Gold extends rebound near $1,860 per ounce on the back of tampering interest rates and raised geopolitical risk in the Middle East due to the ongoing Israel-Hamas conflict, driving safe-haven demand for the precious metal. Further, experts maintain a bullish gold price outlook.
Against this backdrop, it could be wise to invest in fundamentally sound gold stocks Kinross Gold Corporation (KGC), B2Gold Corp. (BTG), and Dundee Precious Metals Inc. (DPMLF) for growth.
Gold prices continue to surge on increased market uncertainty due to the ongoing conflict in the Middle East and dovish comments from the top U.S. Federal Reserve officials weighing on the dollar and bond yields.
Military clashes between Israeli forces and Palestinian Islamist group Hamas raised political unrest in the Middle East, driving the safe-haven appeal of the yellow metal. The conflict further threatens investors with enhanced volatility, adding uncertainty ahead of the corporate earnings season and the U.S. inflation report this week.
“The events in the Middle East have provided a catalyst for gold to rebound from oversold conditions,” said Kyle Rodda, financial market analyst at Capital.com.
Spot gold soared 0.1% to $1,862.80 per ounce by 0314 GMT, following hitting its highest since September 29. U.S. gold futures gained 0.7% to $1,876.90. Moreover, gold grew 1.6% yesterday, marking its biggest one-day jump in nearly five months.
Traditionally, Gold is considered a safe-haven investment during uncertain economic times; however, since it yields no interest, it tends to lose its attraction when interest rate increases.
Recent remarks by top Fed officials prompted investors to undermine the probability of further interest rate hikes, boosting gold prices. As per Fed Vice Chair Phillip Jefferson, the central bank would need to “proceed carefully” given the recent rise in bond yields, while Dallas Fed President Lorie Logan said there may be less need to raise the Fed fund rate if long-term rates remain elevated.
According to the CME Group’s FedWatch Tool, markets are seeing a more than 84% chance that the Fed will hold interest rates steady in its upcoming meeting next month.
Furthermore, several investment banks maintain a bullish gold price outlook. JPMorgan Chase & Co. predicts the gold price to reach $2,175 per ounce next year, an increase from $2,000 per ounce in 2023. Also, Goldman Sachs has a positive outlook for the gold price in 2024, reaching $2,133 per ounce.
Moreover, the enduring appeal of the precious metal is highlighted as central banks posted another month of solid gold buying in August. Central banks collectively raised their gold reserves for the third consecutive month, adding approximately 77t to global official reserves in August, a 37% uptick from July’s buying.
Investors’ interest in gold is evident from the SPDR Gold Shares ETF’s (GLD) 11.2% gains over the past year.
In light of these favorable trends, let’s look at the fundamentals of the three best Miners - Gold stocks, beginning with number 3.
Stock #3: Kinross Gold Corporation (KGC)
Based in Toronto, Canada, KGC engages in acquiring, exploring, and developing gold properties primarily in the U.S., Brazil, Chile, Canada, and Mauritania. Also, it is involved in the extraction and processing of gold-containing ores, reclamation of gold mining properties, and production and sale of silver.
On August 3, KGC announced that its Board of Directors declared a dividend of $0.03 per common share for the second quarter of 2023. The dividend was paid on September 8, 2023, to shareholders of record as of the close of business on August 24, 2023.
The company’s annual dividend of $0.12 translates to a yield of 2.54% at the prevailing price level, while its four-year average dividend yield is 2.16%.
KGC’s pipeline of projects continued to make solid progress. During the second quarter, construction and initial commissioning were completed at the Tasiast 24k project on schedule and budget. The Tasiast 24k project would increase production and reduce costs while generating significant free cash flow. Also, Manh Choh advances on the plan to come online in the second half of 2024.
For the second quarter that ended June 30, 2023, KGC’s metal sales increased 33% year-over-year to $1.09 billion. Its operating income grew 271.6% from the year-ago value to $237.80 million. Its adjusted net earnings from continuing operations attributable to common shareholders rose 348.1% from the prior year’s quarter to $167.60 million.
Furthermore, the company’s adjusted net earnings per share from continuing operations were $0.14, up 366.7% year-over-year. Its adjusted operating cash flow from continuing operations increased 88.7% year-over-year to $459.10 million. Also, free cash flow from continuing operations was $246.70 million, compared with $107.70 million in the same quarter of 2022.
Analysts expect KGC’s revenue for the third quarter (ended September 2023) to increase 20% year-over-year to $1.03 billion. The consensus EPS estimate of $0.11 for the to-be-reported quarter indicates an 11.4% rise year-over-year. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
For the fiscal year ending December 2023, the company’s revenue and EPS are expected to grow 20.2% and 82.1% from the previous year to $4.15 billion and $0.40, respectively.
Shares of KGC have gained 10.8% year-to-date and 28.9% over the past year to close the last trading session at $4.73.
KGC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
KGC has a B grade for Growth, Quality, and Value. It has ranked #7 of 37 stocks in the B-rated Miners - Gold industry.
To see additional POWR Ratings of KGC for Stability, Momentum, and Sentiment, click here.
Stock #2: B2Gold Corp. (BTG)
Headquartered in Vancouver, Canada, BTG is a gold producer with three mines in Mali, the Philippines, and Namibia. It operates the Fekola mine in Mali, the Masbate mine in the Philippines, and the Otjikoto mine in Namibia. The company has a 25% interest in Calibre Mining Corp. and approximately 19% interest in BeMetals Corp.
On September 18, BTG entered into a purchase agreement with AngloGold Ashanti Limited to acquire AngloGold’s 50% stake in the Gramalote project, located in the Department of Antioquia, Colombia. Upon completion of the transaction, B2Gold will own 100% of the Gramalote project.
This agreement consolidates the Gramalote project under a single owner, providing additional benefits to analyze lower capacity intensity and higher return development opportunities for the project. Also, BTG will add 2.11 million gold ounces of Indicated Mineral Resources and 0.74 million gold ounces of Inferred Mineral Resources to the company’s consolidated Mineral Resource base.
On September 29, BTG remained in a solid net positive cash position and paid a quarterly dividend of $0.04 per common share to shareholders of record as of September 21, 2023. Its annual dividend of $0.16 translates to a yield of 5.30% at the current price level, and its four-year average dividend yield is 3.01%.
Additionally, the company’s dividend payouts have grown at a CAGR of 27.3% over the past three years.
Also, on June 21, BTG announced an updated Mineral Resource estimate with a significant increase in the laterite, saprolite, and saprock (collectively oxide) Mineral Resources and an initial sulphide Indicated Mineral Resource estimate for the Anaconda Area. This reflects that the company’s pipeline is on track to make solid progress.
BTG’s revenue has grown at a CAGR of 10.1% over the past three years. Over the same period, the company’s EBITDA and total assets have increased at CAGRs of 6.4% and 15%, respectively, and its levered free cash flow has grown at a CAGR of 3.4%.
In the second quarter that ended June 30, 2023, BTG’s gold revenue increased 23.3% year-over-year to $470.85 million, while its gross profit grew 61.4% from the year-ago value to $190.32 million. The company’s operating income rose 62.7% year-over-year to $159.14 million. Cash provided by operating activities was $194.98 million, up 56.1% year-over-year.
In addition, the company’s adjusted net income and adjusted earnings per share increased 89.6% and 75% year-over-year to $85.80 million and $0.07, respectively.
Street expects BTG’s revenue and EPS for the fiscal year (ending December 2023) to increase 10.6% and 22.7% year-over-year to $1.92 billion and $0.31, respectively. The stock has declined marginally over the past month to close the last trading session at $3.02.
BTG’s POWR Ratings reflect this robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Quality. It is ranked #4 within the 40-stock B-rated Miners - Gold industry.
Click here to see the additional BTG ratings of Momentum, Stability, and Sentiment.
Stock #1: Dundee Precious Metals Inc. (DPMLF)
Headquartered in Toronto, Canada, DPMLF is a gold mining company involved in acquiring mineral properties and exploring, developing, mining, and processing precious metals. It owns and operates a gold, copper, and silver mine located east of Sofia, Bulgaria; a gold mine in southeastern Bulgaria; and a custom smelter located in Tsumeb, Namibia.
On August 18, DPMLF entered into an investment protection agreement (IPA) with the Government of Ecuador for the Loma Larga project. Under the terms of the agreement, the Government of Ecuador granted DPM tax stability and certain tax incentives, and legal protections, including stability of the regulatory framework and resolution of disputes through international arbitration.
The successful completion of the IPA is a significant milestone and a positive step forward for the Loma Larga project.
On August 1, DPMLF declared a quarterly dividend of $0.04 per common share, payable to its shareholders on October 16, 2023. The company’s annual dividend of $0.16 translates to a yield of 2.66% at the current price level, while its four-year average dividend yield is 1.60%. Additionally, its dividend payouts have grown at a CAGR of 58.7% over the past three years.
Over the past three years, DPMLF’s revenue and EBIT have grown at CAGRs of 5.1% and 6.2%, respectively. The company’s net income and EPS have increased at CAGRs of 115.7% and 118.3%, respectively, over the same timeframe. Its total assets have grown at a CAGR of 13.6% over the same period.
DPMLF’s revenue increased 24.6% year-over-year to $167.52 million for the second quarter that ended June 30, 2023. Its earnings before income taxes grew 69.4% year-over-year to $69.24 million. Its adjusted EBITDA rose 26.2% from the prior year’s quarter to $86.65 million.
Furthermore, the company’s adjusted net earnings and adjusted EPS rose 86.9% and 94.1% year-over-year to $62.20 million and $0.33, respectively. Also, its free cash flow was $70.45 million, up 70.9% year-over-year.
Street expects DPMLF’s revenue for the third quarter (ending September 2023) to increase 33.1% year-over-year to $171.20 million. Likewise, the company’s revenue for the fiscal year 2023 is expected to grow 17.4% year-over-year to $668.80 million.
DPMLF’s shares have climbed 23.9% year-to-date and 38.7% over the past year to close the last trading session at $6.09.
DPMLF’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Growth, Value, and Stability. It is ranked first among 37 stocks in the same industry,
In addition to the POWR Ratings we’ve stated above, we also have DPMLF’s ratings for Momentum and Sentiment. Get all DPMLF ratings here.
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KGC shares fell $4.73 (-100.00%) in premarket trading Tuesday. Year-to-date, KGC has gained 18.10%, versus a 14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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