Normandy pick of the bunch

Smart money on Normandy

The key to profitability, the cash margin, was increased to $306 per ounce, compared to the 12-month figure of $291 per ounce. The Super Pit mine at Kalgoorlie, WA, is by far the largest contributor, accounting for around 40 per cent of its overall production. The Super Pit also happens to be a fairly low cost mine at $297 per ounce. These are all certainly positive trends that any potential investor must look at when considering buying a gold sector stock.

The gold price is still on an uncertain track but the smart money in the gold sector must go to Normandy, thanks to its size and status. It has a large hedging program (gold production is sold going forward three years) and while it may not be one of the lowest cost producers around, it certainly would show up on a list of the lower to middle cost producers.

Normandy also pays a decent part of its earnings as dividends, putting it on a forecast FY99 yield of 4.5 per cent. More importantly, it has excellent long-term growth potential, strong cash flows and based on historic figures, is still very much undervalued. Having said this, along with most other resource stocks, NDY has drifted back in the market since our last review on May 8. However, if you want exposure to the gold sector and are prepared to wait, Normandy is the pick of the bunch. ACCUMULATE.