Gold investors finally have something to cheer about! After years of underperformance, gold finally broke out to the upside.
For the first time in years, the S&P/TSX Global Gold Index beat the S&P/TSX Composite Index with annual returns of 39% in 2019.
Considering gold makes up a ton of Canadian stocks on the TSX, it's important for the Index that they succeed.
Why has gold made a comeback?
Market volatility, especially with the stock market crash in 2020. We've seen Canadian tech stocks and gold stocks soar due to insecurities in the economy.
Gold has long been considered a safe haven for investors in times of uncertainty. In the face of recent volatility and uncertain geo-political environment, investors have begun to once again warm to the precious metal. This bodes well for the top gold stocks.
There is also another catalyst that can support gold’s price. Industry experts believe we reached peak gold in 2017, which means that moving forward, world gold extraction will decline. There has been a significant decrease in exploration and the lack of reserve replacements has experts leaning bullish.
Gold is on the rise, which is very good for Canadian gold stocks
In our last update, gold blew through $1,500 an ounce and was on its way towards $1,600. In mid 2020, Gold is now $1,683/oz and some pundits and analysts figure it could hit up to $3000/oz.
What about interest rates? How will they affect Canadian gold stocks?
Historically, gold and interest rates have been negatively correlated. As interest rates rise, the price of gold decreases, and vice-versa. However, we live in much different times.
A recent report by Goldman Sachs (GS) points to a decoupling of this correlation. GS, which has an outperform rating on gold, found that
“based on empirical data for the past six tightening cycles, gold has outperformed post rate hikes four times.”
Of note, it’s the first time in five years that GS has turned bullish on the precious metal.
A well-balanced portfolio should contain a small percentage of gold exposure
This is a very important concept new investors looking to learn how to buy stocks need to know.
Why? It can serve as a hedge in case of a market downturn.
Our gold stocks list is a list of the top TSX-listed gold stocks. The TSX is chocked full of mature and junior gold stocks and it is very important for investors to do their own due diligence when looking at these Canadian mining companies.
Best Gold Stocks in Canada for the remainder of 2020(1 new addition!)
11. Pretivm Resources (PVG.TO)
The first stock on our list is a little bit of a wild card. Since Kirkland Lake Gold’s (TSX:KL) acquire Detour Gold, Pretivm is the last single-asset company in North America.
Single mine companies are attractive takeover targets as they are easier to integrate. M&A has begun to ramp up with three major takeovers last year. As chatter ramps up, Pretivm will be at the top of everyone’s minds.
Pretivm is one of the few gold stocks that is negative territory this year.
Down 22.15%, the company hasn’t fully recovered from the March lows. This is quite surprising considering the company has maintained operations throughout the pandemic. Pretivm is now one of the cheapest gold stocks as it is now trading at only 12 times forward earnings and 1.67 times book value.
Pretivm operates the high-grade Brucejack Mine in British Columbia. It is a very attractive asset that comes with a complicated geology. This is made evident by the fact that the company has struggled to achieve low cost production.
In the beginning, the promise was that Brucejack would be one of the lowest-cost mines in the world with low AISCs of $500/oz. Unfortunately, AISC have hovered much higher and in 2019, Pretivm revised costs upwards - twice. This highlights the complexity of operating the mine.
In the first quarter, AISCs came in at $996 per ounce, and it is guiding to AISCs of $910-1,060/oz in 2020. At these levels, the company is still generating significant cash ($100-170M in 2020).
Higher than expected costs, and a complex geology is also what is holding the company’s stock price back.
Analysts expect the company to grow earnings by approximately 20% annually over the next few years.
10. Eldorado Gold Corp (ELD.TO)
Eldorado was white-hot in 2019, returning 160% and was the best performing stock on our list last year. In fact, it was the second-best performing gold stock (outside of penny stocks).
What drove performance in 2019? The company was significantly undervalued. In 2020, the company is up by approximately 8%, and it remains undervalued. It is trading at one of the lowest book values (0.40x) and only 13.0 times earnings.
This is a company that is expected to grow earnings by 51% in 2020, an average that is expected to be maintained over the next few years. Paying 9.4 times forward earnings for this type of growth is cheap.
Unlike most of the stocks on this list, Eldorado has no major projects on the books. It is focused on reducing debt and streamlining operations to generate strong cash flows. Although there are no major projects, it has plenty of organic growth opportunities within at its existing sites.
9. Barrick Gold Corp (ABX.TO)
Barrick Gold (TSX:ABX), the world’s largest gold producer was all but written off by investors a few years ago. A massive debt load led to significant restructuring, write-offs and asset sales.
However, the company has roared back with a laser focus on its highest-return properties and is one of the lowest cost producers. In 2019, exited the year at the high-end of production and low-end of cost guidance. A great combination.
Like several companies on this list, some of its mines where shut during the pandemic. This has led to the company pulling guidance in 2020. Despite this, Barrick has performed quite well with gains of approximately 30% through the first five months of 2020.
The company continues to zero in on reducing its debt. In the first quarter of 2020, debt dropped by 17% to $1.85 billion and it has no big maturities until 2033. Considering debt was at $14.1 billion in 2014, the company is making significant progress in deleveraging. In fact, it is well ahead of its debt-reduction targets which called for a reduction to $5 billion by the end of 2018.
The company’s merger with Randgold Resources was a positive and is expected to lead to stronger cash flows, cost savings and lower debt costs. It also led to an increase in its quarterly dividend, its first raise since 2016.
8. Lundin Gold Inc (LUG.TO)
Lundin Gold Inc. (TSX:LUG) makes our top gold stock list not for its current production, but for its future potential.
The company is in the finishing stages of the flagship Fruta del Norte mine in Ecuador.
It is the biggest mine in the country and has a 15-year reserve life which is expected to produce over 325,000 ounces of gold annually. True to its word, the company’s flagship mine was built on time and on budget.
Fruta del Norte produced its first gold in November, and the first quarter, Lundin announced that 51,320 ounces of gold was produced at the mine.
Unfortunately, the company’s robust 2020 was hampered by the Pandemic. Lundin Gold was forced to suspend operations at Fruta Del Norte in late March and only resumed operations in late June.
The company can once again focus on ramping up to full scale production which is expected to complete by end of year. A slight delay given COVID19.
Frutal del Norte is expected to have low AISC ($583-$621/ounce) and be among the highest-grade gold projects in the world.
So far, the company has proven adept at building the mine and recent investments by larger players also exude confidence.
7. SandStorm Gold (SSL.TO)
Unfortunately, SandStorm Gold (TSX:SSL) had a difficult year.
Several of its mines have been sidelined due to COVID-19 which has led to missed guidance. Although a 13% gain is nothing to be upset about, it could have soared higher had several of its streaming properties not been temporarily closed.
This has led to the company pulling guidance for 2020. Although it is disappointing right now, this is a company with an aggressive growth profile. It is well positioned to outperform in the second half as most of its mines are now back in operation.
The streamer has interest in 200 properties, of which 23 are cash-flowing assets. By 2023, it expects to reach 140K ounces of gold equivalent production, more than double its expected 2019 production.
The company has little debt and is generating significant cash. As a streamer, it has lower capital costs and is profitable in a low-price environment. As it continues to post record quarterly results, you can expect its price trajectory to continue upwards.
SandStorm is also one of the most aggressive companies in terms of buybacks. Under its current NCIB, it expects to repurchase 18.3M shares (10% of shares outstanding). As of June 3rd, it has repurchased 15.5M shares for cancellation.
6. Dundee Precious Metals (DPM.TO)
Dundee Precious Metals (TSX:DPM) has two main properties – The Chelopech mine, a gold, copper and silver mine located in Bulgaria and the Ada Tepe mine in Krumovgrad, a gold property that has recently entered commercialization. It also has two other projects in late exploration stage. One in Serbia and another in Nunavut.
Dundee is certainly one of the riskier plays on our list. It operates in less politically stable countries, and only has two producing assets. On the bright side, none have been impacted and have continued to operate without interruption during the pandemic.
The company is currently trading at only 7.79 times forward earnings and it has an insanely cheap P/E to growth (PEG) ratio of 0.10. Despite jumping by 60% in 2019 and by another 26.5% year to date, the market is still mispricing the stock based on its expected growth rates.
It is in a strong financial position with low debt, and the Chelopech and Ada Tepe assets will continue to underpin growth thanks to low AISC targets ($680-$760/oz). The company is entering a new phase in which it will generate considerable cash flow. The company is targeting annual free cash flow of $140-$180 million over the next three years.
The big driver in 2020 will be growth at Ada Tepe which achieved commercial production last June. In 2020, the mine is expected to double production from 52,500 oz (at the mid-range in 2019) to 110,000 oz.
It was a record year for the company in 2019 and thus far, 2020 looks to also be a record year.
5. Agnico Eagle Mines Ltd (AEM.TO)
Agnico Eagle Mines (TSX:AEM) is one of the best-managed gold companies in the world, which is why it has remained in our top five on our list of the best gold mining companies to invest in.
In an industry plagued by high capital expenditures that can lead to insurmountable debt, Agnico’s debt to equity ratio is well below industry average. In leveraging its enviable financial position, the company acquired Goldcorp last year.
This vaulted the company into the top 3 largest gold producing companies worldwide. Combined, their 2018 output would have equaled 141 tonnes, just behind industry leaders Barrick Gold and Newmont Mining.
The company is one of the most reliable gold stocks as it has consistently beat earnings expectations over the past year. It was number 2 on our list last year, and it returned an impressive 43% in 2019.
Unfortunately, the pandemic has significantly impacted AEM operations. COVID-19 forced closures put the majority of production under care and maintenance for a few months. As a result, it is one of the few gold stocks in the red this year (-10%).
The important thing to remember, these impacts were temporary. The company recently announced that it should be producing at normal levels beginning in the third quarter. The company is now guiding to 1.63-1.76Moz of gold, down from 1.875 previously.
Agnico expects to grow production by 24% through 2022 which will drive increased cash flows. One of the most attractive aspects of its growth plans is that it expects to achieve this growth from assets they currently own.
Likewise, due to high cash flows, the company is aiming to achieve a self-funding model with no external financing required.
The company is one of the more trustworthy mining companies having consistently exceeded production guidance since 2012. It has posted returns above industry average for the past three, five and ten years.
To top it all off, it has steadily raised the dividend over the past four years and is on the verge of achieving Canadian Dividend Aristocrat status.
4. Alamos Gold (AGI.TO)
Alamos Gold (TSX:AGI) is a new addition to our list. The company is one that continues to rank high on our premium screener and has been among the top performing gold stocks in 2020. The company’s stock price has gained 28.10% and it is nearing an inflection point.
Alamos is nearing the completion of its Lower Mine at Young-Davidson. Initially scheduled for end of June, the pandemic has pushed out the target by a month to the end of July. Once fully operation, Alamos will be looking at a significant bump in production and lower costs.
Before the pandemic hit, first quarter production was trending above guidance. Given several of its mines were put on care and maintenance, it has since pulled guidance. Despite this, the expectation is still for growth YOY.
This is a company that has little debt, and with the completion of YD will be entering a period of significant cash generation.
It operates in two of the safest jurisdictions in the world (Canada & Mexico) and it is only trading at only 1.1 times book value, 22 times forward earnings and at only 0.82 times net asset value. This is excellent value considering Alamos is projected to grow earnings by 44% in 2020 and 78% in 2021 – among the highest growth rates in the industry.
3. Kirkland Lake Gold (KL.TO)
Kirkland Lake Gold (TSX:KL) has finally been knocked of its perch. After topping our list in 2019 and again to start 2020, Kirkland Lake is struggling for the first time in a long while. Down 10.29% in 2020, it is among the worst performing stocks in the industry.
In early 2020, it closed on the Detour Gold Corp acquisition.
Detour was our #9 ranked gold stock last year. It is a single asset gold company with an attractive property in the Province of Quebec. The markets felt as though Kirkland may have overpaid for this high-cost mine.
Much like Agnico, several of its properties have been put on care and maintenance during the pandemic. As such, the company pulled 2020 guidance. All this being said, Kirkland Lake is now trading at only 12.2 forward earnings and provides excellent value.
The company remains in high-growth mode. Over the past three years, it has grown production by a CAGR of 33%. It is growing cash flow, earnings and revenue by 20+% and continues to post record quarterly results with each passing quarter. The company is also a low-cost producer. In the first quarter, AISCs were $776/oz, and reflects a partial quarter of the Detour Lake acquisition.
Based on today’s gold price, it is printing cash. Over the past year, the company has grown free cash flow by triple digits, and it is quietly becoming an interesting income stock.
Kirkland Lake is currently one of the few mining companies growing its dividend. The company first announced a dividend in March of 2017 and has since raised it three times, jumping by 500%!
The company has finally taken a breather – and it may be the perfect time for investors to take a closer look at this stock.
2. B2Gold Corp (BTO.TO)
Dropping a spot, B2Gold (TSX:BTO) comes in at Number 2 on our top gold stocks list for 2020.
B2Gold Corp is a gold producer with five operating mines scattered across the globe. It has one in Mali, one in Namibia, one in the Philippines and two in Nicaragua and a portfolio of other evaluation and exploration assets.
The company has been posting record production year over year and has often exceeded the upper end of its guidance. It is off to a strong start this year, up 32.5% and is one of the best performing producers in 2020.
A big catalyst for the company was that its flagship Fekola Mine achieved commercial production in November of 2017, three months ahead of schedule and on budget. The Fekola mine is a low cost producing mine and is a big part of the expected significant increases in free cash flow.
Operations are now in full swing at all of the company’s mines. Production is expected to reach 1.025 million oz in 2020, up from 953k in 2018. It is worth noting that despite several pulling guidance, B2Gold has maintained guidance despite the pandemic. AISC are on a downward trajectory and B2Gold is expected to exit fiscal 2020 with AISCs of $800/oz down from $862 in 2019
In terms of cheap gold stocks, B2Gold is one of them. The company is well covered by analysts and all 14 rate the company either a ‘buy’ or ‘strong buy’. Yep, you read that correctly, it’s unanimous - B2Gold is expected to be a winner.
1. Franco Nevada Corp (FNV.TO)
Franco Nevada (TSX:FNV) takes a leap to become our top gold stock after as it is currently up by approximately 30% this year. All three that were previously ranked above the company have proven more vulnerable to the pandemic, and as such Franco Nevada deserves top billing.
In such a bullish environment for gold, producers tend to outperform the streamers. However, Franco Nevada is one of the most reliable performers and last year, it was a strong performer with gains of 40%.
During this pandemic, investors are flocking to safety and Franco Nevada is proving to be a safe place for investors to park their cash.
Franco Nevada Corp is a streaming company with stakes in metals and oil & gas properties. Despite its recent foray into liquid gold, it’s still very much a gold streaming play and aims to have 80% of its revenues come from precious metals.
Franco Nevada is one of the few gold companies that have rewarded investors despite a prolonged bear market. Over the past 5-years, the company’s share price has returned approximately 19% on average far outpacing the 8.5% average gain of the S&P/TSX Global Gold Index.
The greatest advantage to owning a streaming company is that it is not saddled with the high costs of capital expenditures and operational mining costs.
The company is also a Canadian Dividend Aristocrat having raised dividends for 12 straight years. It is the only gold company to have kept its dividend growth streak alive after the price of gold crashed. It is also one of only 3 Aristocrats to have raised the dividend during the pandemic.
Reliability is key in this sector, and Franco Nevada is as reliable as it gets.