Gold prices soared to another record high today, thanks to a nonfarm payrolls report that investors viewed as supportive of a rate cut from the Fed. April-dated gold futures (GCJ24), the most active contract, peaked above $2,192 an ounce earlier before paring some gains. Spot gold has now gained 20% over the past year, with demand driven by global central bank buying, largely as an inflation hedge.
In addition to persistent inflation, the mounting U.S. debt - at nearly $34.4 trillion as of March 6 - a weakening dollar, geopolitical tensions, and election-year uncertainty in several nations worldwide are all expected to drive gold prices higher in the foreseeable future. In a January note, JPMorgan projected gold prices would reach a new high of $2,300 in 2025 - but at today’s record peak, the yellow metal has already surpassed the investment bank’s 2024 gold forecast of $2,175.
One strategy to capitalize on the bullish gold price trend is to invest in gold stocks. So, which gold stocks have the potential to climb higher? Sandstorm Gold Ltd. (SAND), Coeur Mining, Inc. (CDE), and Gold Royalty Corp. (GROY) could be worth considering, as Wall Street analysts expect these stocks to deliver solid upside.
Gold Stock #1: Sandstorm Gold Ltd. (SAND)
Sandstorm Gold Ltd. (SAND), headquartered in Vancouver, is a gold royalty company that provides funding to mining companies in exchange for royalties, primarily in the form of net smelter returns and streams. Since its inception in 2008, Sandstorm Gold has built an impressive portfolio of over 250 royalties on mines worldwide. Its market cap currently stands at $1.4 billion.
Shares of SAND are down about 4% over the past 52 weeks, but up 5% over the past month. The stock offers an annual dividend of $0.05 per share, which translates to a dividend yield of 0.98%.
The stock currently trades at 72.48 times forward earnings and 12.65 times forward sales.
Sandstorm Gold's latest earnings results for the fourth quarter were impressive, with both revenue and EPS beating expectations. Sandstorm reported revenues of $44.5 million in the quarter, up 15.9% year-over-year. Its net income stood at $24.5 million, or $0.08 per share, compared to a net loss of $2.1 million, or $0.01 per share, in the year-ago quarter. Cash flows from operating activities increased by 22.1% from the prior-year quarter to $36.5 million.
Looking into Sandstorm Gold's portfolio, the Greenstone project (in which SAND holds a 2.375% gold stream on the first ~120,300 ounces at 20% spot to Orion, stepping down to ~1.58% after) remains on schedule. The first gold pour is currently targeted for the first half of 2024, and the average annual cash flows to Sandstorm are expected to range between $10 million and $15 million. If the mine can achieve its milestones of production, it is expected to contribute ~8,500 ounces in its first five full years of production to Sandstorm.
Additionally, in 2024, if Ivanhoe has its Platreef mine in northeast South Africa up and running, production should increase in future years from this high-quality, long-life mine. Construction of the Phase 1 concentrator is advancing on schedule and is over 80% complete. An updated feasibility study and PEA, covering the scope of optimized Phase 2 and the new Phase 3 expansion, is expected to be completed and published in the second half of 2024. The project is forecasted to generate average annual cash flows to Sandstorm (Phase 1 & 2) between $5 million and $ 20 million.
Based on Sandstorm's existing royalties, attributable gold equivalent ounces for 2024 are forecasted to be between 75,000 and 90,000 ounces. The company's production forecast is expected to reach approximately 125,000 attributable gold equivalent ounces within the next five years.
Sandstorm Gold stock has a consensus “Strong Buy” rating. Out of the 11 analysts offering recommendations for the stock, seven rate it “Strong Buy,” three have a “Moderate Buy," and one advises a “Hold.” The mean price target of $7.23 indicates roughly 55% upside potential.
Gold Stock #2: Coeur Mining, Inc. (CDE)
Chicago-based Coeur Mining, Inc. (CDE), with a market cap of over $1.2 billion, is a well-diversified, growing precious metals producer with four wholly-owned operations: the Palmarejo gold-silver complex in Mexico; the Rochester silver-gold mine in Nevada; the Kensington gold mine in Alaska; and the Wharf gold mine in South Dakota. In addition, the company wholly owns the Silvertip silver-zinc-lead exploration project in British Columbia.
Shares of CDE have gained 8% over the past 52 weeks, and 16% over the past month.
The stock is trading at 1.37x forward sales and 29.58x cash flow.
Coeur Mining announced a 35% quarter-over-quarter revenue increase to $262.1 million in the fourth quarter of 2023, which surpassed analysts’ estimates. The company doubled its adjusted EBITDA to $64.3 million, though its net loss for the quarter was $6 million, or $0.02 per share.
The top-line growth was based on gold and silver production increases of 29% and 34% quarter-over-quarter to 101,609 ounces and 3.1 million ounces, respectively, from the Rochester operation and the Wharf gold mine. For the full year 2023, gold and silver production totaled 317,671 ounces and 10.3 million ounces, respectively, within the company’s consolidated production guidance ranges.
CDE expects an annualized revenue run rate exceeding $1 billion, based on its Q4 results. The company expects that on an annualized basis, this run rate could lead to $250 million in EBITDA.
Since acquiring the Wharf mine in February 2015, Coeur has generated cumulative free cash flow of over four times its original $99.5 million investment. Mine life has remained strong, at six years, compared to the estimated five-year mine life at the time of acquisition. The Wharf mine ended the fourth quarter with an operating cash flow of $29 million and a free cash flow of approximately $27 million. For the full year, operating cash flow totaled $84 million, and free cash flow reached a record $82 million. Wharf's 2024 gold production is expected to be between 86,000 ounces to 96,000 ounces.
Additionally, the commissioning of Rochester’s new crushing circuit is progressing, with the completion of ramp-up activities anticipated during the first half of 2024. Once operating at full capacity, throughput levels are expected to average 32 million tons per year, approximately 2.5 times higher than historical levels. For 2024, gold production is expected to be between 37,000 ounces and 50,000 ounces. Production in 2024 is expected to increase after a slow first quarter, due to commissioning and ramp-up in the first half of this year.
Coeur Mining is a “Moderate Buy”-rated stock with a mean price target of $3.58, implying a potential upside of nearly 13%. Out of the six analysts offering recommendations for the stock, two rate it “Strong Buy,” two say it’s a “Moderate Buy," and two advise a “Hold.”
Gold Stock #3: Gold Royalty Corp. (GROY)
With a market cap of $269.6 million, the Vancouver, Canada-based Gold Royalty Corp. (GROY) is a precious metals-focused royalty and streaming company offering creative financing solutions to the metals and mining industry. Its diversified portfolio consists of over 200 royalties located in mining-friendly jurisdictions throughout the Americas.
GROY shares have lost 6.1% over the past 52 weeks, but gained 30.9% year to date.
The stock trades at 76.89 times forward sales and 0.51 times book value.
In the third quarter of 2023, the company's total revenue and land agreement proceeds rose 48.4% year-over-year to $1.4 million, while there was a 50% year-over-year decline in its cash operating expenses to $1.6 million. Its adjusted net loss improved to $1.1 million, or $0.01 per share, from $3.4 million, or $0.03 per share in the year-ago quarter.
Gold Royalty recently invested in gold-focused projects in Quebec, Canada, with a portfolio of 21 royalties, and in Rio Grande do Norte State, Brazil.
The company's Royalty Generator Model had a productive third quarter, with two new royalties added. Gold Royalty has generated 39 royalties through this model since the acquisition of Ely Gold Royalties Inc. in 2021. The model continues to incur low operating costs, with under $80,000 spent on mineral interest maintenance expenses during the third quarter.
Production via the ramp at the Odyssey South deposit increased through the quarter, reaching 3,300 tonnes per day (tpd) in September, and approaching the planned mining rate of 3,500 tpd for 2024. Moreover, as of Sept. 30, the Côté Gold Project was estimated to be approximately 92% complete, and first production is expected to commence in early 2024. Mining activities are on track to the target build-up of 5.0 million tonnes by the end of the year.
Gold Royalty's management believes that the company is pacing to meet its previously disclosed forecast of $5.5 million to $6.5 million in total revenue and land agreement proceeds in 2023. It expects to generate positive net operating cash flow in 2024, when select key growth projects - including the long-life cornerstone mines at Côté and Odyssey - are expected to ramp up in production.
For the upcoming March 28 earnings release, Wall Street expects a loss of $0.01 per share.
Gold Royalty has a consensus rating of “Moderate Buy.” Of the seven analysts offering recommendations for the stock, four rate it “Strong Buy,” one suggests “Moderate Buy," and two recommend a “Hold.” The average price target of $3.50 implies a potential upside of 82%.
