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RANDGOLD RESOURCES LTD (GOLD) 83.27 -$0.30 (-0.36%) 03:28AM (15 mins delay)

Exploring Gold Miner Stocks: Mid-Year 2009 Analysis

Jul 02, 2009 - 11:48 AM EDT

The Gold Stock Strategist submits:

There are several ways to value large gold producers. One of the conventional methods is to use “price to earnings” ratio calculations, commonly referred to as “PE”. This method of analysis is the one of the most basic valuation techniques. Lower PE ratios suggest a company is undervalued relative to competitors. PE ratios are best used as a “first cut” in due diligence to see how the market is valuing gold mining companies relative to others in the industry.

As the table below (sorted by 2010 PE ratios) shows, current PE levels in 2010 for 14 major and mid tier gold producers elegantly break down into two groups—those above a 20 PE and those below.

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Source: Seeking Alpha (Jul 02, 2009 - 11:48 AM EDT)