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.
Why has gold made a comeback? Market volatility. 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 $1,400 an ounce and was on its way towards $1,500. In early 2020, Gold is now $1,547/oz and is on its way towards $1,600.
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
Top Canadian Lumber Stocks
Top Canadian ETFs
Best Gold Stocks in Canada for 2020
10. Pretium Resources (PVG.TO)
The first stock on our list is a little bit of a wild card. In light of Kirkland Lake Gold’s (TSX:KL) impending deal to acquire Detour Gold (TSX:DGC), Pretium 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, Pretium will be at the top of everyone’s minds.
Pretium 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 between $800-$900/oz over the past little while.
In fact, it has revised costs upwards twice in 2019. At these levels, the company is still generating significant cash, however it highlights the complexity of operating the mine. It has also held the company’s stock price back. In 2019, it only gained 24% which was below the Gold Index average.
Analysts expect the company to grow earnings by triple-digits in 2020 and all six analysts that cover the company rate it a “buy”. At 13 times forward earnings, the company offers value as a standalone, or as a potential takeover target.
Mkt Cap: $2.59 Billion
YTD Gains: N/A
Fwd P/E: 12.83
1Yr Price Target: $16.30
9. 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? For starters, the company was significantly undervalued. Despite the recent run-up, Eldorado remains attractive. It is trading at more than half book value and at only 11.50 times forward earnings.
This is a company that is expected to grow earnings by 700% next year, and by 52% on average over the next five years. Paying 11.50 times forward earnings for this type of growth is cheap.
Unlike the majority 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.
Mkt Cap: $1.528 Billion
YTD Gains: N/A
Fwd P/E: 11.59
1Yr Price Target: $10.93
8. 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.
Dundee is certainly one of the riskier plays on our list which is why we cannot justify moving it up higher on the list. It operates in less politically stable countries, and only has two producing assets.
It is however, one of the cheapest stocks in the industry and has two other projects in late exploration stage. One in Serbia and another in Nunavut.
The company is currently trading at only 10.10 times forward earnings and it has an insanely cheap P/E to growth (PEG) ratio of 0.10. Despite jumping by 60% in 2019, 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 ($675-$820/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 $120-$170 million.
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 barring no setbacks, 2020 looks to also be a record year.
Mkt Cap: $1.07 Billion
YTD Gains: N/A
Fwd P/E: 10.07
1Yr Price Target: $7.15
7. 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, it expects to exit the year at the high-end of production and low-end of cost guidance. A great combination.
The company continues to zero in on reducing its debt. In the third quarter of 2019, debt dropped by 14% to $3.2 billion. Considering debt was at $14.1 billion in 2014, the company is making significant progress in deleveraging. In fact, it is 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.
Mkt Cap: $41.71 Billion
YTD Gains: N/A
Fwd P/E: N/A
1Yr Price Target: $23.96
6. 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 in early January, Lundin announced that 28,679 ounces of gold was produced at the mine.
The company is now focused on ramping up to full scale production which is expected to complete by mid-year. 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.
However, the company has even more ambitious plans. Now that Ecuador mine is built, the company wants to grow operations to 1 million-ounces a year through the development of handful of properties.
Mkt Cap: $1.97 Billion
YTD Gains: N/A
Fwd P/E: 23.84
1Yr Price Target: $9.37
5. B2Gold Corp (BTO.TO)
Dropping a spot, B2Gold (TSX:BTO) comes in at Number 5 on our 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.
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. AISC are on a downward trajectory and B2Gold is expected to exit fiscal 2019 at $855/oz, 13% ahead of guidance.
In terms of cheap gold stocks, B2Gold is one of them. The company is well covered by analysts and all 17 rate the company a buy. Yep, you read that correctly, it’s unanimous – B2Gold is a ‘buy’.
It hasn’t jumped as much as others on this gold stock list (up only 30% in 2019), which means it still presents an excellent entry point for investors.
Mkt Cap: $5.4 Billion
YTD Gains: N/A
Fwd P/E: 14.22
1Yr Price Target: $6.44
4. Franco Nevada Corp (FNV.TO)
Franco Nevada (TSX:FNV) drops out of the third position to the fourth on our list of the best gold mining stocks in 2020.
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%.
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 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 eleven 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.
The company is also a Canadian Dividend Aristocrat having raised dividends for 11 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.
Mkt Cap: $25.76 Billion
YTD Gains: N/A
Fwd P/E: 65.05
1Yr Price Target: $130.38
3. SandStorm Gold (SSL.TO)
Moving up from number 4 to 3 is SandStorm Gold (TSX:SSL).
SandStorm is another gold streaming company who is performing quite well. Why have the two switched spots on this year’s list? Sandstorm comes out ahead of Franco Nevada thanks to its more aggressive growth profile.
The streamer has interest in 185 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 2019 production.
In 2019, it was a strong performer as its share price shot up by 53% last year. It recently announce preliminary year-end results in which it posted record sales.
The company also believes its share price is significantly undervalued and is aggressively buying back shares. In November of last year, the company announced plans to purchase up to 10% of its outstanding shares by the end of 2019.
It is a plan that will be internally funded by cash flows and won’t require any debt. As of end of the third quarter, it bought approximately 10.4 million shares of the 18.3 million available for repurchase.
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.
Mkt Cap: $1.58 Billion
YTD Gains: N/A
Fwd P/E: 69.62
1Yr Price Target: $10.00
2. 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 at #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. 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.
Agnico expects to grow production by 30% through next year 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.
Mkt Cap: $18.83 Billion
YTD Gains: N/A
Fwd P/E: N/A
1Yr Price Target: $79.83
1. Kirkland Lake Gold (KL.TO)
Kirkland Lake Gold (TSX:KL) continues to set the bar. While the sector struggled, Kirkland Lake delivered outsized returns. It has been much of the same of late. It was our top gold stock of 2019 and it remains so in 2020.
It was one of the top performing gold stocks in 2019 and it made a strategic move to acquire Detour Gold Corp. 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 deal is expected to close in early 2020.
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 2019, it expects to exit the year with AISC of only $584/oz, down from $685 in 2018.
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%!
With expected growth rates in excess of 30% over the next few years, there appears to be no stopping this company.
Mkt Cap: $12.16 Billion
YTD Gains: N/A
Fwd P/E: 20.87
1Yr Price Target: $60.36