Commodities & Metals

Gold Could Shatter Records If the Coronavirus Threat Turns Into a Pandemic

Franco-Nevada

This off-the-radar play offers numerous ways for investors to make money. Franco-Nevada Inc. (NYSE: FNV) is a resource sector royalty and investment company that was formed to acquire an established portfolio of mining, oil and natural gas royalties and certain equity interests. The royalty assets were spun out of Newmont Mining.

The royalty portfolio represents over two decades of acquisitions by Newmont and the old Franco-Nevada, which Newmont acquired in 2002. Franco-Nevada intends to grow through the advancement of existing properties and through acquisitions and investments.

The Merrill Lynch team remains very positive on the shares for 2020, noting that the company is very well positioned financially to pursue new royalty and stream acquisitions that are focused on precious metals.

Investors receive a 1.00% dividend. Merrill Lynch has set a $127 price target. Oddly, the consensus target is just $81.27, but Franco-Nevada stock was last seen at $107.50, even after slipping 4.5% on Friday.

Newmont

This is one of the largest mining companies and a solid buy for more conservative accounts. Newmont Corp. (NYSE: NEM) is a leading gold and copper producer. It employs approximately 29,000 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, Indonesia and Suriname. Newmont is the only gold producer listed in the S&P 500 index.

In recent years, the company announced that “first gold” has been poured at its new mine, called the Merian gold mine, in Suriname in South America. It reported Merian contains gold reserves of 5.1 million ounces and that annual production is expected to average between 400,000 and 500,000 ounces of gold at competitive costs during the first five full years of production.

The analysts noted this about recent very positive news:

In keeping with its capital return objectives, Newmont announced a 79% hike in its quarterly dividend to $0.25, effective the second quarter of 2020. The company has repurchased 12.4 million shares for $506 million, halfway to achieving its $1 billion share repurchase program. Approaching its centenary, the company has rebranded itself from Newmont Goldcorp to Newmont Corporation.

Shareholders receive a 1.25% dividend. The $54 Merrill Lynch price objective compares with the $50.86 consensus figure and the most recent close at $44.63. Shares retreated 4% on Friday.

Wheaton Precious Metals

This precious metals royalty stock makes good sense for more conservative accounts looking to have exposure to the sector. Wheaton Precious Metals Corp. (NYSE: WPM) is a Canadian precious metals streaming company with approximately 60% of its revenues from the sale of silver and 40% from gold.

Under the terms of long-term contracts, the company purchases silver and gold from a variety of mines, including Goldcorp’s Penasquito mine in Mexico, Vale’s Salobo mine in Brazil, the Lundin Mining Zinkgruvan mine in Sweden, and Glencore’s Antamina and Yauliyacu mines in Peru, then sells the silver and gold into the open market.

Shareholders receive a 1.16% dividend. The Merrill Lynch price target is $38. The consensus target is $35.86, and Wheaton Precious Metals stock pulled back almost 8% to close at $28.50 on Friday.

Proper asset allocation should always include a single-digit percentage holding of precious metals like gold and silver. Not only do they hedge inflation over the long term, but they can really help when the market does go into correction or bear market mode, as they tend to trade inverse to the markets.

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