With stocks reeling under the weight of today's disappointing payrolls report - which has raised fears of a faltering economy, just days after the Fed opted to stand pat on interest rates again - gold futures are once again getting a shot in the arm. The precious metal has had a breakout year, bolstered by its status as an inflationary hedge and a safe-haven investment amid a backdrop of stubbornly high prices and flaring geopolitical tensions. Eventual Fed rate cuts should also support gold as the dollar weakens - but that narrative is taking a backseat today in the face of troubling jobs data.
Gold futures for December delivery (GCZ24), the most active contract, jumped 1% this morning to trade above $2,500, after opening at new highs of $2,522. Cash gold is now up more than 19% on a YTD basis, easily outperforming the S&P 500 Index ($SPX), which is clinging to a gain of 12.7%. Many analysts think there's more upside to come, with analysts at major brokerage firms calling for a longer-term rise to $3,000.
For investors looking to add exposure to the precious metal, here's a look at two gold mining stocks that pay dividends, have earned “Strong Buy” ratings from analysts, and have room to keep rising to Wall Street's mean price targets.
#1. Alamos Gold
Formally incorporated in 2007, Alamos Gold (AGI) is a leading intermediate gold producer with operations in North America. The company focuses on discovering, developing, and operating profitable gold mines. It owns and operates several gold mines, primarily in Mexico and Canada. The company is currently valued at a market cap of $6.93 billion.
Alamos stock has been an outperformer in 2024 so far, rising 31% on a YTD basis. The stock pays a modest dividend yield of 0.58%, with a conservative payout ratio of 8%, indicating that AGI is still investing most of its earnings back into growth.
AGI's numbers for the latest quarter were quite upbeat, as both revenue and earnings displayed healthy yearly growth, and surpassed Wall Street's consensus estimates, as well. Operating revenues of $332.6 million marked a rise of 27.4% from the prior year, following record production of gold. EPS jumped by 60% to $0.24, outpacing the consensus estimate of $0.19. Notably, this marked the company's fifth consecutive quarterly earnings beat.
The company produced 139,100 ounces of gold, up from 136,000 ounces in the previous year. Gold sales also increased by 6.8% yearly to 140,923 ounces, with an 18.2% improvement in the average realized gold price to $2,336 per ounce over the same period.
Cash flow from operations went up by 37.2% to $194.5 million, and the company ended the quarter with a cash balance of $313.6 million. Moreover, the company is debt-free.
AGI's $325 million acquisition of Argonaut Gold's Magino Mine should strengthen its operational position. The combined Ontario assets could produce about 450,000 ounces annually, potentially increasing to over 500,000 with a Magino mill expansion. This would create a near Tier-1 mining complex for Alamos.
Additionally, the company believes that its increased investments at Lynn Lake are expected to produce upwards of 205,000 ounces over its first five years, with the potential to improve the production profile by adding new deposits like Burnt Timber and Linkwood.
With its robust balance sheet and exciting operational developments, analysts are bullish about AGI, giving it a consensus rating of “Strong Buy.”
The mean target price of $19.94 denotes an upside potential of about 11.2% from current levels. Out of 11 analysts covering the stock, 9 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 1 has a “Hold” rating.
#2. Agnico-Eagle Mines
Formed in 1957 through the merger of two Canadian mining companies, Agnico-Eagle Mines (AEM) is a leading Toronto-based senior gold mining company. It is involved in the exploration, development, and operation of gold mines, primarily in Canada, Finland, and Mexico. The company currently commands a market cap of $38 billion.
AEM stock has surged 40.6% on a YTD basis. The miner offers a dividend yield of 2.10%, with a 56% payout ratio.
Agnico-Eagle Mines is also fresh off a July 31 earnings report, like Alamos, and also delivered an impressive Q2FY24, with both revenue and earnings topping estimates.
Revenues grew by 21% from the previous year to $2.08 billion, driven by increased production and improved average realized selling price. EPS shot up by 67.2% to $1.07, easily surpassing the consensus estimate of $0.93. Looking back, the company's EPS has outpaced Wall Street's estimates in each of the past five quarters.
Production and sales both improved from the previous year, reflecting operational tailwinds, While production rose by 2.6% to 895,838 ounces, sales increased by 1.8% on a YoY basis to 874,230 ounces. Realized prices moved higher as well, up by 18.6% from the prior year to $2,342 per ounce.
Amid increased sales and volumes, the company generated cash flow of $961.3 million from operations - up 33.1% YoY. Overall, the company closed the quarter with a cash balance of $921.9 million, while net debt of $919.7 million was down sequentially from $1.3 billion.
Agnico Eagle has steadily increased its reserves through acquisitions and exploration. Key contributors include East Gouldie, full ownership of Canadian Malartic, and outperforming mines like Fosterville and Macassa. Further, the company's San Nicolas stake holds substantial gold and other metal reserves, with growth expected from Wasamac and continued exploration at Canadian Malartic, Hope Bay, and Detour Lake.
Significantly, Agnico Eagle's pipeline - including Hope Bay, Malartic, Detour Lake, San Nicolas, and Upper Beaver - exceeds 1.3 million gold ounces, offsetting challenges like Meadowbank's closure (400,000 ounces), Pinos Altos (about 100,000 ounces), and potential grade declines elsewhere.
Wall Street analysts have deemed AEM stock a “Strong Buy,” with a mean target price of $82.20, which indicates an upside potential of roughly 7.7% from current levels. Out of 14 analysts covering the stock, 10 have a “Strong Buy” rating, 3 have a “Moderate Buy” rating, and 1 has a “Hold” rating.
