Finding companies with the best fundamentals or value from certain operational metrics is important to do, particularly in sectors such as precious metals mining which tends to consist of somewhat homogeneous companies providing the market with a commodity good.
In this context, I’m going to discuss why I believe Kirkland Lake Gold (TSX:KL) is the best value pick on the TSX today.
Given the input price of gold is out of every gold producer’s control, the focus on cost containment and margins is of utmost importance when analyzing these companies. Kirkland Lake has one of the best all in costs of production of its peers, producing gold at an all-in cost of around U.S$1000 per oz.
Doing the math on margins with gold having covered nearly the $2000 US per oz level of late is simple – a 50% margin in this sector is relatively unheard of, as one investors ought to pay attention to.
Many analysts have pointed to the fact that most gold producers have future cash flows calculated at a long-term average price of gold in the $1,400 U.S. to $1,500 U.S. per oz range as an indication of just how cheap gold companies are in general. With this in mind, I’d highly recommend value investors consider companies like Kirkland Lake in this rising gold price environments spurred by continued central bank leverages an ongoing government stimulus.
Invest wisely, my friends.