With prices on the rise gold stocks are on the minds of traders. Top gold stocks could see substantial gains in 2018 as industrial and consumer demand support prices. The best gold stocks to buy now are junior and senior miners who can manage their costs, have plans for expansion and operate with little debt. Click Here To Go Straight To Our Top Gold Stocks
Gold Stocks; Like Owning A Money Printing Machine
Owning a gold stock is like owning a money printing machine. These companies dig the worlds most sought after commodity, a metal that has dazzled the minds and hearts of mankind for millennia. The only problem is that producing gold is a costly affair, there is a limited quantity on Earth and it is hard to find.
Gold’s value is based on its rarity, its resistance to corrosion, its malleability and bright, distinctive coloring. It has been used as a form of jewelry and exchange of value since the dawn of recorded history.
Gold is the earliest and longest lasting currency ever used. It is still in use today and likely will continue to be used in some form or another long into the future.
Gold is thought to exist naturally within the earth’s matrix but only within the core of the planet. All metal found on the surface has been deposited by extra-terrestrial sources and quickly being mined out. This means that, long term, the only real risk to gold price is the possibility man will discover and exploit a large source of the metal somewhere in space.
The gold price chart history shows an asset that has corrected from a peak and now bouncing from long term support. Support is derived by physical demand as well as central bank policy, policy which has flooded the market with currency and inflated the value of all commodities. This support is not expected to diminish long term, only grow, as world populations and global economies continue to grow.
Based on this chart gold prices could easily move up over the next few years to retest highs near $1,800. In the nearer term, as in 2018, we are expecting gold prices to remain range bound with a chance of testing the most recent highs near $1,350. With prices like this miners and royalty companies that are able to control their costs will be able to make money, pay dividends and expand operations.
Top Gold Stocks And The Oil Price Outlook
When it comes to mining gold the mostly costly part is oil. It takes a lot of oil to dig gold out of the ground, wash and reclaim it. This means that gold miners are sensitive to oil prices and recent increases are sure to hurt margins. Longer term the outlook is good. The EIA and IEA agree, average prices in 2018 will be closer to $52 than $62 and likely remain near that level in 2019. This means that oil prices are expected to fall sharply while gold prices remain relatively steady; a condition that will boost margins, increase earnings and fuel dividends.
What Are The Best Gold Stocks To Buy Now
The best gold mining stocks combine a number factors that are expected to help them outperform the major gold indices in 2018. These include low costs, low leverage, good cash positions and positive outlook for new projects/exploration.
Top Gold Stocks: Royalties and Streamers
Royal Gold, Inc (RGLD) Royal Gold Inc is the largest and most successful of the non-traditional operators. Where a traditional operator has high overhead with labor, machines and fuel Royal Gold makes it money a different way. It owns royalty shares on mines and loans capital to dirt-movers in exchange for working rights.
It has royalty and streaming agreements at mine sites in over 20 countries and is by far the most diversified of the senior miners. One notable streaming agreement is with the aforementioned Barrick Gold Corporation for production at a mine in Dominica. This style of operation means Royal Gold can convert more than 60% of its revenues to free cash flow. Free cash flow powers a dividend yielding 1.20% at today’s prices and among the highest in the sector.
The stock has recently seen a down turn as operations at one mine were temporarily suspended. This was due to a lack of water that is expected to be corrected early in 2018. Nevertheless, the news caused concern turn-around plans would not bear fruit and led one analyst to downgrade the stock. The downgrade was to hold from buy, issued by Canaccord, and has set the stock up for rebound as the year progresses. Looking forward the company has ownership stakes in 21 development stage and 131 exploration stage projects which means it is likely to produce profits long into the future.
Sandstorm Gold (SAND) – Sandstorm Gold is a gold royalty company leasing claims to top-tier and mid-level operators. The company recently released fiscal year 2017 results and blew past estimates. The company increased total gold equivalent production by 10% over 2016 and the highest level in the company’s history. This was achieved through revenue from 20 streams and royalties and is expected to carry through into the new year. The company has added an additional 38 new revenue streams in 2017, including a 30% stake in the Hot Maden claim, that are expected to begin paying off as early as this year.
The company is sitting on a nice pile of cash, about $32 million, with little to no debt and an undrawn revolving credit facility worth $110 million. This leaves the company well positioned to continue with expansion operations in the New Year. Looking forward there are a number of catalysts on the horizon but most are at least a year off. 2018 should see the start of production at one new mine at least with more coming online the following year. Analysts are expecting the company to more than double its production by 2022.
Top Gold Stocks: The Junior And Senior Miners
Barrick Gold Corporation (ABX) – Barrick Gold Corporation is hands down the best in breed of all gold stocks. It is the largest in terms of market cap and production, and is lowest in terms of all-in-sustaining-costs. The company averaged about $750 per ounce in 2017 and is the benchmark for other producers. Free cash flow totaled more than $1.5 billion in the last fiscal year and resulted in a 42% increase to the dividend.
The company faces some headwinds in the New Year that may impair results but the medium to long term prospects remain positive. Longer term the company is working to reduce its debt which will help unlock more value. The company is seen as undervalued relative to its peers, possibly due to an expectation for slight declines in production, but still well positioned to make money in 2018.
Agnico Eagle Mines Ltd. (AED) – Agnico Eagle is one of the leading gold stocks Canada has to offer. The company is headquartered in Quebec and trades with a market near $11 billion. The company operates with low debt, about 28% debt-to-equity, and has exceeded expectations for the full year 2018. Results were driven by low cost initiatives and production results which came in at the high end of the range. The company pays a healthy dividend, about 1% at current shares prices, with a chance of increases in the coming quarters.
Looking forward the company is in a position to buy and expected to be acquisitive. They have already been adding to their production base with plans for more in the New Year. This includes new projects and expansion at existing mines. Once such project, the purchase of Canadian Malarctic Corporation, was announced in December 2017.
GoldCorp (GC) – Goldcorp is one of the more interesting stories in the mining community. The company was founded in 1994 but struggled with operations until the year 2,000. Company founder Rob McEwen had a bright idea, he made the companies geological data available to the public as part of a contest to see who could find the gold. The contest was wildly successful and resulted in the discovery of more than 110 sites, 80% of which produced “significant” deposits. Now, the company’s holdings have been described as among the largest and lowest cost reserves on the planet.
Looking forward the company has aggressive plans to increase operations and productions through the year 2021. This, combined with all in sustaining costs near $850, will drive revenue and earnings regardless the price of gold. To put things into perspective, this company has an estimated 41.8 million ounces of gold in proven reserves and only needs to dig them up in order to make money.
Newcrest Mining (ASX:NCM) – Newcrest Mining is the best of the gold stocks ASX and NYSE listed. The company has a market cap near $14 billion and pays a dividend near $1.00 at today’s share prices. It is considered one of the safer plays as its operations are built primarily on two large proven reserves. In addition it is also a copper producer which itself has seen a resurgence in price as global demand picks up. Newcrest is also well regarded as a low-cost operator although there has been some criticism over the recent acquisition of the Lihir mine.
Looking forward there are a couple of potential catalysts for the stock. The first is a planned expansion at the Cadia mill processing facility. The plans should result in a near 15% increase in annual processing capability, an increase in revenue and margins at the plant. The second is a previously undervalued holding in the SolGold project. SolGold is as yet unproven in terms of total reserves but is expected to be one of the best gold/copper projects in the industry.
Newmont Mining (NEM) – Newmont Mining is a hands-on miner in the business of acquiring, exploring, developing and producing gold. The company has been working to hard to increase production and reduce costs and those efforts are bearing fruit. The company has revised its full year 2018 guidance to show higher production and lower all-in-sustaining-cost than previously expected. Production is now expected in a range 5% higher than previous with AISC in the range of $700 to $750. Costs had been projected in a much wider range of $700 to $800.
Looking forward the company is expected to spend more than $2.5 billion on capex in the next three years. The money will go help with improving existing operations, developing and exploring new projects. The company is also planning to raise the dividend by as much as 50% which is sure to drive market interest. The hike is due to balance sheet improvements and subsequent increases in free cash flow that will also help pay for capex plans.
IAMGOLD (IAG) – IAMGold is a smaller operator working hard to improve operations both internally and at the mine. The company has been able to reduce its all-in-sustaining-costs by roughly 25% over the last year while strengthening the balance sheet and cash position. The company liquidated holdings in profitable positions both reducing debt and increasing cash which now sits near $835 million, about $550 million of which is unrestricted cash and cash equivalents. When added to the nearly $235 million in credit facilities IAMGold has nearly $1 billion in investable assets it can use for expansion and exploration. They do still have some long term debt, about $385 million, but that has been whittled down over the past year and expected to continue declining over the next.
Analysts see 3 possible catalysts for price movement in 2018, any one of which could boost share prices. First is a continuation of falling costs as production at the Westwood mine ramps up to full capacity, solar power is added to a mine at Essakane and productivity improvements are made at the Rosebel mine. The Second is the possibility of positive test results from at least 3 new projects in the early stages of development. Third, the possibility of M&A activity. The company sits on a large cash position that could be used acquisitively to buy other gold stocks.