There was no ambiguity this week from Federal Reserve Chair Jerome Powell, as he and the rest of the Fed governors continue to face the music over spiraling inflation and the rampant government spending spree that has taken and kept inflation at the highest levels in over 40 years. Powell noted on Tuesday that while we have likely entered a disinflationary period, more rate hikes are on the way. This after an increase of a whopping 475 basis points in less than a year.
The question for investors is what to do now? With central banks around the world literally buying gold daily, and the bond market inversion between the 10-year note and the two-year paper suggesting recession is on the way, alternative assets are in demand. One of the best ideas always has been to seek positions in commodities, and the best area for investors to look at now is the top gold miners and royalty companies. The bonus for investors is that while the sector surprisingly has raced higher since early November, a recent backup is offering a much better entry point.
We screened the BofA Securities gold-mining research universe looking for the top stocks. The following six stocks are rated Buy and come with respectable dividends, so they look like great ideas for worried investors now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Agnico Eagle Mines
This is one of Wall Street’s most preferred North American gold producers. 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 stock has backed up nicely from highs over the past month and is offering one of the best entry points in some time.
Shareholders receive a 3.04% dividend. The BofA Securities price target on Agnico Eagle Mines stock is $61. The consensus target is higher at $65.09, but shares closed on Wednesday at $52.69.
This is another top gold stock, and it still offers a solid entry point. Barrick Gold Corp. (NYSE: GOLD) and Randgold Resources completed their merger on January 1, 2019. This created the world’s largest gold company in terms of production, reserves and market capitalization.
The company holds a 50% interest in the Veladero mine located in the San Juan Province of Argentina; 50% interest in the KCGM, a gold mine located in Australia; 95% interest in Porgera, a gold mine located in Papua New Guinea; 50% interest in the Zaldavar, a copper mine located in Chile; and 50% interest in the Jabal Sayid, a copper mine located in Saudi Arabia.
Barrick also owns gold mines and exploration properties in Africa and gold projects located in South America and North America. It also has a strategic cooperation agreement with Shandong Gold Group.
Barrick Gold stock investors receive a 3.00% dividend. BofA Securities has a $25 price target, which compares with a $22.28 consensus target and Wednesday’s close at $18.34 a share.
This is a small-cap gold stock for aggressive investors looking for sector exposure. B2Gold Corp. (NYSE: BTG) is a global, growth-oriented mid-tier gold producer whose primary assets include gold mines located in Nicaragua (La Libertad and El Limon), the Philippines (Masbate), Namibia (Otjikoto) and Mali (Fekola).
When the company posted solid results in January, BofA Securities noted this:
BTG announced fourth quarter 2022 results and 2023 guidance. Q4 results were strong as expected and up 62% quarter-over-quarter. 2023 guidance showed production within the range of consensus expectations yet costs/capex were higher. 2023 capex includes significant investment into growing production at Fekola which we view as a high-return opportunity.
The dividend yield here is 4.22%. The $4.30 BofA Securities price target is less than the $5.02 consensus target, but B2Gold stock closed on Wednesday at $3.80.
Investors who are more aggressive may want to consider this smaller-cap mining company. Kinross Gold Corp. (NYSE: KGC) engages in the acquisition, exploration and development of gold properties principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania.
The company is also involved in the extraction and processing of gold-containing ores, reclamation of gold mining properties and the production and sale of silver.
Kinross announced last month that it has acquired deemed beneficial ownership of 5,018,017 common shares of Allegiant Gold issuable upon exercise of common share purchase warrants previously acquired by Kinross. The warrants were acquired as part of the previously announced investment in Allegiant completed on March 17, 2022. Pursuant to the investment, Kinross purchased 10,036,034 units of Allegiant, representing 9.9% of its issued and outstanding shares. Each unit consisted of one common share and one-half of one common share purchase warrant.
Investors receive a 2.76% dividend. BofA Securities has set its price target at $4.90, while Kinross Gold stock has a consensus target of $5.49. Wednesday’s closing share price was $4.33.
This is one of the largest mining companies and a solid buy for investors who are more conservative. Newmont Corp. (NYSE: NEM) is engaged in the production of gold.
Its North America segment consists primarily of Carlin, Phoenix, Twin Creeks and Long Canyon in Nevada and Cripple Creek and Victor in Colorado. The South America segment consists primarily of Yanacocha in Peru and Merian in Suriname. The Australia segment consists primarily of Boddington, Tanami and Kalgoorlie in Australia. The Africa segment consists primarily of Ahafo and Akyem in Ghana.
It was reported over the past week that Newmont bid $16.9 billion for Newcrest, a 21% premium to last Friday’s close. BofA Securities feels this would catapult Newmont to the world’s dominant gold miner, with estimated 2023 gold production of around 8.2 million ounces. The analyst estimates the offer price is a very attractive $1,180 per ounce, or a 37% discount to the current gold price.
Shareholders receive a 4.62% dividend. Newmont stock has a $64 price objective at BofA Securities, but the consensus target is higher at $74.36. Shares closed at $48.35 on Wednesday.
Wheaton Precious Metals
This precious metals royalty stock makes good sense for more conservative investors who are 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, and then sells the silver and gold into the open market.
Wheaton Precious Metals stock comes with a 1.37% dividend. The BofA Securities price target is $49. The consensus target is $53.50. On Wednesday, the stock closed at $43.66.
The SPDR Gold Trust (NYSE: GLD) exchange-traded fund is perhaps one of the best pure plays on gold for investors. The trust that sponsors the fund holds physical gold bullion, as well as some cash. Each share represents one-tenth of an ounce of the price of gold. Note though that the fund does not pay a dividend.
Proper asset allocation should always include at least a single-digit percentage holding of precious metals like gold and silver. Not only do they hedge inflation, which may continue to be huge now and over the long term, but they can really help if the market does go into correction or bear market mode, as we are in now, because they tend to trade inverse to markets.
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