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🥇 Gold Stocks Showdown! All That Glitters is Gold! 🤩
Which gold stocks are YOU buying? Investing Intel focuses on gold with an examination of Newmont, Dundee Precious Metals and B2Gold...
Aloha, and welcome to another edition of ValueTheMarkets’ Investing Intel newsletter! With yesterday being President’s Day, it’s a shorter-than-usual week spilling out in front of us, but that doesn’t mean there isn’t a wealth of excitement and opportunity.
That’s this week’s Investing Intel includes:
👉 Three stock insights
👉 A news roundup
👉 The finest content from ValueTheMarkets
👉 Key dates for your diary
👉 Some fun facts!
Honestly, what more could you want? Let’s get stuck in!
In Focus: Gold
This week, we’re looking squarely at gold. We’re not just looking at it because it’s pretty, we’re looking at it because it’s currently giving off the whiff of opportunity.
After approaching $1,950 per oz towards the end of 2022, gold prices have been in retreat since early February.
Putting things simply, nobody seems to know or understand what is going on. These are exactly the kinds of conditions in which gold can thrive. That’s because the precious metal is often used as a hedge against inflation.
But there are multiple ways to invest in the gold stuff. This week, we’re looking under the bonnet at three gold stocks we like the look of.
The Big Beast - Newmont Mining (NYSE: NEM)
Newmont Mining (NYSE: NEM) is a big slice of company. Pound for pound, it’s the biggest gold producer on planet earth, and it could be getting bigger shortly.
But before we get into all that, let’s look at how Newmont got to where it is now.
The business’s name is actually a portmanteau of ‘Montana’ and ‘New York’, which were the two most significant places in founder William Boyce Thompson’s life, having been born in the former and made his money in the latter. When he started the business just over a century ago, it was merely a vessel for his varied investments.
However, mining and oil were largely in focus, and the business’ 1929 acquisition of the Empire and North Star mines in California steered the business towards the shiny stuff. Since then, the business has floated on the NYSE, broken the record for the largest corporate buyout and fended off corporate raiders.
So why is this storied stock so attractive to us? Well, let’s start with recent headlines.
The big story this year is Newmont’s proposed takeover of fellow gold miner Newcrest. On 5 February Newmont told shareholders it had offered to fully acquire its Australian rival for around $16.9bn in an all-share deal.
This offer has been rebuffed, but Newcrest didn’t exactly sound mortified by the idea of buddying up in its response. Its refusal simply said the offer “does not represent sufficient value for Newcrest shareholders” but appeared open to further offers.
From a Newmont perspective, snapping up Newcrest makes sense. The Australian miner is itself enormous, with 120 million ounces of measured and indicated gold resources at its disposal as of June 2022. That’s considerably higher than the 92.8 million ounces Newmont claimed to have in February 2022.
Additionally, Newcrest has significant copper reserves and operations with long lifespans. In short, Newmont could do a lot worse in securing its place as the top dog in gold mining.
There’s more reason to be attracted to Newmont besides its potential acquisition of Newcrest.
The company’s price-to-earnings ratio of 39.33 might be high, but its price-to-book ratio of 1.79 is lower than the average for the metals and mining subsector. Additionally, its projected price-to-earnings ratio for the next 12 months is much lower at 16.81, indicating a strong expectation for earnings growth.
These create a mixed picture of how fairly valued NEM stock is.
But Newmont’s dividend is another point of note. At 4.75% over the last year, the company’s dividend is falling right in the sweet spot, making the stock look like a strong option for anyone looking to earn income from their investments.
Newmont is a big beast. It might have a lower potential for growth than smaller fish, but it’s clear the business has an appetite for continued expansion and rewards its investors generously for their backing.
We’ll certainly have our eyes peeled for the company’s earnings release on Wednesday.
The Expander - B2Gold Corp (TSX: BTO) (NYSEAMERICAN: BTG)
Here is a business with development and exploration projects spanning Mali, the Philippines, Namibia, Colombia, Finland and Uzbekistan. But what’s B2Gold Corp’s (TSX: BTO) story, and why do we think the stock is worth a look?
It’s probably smart to start with the biggest recent news. That news is B2Gold’s takeover bid for Sabina Gold & Silver Corp, which the company announced had been agreed upon just last week.
The all-stock deal worth $820m will see B2Gold take control of Sabina’s Back River Gold District located in Nunavut, Canada. Feasibility studies indicate the construction-ready project could yield a gold mine with a 15-year lifespan and average production of 223,000 ounces of gold per year.
There’s exploration potential too.
It’s fair to say that B2Gold has big plans for the project, with President and CEO, Clive Johnson, commenting:
“The acquisition of Sabina represents an exciting opportunity to develop the significant gold resource endowment at the Back River Gold District into a large, long-life mining complex.
It’s not the first acquisition B2Gold has added to its expanding operations. In 2022 the company took over Oklo Resources Ltd with a view to developing its assets in Mali.
It’s also worth pointing out that, like Newmont, B2Gold Corp has an earnings update this week. However, as the company’s market cap is just a tenth the size of Newmont’s, it’s not likely to be a comparably significant event for the market.
Even so, the update will shed light on the integration of Oklo Resources and the business’s financial position. It has already confirmed that it saw record production in the fourth quarter of 2022, with the business meeting or exceeding annual production guidance for the seventh successive year.
There is reason to pause for thought when it comes to the business’s financial metrics. B2Gold’s price-to-equity and price-to-sales ratios are slightly higher than average for mining stocks, indicating that the stock could be overpriced. However, with expansion appearing to be the order of the day, the business’ potential could override this concern.
Indeed, analysts seem to like B2Gold too. The stock is listed as a ‘Strong Buy’ by 10 of the 14 analysts the Wall Street Journal covers.
We like B2Gold because the business is realistic and consistent, while also willing to embark on ambitious projects that can stimulate growth. If you want to know more, keep your eyes peeled for the company’s earnings this week.
The Edgy Bet - Dundee Precious Metals (TSX: DPM) (OTCMKTS: DPMLF)
The final gold miner we’re taking a look at today is Dundee Precious Metals (TSX: DPM) (OTCMKTS: DPMLF).
Its name might be right out of the land of tartan and shortbread, but Dundee is one of Canada’s most interesting gold miners. Its head office is in Toronto, but the company’s operations stretch across Bulgaria, Serbia, Ecuador and Namibia.
The business’s flagship asset is the Chelopech underground gold-copper mine in aforementioned Bulgaria. 2022 saw the asset produce 179,135 ounces of gold, achieving its annual guidance despite a slight downturn compared to the year before.
The company’s fourth-quarter earnings came out just days ago, showing solid revenue, earnings and free-cash-flow despite downturns. The business also hiked its guidance for the remainder of 2023, indicating its confidence in ongoing operations.
While Newmont’s financial metrics portrayed a mixed picture, Dundee’s numbers look a bit rosier. The company’s price-to-sales ratio (2.01) and price-to-book ratio (1.23) are lower than industry averages, while forward P/E is also superior to the norm among mining and metals outfits.
The company’s share price has fared well over recent months too, climbing by more than 10% over the past year as a 31% recovery in the last six months saw it erase earlier losses.
However, there is a significant risk to investing in Dundee at the moment. This concerns the company’s project in Ecuador, where development appears to have stalled. Dundee’s Loma Larga Gold Silver project has come up against resistance from locals.
However, legal challenges upheld the validity of Dundee’s environmental permits for exploration at Loma Larga last July.
The project is slated to produce an annual average of approximately 200,000 ounces of gold in its first five years of operation. Across its expected lifespan of 12 years, production is expected to be approximately 170,000 ounces of gold per year.
This would make the mine Dundee’s largest asset in terms of production.
As such, the mine is something of a big deal.
A revised feasibility study for the project is expected during the current quarter, while the appeals process from July’s court ruling is pending.
Good news on either topic could help Dundee’s share price shine.
Dundee’s underlying numbers are strong and the business appears to have share price momentum, as well as a project which can ensure continued production growth. However, interested investors should be aware of the hurdles that the company faces.
News in Brief
Moscow’s Mule. Russian President Vladimir Putin suspended a major nuclear arms agreement with the US in a speech which he used to blame the West for starting his war in Ukraine. The Russian leader’s brinksmanship adds further uncertainty to an already confusing economic environment.
Long Weekend. The largest-ever trial of a four-day working week has seen 92% of the companies involved continue with the policy. The six-month trial noted improvements in employees’ mental health and slight increases in company revenues.
At Your Service. Eurozone PMI has climbed to a nine-month high, aided by unexpectedly strong services growth and a return to growth in Germany. Preliminary readings from across the Channel in the UK showed a similar surprise upturn.
No Hike on the Hike. Goldman Sachs expects the Fed to hike interest rates by 25 points at its next three meetings, with the deceleration due to better-than-anticipated growth numbers.
Hot Property – This Week’s Intel
What are the stocks in focus from the week just gone?
🤖 ChatGPT has inspired interest in AI, leading C3AI (NYSE: AI) to emerge as the top trending stock on Reddit over the last 24 hours. The other leading stocks from Reddit for the period were Tesla (NASDAQ: TSLA), DTE Energy (NYSE: DTE) and Meta Platforms (NASDAQ: META).
🚙 Elon Musk’s electric car giant Tesla (NASDAQ: TSLA) was the most-mentioned stock on the influential investor subreddit WallStreetBets. Other stocks making an impact here include NVIDIA (NASDAQ: NVDA) and DraftKings (NASDAQ: DKNG).
⛏️ Mining outfit Cleveland-Cliffs Inc (NYSE: CLF) are big in Washington, with the stock being one of the most purchased by members of Congress over the weekend.
More Hot Content from ValueTheMarkets
This week's potential IPOs include a Chinese components e-commerce website and a fintech platform aiming squarely for the advertising industry.
This week’s company earnings include Fiverr International Ltd (NYSE: FVRR), Icahn Enterprises (NASDAQ: IEP), Overstock.com Inc (NASDAQ: OSTK), Moderna Inc (NASDAQ: MRNA), and Alibaba Group Holding ADR (NYSE: BABA).
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This Week – Dates in the Diary
Tuesday 21st – US Existing Home Sales (January) / S&P Global Composite PMI Estimate (February)
Wednesday 22nd – Federal Open Market Committee (FOMC) Minutes
Thursday 23rd – US Real Consumer Spending Growth (Q4)
Friday 24th – Canada Imperial Bank of Commerce Earnings / US New Home Sales (January)
Fun Fact – Kings of the Curbstone
So-called ‘curbstone brokers’ were stock market trailblazers in the United States. They were a common sight on Wall Street in the 19th century, trading stocks from the sidewalk on New York’s Broad Street.
The group’s Curb Exchange was a major rival for the New York Stock Exchange or ‘Big Board’, which operated nearby. By 1930, it was even the planet’s largest stock market for international business, listing more foreign issues than all other US securities markets combined.
But that glosses over the exchange’s rag-tag reputation.
Its boisterous and noisy brokers seem to have been widely regarded as a source of irritation for New Yorkers, with their market on Broad Street being described as a "gambling institution, pure and simple" by a lawyer who attempted to gain support for their removal in 1907.
He was clearly not alone in his opinion, with the New York Evening Post poetically describing the market as a "motley, agitated mass of struggling, yelling, finger-wriggling humanity" in 1920.
After various changes of location, June 2021 saw New York’s curbstone brokers move indoors. In time, the Curb Exchange became the American Stock Exchange and was eventually acquired by NYSE Euronext in 2008. Today, the exchange is the well-known NYSE American.
So, in the end, the Big Board snapped up the curbside brokers with whom they had once been so at odds.
Until Next Time…
Many thanks for taking the time to enjoy Investing Intel today, we hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
Catch you on the flip side!
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