Investors turned to gold last year to protect their wealth during the COVID-19 -led economic slowdown and industrial uncertainty. However, the market for precious metal market has recently corrected to a degree on rising optimism about a quick economic recovery. In fact, the market now seems to be under pressure due an uptick in long-term U.S. interest rates and the strengthening U.S. dollar. Consequently, the SPDR Gold Shares (GLD) has lost more than 5% so far this year to trade near $1800.
The new U.S. Presidential administration is currently moving toward the passage of a $1.9 trillion relief bill with the goal of boosting consumer spending. With this, the potential of rising inflationary pressures has been pushing interest rates higher despite the central bank’s asset purchases. Consequently, gold should start witnessing strong demand because the yellow metal tends to perform well in inflationary conditions.
Gold hit prices above $2,000 an ounce for the first time in the first week of August 2020. It soon receded from that watershed level, however, due to government efforts to stimulate economic growth through massive spending. However, as the Fed is unlikely to change its accommodative stance in the near term, and the markets are expected to remain volatile, experts believe gold’s robust run is far from over and it could break $2,000 again soon.
While investors' risk appetite is generally better now, uncertainties continue to loom over the pace of economic recovery and the effectiveness of the mass coronavirus vaccination drive.
Shares of gold mining companies AngloGold Ashanti Limited (AU), Gold Fields Limited (GFI), B2Gold Corp (BTG) and Yamana Gold Inc. (AUY), which demonstrated strength last year, we think are likely to reach new highs in the near term as gold prices rebound.
AngloGold Ashanti Limited (AU)
AU is the third-largest gold mining company in the world, it produces dóre bars, silver, uranium, and sulphuric acid. The company operates 14 mines and three projects in nine countries in South Africa, Continental Africa, the Americas, and Australia.
In December, AU and its joint venture partner IAMGOLD Corporation (IMG), completed the sale of their entire 82% interest in its Sadiola Mine to Allied Gold Corp., in the Kayes region of Western Mali. Also, back in in November, AU along with Barrick Gold Corporation (GOLD), concluded the sale of its interest in Morila Limited, which owns 80% of the Morila gold mine in Mali, to Firefinch Limited.
AU is scheduled to release its fourth-quarter and full-year 2020 financial results on February 22. AU produced 837,000 ounces of gold in the third quarter of 2020, underpinned by strong performances at most sites, with standout performances at Sunrise Dam in Australia and AGA Mineração in Brazil. While its all-in sustaining costs (AISC) came in at $1,044 per oz, the company generated a near fourfold increase in free cash flow of $339 million.
AU is deriving significant value from its operations as demonstrated by steady production and lower costs. The company is efficiently capitalizing on its global mining portfolio strength and benefiting from higher gold prices. AU is set to provide details on its portfolio’s potential and on its vision for each site at the Capital Markets Day scheduled for Feb. 23. Wall Street analysts expect AU’s EPS to grow at the rate of 28.8% per annum over the next five years.
AU’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has an overall rating of B, which equates to Buy in our proprietary rating system. AU has a grade of A for both Growth and Momentum. It is ranked #9 of 49 stocks in the Miners – Gold industry.
In total, we rate AU on eight different levels. To see additional POWR Ratings for Value, Stability, Sentiment, and Quality for AU, click here.
Gold Fields Limited (GFI)
GFI is a globally diversified mining company involved in underground and surface gold and copper mining and related activities, including exploration, development, extraction, processing and smelting. It holds interest in nine operating mines located in Australia, Peru, South Africa and West Africa (including the Asanko JV), as well as one project in Chile.
GFI mines most gold from the Australian region, and from its mines in West Africa, primarily Ghana. Though the company suffered distressed production across all the mines, its South Deep mine in the South Africa region was the most affected. However, the mine had a strong recovery in the third quarter of 2020, producing 65koz of gold and is now generating meaningful cash flow.
Over the past three years, GFI’s revenue and EPS have grown at a CAGR of 7.2% and 34.1%, respectively. In the third quarter, GFI’s revenue climbed 31% year-over-year to $1,921 per-ounce. Its attributable gold equivalent production was 557,000 oz, up 7% year-over-year., while its all-in costs (AIC) decreased by 1% year-over-year to $1,070 per oz. Its EPS for the quarter came in at $0.09, compared to the year-ago value of $0.04.
GFI is benefitting from higher commodity prices through agile management and operational efficiency. Its management expects attributable equivalent gold production for the full-year 2020 to be between 2.20 Moz and 2.25 Moz. Furthermore, analysts expect GFI’s EPS to grow at a rate of 100.5% annually in the next five years.
GFI’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has an overall rating of B, which equates to Buy in our proprietary rating system. GFI has a grade of A for both Growth and Momentum, and B for Value. In the 49-stock Miners – Gold Industry, it is ranked #11.
Beyond what we stated above, we have also given GFI grades for Stability, Quality and Sentiment. Get all GFI’s ratings here.
B2Gold Corp (BTG)
BTG is a low-cost international senior gold producer that operates with three mines in Mali, the Philippines, and Namibia. The company has numerous exploration and development projects in various countries including Mali, Burkina Faso, Namibia, Uzbekistan, Finland and Colombia.
In December, BTG announced the sale of its entire inventory of limited-edition Rhino Gold Bars, which generated approximately $1.7 million. The Rhino Gold Bar initiative began in early 2020 when BTG announced a ground-breaking donation of 1,000 ounces of gold produced from its Otjikoto mine in Namibia to support the preservation of the black rhino population in the country.
BTG’s fourth-quarter results did not fail to impress the Street. The company produced 270,469 ounces of gold during the quarter, which contributed to a record annual consolidated gold production of 995,258 ounces in 2020. BTG generated quarterly revenue of $480 million from sale of gold, surging 53% over the year-ago quarter to record annual gold revenue of $1.79 billion, an increase of 55% year-over-year.
BTG continued exploration drilling near the Fekola and the Anaconda area in Mali in the second half of 2020 and announced positive exploration drilling results for gold deposits at the Fekola mill in September. Furthermore, BTG is focusing on adding a larger mining fleet and optimizing its mining sequence. In line with its progress, analysts expect BTG’s EPS to grow at a rate of 15.8% per annum over the next five years.
It is no surprise that BTG has an overall rating of B, which equates to Buy in our POWR Ratings system. BTG has a grade of A for both Momentum and Quality, and B for Value. It is ranked #12 in the Miners – Gold industry.
Click here to see the additional POWR Ratings for BTG (Growth, Stability, Sentiment, and Industry).
Yamana Gold Inc. (AUY)
AUY is a Canadian precious metals producer that explores for and produces gold and silver ores. It has production, development stage properties, exploration properties, and land holdings throughout the Americas, including Brazil, Chile, and Argentina.
AUY recently expanded its footprint in Quebec’s Abitibi Region, a prolific mining district, its acquisition of Monarch Gold Corporation to further solidify its gold projects in that area. As part of the deal, AUY will acquire Monarch’s Wasamac property and the Camflo property. In the previous quarter, the company completed the integration of the Agua Rica project with the Minera Alumbrera plant and infrastructure, which together are now known as the MARA project.
AUY is scheduled to release its fourth-quarter and full-year 2020 financial results on February 11. Its fourth quarter gold equivalent ounce (GEO) production came in at 255,361 ounces, while full-year production was 901,155 GEO, both of which exceeded the management’s original guidance. In addition, production at its Jacobina mine hit an all-time high during the fourth quarter, increasing for the seventh consecutive year.
AUY plans to continue to build on its operations through expansion and optimization initiatives at existing operating mines, development of new mines, the advancement of its exploration properties. The company recently issued its 2021 cost guidance and its 10-year production overview. Also, Wall Street analysts expect AUY’s EPS will grow at a rate of 40% per year over the next five years.
AUY’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has an overall rating of B, which equates to Buy in our proprietary rating system. AUY has a grade of A for both Growth and Momentum. It is ranked #14 in the Miners – Gold industry.
To see additional POWR Ratings for Value, Sentiment, Quality, Stability and Quality for AUY, click here.
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AU shares were trading at $22.98 per share on Friday afternoon, up $0.77 (+3.47%). Year-to-date, AU has gained 1.59%, versus a 3.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.
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