On Monday, October 12th, gold stocks and gold futures inched up slightly. While there are many reasons behind this, the main factor is a mix of the upcoming U.S. election and the COVID-19 stimulus package. As much as we like to think gold stocks are immune to speculation, it is quite the opposite. And while gold stocks do tend to rise and fall with geopolitical tensions, it is usually in the inverse direction of the market. This is because investors tend to buy gold when markets show signs of turmoil. This turmoil could be geopolitical, economic, or inflation-related.
But regardless, gold futures and gold stocks rise and fall accordingly. Since the start of the pandemic, we have seen investors continue to be bullish about gold stocks. Carlo Alberto De Casa, a chief analyst at ActivTrades, stated that “technically gold is regaining strength with the consolidation above $1,920 a supportive signal for bullion and confirming traders’ huge interest.”
After Trump’s COVID diagnosis, the president stated that he hopes to get a stimulus package through as soon as possible. This sentiment has helped to push gold futures higher in the past week or so. In addition, the Fed’s choice to keep interest rates at near-zero has helped to bolster the economy and lower inflation rates. With gold hitting an all-time high of $2,089.20 back in August, investors believe that there could be more bullish sentiment in the near future. With that in mind, let’s take a look at 5 gold stocks ahead of the U.S. election.Gold Stocks to Watch:
- Freeman Gold Corp. (FMANF Stock Report)
- Eldorado Gold Corp. (EGO Stock Report)
- Yamana Gold Inc. (AUY Stock Report)
- B2Gold Corp. (BTG Stock Report)
- Wheaton Precious Metals Corp. (WPM Stock Report)
Freeman Gold Corp. is one of the junior gold stocks to watch. For those who don’t know, Freeman Gold works by acquiring mining projects which it then develops into gold producing assets. Recently, Freeman Gold purchased the parent company of Lower 48 Resources Ltd. This move was a strategic one that gave the company the right to acquire the famed Lemhi Gold Project in Lemhi County, Idaho. This gold project represents some of the vast potential that Idaho has for the gold mining industry. Last year, the Fraser Institute named Idaho as No. 8 in the world for its mining attractiveness.
Currently, there are over 355 holes drilled in the Lemhi Mine. These holes have given Freeman Gold invaluable data as to where and how much gold there may be in the mine. Current estimates show that the project could develop as much as 1.5-2M ounces total. After discovering the potential of this mine, Freeman Gold focused further on derisking the asset further. The company ended up striking a deal with Yamana Gold Inc. whereby Freeman acquired a back-in right to the Lemhi Project, from Yamana. When the news hit the market, it was incredibly exciting as it offered both parties a great opportunity. Yamana now has a 5% equity stake in Freeman Gold which is worth around 4.3 million common shares of the company.
During the second half of the third quarter, 2020, Freeman acquired the Moon #100 and Moon #101 unpatented mining claims, located within the historical resource area of its Lemhi project. The Moon Claims are located towards the northern portion of the historical resource area in the immediate vicinity of historical drill holes 86065, 93002 and 93005 which contain significant gold mineralization including both broad (193.55 meters of 1.8 grams per tonne gold (‘g/t Au’)) and high grade (57.91 meters of 4.09 g/t Au) gold intercepts.Gold Stocks to Watch #2: Eldorado Gold Corp.
Eldorado Gold Corp. is another leader in the gold mining industry. The company works in the exploration, development, production and sale of various mining resources. While it does have mines around the world, the company is primarily focused on Europe and Canada. As of October 2020, Eldorado Gold has five mines that are in operation. This includes the Kisladag and Edemcukuru mines located in Turkey, the Lamaque Mine in Canada, and the Olympias and Stratoni mines in Greece. With these mines, the company is able to produce silver, zinc, lead and iron. Despite its production of various minerals, Eldorado primarily works on the production of gold.
At the end of July, Eldorado announced that it had completed redeeming almost $60 million in senior debt notes. This helped to bring in a newfound sense of confidence to the business as debt reduction is always a major positive. Since late September, shares of EGO stock have pushed up by more than 33%. This is quite substantial and should not be ignored by investors. In addition, the company recently welcomed Judith Mosely to its board after Dr. Michael Price stepped down from his role. This news helped to push EGO stock in the right direction over the past month or so. With that, it remains a leading gold stock to watch.Gold Stocks to Watch #3: Yamana Gold Inc.
Yamana Gold Inc. is a gold mining company that has performed quite well this year. As mentioned before, Yamana Gold recently struck a deal with Freeman Gold Corp. which was big news when it hit the market. On its own, however, Yamana Gold Inc. has a lot to offer. On October 7th, Yamana Gold announced its preliminary second-quarter results. These results showed that the company has continued its winning streak in 2020. Its gold production hit around 240,466 ounces which is up by around 31% sequentially. The company was also able to increase its cash by $145 million over the previous quarter which is no small feat.
In addition, Yamana Gold announced that it has reduced its net debt to $0.62 billion from $1.7 billion only 3 years ago. Lastly, Yamana announced that it has increased its dividend yield to 1.7%. All of this news is quite positive for Yamana and the gold industry at large. When we see large gold stocks like Yamana producing positive results, it reflects highly on the industry as a whole.
Another metric we can use to look at Yamana is a comparison between it and the VanEck Vectors Gold Miners ETF (GDX Stock Report). In 2020, Yamana Gold is up by around 80% while the VanEck Gold Miners ETF is only up by around 45%. With this in mind, investors may continue keeping a close eye on Yamana Gold Inc.Gold Stocks to Watch #4: B2Gold Corp.
B2Gold Corp. is one of the top-performing gold stocks of 2020. This year, BTG stock has shot up by as much as 73% while benchmarks like GDX have climbed around 45% in the same period. As with many gold stocks, a lot of this growth is due to the effects that COVID has had on the market. In the past six consecutive quarters, BTG stock has returned growth in all aspects of its business. With the increasing price of gold and the decreasing price to mine gold, the company has posted a trailing four-quarter earnings amount of around 1%.
With a market cap of roughly $7.3 billion as of October, B2Gold is one of the largest gold stocks in the industry. Analysts have stated that the company has a long-term earnings per share growth rate of almost 20%. While this may be an overestimate, the company does look like it has a lot of future potential.
One of the major factors in the increasing value of B2Gold is the performance of its mines. In particular, its Otjikoto and Masbate mines in Namibia and the Philippines respectively, have well outperformed the target production amounts. For the year, B2Gold expects to produce more than 1 million ounces of gold. All of this adds up to make B2Gold an attractive gold stock to watch.Gold Stocks to Watch #5: Wheaton Precious Metals Corp.
Wheaton Precious Metals Corp. is different from most gold stocks as it is considered to be a streaming company. This means that it enters into contracts to purchase certain amounts of gold from the mines directly. This is done with an upfront payment and an additional payment after the metals are delivered. There are several strategic advantages to this business model. This includes most notably, the ability to have low risk compared to companies that mine ore directly. In addition, the company is able to push some of the highest margins in the gold mining industry.
Recently, the company announced that it intends to list its shares on the London Stock Exchange or LSE. While this does not affect U.S. traders holdings in the company, it could offer more capital to Wheaton Precious Metals. CEO of Wheaton, Randy Smallwood stated that “as a leader in the precious metals sector, Wheaton is excited to take our place amongst the largest mining companies globally on the London Stock Exchange.
Wheaton is one of the world’s largest precious metals streaming companies, providing investors a unique and sustainable proposition with some of the highest margins in the mining industry and exposure to a high-quality portfolio of assets.” With this, Wheaton Precious Metals looks like it has an advantageous position in the future of the gold industry.