Look Beyond Newmont's Gold

Just because a fisherman is targeting swordfish with his long-line doesn't mean he'll bemoan the snaring of some mako sharks along the way.

Out on the water, that's known as bycatch. In the mining world, its by-product, and investors are advised to pay close attention to it while assessing investment opportunities among all sorts of miners.

Since copper and gold are commonly found in association with each other, gold miners have varying degrees of their fortunes tied up in the outlook for the red metal.

Newmont Mining (NYSE: NEM), with noteworthy copper reserves of 9.1 billion pounds accompanying its 91.8 million ounces of gold in reserves, offers a fine example of a copper-rich gold producer. The topic is particularly timely because copper's price has shown astounding strength throughout 2010, and copper plays a modest yet impactful role in Newmont's success as a gold miner.

Copper's impact can best be seen through production costs. Under the circumstances, Newmont recorded an acceptable cost of $477 per ounce of gold when you ignore copper by-product. Since the company's new Boddington mine in Australia has encountered significant challenges during ramp-up, pressing costs there up to $617 per ounce for the quarter, Newmont is feeling the competitive pressure from rivals like Goldcorp (NYSE: GG), which firing on all cylinders with their newly commissioned megamines. After Boddington production faltered in the quarter because of unplanned maintenance, Newmont has again increased its full-year cost projections for the beleaguered mine, to $575 to $595 per ounce.

But when you apply Newmont's consolidated copper production as a by-product to the cost basis for gold production, we find that despite its challenges, Newmont remains near the top of its class. It boasts a by-product cost applicable to sales of just $195 per ounce of gold. That's not enough to oust Yamana Gold (NYSE: AUY) from the top spot for lowest by-product costs, but it significants outperforms rival Barrick Gold (NYSE: ABX), which reported a net cash cost of $349 per ounce.

If copper continues to join gold in this multiyear march toward higher nominal prices, copper-heavy producers such as Yamana and Newmont are bound to enjoy a good deal more of the margin expansion we've observed throughout this year. For Fools who anticipate larger percentage gains in copper prices than in gold, primary copper plays like Freeport-McMoRan Copper & Gold (NYSE: FCX) tip the scales to render gold the by-product (while keeping copper costs insanely low). Ivanhoe Mines (NYSE: IVN), which is presently constructing a massive mine over a copper and gold mother lode, offers another exciting opportunity.

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