It’s been a rough go for gold investors and Canadian 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 TSX Gold Index hit a multi-year low in 2015 and lost approximately 70% 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. Canadian gold companies and their stock prices were punished accordingly.
The good news? gold is making a comeback, and that is good news for Canadian gold stocks
Through the first half of the year, the price of gold is off to a great start. Year to date, gold is up by 14% and the TSX Gold Index has followed suit posting robust returns averaging approximately 27%. Recovering prices brings a unique opportunity for gold stocks to invest in.
Why is gold making a comeback? Market volatility. 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 experts leaning bullish.
In our last update, experts were calling for $1,400 gold by end of 2019. Gold achieved has already blown past this key technical support and is well on its way to $1,500.
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
Gold Stocks To Buy For 2019
10. Eldorado Gold Corp (ELD.TO)
Kicking off the list of the top gold stocks is new addition Eldorado Gold (TSX:ELD).
Eldorado has been white-hot returning 166% through mid-July. This is tops in the industry among mid-to-large cap gold stocks.
What has been driving recent performance? For starters, the company was significantly undervalued. Despite its recent run-up, it remains attractive. It is trading at more than half book value and at only 16 times forward earnings.
This is a company that is expected to grow earnings by 500% this year, and by 52% on average over the next five years. Paying 16 times 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 it has no major projects, it has plenty of organic growth opportunities within at its existing sites.
9. Detour Gold (DGC.TO)
Detour Gold (TSX:DGC) drops to number 9 from 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.
In 2018, the company suffered a few setbacks which led to underperformance. However, it has since roared back posting 69% gains through mid-July this year. This is in large part the reason for its current positioning. Detour’s stock is no longer one of the cheapest on the market.
The company has hired a new CEO and CFO over the past couple of months and there is a renewed focus on generating strong cash flows. By 2023, the company expects to reduce AISCs to $843 per oz, a drop of 30% over 2019 estimates for $1,194 per oz.
It has low net debt and as of end of the second quarter has a strong cash position of $201 million.
8. Dundee Precious Metals (DPM.TO)
A new addition to our list, Dundee Precious Metals (TSX:DPM) makes its debut at Number 8.
Dundee Precious Metals has two main properties – The Chelopech mine, a gold, copper and silver mine located in Bulgaria and Krumovgrad, a gold property currently in development.
Dundee is certainly one of the riskier plays on our list. It operates in Bulgaria, and only has one mine-producing asset. It is however, one of the cheapest stocks in the industry and has two other projects in late exploration stage. One in Bulgario, and another in North America.
The company is currently trading at only 10.79 times forward earnings and it has an insanely cheap P/E to growth (PEG) ratio of 0.38. Despite being up almost 30% this year, the market has is still mis-pricing the stock based on its expected growth rates.
It is in a strong financial position with low debt and its Chelopech asset continues to underpin growth thanks to low AISC of $659 per oz achieved in 2018.
The big news however, is that its Krumovgrad project achieved commercial production this past June. Full design capacity is expected by end of the third quarter.
7. 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 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.
As of mid-July, the company remains on target and on budget and construction is approximately 73% complete. Once complete Frutal del Norte is expected to have low AISC ($583/ounce) and be among the highest grade gold projects in the world.
6. 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. Its all-in sustaining costs of US$765-815 per ounce is one of the lowest of the majors.
The company continues to zero in on reducing its debt. In the first quarter of 2019, debt dropped by 12% to $3.65 billion. Considering its 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.
5. B2Gold Corp (BTO.TO)
Dropping a spot, B2Gold (TSX:BTO) comes in at Number 5 on our our top gold stocks list for 2019.
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 1.095 million oz in 2020, up from 953k in 2018. All in sustaining costs are on a downward trajectory and reached a low of $848 in the first quarter of 2019, 14% 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, its unanimous, B2Gold is a ‘buy’.
It hasn’t jumped as much as others on this gold stock list (up only 9% year to date), which means it still presents an excellent entry point for investors.
4. SandStorm Gold (SSL.TO)
Moving up from Number 5 to 4 and just outside our top three is SandStorm Gold (TSX:SSL).
SandStorm is another gold streaming company who is performing quite well. 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.
It has also been one of the best performing stocks in the industry. Through mid-July, the company’s stock price is up almost 50% in 2019.
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. As of end of the second quarter, it bought approximately 8 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.
3. Franco Nevada Corp (FNV.TO)
Franco Nevada (TSX:FNV) drops out of number one to number three on our list of the best gold mining stocks in 2019. This is not a function of its recent performance, but moreso as its status as a royalty company. When gold enters a bullish stage, the producers tend to outperform the streamers.
Previously ranked #1 on our list, Franco Nevada has been a steady performer and has returned 27% through mid-July.
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 17% on average far outpacing the 3% average gain of 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.
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 earlier this 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 Minning.
The company has one of the most reliable gold stocks as it has consistently beat earnings expectations over the past year.
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. Kirkland Lake Gold (KL.TO)
Who has been the best performing gold stock on the TSX? In 2018, that distinction belonged to Kirkland Lake Gold (TSX:KL). The company has returned approximately 50% while the sector has been under water.
This premier gold stock has continued to post outlandish returns. Through the first half of 2019, Kirkland Gold is once again among the top performers in the industry. Its share price has jumped 78% through mid-July.
So why the out performance? The company is in high-growth mode. It is growing its 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 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. 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.