Commodities & Metals

Geopolitical Events in Europe May Create More Upside in 4 Great Gold Stocks

Every time it seems like maybe things have quieted down, there is another incident that looks to be a terror attack and investors get nervous. Following the arrest of a suspected plotter in the Paris attacks, a bombing at the Brussels airport and train station roiled the markets, and once again gold traded higher as a safe haven. While this too eventually will move from the headlines, it’s always a reminder for a portfolio hedge.

The one constant that the recent events remind investors of is that we live in a world where this horrible mayhem has become all too commonplace, and while there is no reason to live constantly worried, it is important to protect portfolios with the kind of insurance that precious metal companies provide. Having a safe haven allocation just makes sense.

We screened the Merrill Lynch research universe and found four companies rated Buy that fit well in aggressive growth portfolios.

Agnico Eagle Mines

This top stock has remained a long-time Wall Street favorite. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden. The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.

The company was the most successful in reducing its all-in sustaining costs in 2015. Agnico Eagle came in 29% lower year over year, at $810 per ounce. It also lowered its cash cost guidance for the second time this year to $850 per ounce (midpoint) from $880 per ounce. The upgrades have mainly been due to higher-than-expected grades and currency tailwinds from the Canadian dollar and the Mexican peso.

The company is one of the top picks on Wall Street, as it fits the objectives of having quality mining assets with attractive margins, and it sports a very solid balance sheet.

Agnico Eagle investors are paid a 0.9%% dividend. The Merrill Lynch price objective is $39.50, and the Thomson/First Call consensus target price is $37.94. The shares closed Tuesday at $36.25.


AngloGold Ashanti

This top gold miner is a smaller cap play with outstanding upside potential. AngloGold Ashanti Ltd. (NYSE: AU) is the world’s third biggest producer of gold, and it operates as a gold mining and exploration company. It also produces silver, uranium oxide, copper, molybdenum and sulphur. The company has 20 operations and exploration projects in South Africa, Continental Africa, Australasia and the Americas. The company produced 4.4 million ounces of gold in 2014, generating $5.5 billion in gold income. The company has an attributable ore reserve of 57.5 million ounces of gold and an attributable mineral resource of 240.6 million ounces.

Merrill Lynch notes that the company is one of the lowest-cost producers of all the South African companies, and it has prioritized debt reduction with what it terms as “self-help” initiatives to reduce the net debt on the balance sheet.

Merrill Lynch has a $15.34 price target, which is higher than the consensus target of $14.39. The shares closed most recently at $12.96.