported 18,943m drilling to the east of the SMC. The above drilling includes 41 drill holes at 5300 feet Level located at the east exploration drift. The location is intersected by high-grade mineralization away from 200 m northeast of the existing Mineral Resource.

Financial Highlights: Kirkland Lake Gold Ltd announced its second quarter results for FY19 wherein, the company reported revenue at US$281.267 million as compared to US$214.653 million on Q2FY18 and net earnings of US$ 104.195 million as compared to US$ 61.486 million on pcp. The company reported cash at US$ 469.385 million, total assets at US$ 2019.498 million and shareholder’s equity at US$1473.593 million as on 30 June 2019.

Q2FY19 Financial Highlights (Source: Company Reports)

Stock Update: The stock of KLA closed at $71, up 4.658% on 20 September 2019. The market capitalisation of the stock stands at $14.23 billion and is available at a price to earnings multiple of 26.3x. The stock has generated stellar returns of 18.79% and 44.86% during the last three months and six-months respectively. Currently, the stock is trading near the upper band of its 52-week trading range of $25.80 to $81.


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