In the wake of gold’s surge to $2,000 in 2020, Wall Street braced for an extended bull market in gold. The Federal Reserve’s unprecedented money printing and the highest inflation since the 1980s sent investors flocking to gold.
Yet, the anticipated rally never came. Gold has failed to meaningfully breach $2,000.
But inflation has been stubborn despite high rates. For each day that continues, an upside breakout in gold becomes more likely.
Gold miners can offer significant leverage to the price of gold. Due to the fixed cost structure of the mining business, all sales above a breakeven price flow right to profits. But selecting the right ones demands keen attention to their infamous spending habits and historically poor capital management.
So if you’re looking to increase your gold exposure, consider these seven gold stocks as a more tactical way to play the yellow metal:
|Stock||Market Cap||YTD Return (as of Sept. 5 close)|
|DRDGold Ltd. (ticker: DRD)||$873.6 million||33.2%|
|Sibanye Stillwater Ltd. (SBSW)||$4.1 billion||-45.7%|
|Kinross Gold Corp. (KGC)||$6 billion||21.4%|
|Gold Fields Ltd. (GFI)||$11.6 billion||21%|
|Barrick Gold Corp. (GOLD)||$28 billion||-5.6%|
|Newmont Corp. (NEM)||$30.6 billion||-16.1%|
DRDGold Ltd. (DRD)
While most of the attention in the gold industry typically revolves around traditional miners, exploration ventures or royalty/streaming outfits, DRDGold carved out its own niche.
This South Africa-based company doesn’t bear the risk of mining, nor does it suffer from the binary-like nature of relying on exploration success. Instead, it basically sifts for gold in a bunch of waste.
DRD recovers tailings, which are the leftover residues from the gold extraction process. These tailings often still contain significant amounts of gold, but their extraction was uneconomical at one time. DRD has made significant technological strides in extracting gold from this waste, making the company sound like modern-day alchemists.
One of the most compelling aspects of DRD’s business model is its high operating leverage to the price of gold. This stems from its reprocessing strategy, which often has lower operational costs compared to traditional mining.
The stock is one of the best-performing U.S.-listed gold stocks in 2023, returning about 33% year to date. Some investors are worried about its valuation, making a rising gold price an important key to this stock’s thesis.
Year-to-date (YTD) return: 33.2% Market cap: $873.6 million
Sibanye Stillwater Ltd. (SBSW)
South Africa-based Sibanye Stillwater is a diversified metals miner. The company mines an array of metals, prominently featuring platinum group metals (PGMs) like platinum, palladium and rhodium, and extending to gold, lithium and copper.
One of the most compelling aspects of Sibanye is its diversified metals portfolio. While many miners focus primarily on gold, Sibanye reduces its reliance on one commodity price. However, it’s not just about the stability, which supports its 10.3% dividend yield.
It’s also strategically positioned to tap into multiple growth narratives, with PGMs and lithium, often called “green metals,” acting as cornerstones of the green revolution. These metals are instrumental in hydrogen fuel production, battery technology and emissions reduction.
But SBSW has faced some challenges lately. The stock has plunged 45% year to date and a staggering 54% from its 2022 highs. The combination of declining PGM prices and political unrest in South Africa has pressed the stock down to a low 5x earnings multiple.
While the risks are palpable, the value-oriented investor might’ve just been presented with a golden opportunity.
YTD return: -45.7% Market cap: $4.1 billion
Kinross Gold Corp. (KGC)
Once a storied stock among mining investors, Canada’s Kinross Gold Corp. is a dominant player in the gold market, with mines spanning the U.S., Canada and Brazil.
But recent challenges including declining production and elevated costs have left Kinross Gold’s stock in a downtrend since 2020.
Its fortunes seem to be pivoting, as the 21% rise in its stock so far this year suggests. Production surged in the most recent quarter, increasing 22% year over year. That, combined with a tapering in production costs and debt reduction, is putting Kinross back on investors’ radar.
Trading at four times next year’s cash flow estimates, the company is one of the cheapest major miners. The lowball valuation is underlined by Endeavour Mining’s (OTC: EDVMF) botched takeover bid, a clear sign that KGC’s competitors think it’s too cheap.
YTD return: 21.4% Market cap: $6 billion
Gold Fields Ltd. (GFI)
South African major Gold Fields Ltd. produced 2.4 million ounces of gold last year through its global portfolio of mines ranging from Australia to Chile.
With its 21% ascent, GFI is one of the hotter gold stocks this year. But the stock has struggled in the second half of 2023, its share price sliding to $12.24 from a high of $17.78.
The company’s recent semiannual earnings report confirmed what the market was hinting at: Things are cooling off at GFI. Falling short of Wall Street forecasts, it reported year-on-year dips in both profits and production, primarily attributed to the rising costs in the mining industry.
In a strategic pivot, following a failed bid for Yamana Gold, GFI is changing its growth strategy. Instead of acquiring competitors, the miner is on a quest to build new, profitable mines in South America and Canada. A signpost of the strategy’s success is the positive market reaction to its Windfall project collaboration with Osisko Mining Inc. (OSK.TO), which buoyed GFI shares by 4% on the day of the announcement.
YTD return: 21% Market cap: $11.6 billion
Barrick Gold Corp. (GOLD)
Barrick Gold, with a market cap of $28 billion, sits firmly as the world’s second-largest gold producer. If you want stability in the gold mining industry, it’s hard to find a better stock to buy than Barrick Gold.
With a massive, diversified portfolio of global mines and projects, its revenues can’t be disrupted by a one-off geopolitical event. Crucially, most of that revenue comes from North America, coming with significantly less political risks than the more tumultuous territories other companies grapple with.
Yet even stalwarts like Barrick aren’t impervious to industry headwinds. Like some others on this list, Barrick has faced an uphill battle in the last few years. Dwindling cash flows, mounting expenses and an escalating debt position have been challenges.
Barrick’s stumbles have created a compelling opportunity in its shares, trading at about six times Wall Street’s 2024 cash flow estimates. At that valuation, it’s a more than reasonable buy for value-minded investors looking for stability in the volatile gold industry.
YTD return: -5.6% Market cap: $28 billion
Newmont Corp. (NEM)
The world leader in gold production, Newmont Gold looks to entrench its position with the acquisition of Australian competitor Newcrest Mining Ltd. (OTC: NCMGY). The combined company will make it significantly larger than the rest of the major miners.
The acquisition comes as finding new profitable projects is ever harder to come by in the mining industry, as all the low-hanging fruit was picked long ago. With the gold mining industry in a trough lately, it’s no surprise that M&A activity is on the rise.
And Newmont management certainly has ambitious goals for the merger. The company expects to add $2 billion of cash flow and subtract $500 million in costs within two years of the merger. The market isn’t entirely sold on this: NEM shares have retreated about 15% since the deal was announced in May. However, the decline offers investors an opportunity to own the global dominator of the gold market after a pullback in its share price.
YTD return: -16.1% Market cap: $30.6 billion
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Update 09/06/23: This story was previously published at an earlier date and has been updated with new information.