Top Gold Stocks Quick Picks:
It’s been a rough go for gold investors and gold stocks over the past number of years.
After gold’s meteoric rise through mid-2011, its subsequent crash decimated the sector. Since reaching its high in September 2011, the TMX Gold Index has lost approximately 60% of its value.
During the gold rush, gold companies became unhinged, making poor financial management decisions. As such, they weren’t prepared for gold’s sudden weakness which led to significant write downs. Gold companies and their stock prices were punished accordingly.
The good news? gold is quietly making a comeback, and that is good news for Canadian gold stocks
The price of gold got off to a good start before dipping this past summer. The good news for investors is that gold is quietly making another comeback. Recovering prices brings a unique opportunity for gold stocks to invest in.
As the market is seeing significant volatility, gold is rebounding. Gold has long been considered a safe haven for investors in times of uncertainty. In the face of recent volatility, 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 bullish experts calling for $1,400 gold by end of 2019.
What about rising 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
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.
If you like our list of the top gold stocks, don’t forget to check out our other lists:
Top Oil Stocks
Top Canadian Dividend Stocks
Best Stocks To Buy In Canada For Growth
Best Canadian Bank Stocks
Top Canadian Marijuana Stocks
The Best Canadian Lithium Stocks
The Top Tech Stocks To Buy Right Now
Gold Stocks To Buy For 2019
Goldcorp goes from number 4 to almost missing our list of the top gold stocks in Canada for 2019.
Goldcorp is another major player who has been punished by the market.
It has endured many of the same struggles as its peers and has been focusing on operational efficiencies. Its turnaround efforts appear to be bearing fruit. In 2017, the company found approximately $200 million in operational efficiencies.
Unfortunately, Goldcorp posted a dismal 2018 third quarter. Although the bad quarter was expected, it was weaker than anticipated. As a result, it drops to the bottom of the list and will need a big fourth quarter to renew positive investor sentiment.
What does the future hold? Management has high expectations for the company. It expects to increase reserves and production by 20% through 2021 and along with it, reduce all-in sustaining costs by 20%. If the company can achieve these targets, cash flow will skyrocket as will the company’s share price which is sitting close to a 15-year low. This is a turnaround story.
8) Lundin Gold Inc.
Lundin Gold Inc. makes our top gold stock list not for its current production, but for its future potential.
The company is currently building its flagship Fruta del Norte in Ecuador. The company is poised to build the mine on time and on budget and will be the biggest mine in the country. Production is targeted to start by the end of 2019 and the mine has a 15-year reserve life which is expected to produce over 325,000 ounces of gold annually. Recently, the company secured $250 million in financing from one of the world’s largest gold producers, Australia’s Newcrest Mining Ltd, to complete the construction of the mine.
So far, the company has proven adept at building the mine and recent investments by larger players also exude confidence. However, the company has even more ambitious plans. Once the Eacuador mine is built, the company wants to grow operations to 1 million-ounces a year through the operation of handful of properties.
7) Barrick Gold Corp.
Barrick Gold, 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. Its all-in sustaining costs of US$765-815 per ounce is one of the lowest of the majors.
The company reduced its net debt by $1.5 billion in 2017, exceeding its target. Its debt has dropped from $14.1 billion in 2014 to $6.43 billion in 2017. Furthermore, it expects to exit 2018 with debt below $5 billion. Barrick’s primary focus is growing cash flow and is targeting to be cash flow positive at a gold price of US$1,000/oz. After years of declining reserves, the company finally returned to growth in 2017.
The company’s merger with Randgold Resources is set to close on January 1st and is anticipating a return to dividend growth on the back of stronger cash flows, cost savings and lower debt costs.
6) Detour Gold
Detour Gold falls to number 6 on our list of the best Canadian gold stocks.
Detour Gold is one of the smaller players on the list but is an attractive investment in the sector. Its flagship property, Detour Lake, has long reserve life of 22 years as compared to the industry average of 10 years. This primary asset is located in Northern Ontario which is one of, if not the safest mining jurisdictions in the world.
The company had been executing well in the first half of the year, but recently experienced some setbacks. In the third quarter, it missed production estimates and lower gold sales resulted in much higher AISC. On the bright side, before its setback it had grown cash flows every quarter since the fourth quarter of 2015. Over the past two years, quarterly free cash flow has grown 520% to $258 million in the fourth quarter of 2017.
Analysts’ are still bullish on Detour Gold. It has 15 analysts following the company, of which 13 have the company rated as a ‘buy’. The median analyst price target is $16.53, which implies a 70% upside from today’s share price.
5) SandStorm Gold
Number 5 on our gold stock list is SandStorm Gold.
Sandstorm is another gold streaming company who is performing quite well. The streamer has interest in 188 properties, of which 20 are cash-flowing assets. By 2023, it expects to reach 140K ounces of gold equivalent production, more than double its expected 2018 production.
The company believes its share price is significantly undervalued and is aggressively buying back shares. In November, the company announced plans to purchase up to 10% of its outstanding shares by the end of 2019. It’s a plan that will be internally funded by cash flows and won’t require any debt. That is a massive amount and is a big positive for shareholders. If you’re looking for cheap gold stocks, Sandstorm is definitely an option.
The company has no debt and is generating significant cash. As a streamer, it has lower capital costs and is oft profitable in a low-price environment.
4) B2Gold Corp.
Just missing the top 3 of our top gold stocks list for 2019 is B2Gold.
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 posted record production in 2017, exceeding the upper end of its guidance. A big catalyst for the company is that it’s flagship Fekola Mine achieved commercial production this past November, three months ahead of schedule and on budget.
Fekola was not the only good news story last year. Operations are now in full swing and total gold production at the company is expected to jump 47% in 2018. The Fekola mine is a low cost producing mine and is a big part of the expected significant increases in free cash flow.
In terms of cheap gold stocks, B2Gold is one of them. The company is well covered by analysts and all 16 rate the company a buy. Yep, you read that correctly, its unanimous, B2Gold is a ‘buy’.
3) Kirkland Lake
Who has been the best performing gold stock on the TSX? In 2018, that distinction belongs to Kirkland Lake Gold. The company has returned approximately 50% while the sector has been under water.
So why the out performance? The company is in high-growth mode. It is growing its cash flow, earnings and revenue by 20+% and has posted many quarterly records in 2018. The company is also a low-cost producer. In 2018, it has guided to full-year all-in sustaining costs of $735-$760 per ounce sold. Based on today’s gold price, it is printing cash.
In the third quarter of 2018, it posted record operational cash flows of $128 million, up 77% from the third quarter of 2018. The company expects strong results in 2019 as production is expected to grow and costs are once again expected to drop.
Kirkland lake is also 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.
2) Agnico Eagle Mines Ltd.
Agnico Eagle Mines is one of the best-managed gold companies in the world, which is why it has moved up to #2 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 at 34%. The company has consistently beat earnings expectations over the past year and is currently trading 21% below analysts’ estimates.
Agnico expects to grow production by 30% through 2020 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.
1)Franco Nevada Corp
Franco Nevada is #1 on our list of the best gold mining stocks in 2019.
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 declining metal price. Over the past 5-years, the company’s share price has returned approximately 123% to shareholders as compared to the 16% loss in value suffered by the TSX 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 ten straight years. It is the only gold company to have kept its dividend growth streak alive after the price of gold crashed. Reliability is key in this sector, and Franco Nevada is as reliable as it gets.