With gold at an eight-year high, is there value in the mines?

Last year, the world's largest operator, Newmont Mines (NYSE:NEM), extracted gold for $265 an ounce and sold it for $366. The result was third-quarter net income of $0.28 a share. Annualize that forward and the stock trades at almost 44 times earnings.

Even if Newmont manages to sell next year at today's $416 an ounce (a $50 premium to last quarter's average), the stock would still go for roughly 30 times earnings. A great company with great assets, Newmont is hardly a value.

Other large miners like Placer Dome (NYSE:PDG) and Barrick Gold (NYSE:ABX) trade at high multiples to earnings as well. Like Newmont, their valuations appear to be anticipating much higher gold prices.

More moderate multiples can be found with the smaller miners. Richmont Mines (AMEX:RIC) has benefited handsomely from gold's run and has a strong balance sheet with no debt. At a more reasonable 21 times trailing earnings, it appears to offer more upside should gold continue to head higher.

Investors might also check out stocks like Freeport-McMoRan (NYSE:FCX), the owner of a large gold and copper mine. The stock trades at 28 times trailing earnings and is benefiting from strong copper prices, too. Historically, when the worldwide economy booms, copper booms along with it.

Hecla Mining (NYSE:HL) owns and operates silver and gold mines. Silver is at a four-year high and is economically sensitive, too. Current strong gold and silver prices should help Hecla beat the highest analyst estimate of $0.34 a share in earnings.

Still, before putting too much stock in gold, consider the point Mathew Emmert made earlier this year. "A dollar invested in gold about 200 years ago would be worth about, well, a dollar today (adjusted for inflation)." That's not a good thing.

Two other factors do not work in gold's long-term favor. First, almost all the gold ever mined is unused (it just sits in vaults or is passed down as jewelry from generation to generation). Second, as the price increases, previously uneconomical reserves will be mined and swell supply.

Perhaps ironically, given its reputation as a store of value, gold is a highly speculative investment at today's prices.

W.D. Crotty likes to discuss gold and other metals with other investors on The Motley Fool's Mining and Metals discussion board.

You can e-mail W.D. at wdcrotty@yahoo.com.