After a brief hiatus in its fight against inflation last month, the Federal Reserve resumed its campaign by raising its benchmark interest rate to its highest level in 22 years. With the Fed's willingness to consider additional rate hikes, investors might want to turn to assets such as gold to seek stability.
In pursuit of this objective, it could be wise to capitalize on fundamentally robust gold stocks Barrick Gold Corporation (GOLD), DRDGOLD Limited (DRD), and Gold Fields Limited (GFI) at this juncture. Let’s understand this in detail.
August’s Consumer Price Index (CPI) increased 3.7% from 12 months earlier, up from 3.2% in July, due to higher gasoline prices. Although this increase is likely temporary, this could lead to policy tightening. Fed officials signaled to hold interest rates steady in September in the range of 5.25%-5.5%, this does not mean that the central bank has finished raising rates.
With the possibility of additional rate hikes, investors could consider investing in gold. Gold's status as a “safe-haven” asset, retaining value and liquidity amid economic uncertainty, makes it an attractive option. Investors often turn to stable assets such as gold as it offers protection against inflation and economic downturns.
During the first half of the year, gold exhibited a notable 5.4% surge, concluding June at $1,912.25 per ounce. Gold not only bolstered investor portfolios with favorable returns but also played a pivotal role in mitigating volatility, particularly amid the mini-banking crisis in March.
Certain analysts hold a notably bullish outlook for gold, forecasting a 2024 year-end target of $2,500. “My target is $2,500 by the end of 2024 … Much of this has to do with the fact that recessionary forces may take hold beginning later this year and gain steam in 2024,” said David Neuhauser, founder of Livermore Partners.
Moreover, the growing appetite for gold is conspicuous in countries such as China and India, propelled by cultural and economic forces that amplify jewelry demand during festive occasions and weddings. These areas are poised to experience heightened jewelry consumption, ultimately favoring the gold sector.
According to Zion Market Research, the global gold mining market was worth around $198 billion in 2022 and is predicted to grow to about $260 billion by 2030 at a CAGR of 3.5%.
Considering these conducive trends, let's take a look at the fundamentals of the three best Miners - Gold stocks, starting with number 3.
Stock #3: Barrick Gold Corporation (GOLD)
Based in Toronto, Canada, GOLD produces and sells gold and copper while engaging in exploration and mine development. The company holds ownership stakes in operational gold mines across Argentina, Canada, Cote d'Ivoire, the Democratic Republic of the Congo, the Dominican Republic, Mali, Tanzania, and the United States.
On August 8, GOLD announced its steadfast progress towards achieving its 2023 gold and copper production targets, bolstering long-term value through organic growth initiatives.
GOLD highlighted the substantial advancements in the Pueblo Viejo expansion project. The process plant is currently scaling up to full capacity, extending the Tier One mine's lifespan beyond 2040. This expansion, along with a new tailings storage facility, is poised to sustain annual gold production above 800,000 ounces.
Furthermore, in Pakistan, GOLD is making substantial strides in the Reko Diq project, set for initial production in 2028, coinciding with the Lumwana expansion's completion. These endeavors are poised to catapult GOLD into the premier league of copper producers, aligning with its strategy to significantly enhance its copper portfolio.
During the second quarter that ended June 30, 2023, GOLD’s revenues stood at $2.83 billion. It registered an adjusted EBITDA of $1.37 billion. As of June 30, 2023, the company’s cash and cash equivalents came in at $4.16 billion, and its current assets amounted to $7.37 billion as of June 30, 2023.
The consensus revenue estimate of $11.99 billion for the fiscal year ending December 2023 reflects an 8.9% rise year-over-year. Likewise, the consensus EPS estimate of $0.92 for the ongoing year indicates a 22.9% year-over-year improvement. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.
GOLD’s shares have gained 1.7% over the past five days to close the last trading session at $16.05.
GOLD’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
GOLD has a B grade for Quality and Growth. It has ranked #14 in the 39-stock B-rated Miners - Gold industry.
In addition to the POWR Ratings I’ve just highlighted, you can see GOLD’s ratings for Sentiment, Value, Momentum, and Stability here.
Stock #2: DRDGOLD Limited (DRD)
Headquartered in Johannesburg, South Africa, DRD operates in the surface gold tailings retreatment sector within South Africa. The company is engaged in exploration, extraction, processing, and smelting while also recovering gold from surface tailings located in the Witwatersrand basin in Gauteng province.
On August 23, DRD reported the nearing completion of its initial 20MW solar project phase. Over the next two years, DRD plans to augment it with an additional 40MW, along with a 160MWh power storage facility that will contribute power to the grid, enabling the offsetting of power consumption across the business via wheeling.
Additionally, the company anticipates increased throughput for fiscal 2024, projecting production in the range of 165,000 to 175,000 ounces, indicating promising prospects.
For the fiscal year that ended June 30, 2023, DRD’s revenue increased 7.4% year-over-year to R5.50 billion ($290.37 million). Its gross profit from operating activities grew 15.1% from the year-ago value to $1.59 billion ($83.75 million).
In addition, the company’s profit for the year and EPS rose 14% and 13.5% from the prior year to R1.28 billion ($67.70 million) and R148.2, respectively.
Analysts expect DRD’s EPS to grow 10% per annum over the next five years. The stock has gained 31.8% over the past six months and 63.2% over the past year, closing the last trading session at $9.53.
DRD’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
DRD has a B grade for Quality and Stability. It is ranked #11 out of 39 stocks in the Miners – Gold industry.
Click here to access the additional DRD ratings (Growth, Value, Momentum, and Sentiment).
Stock #1: Gold Fields Limited (GFI)
GFI, headquartered in Sandton, South Africa, produces gold and copper, boasting nine operational mines and substantial mineral reserves of around 48.6 million ounces, coupled with mineral resources totaling approximately 111.8 million ounces. Its operations span five key segments: South Africa; Ghana; Chile; Australia; and Peru.
In its most recent financial report, GFI highlighted significant developments that are expected to yield substantial benefits. Firstly, the proposed Tarkwa/Iduapriem JV in Ghana with AngloGold Ashanti, pending approval by the Government of Ghana, promises a notable production increase and a reduction in AISC.
Secondly, GFI's partnership with Osisko Mining to develop the Windfall Project in Canada, with its Environmental Impact Assessment (EIA) submitted in March, is anticipated to receive approval in 12 to 18 months. This milestone will trigger essential construction activities, bolstering GFI's outlook.
For the six months that ended June 30, 2023, GFI’s revenue increased 1.4% year-over-year to $2.27 billion. Its cash inflow from financing activities grew 131.5% from the year-ago value to $158.80 million. As of June 30, 2023, the company’s total assets amounted to $7.85 billion, compared to $7.34 billion as of December 31, 2022.
The company’s revenue for the fiscal year ending December 2024 is expected to increase 21.6% year-over-year to $5.55 billion. Similarly, analysts expect GFI’s EPS for the same period to come in at $1.25, up 35.2% from the previous year. Moreover, the company surpassed the consensus EPS estimates in three of the four trailing quarters.
Over the past year, the stock has gained 48.2%, closing the last trading session at $12.51.
GFI’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
GFI has a B grade for Growth and Quality. It is ranked #9 within the same industry.
Click here to access additional GFI ratings for Value, Stability, Sentiment, and Momentum.
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GOLD shares were trading at $16.06 per share on Wednesday afternoon, up $0.01 (+0.06%). Year-to-date, GOLD has declined -3.61%, versus a 17.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Gold Mining Stocks to Take Advantage of ASAP StockNews.com
