Amid an uncertain economic environment due to still-high inflation, rising interest rates, and growing worries about a potential recession, economists and market professionals view gold as a stable and lucrative investment option. That is because it holds its value and preserves your purchasing power over the long run, despite high inflation and currency fluctuation.
Therefore, it is the right time to invest in fundamentally sound gold stocks that Endeavour Mining plc (EDVMF), B2Gold Corp. (BTG) and Centamin plc (CELTF), which could offer stability and protection against challenging economic conditions.
For more than a year, the Fed enacted a series of interest rate hikes designed to restore price stability. Inflation cooled in March as the consumer price index (CPI) rose 0.1% for the month and 5% year-over-year, versus estimates of 0.2% and 5.1%, respectively. While price increases have continued to ease since hitting a four-decade high last summer, inflation is still well above the Fed’s target of 2%.
According to Bankrate’s quarterly survey of economists, the odds of a recession this year hover at 64% amid turmoil in the financial system and higher interest rates.
“While the odds of a recession have been seen as elevated for many months now, recent bank failures and the related flare-up of financial system instability are widely seen as raising the economy’s downside risks,” said Mark Hamrick, senior economic analyst at Bankrate.
During periods of enhanced economic uncertainty, investors turn to stable investment options like gold to help mitigate some of the risks. Gold is traditionally considered a “safe haven” investment because even during economic downturns, it retains its value and liquidity. Also, gold can be a potential hedge against inflation and market volatility.
Elevated inflation increases investors’ interest in purchasing gold, thereby driving up its prices. Gold has been on an unstoppable run recently, with its prices racing to above the $2000 level for the first time since March 2022. Gold reached its all-time high of $2,075 in August 2020. And various analysts expect the precious metal to surpass that previous peak this year.
According to CMC Markets, a Fed pivot will trigger a sell-off in the U.S. dollar and plunge bond yields, pushing gold prices up to between $2,500 and $2,600 per troy ounce. Also, Randy Smallwood, CEO of Wheaton Precious Metals (WMP), forecasted gold prices to reach $2,500 per ounce.
Investors’ interest in gold stocks is evident from VanEck Gold Miners ETF’s (GDX) 32.6% gains over the past six months.
If you’re seeking a hedge against inflation or a greater portfolio diversification, investing in fundamentally strong gold stocks EDVMF, BTG, and CELTF could be ideal for significant gains.
Let’s take a closer look at the fundamentals of these stocks:
Endeavour Mining plc (EDVMF)
Headquartered in London, United Kingdom, EDVMF operates as a gold mining company in West Africa. It has six operating assets, such as the Boungou, Houndé, Mana, and Wahgnion mines in Burkina Faso; the Ity mine in Côte d'Ivoire; the Lafigué project in Côte d'Ivoire; the Sabodala-Massawa mine in Senegal; the Kalana projects in Mali; and a portfolio of exploration assets on the Birimian Greenstone Belt.
EDVMF’s Sabodala-Massawa expansion and the Lafigué greenfield project are both on budget, with 70% and 46% of the initial capital committed respectively, and on schedule for the second quarter and third quarter of 2024, respectively.
For the first quarter that ended March 31, 2023, EDVMF’s net earnings attributable to shareholders and net earnings per share came in at $4 million and $0.02, compared to net loss attributable to shareholders and net loss per share of $57 million and $0.23, respectively. Also, strong financial position at quarter end with $810 million in cash in addition to $285 million in available sources of financing.
EDVMF pays a $0.81 per share dividend annually, translating to a 3.09% yield on the current price. Its four-year average dividend yield is 1.46%.
Analysts expect EDVMF’s revenue for the fiscal year (ending December 2023) to increase 7.6% year-over-year to $2.69 billion. The consensus EPS estimate of $2.32 for the current year indicates an improvement of 42.3% year-over-year. Furthermore, the company’s revenue and EPS for the fiscal year 2024 are expected to grow 3.3% and 46.6% year-over-year to $2.78 billion and $3.40, respectively.
Over the past six months, the stock has gained 34.6% and 9.6% over the past year to close the last trading session at $26.25.
EDVMF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EDVMF has a B grade for Quality, Stability, and Sentiment. In the B-rated Miners-Gold industry, it is ranked #4 out of 39 stocks.
Click here for the additional POWR Ratings for Growth, Value, and Momentum for EDVMF.
B2Gold Corp. (BTG)
BTG is a leading gold producer with operating mines in Mali, the Philippines, and Namibia. The company operates the Fekola Mine in Mali, the Masbate Mine in the Philippines, and the Otjikoto Mine in Namibia. Also, it has a 25% interest in the Calibre Mining Corp. and nearly 19% interest in BeMetals Corp. It is headquartered in Vancouver, Canada.
On April 19, BTG completed acquisition of Sabina Gold & Silver Corp. The arrangement results in B2Gold acquiring Sabina’s 100% owned Back River Gold District located in Nunavut, Canada. The Back River Gold District comprises of five mineral claims blocks along an 80 kilometre belt.
Goose, the most advanced project in the district is fully permitted, construction ready, and has been de-risked with significant infrastructure currently in place. The addition of this high-quality, high grade gold project in a top mining jurisdiction to BTG’s global portfolio is expected to boost its growth and profitability.
For the fiscal year that ended December 31, 2022, BTG’s cash inflows from operating activities came in at $595.80 million. As of December 31, 2022, the company’s cash and cash equivalents were $651.95 million, while its current assets stood at $1.04 billion.
BTG pays a $0.16 per share dividend annually, translating to a 3.92% yield on the current price. Its four-year average dividend yield is 2.51%. Its dividend payouts have grown at a 109.1% CAGR over the past three years.
Analysts expect BTG’s revenue for the fiscal year (ending December 2023) to increase 9.5% year-over-year to $1.90 billion. The company’s EPS for the ongoing year is expected to grow 22% year-over-year to $0.31. Shares of BTG have gained 21.4% over the past six months to close the last trading session at $4.08.
BTG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
BTG has an A grade for Quality and a B grade for Value. Within the B-rated Miners-Gold industry, it is ranked #5 of 39 stocks. To access BTG’s ratings for Growth, Momentum, Sentiment, and Stability, click here.
Centamin plc (CELTF)
Saint Helier, Jersey-based, CELTF engages in the exploration, mining, and development of precious metals in Egypt, Burkina Faso, Côte d'Ivoire, Jersey, the United Kingdom, and Australia. The company explores for gold deposits and its principal asset is the Sukari Gold Mine project, which covers an area of approximately 160 square kilometers located in the Eastern Desert of Egypt.
Talking about great progress the company made in 2022, Martin Horgan, CEO, said, “In terms of growth, Sukari achieved its second successive year of reserve growth and across the wider portfolio, we commenced exploration work across our EDX portfolio in Egypt and progressed our Doporo PFS which is expected to be completed in the first half of 2023.”
He added, “The Company secured its inaugural sustainability linked debt facility with a group of leading international resource banks, adding financial flexibility to an already robust balance sheet and enable us to deliver our identified growth opportunities.”
CELTF’s gold production increased 6.2% year-over-year to 440.97 Koz in the fiscal year that ended December 31, 2022. The company’s gold sales grew 7.7% year-over-year to 438.64 Koz. Its revenue came in at $788.4 million, an increase of 7.5% year-over-year. In addition, its profit before tax grew 11% from the prior year to $171 million.
Analysts expect CELTF’s revenue to increase 17.5% year-over-year to $205.20 million for the first quarter that ended March 2023. Furthermore, the consensus revenue estimate of $874.78 million for the fiscal year 2023 indicates an improvement of 11% year-over-year.
The stock has gained 33.9% over the past six months and 30.7% over the past year to close the last trading session at $1.50.
CELTF’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
CELTF has a B grade for Quality, Value, and Stability. It is ranked #3 out of 39 stocks in the same industry.
In addition to the POWR Ratings stated above, we have also given CELTF grades for Growth, Momentum, and Sentiment. Get all CELTF ratings here.
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EDVMF shares were trading at $26.25 per share on Tuesday morning, down $0.06 (-0.23%). Year-to-date, EDVMF has gained 22.45%, versus a 7.87% 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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