The ascent of gold prices is steered by increasing demand fueled by geopolitical instability and sustained interest from the jewelry sector. Thus, it could be wise to invest in fundamentally sound gold stocks, Alamos Gold Inc. (AGI), Centamin plc (CELTF), and Kinross Gold Corporation (KGC), for possible gains in the near future.
Before delving into the stocks, let's examine in detail the factors driving the rise in gold prices.
Last week, gold prices hit an all-time high, forming a long-term rally that is expected to continue rising even as the U.S. economy slows down. The yellow metal peaked last week, breaking beyond $2,100 an ounce before a slight cooling-off period, with market prices averaging $2,030.
Amid rising global uncertainty stemming from the escalating Middle East conflict, gold prices are anticipated to surge further, given investors' inclination toward safe-haven assets. Additionally, regions experiencing war-like conditions might prompt central banks to expedite their gold acquisitions.
The World Bank estimates that average gold prices might increase 6% in 2024 to $1,900 an ounce before the market cools the following year. In contrast, a survey of 30 analysts and traders yielded a median estimate for gold higher than the $1,925 predicted this year, at $1,986.5 per troy ounce for 2024.
The jewelry sector's reliance on gold, influenced by cultural and economic factors in nations such as China and India, also provides a stable demand base. Concurrently, global governments' substantial demand for gold as a secure store of value contributes to the industry's overall resilience.
An increase in the demand for gold indicates that conditions would be favorable for gold miners in the future, ensuring stable market dynamics and supporting long-term stability and profitability. That said, the global gold mining market is predicted to grow at a CAGR of 3.5% and reach $260 billion by 2030.
In light of these trends, let’s look at the fundamentals of the three Miners - Gold stocks, beginning with number 3.
Stock #3: Alamos Gold Inc. (AGI)
Headquartered in Toronto, Canada, AGI is an intermediate gold producer operating three mines in North America. The company also manages a strategic portfolio of development projects, notably the Phase 3+ expansion at Island Gold and the Lynn Lake Project in Manitoba, Canada.
On November 9, AGI unveiled compelling outcomes from its Island Gold near-mine and regional exploration drilling initiative. The ongoing underground drilling extended high-grade gold mineralization within the Island Gold Deposit, enhancing resource potential across the E1E and C-Zones and adjacent structures.
Simultaneously, the regional exploration program successfully identified high-grade gold mineralization in two nascent targets. This success translates into heightened operational flexibility and additional low-cost ounces for development, with some already in extraction, spotlighting immediate growth prospects for the company.
On September 13, AGI revealed fresh findings from ongoing surface exploration drilling in the Mulatos District. The drilling expanded high-grade gold mineralization beyond existing Mineral Reserves and Resources at Puerto Del Aire (PDA) and also showcased substantial gold mineralization in step-out drilling at the Capulin regional target.
Encouraged by AGI's exploration triumphs and the deposit's open nature in multiple directions, the company increased the exploration budget for the second time this year. This allows for an assertive, continuous drill program, signaling an extension of the Mulatos mine life and the emergence of another compelling, high-return project.
The stock’s trailing-12-month gross profit margin of 56.23% is 97.8% higher than the industry average of 28.43%. Its trailing-12-month EBITDA margin of 49.27% is 184.8% higher than the 17.30% industry average. Moreover, AGI’s trailing-12-month net income margin of 20.34% compares to the 5.96% industry average.
For the third quarter that ended September 30, 2023, AGI’s operating revenues increased 19.9% year-over-year to $256.20 million. Its earnings from operations rose 176.3% from the year-ago value to $82.60 million. In addition, the company’s adjusted net earnings and adjusted earnings per share grew 102.6% and 100% from the prior year’s period to $54.50 million and $0.14, respectively.
For the fiscal year ending December 2023, AGI’s revenue is estimated to grow 22.9% year-over-year to $1.01 billion. Similarly, the company’s EPS for the ongoing year is expected to rise 91.8% from the prior year to $0.54. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters.
The stock has gained 37.2% over the past year to close the last trading session at $13.77.
AGI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AGI has an A grade for Sentiment and a B for Quality. It is ranked #12 out of 42 stocks within the Miners - Gold industry.
In addition to the POWR Ratings I’ve highlighted, you can see AGI’s Growth, Value, Momentum, and Stability ratings here.
Stock #2: Centamin plc (CELTF)
CELTF is involved in exploring, mining, and developing precious metals, boasting a portfolio encompassing the Sukari Gold Mine, Doropo Project, and ABC Project. Sukari, its flagship endeavor, operates as both a bulk tonnage open pit and a high-grade underground operation within a vast 160 square kilometers tenement.
On October 12, CELTF's Sukari was reaffirmed as a worldwide tier-one gold asset. The plan forecasts long-term production exceeding 500,000 ounces annually with all-in sustaining costs below $1,000 per ounce, showcasing CELTF's commitment to optimizing free cash flow.
Notably, this plan surpasses previous iterations, boasting reduced operational risk and enhanced carbon abatement. It serves as a cornerstone in CELTF's strategy, emphasizing Sukari's pivotal role in fostering growth and diversification while prioritizing stakeholder returns.
On July 20, CELTF disclosed the principled agreement on the Model Mining Exploitation Agreement (MMEA) framework with the Egyptian Ministry of Petroleum & Natural Resources (MoP) and the Egyptian Mineral Resources Authority (EMRA).
Drawing on over two decades of successful operations in Egypt, CELTF sees these terms as a cornerstone for advancing Egypt's mining sector, tapping into the country's unquestionable geological potential. Such expansion endeavors should bode well for the company.
CELTF’s trailing-12-month EBITDA margin of 41.84% is 141.9% higher than the industry average of 17.30%. Its trailing-12-month CAPEX/Sales of 30.24% is 311.9% higher than the 7.34% industry average. Also, the stock’s trailing-12-month net income margin of 9.46% is 58.7% higher than the 5.96% industry average.
For the third quarter that ended September 30, 2023, CELTF’s revenue came in at $200.40 million. Its EBITDA registered at $99.01 million. Moreover, the company’s free cash flow increased 16.5% from the prior year’s period to $12.42 million. Furthermore, as of September 30, 2023, the company’s cash on hand amounted to $78.50 million.
The consensus revenue estimate of $865.28 million for the fiscal year ending December 2023 reflects a 9.8% year-over-year improvement. Similarly, the consensus revenue estimate of $910.10 million for the next fiscal year (ending December 2024) exhibits a 5.2% rise from the previous year.
Shares of CELTF have gained 12.5% over the past month to close the last trading session at $1.17.
CELTF’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CELTF has a B grade for Value and Stability. It is ranked #8 out of 42 stocks within the Miners - Gold industry.
Click here to access the additional CELTF ratings (Growth, Momentum, Sentiment, and Quality).
Stock #1: Kinross Gold Corporation (KGC)
Headquartered in Toronto, Canada, KGC acquires, explores, and develops gold properties. The company is also involved in extracting and processing gold-containing ores and reclaiming gold mining properties. Additionally, it engages in the production and sale of silver.
On February 13, KGC unveiled the initial mineral resource estimate for its wholly-owned Great Bear project in Ontario, Canada, comprising 2.737 Moz. of indicated resources and 2.290 Moz. of inferred resources.
This marks a significant milestone in the company's year-long ownership, confirming its potential as a world-class asset. The estimated and sustained high-grade findings at depth strengthen KGC's vision for a high-quality open pit and substantial underground mine.
KGC’s trailing-12-month gross profit margin of 49.15% is 72.9% higher than the industry average of 28.43%. Its trailing-12-month EBITDA margin of 38.73% is 123.9% higher than the 17.30% industry average. Furthermore, the stock’s trailing-12-month CAPEX/Sales of 28.58% compares to the 7.34% industry average.
During the third quarter that ended September 30, 2023, KGC’s metal sales increased 28.7% year-over-year to $1.10 billion. Its adjusted operating cash inflow from continuing operations rose 81.4% from the year-ago value to $470.60 million.
Additionally, the company’s adjusted net earnings from continuing operations attributable to common shareholders and adjusted net earnings from continuing operations per share amounted to $144.6 million and $0.12, up 110.5% and 140% from the previous year’s period.
The consensus revenue estimate of $4.13 billion for the fiscal year ending December 2023 reflects a 19.4% year-over-year improvement. Likewise, the consensus EPS estimate of $0.40 for the current year indicates an 83.6% rise from the previous year. Also, the stock topped the consensus EPS estimates in all of the trailing four quarters.
The stock has gained 19.3% over the past six months and 35% over the past year to close the last trading session at $5.75.
KGC’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
KGC has a B grade for Growth, Value, and Quality. It has ranked #6 out of 42 stocks within the same industry.
Click here to access additional KGC ratings for Momentum, Sentiment, and Stability.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
KGC shares were trading at $5.70 per share on Monday morning, down $0.05 (-0.87%). Year-to-date, KGC has gained 43.05%, versus a 21.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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