The timing couldn’t be better for gold. The dollar is plummeting, the stock market has lost over 80 percent of the ‘Trumphoria’ gains it made, and gold is once again everyone’s favorite safe haven asset.
Gold is looking fantastically more attractive as the market keeps pulling back from its record highs, with the Dow Jones falling for the eighth straight session on Monday in its longest losing streak since 2011. The last straw was the failure of the GOP healthcare plan last week.
Lost faith in the market, means burgeoning faith in gold, which has hit a four-week high and is poised for a hot spring rally.
With gold prices surging and demand set to spike, these are our top 5 picks for gold stocks right now:
#1 Goldcorp Inc. (NYSE:GG)
This Canadian giant—No. 3 in the world for gold—swung into major profits last quarter, and far exceeded analyst expectations. But a juicy catalyst that caught our eye is the company’s recent commitment of almost $1 billion to get in on a partnership with Barrick Gold Corp. in Chile’s gold belt. This is a nice growth potential move that comes at a great time for gold and should be a sweet catalyst for Goldcorp stocks.
The deal gives Vancouver-based Goldcorp a stake in one of the biggest, most underdeveloped gold plays in the world, and investors will certainly take notice—eventually. The market’s immediate response wasn’t great, and Goldcorp’s shares dropped 6.7 percent, but at the end of the day, this is a smart move: it’s an opportunity for a strong rate of return on capital to shareholders at a time when there aren’t very many new opportunities around in gold, so it’s time to get counter-intuitive.
Which leads us to the next new opportunity, and another of the world’s massively underexploited gold venues…
Broadway Gold Mining Ltd. owns a 100 percent interest in the Madison Gold and Copper Mine in the heart of southwestern Montana’s prolific Silver Star Mining District gold belt. This is a pure play gold and copper project in Butte, Montana—arguably one of the largest collections of metals in the entire world. It’s only 50 miles from the famous Butte open pit mine.
This is an all-American pure gold play in prime gold rush territory, and Broadway’s acreage here is a brilliant set-up. This area has never been fully explored or exploited, and Broadway has already identified a series of high-grade gold and copper zones for expansion. The area has extensive existing underground development and facilities—so it’s a win-win situation for this small-cap, and the timing couldn’t be better.
It’s already in the advanced stage of exploration, with immediate access to material. The surface drilling program is already into Phase 2, working toward Broadway’s maiden 43,000+ resource calculation.
Topping it all off, the company is a brand new listing and is already fully capitalized after two successful fund-raising series. That’s probably down to its legendary management, which is the key for small-cap success. This is a low-burn company with key leaders who don’t need a day-to-day paycheck, so they are fully motivated to bring this new project across the finish line fast.
#3 Barrick Gold (NYSE:ABX)
For Barrick—a $23.27-billion market cap company, and the world’s largest gold producer—the Chile deal with Goldcorp adds a very attractive package of underdeveloped gold to its portfolio. This is a solid long-term play as well because Barrick has been one of the smartest in terms of reducing debt, cutting costs and generating solid free cash flow. It’s got one of the lowest cost structures of all the big miners, and it even raised dividends for shareholders in the last quarter of 2016.
And there are plenty of catalysts even beyond broader gold fundamentals. Word is that Barrick is considering the sale of all or part of its Lagunas Norte mine in Peru, which is potentially worth anywhere from $700 million to $1.4 billion.
As gold climbs, Barrick is extremely well-positioned to make attractive gains.
#4 Agnico Eagle Mines (NYSE:AEM)
This $9.61-billion market cap gold miner may have been getting a beating on the market in the first quarter of 2017, and it may have disappointed analysts, but they’re missing the bigger picture. While the stock is down over 14 percent since the release of its Q4 2016 earnings, last year was a stellar year for Agnico, which rallied almost 60 percent. There are plenty of catalysts to make this a diamond in the rough, and the negative sentiment may just be in comparison to Goldcorp and Barrick, both of which significantly impressed investors coming out of 2016.
Agnico also had an interesting turn-around last year with two of its northern Canadian mines—Meliadine and Meadowbank. 2016 saw these two mines transform from liabilities into valuable assets. They’d been written off earlier as impairments, but the company struck new gold at both last year and reversed the writedowns, while also expanding growth and production through 2020.
And there’s still more reason to like Agnico: It’s significantly lowered its debt and boosted its cash from operations and is now one of the lowest cost miners in the industry, giving it a major competitive advantage.
#5 Newmont Mining Corporation (NYSE:NEM)
Newmont has had a great run, up 6.28 percent in three months, but analysts are torn between a neutral and positive outlook. Again, it’s likely because Barrick and Goldcorp outshined everyone on this playing field, so ‘neutral’ is a very relative term. But the fact remains, it’s been a strong year for Newmont, up over 32 percent in the past 12 months, though there’s still room to improve on this. Share prices are still down from their highs, but climbing—which makes it a good game to get it on.
One thing keeping Newmont strong is its solid ability—compared to some of its peers—to pay interest expenses on outstanding debt. But there is also a list of catalysts that suggest Newmont may outperform this year. For one thing, the company has a brilliant asset portfolio that will get a nice boost this year. It just brought four big projects into production in Colorado, Nevada, Suriname and Australia. It’s also got some big project decisions that could lead to more expansion later this year.
• Kinross Gold (NYSE:KGC): Kinross is trading at a massive discount to its peers, most likely because of uncertainty over its mine in Mauritania.
• Eldorado Gold (TSX:ELD): With a market cap of US$2.3 billion, this company didn’t benefit from the late-2016 rally because of concerns about production and performance of its operations; but it’s on track and the price is nice.
• B2 Gold (TSX:BTO) (NYSEMKT:BTG): This is a CAD$3.68-billion market cap company, and the one of the most actively traded companies on the TSX, and its stocks are climbing.
• Alamos Gold Inc. (NYSE:AGI) (TSX:AGI): Alamos Gold, with a market cap of US$2.47 billion, is also set to outperform.
• Cameco Corporation (TSX:CCO) (NYSE:CCJ): Cameco—a US$4.52-billion market cap company--is trading at a major discount to its intrinsic value right now, and it’s a good play for dividend-focused investors.
• Franco-Nevada Corporation (TSX:FNV): This is a CAD$15.52-billion market cap company. Some investors like the fact that FNV ties returns to the price of gold without risky exposure to direct ownership and operatorship of mines.
By Charles Kennedy for Oilprice.com
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