Gold spot prices slumped as much as 5.2% on Monday, recording its biggest plunge since August, as pharmaceutical giant Pfizer (PFE) and its German partner, BioNTech (BNTX), announced that “its experimental coronavirus vaccine was more than 90% effective at preventing COVID-19 in trial participants.” The news pushed major stock indexes to record highs, with investors dumping safe havens and shifting to riskier assets.
Although there are shifting expectations for new fiscal stimulus measures by the government, the reality is that the Fed will keep interest rates unchanged. This will continue to benefit precious metals. Easy monetary policy and economic uncertainty are typically favorable for the yellow metal and gold is already up 1.1% after the major pullback. According to Lachlan Shaw, Head of Commodity Research at National Australia Bank, “Central banks are unlikely to change their accommodative stance in the near to medium term as it will take time for a vaccine deployment and a pick-up in growth, inflation and labor market.”
While vaccine optimism boosted risk appetite, uncertainties continue to loom over the impact of surging infections in the United States and Europe. Shares of gold mining companies like Newmont Goldcorp Corporation (NEM), Barrick Gold Corporation (GOLD), B2Gold Corp (BTG), and Eldorado Gold Corporation (EGO) are well-positioned to reach new highs as gold prices rebound.
Newmont Goldcorp Corporation (NEM)
NEM engages in the acquisition, development, production and exploration of gold, copper, silver, zinc, and lead. The company has operations and assets in the United States and internationally. NEM has the largest gold reserve base in the industry, underpinned by its world-class ore bodies in top tier jurisdictions.
NEM formed an exploration joint venture with Agnico Eagle Mines Limited (AEM) on September 29th, to explore the Anzá project and advance other prospective gold targets of district-scale potential in Colombia. Moreover, funding for NEM’s capital projects Tanami Expansion 2 in Australia and Musselwhite Materials Handling in North America, have been approved in the previous quarter, and the projects are in execution.
NEM produced 1.5 million attributable ounces of gold in the third quarter of 2020. Revenue for the quarter increased 17% year-over-year to $3.17 billion, primarily due to higher average realized gold prices. Operating cash flow from continuing operations increased 101% year-over-year to a record $1.6 billion. Consequently, NEM declared a dividend of $0.40 per share, a sequential increase of 60%. Non-GAAP EPS for the quarter came in at $0.87, compared to the year-ago value of $0.86.
NEM is efficiently capitalizing on its portfolio strength and higher gold prices. Hence, analysts expect NEM’s current year EPS to grow 99.2% compared to the year-ago value. The stock plunged 3.1% yesterday to close the session at $66.01. NEM has gained 51.9% year-to-date and is presently trading just 8.6% below its 52-week high of $72.22.
How does NEM stack up for the POWR Ratings?
B for Buy & Hold Grade
B for Peer Grade
B for Overall POWR Rating.
It is ranked #1 out of 30 stocks in the Miners – Gold industry.
Barrick Gold Corporation (GOLD)
GOLD engages in the exploration, mine development, production, and sale of gold and copper properties. GOLD’s operations span five continents, making it the largest gold miner on the planet. It has ownership interests in producing gold mines that are located throughout the Americas and Africa.
GOLD’s credit rating was recently upgraded to Baa1 from Baa2 by Moody’s Investors Service. Subsequent to the third quarter, GOLD and the government of Papua New Guinea announced that they had agreed in principle on the formation of a new partnership to operate the Porgera mine.
In the third quarter, GOLD’s net revenue climbed 32% year-over-year to $3.54 billion. The company produced 1.155 million ounces of gold during the quarter. Operating cash flow of $1.9 billion, increased 80% and free cash flow grew 151% to $1.3 billion, sequentially, primarily due to high gold prices and increased royalty costs. EPS for the quarter came in at $0.5, rising 150% sequentially.
GOLD is capturing the benefit of higher commodity prices through agile management and operational efficiency. Hence, the market expects GOLD’s current year EPS to grow 117.6% compared to the year-ago value. The stock fell 6.8% yesterday to close the session at $26.90. GOLD has gained 44.7% year-to-date and is presently trading 13.8% below its 52-week high of $31.22.
GOLD is rated “Buy” in our POWR Ratings system, consistent with its strong momentum. It holds an “B” in Buy & Hold Grade and Peer Grade. It is ranked #2 out of 30 stocks in the Miners – Gold industry.
B2Gold Corp (BTG)
BTG is a low-cost international senior gold producer that operates with three mines in Mali, the Philippines, and Namibia. The company has numerous exploration and development projects in various countries including Mali, Burkina Faso, Namibia, Uzbekistan, Finland, and Colombia.
BTG continued exploration drilling this year near Fekola and the Anaconda area in Mali that focused on exploration at the Cardinal and FMZ zones near the Fekola deposit. The company announced positive exploration drilling results for additional gold deposits within 3 kilometers of the Fekola mill in September. Moreover, BTG successfully completed the mill expansion at the Fekola Mine to 7.5 million tons per annum in the same month, approximately a month ahead of the scheduled date.
The most recent third quarter result reported by BTG did not fail to impress the street. The company produced a total of 263,813 ounces of gold during the quarter. BTG recorded revenue of $487 million from the sale of gold, a significant increase of 57% over the year-ago quarter. The company generated $301 million cash flow from operating activities, surging 79% year-over-year. Consequently, it announced a 100% increase of its quarterly dividend to $0.04 per share. EPS came in at $0.25, rising 400% from the year-ago value of $0.05.
Based on the addition of a larger mining fleet and the optimization of the mining sequence, analysts expect BTG’s EPS to grow 200% next year. The stock slumped 7.3% yesterday to close the trading session at $6.44. BTG has gained 60.6% year-to-date and is presently trading 14.7% below its 52-week high of $7.55.
It’s no surprise that BTG is rated “Buy” in our POWR Ratings system. It also has an “A” for Peer Grade, and a “B” for Trade Grade and Buy & Hold Grade. It is ranked #4 out of 30 stocks in the Miners – Gold industry.
Eldorado Gold Corporation (EGO)
EGO engages in the exploration, discovery, acquisition, financing, development, production, sale, and reclamation of mineral products, primarily in Turkey, Canada, Greece, Brazil, and Romania. The company primarily produces gold, as well as silver, lead, zinc, and iron ore. It operates five mines: Kisladag and Efemcukuru located in western Turkey, Lamaque in Canada, and Olympias and Stratoni located in northern Greece.
The Greek Ministry of Environment granted EGO permits to conduct surface exploration drilling in the Stratoni area in the last quarter. The company commenced an expansion project in Greece and renewed its operating permit for Olympias that allows for an annual production limit of 470,000 tons per year.
GDOT had an excellent third quarter as its top-line grew 67% year-over-year to $287.6 million, with gold contributing nearly 92% to the total revenue. Gold production of 136,922 ounces increased 35% from last year’s comparable quarter. Net cash generated from operating activities of $165.4 million increased 223% year-over-year, as a result of higher sales volumes, a higher average realized price, and the timing of certain payments. EGO reported an adjusted net earnings of $0.33 per share, compared to the year-ago value of $0.05 per share.
EGO is driving significant value from its operations demonstrated by steady production and lower costs. Hence, the street expects EGO’s EPS to grow 66.7% next year. The stock slumped 8.3% last day to close the trade at $13.16. EGO has gained nearly 64% year-to-date and has recently hit its 52-week high of $14.49.
EGO’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade. Among the 30 stocks in the Miners – Gold industry, it’s ranked #6.
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NEM shares were trading at $65.09 per share on Tuesday afternoon, down $0.92 (-1.39%). Year-to-date, NEM has gained 51.45%, versus a 11.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.4 Mining Stocks to Buy on Yesterday’s Sell-Off in Gold appeared first on StockNews.com