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If the year ended in early August, investors would have been gushing about gold and silver mining stocks, which were the year's top performers at the time. In August, gold was higher by more than $300 per ounce from where it began the year, and of all the publicly traded gold miners with a valuation north of $300 million at the time, you could have thrown a dart and had a better than 50-50 chance of nabbing one that had at least doubled year to date.

Today, gold is somewhat in shambles. Since hitting an overnight high of $1,340 per ounce on election night, gold has shed nearly $220 per ounce, placing it dangerously close to re-entering bear-market territory. While profit-taking can be credited with part of the blame, the real issue for physical gold has been a strengthening U.S. economy and the likelihood of future rate hikes from the Federal Reserve.

Last week, the Fed wound up hiking the federal funds target rate by 25 basis points, which represents just the second time it's raised rates in a decade. However, with each rate hike the Fed passes, interest-bearing assets become a little more attractive to income-seeking investors. While some interest-based assets are still losing purchasing power compared to the national rate of inflation, if the Fed holds firm to the end-of-year forecast that three hikes could be made in 2017, investors could begin trading out of gold and silver and into bonds and CDs. If that happens, it's always possible physical gold could take out its six-year low of $1,050 per ounce set earlier this year.

These gold miners could survive another 20% drop in gold with ease

Now here's the good news: Some gold miners have done a remarkable job of cutting their capital expenditures, streamlining their operations, and boosting production in high ore grade mines. In fact, based on the latest all-in sustaining cost (AISC) estimates provided during the third quarter by more than a dozen gold miners, three would be sustainably profitable (assuming costs remain static to today's level) even if physical gold dipped another $200-plus per ounce to $900 per ounce.

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Barrick Gold

Of the larger traditional gold miners, none has a lower AISC than Barrick Gold (NYSE:ABX). It once again revised its full-year AISC lower during the third quarter to a fresh range of $740 to $775 per ounce, or more than $370 below the current spot price of gold at the midpoint.

Barrick's keys to success involve a mixture of cost-cutting and smart production expansion. In particular, Barrick has reduced its capital expenditures by more than three-quarters in just four years, and it's on track to have repaid $5 billion in debt over the past two years, primarily as a result of divesting non-core assets. Having less debt means lower interest expenses, and it also gives Barrick better financial flexibility should it see an attractive merger or acquisition opportunity. Byproduct production of copper also helps lower Barrick's gold production costs.

On the other side of the equation, Barrick's new full-year guidance calls for 5.25 million to 5.55 million ounces of gold production in 2016 compared its original forecast of 5 million to 5.5 million. Even though this represents a year-over-year production decline, the company is simply working smarter, not harder, and it has plenty of organic opportunities for expansion. Barrick's Goldrush mine has 8.6 million ounces of measured and indicated resources that could lower costs and fuel production in the years to come.

Considering that Barrick Gold is angling for an AISC of less than $700 by 2019, it looks capable of surviving a considerable dip in gold prices with ease.

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New Gold

Another mining company with an exceptionally low cost profile is New Gold (NYSEMKT:NGD), which has four producing mines located in North America and Australia. Based on its full-year forecast for 2016, New Gold's AISC is expected to come in at just $770 per gold ounce.

During the third quarter, New Gold wound up reporting a $177-per-ounce drop in year-over-year AISC, most of which is attributed to lower costs at its Peak mines. Lower sustaining costs, including selling, general, and administrative expenses, played a role in the company's markedly lowered costs, too.

We also can't talk about lower costs at New Gold without mentioning the role that byproducts can play on reducing its AISC. New Afton, for instance, generated 21.3 million pounds of copper during Q3, and it's produced nearly 66 million pounds of the company's 76.6 million pounds through the first nine months of 2016. All of these aspects are working together to push New Gold's costs well below the industry average.

Perhaps most importantly, New Gold's costs are dropping considerably despite the Rainy River project ramping up. Through late October construction at the mine was 60% complete, with 45 million to 50 million tons of overburden and waste expected to be stripped by the start of commercial production in mid-2017. Once fully ramped up, Rainy River is expected to produce an average of 325,000 ounces of gold annually, which should more than offset the transition of Cerro San Pedro to residual leaching.

If New Gold can keep its costs substantially below the industry average, it's bound to turn heads.

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Royal Gold

Finally, we have Royal Gold (NASDAQ:RGLD), which arguably has the best gross margin of all gold stocks relative to the current spot price of gold, but it isn't a mining stock in the traditional sense of the term.

Royal Gold's business model is simple: It enters into long-term or life-of-mine contracts with mining companies that are looking to expand an existing mine, or develop a new mine, in exchange for the upfront cash to make it happen. In return, Royal Gold receives a specific percentage of production at a fixed or modestly variable cost that's usually well below the current spot price of gold. According to Royal Gold's fiscal 2017 first-quarter results, its AISC was just $352 per gold equivalent ounce. This works out to nearly $775 in gross margin based on the current spot price of gold. 

Another factor investors are bound to like with Royal Gold's business model is that it's merely the financier, and it isn't involved in the day-to-day operations of mining. This means unexpected mining costs won't necessarily affect its bottom line, although it is dependent on the production of its contracted partners to grow its business.

Beyond its attractive business model (and the fact that it can afford to pay a dividend), Royal Gold also has a healthy number of contracted partners. This allows its risk to be spread around, ensuring that one bad quarter of production from a single miner or two doesn't disrupt its own quarter.

Royal Gold may very well be in the best shape of all gold stocks when it comes to falling gold prices.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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