Gold prices may still be years away from a peak.
Gold prices hit a high mark on July 27, partly on concerns that stimulus actions will trigger inflation in the U.S. dollar. The U.S. government issued about $1.8 trillion in economic stimulus funds from 2008 to 2012. In 2020, the government has authorized $3.6 trillion in stimulus dollars, and more are likely on the way. The stock market bottomed in March 2009, almost exactly 11 years before the March 2020 floor. Yet gold prices didn’t peak following the financial crisis until 2011. Here are seven of the best gold stocks to buy, according to Bank of America.
Agnico Eagle Mines (ticker: AEM)
Agnico Eagle Mines is a Canadian gold mining company that produced 1.78 million ounces of gold in 2019. Analyst Michael Jalonen says Agnico’s 2021 production should ramp up to 2 million ounces as it expands its operations at several mines. Jalonen is projecting $1.45 in 2020 earnings per share and $3.71 in 2021 EPS, suggesting that the stock is trading at just 18.8 times 2021 earnings. The higher gold prices rise, the more of a boost Agnico’s margins get. Bank of America has a “buy” rating and $72 price target for AEM stock.
Barrick Gold Corp. (GOLD)
Barrick Gold is a Canadian gold mining company projected to produce in 2020 between 4.6 million and 5 million ounces of gold and 500 million pounds of copper. Barrick reported 1.15 million ounces of gold and 120 million pounds of copper output in the second quarter. Jalonen says Barrick is on track for EPS of 86 cents in 2020 and $1.31 in 2021. Jalonen is bullish on Barrick because of its robust free cash flow and its investor-friendly capital allocation. Bank of America has a “buy” rating and $34 price target for GOLD stock.
B2Gold Corp. (BTG)
B2Gold is a gold producer that owns mines in the Philippines, Namibia and Mali. Analyst Lawson Winder says a second-quarter production beat improved B2Gold’s net asset value by 3%. In addition, better-than-expected gold prices and sales have helped to support the company’s margins. None of B2Gold’s major mines has been interrupted by the 2020 health crisis, and the company still estimates between 1 million and 1.05 million ounces of gold production in 2020. Winder is projecting 48 cents in 2020 EPS. Bank of America has a “buy” rating and $6.55 price target for BTG stock.
Eldorado Gold Corp. (EGO)
Eldorado Gold is a gold producer with properties in Turkey, Greece and Brazil. Jalonen says Eldorado’s second-quarter gold production was in line with expectations, its 2020 EPS outlook is better than expected, and the stock is trading below net asset value. He says the life-of-mine plan for the Kisladag, Turkey, property should allow Eldorado to produce at least 450,000 ounces per year for the next five years, and its management team is experienced. Eldorado’s stock is not fully reflecting this strong performance and production value, Jalonen says. Bank of America has a “buy” rating and $12 price target for EGO stock.
Iamgold Corp. (IAG)
Iamgold is a Canadian gold mining company with operations in Canada, Burkina Faso and Suriname. Iamgold recently announced it plans to proceed with building its Côté Gold project in Ontario, Canada. Jalonen estimates that by 2024 the Côté mine will increase Iamgold’s gold production and net asset value by 50%. Bank of America is projecting $750 million in free cash flow through 2023, and Jalonen says Iamgold is well-positioned to fully fund Côté construction. Finally, Iamgold has already hedged 90% of its near-term oil exposure. Bank of America has a “buy” rating and $5.60 price target for IAG stock.
Kirkland Lake Gold (KL)
Kirkland Lake Gold is a Canadian gold producer with major mines in Canada and Australia. Jalonen says Kirkland’s second-quarter gold output was solid, up 54% year over year. One of the company’s biggest production growth drivers was its early 2020 acquisition of the Detour Lake mine in Canada. Kirkland recently reiterated its full-year production growth guidance of between 1.35 million and 1.4 million ounces. Jalonen says the recent surge in gold prices has created a potential earnings multiple upside for Kirkland as investors anticipate higher margins. Bank of America has a “buy” rating and $57 price target for KL stock.
Newmont Corp. (NEM)
Newmont is the world’s largest gold producer. Jalonen says Newmont has an impressive pipeline of development projects, robust free cash flow and a stable balance sheet. He says Newmont management is focused on building a sustainable long-term business. Newmont is forecasting between 6.2 million and 6.7 million ounces per year in production through 2024. Bank of America is projecting EPS will grow from $2.10 in 2020 to $4.06 in 2021. Those targets suggest Newmont is trading at just 15.5 times 2021 earnings. Bank of America has a “buy” rating and $82 price target for NEM stock.
Gold stocks to buy on price rise:
— Agnico Eagle Mines (AEM)
— Barrick Gold Corp. (GOLD)
— B2Gold Corp. (BTG)
— Eldorado Gold Corp. (EGO)
— Iamgold Corp. (IAG)
— Kirkland Lake Gold (KL)
— Newmont Corp. (NEM)
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