Source: Yahoo Finance

For Barrick Gold Corp. and Newmont Mining Corp., Morgan Stanley sees downside in the share price (9% and 13%) from the current market price. For Goldcorp Inc., the firm glimpses the possibility of upsides of up to 18%.

The firm says it prefers Goldcorp Inc. to Barrick Gold Corp. and Newmont Mining Corp. because, based on NAV, the stock is pricing in gold below the strip, the miner set a more feasible gold production target for the next two years, it can achieve a constant production in the coming quarters and has a large resource base.

However, Barrick and Newmont have considerable assets. The largest gold miner in the U.S. can count on highly productive operations located on five continents. Barrick has a portfolio of assets that allow the miner to extract the precious metal at the industry’s lowest cost per ounce and can supply the market with the highest quantity of gold. This is why they are the world’s largest gold producer.

On Dec. 31, 2015, Newmont had 73.7 million attributable ounces of proven and probable gold reserves computed assuming a gold price of $1,200. Barrick Gold had 91.9 million ounces of total proven and probable gold mineral reserves computed assuming a short-term gold price of $1,000 per ounce till 2020 and a long-term gold price of $1,200 per ounce from 2021 onwards.

On Dec. 31, 2015, Goldcorp had 40.73 million ounces of proven and probable gold reserves estimated assuming a gold price per ounce of $1,100.

The quality of the assets of the three gold mining companies can be measured by the Mineral Reserve Grade (g/t), as shown in a chart from a presentation by Agnico Eagle (AEM).

View photos

Source: Agnico Eagle’s Corporate Update – November 2016

The mineral reserve grade (g/t) is an important indicator to measure the quality of the asset base of a gold mining company because the “concentration of a mineral or metal in ore directly affects costs associated with mining as well as its subsequent beneficiation and extraction of precious components,” according to Mining.com.

The lower the grade is, the higher the cost to extract one ounce from the ground, “making high-grade ore deposits a crucial consideration for all types of investors in mining.”

As shown by the picture above, the asset base of Barrick and Newmont is characterized by a mineral reserve grade of 1.32 and 1.06, respectively, versus an industry average of 1.08.

By looking at the balance sheet of the three miners for the third quarter, we can see that Barrick has the highest liquidity available with $2,648 million in cash on hand, Newmont has $2,179 million and Goldcorp has only $383 million.

Barrick is the most indebted miner with $8,386 million of total long-term debt. Newmont reported long-term debt of $4.6 billion and Goldcorp reported $2.73 billion of total long-term debt. Barrick’s long-term debt is characterized by a comfortable repayment schedule: less than $200 million must be repaid before 2019 and $5 billion of the outstanding $8.5 billion is not due until 2033.

Newmont Mining Corp.’s price-book ratio (mrq) is 1.55 and the EV/EBITDA is 6.31.

Barrick Gold Corp. is trading at 2.35 times its book value per share and the EV/EBITDA is 5.80.

Goldcorp’s price-book ratio (mrq) and EV/EBITDA are, respectively, 0.85 and 10.15.

Disclosure: I have no positions in any stock mentioned in this article.

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This article first appeared on GuruFocus.