LONDON, April 9, 2019 /CNW/ -- After a rough 2018, gold stocks are set for a rebound. Prices began to bounce back in late 2018, as uncertainty in the market brought investors around to gold as a useful hedge. Mentioned in today's commentary includes: Barrick Gold Corp. (NYSE:GOLD), Newmont Mining (NYSE: NEM), Kirkland Lake Gold (NYSE:KL), Rio Tinto (NYSE:RIO), Wheaton Precious Metals Corp. (NYSE:WPM).
Gold stocks were depressed for years. But now, worries about dwindling gold supplies—"peak gold"—and the low prices of gold stocks have investors interested again, sending prices up above $1300 per ounce.
Goldman Sachs predicts only twenty years of gold left: "We found it all!" cries one gold miner. And with market uncertainty lingering, on the back of Brexit, the US-China trade war and signs of an economic slowdown, it's likely that gold will continue to gain.
With that in mind, here are 5 gold stocks to add to your ledger
#1 Barrick Gold Corp. (NYSE:GOLD)
The world's most valuable, and profitable, gold miner made a big move this year, attempting a take-over of rival Newmont Mining The announcement came out of nowhere, and if it had gone through would have seen some $17.8 billion change hands.
The deal fell through, but there was a silver lining: the two companies agreed to partner up to exploit a potential find in Nevada, with a two-thirds share for Barrick. The joint venture is expected to unlock nearly $5 billion over the next twenty years. That's good news for Barrick, which is already the biggest name in gold mining.
Last year Barrick reported 4.5 million ounces in gold. Nevada could yield 76 million ounces, providing for both Newmont and Barrick and all, as Barrick's CEO Mark Bristow put it, "without issuing a single stock."
Buoyed by the news of a potential takeover, Barrick's stock has been soaring, gaining 9.4% in the thirty days before March 26. Analysts put the company's short-term value at $14.34, representing gains of more than 50% since September. So even without Newmont in its ledger, Barrick should enjoy a strong year, particularly as calls of "peak gold" echo around the market.
A tiny company has made a big acquisition…and it's right out of the history books. An ancient Roman gold mine deep in the forests of Romania. And Euro Sun Mining Inc. has the means to get it kick-started.
The scale of this resource is immense: the Rovina Mine, once it's up and running, will be the 2nd biggest gold mine in all of Europe: 400 million tons of ore, yielding 10.1 million ounces of gold equivalent. Profits from this find are estimated at $550 per ounce…for a total haul of $5.5 billion over the mine's lifetime.
What makes Euro Sun so special? Well, there are actually HUNDREDS of mines scattered across Europe. Many of them were left over from Roman times, but still contain hundreds of millions of tons of accessible ore. The problem is with licensing: inside the European Union, it can be insanely difficult to get the necessary licenses.
Rovina was built up over time; at one point, Barrick sank $20 million into the project. But the mine's owners couldn't get the necessary licenses and had to abandon the find. That's when Euro Sun swooped in for the kill. The company took its time to get the necessary permits, and the mining license from the Romanian government was obtained in November 2018 (The First Romanian Mining Permit Since 2003).
It's no wonder that GMP noted Rovina has "robust economics and upside…If another ounce is never found, Euro Sun already owns a potentially extremely robust project."
GMP's estimate has been upheld by Cantor Fitzgerald, which completed its own estimate in early 2019. The deposit at Rovina "carries strong economics on a standalone basis." The only thing holding Euro Sun back is the dismal state of small mining stocks.
Cantor Fitzgerald puts Euro Sun's short-term target at $2.10. That's a 218% increase from its current price. And GMP goes even further: they reckon Euro Sun is worth $3.00, an increase of 355%.
The company's stock leapt up by 20% after one small announcement. And more goods news, or activity on the gold market, could send it up even higher.
The Chinese have already put some serious money into mining, laying down $1.4 billion to acquire a nearby asset with none of the qualities Rovina can boast. It could be no time 'till Euro Sun (ESM, CPNFF) gets snapped up.
#3 Newmont Mining (NYSE: NEM)
Newmont is making big moves: it's about to take over rival Goldcorp, forming a new firm that could rival Barrick in size. Newmont made the announcement in January, part of a slew of M&A deals among the gold miners, taking advantage of depressed valuations. And while the Newmont-Barrick merger seems dead, the purchase of Goldcorp looks like a sure thing.
The news comes on the heels of Barrick's attempted acquisition of Newmont, a deal that fell through. But Newmont seems better off. It's earned a one-third share in the joint venture launched with Barrick in Nevada, a deal that could yield $5 billion over twenty years.
In 2018 Newmont announced that "first gold" had been produced at its Merian mine in Suriname, South America. The mine contains reserves of 1.5 million ounces and annual production is expected to average between 400,000 and 500,000 ounces during the first five years. And news of the Goldcorp deal is sending the stock higher.
Amidst a positive M&A atmosphere in the gold world, this purchase could be the biggest of all.
#4 Kirkland Lake Gold (NYSE:KL)
This major gold miner is valued at more than twice Barrick or Newmont…and with good reason. Kirkland posted some big numbers for last year, reporting 724,000 ounces of gold produced and exceeding its quarterly production record by 28%.
Unlike other major miners, which have assets scattered around the world, Kirkland is focused on Canada and Australia. Its portfolio makes it a low-risk, high-value stock, one that looks even more attractive after the good news from 2018.
Kirkland currently boasts a Zacks ranking of #1. The Zacks Consensus Estimate for earnings in 2019 has risen 52%, and project four-year growth of 47%. And Kirkland doesn't intend to slow down any time soon.
It has plans to expand operations in Canada and is sinking more than $100 million into exploration, confident that "peak gold" predictions won't come to pass. The company's Canadian workforce is set to grow by the thousands, once a new shaft is sunk at the Macassa mine.
#5 Rio Tinto (NYSE:RIO)
One of the world's biggest miners is also in the gold business…though you might not know it. Rio Tinto, the mining giant, made a huge discovery in February, uncovering what could be its next big copper-gold mine in Western Australia. The mine is part of Rio's $250 million exploration program. Analysts predict the company will be able to scale up its operation quickly, thanks to the company's ample resources.
Rio recently delayed production on a mine in Mongolia, pushing back the planned expansion from early 2020 to third quarter 2021, so the Western Australia discovery comes at a good time. Like other gold stocks, Rio Tinto has been ticking up this year, buoyed by concerns over market volatility and helped along by the depressed state of the gold market coming in from 2018.
Rio has already been named the most innovative company according to Boston Consulting Group, thanks in part to its high-tech min in Pilbara, Western Australia.
Another company to consider as gold inches higher…
Wheaton Precious Metals Corp. (NYSE:WPM)
Wheaton is a company with its hands in operations all around the world. As one of the largest 'streaming' companies on the planet, Wheaton has agreements with 19 operating mines and 9 projects still in development. Its unique business model allows it to leverage price increases in the precious metals sector, as well as provide a quality dividend yield for its investors.
Recently, Wheaton sealed a deal with Hudbay Minerals Inc. relating to its Rosemont project. For an initial payment of $230 million, Wheaton is entited to 100 percent of payable gold and silver at a price of $450 per ounce and $3.90 per ounce respectively.
Randy Smallwood, Wheaton's President and Chief Executive Officer explained, "With their most recent successful construction of the Constancia mine in Peru, the Hudbay team has proven themselves to be strong and responsible mine developers, and we are excited about the same team moving this project into production. Rosemont is an ideal fit for Wheaton's portfolio of high-quality assets, and when it is in production, should add well over fifty thousand gold equivalent ounces to our already growing production profile."
By. Meredith Taylor
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