The U.S. Labor Department has reported rising inflation, with a 6.2% annual increase in the Consumer Price Index (CPI) in October, its highest year-over-year increase since November 1990. The high inflation is eroding wage gains, and holding cash seems costly now. According to Ray Dalio, the founder of investment management firm Bridgewater Associates, there are better assets to hold than cash.
As a good inflation hedge, gold has attracted investors, hitting five-month highs lately. Spot gold has rallied 0.6% to$1,861.39 per ounce. Furthermore, with the central bank viewing current inflation as transitory, and exhibiting no inclination to raise benchmark interest rates anytime soon, analysts expect gold to hit $1,900 per ounce soon.
Given this backdrop, Wall Street analysts predict gold mining stocks Agnico Eagle Mines Limited (AEM), Kinross Gold Corporation (KGC), B2Gold Corp. (BTG), and Yamana Gold Inc. (AUY) will rally 18% or more in the near term.
Click here to check out our Gold and Silver Industry Report for 2021
Agnico Eagle Mines Limited (AEM)
AEM is an explorer, developer, and producer of mineral properties in Canada, Sweden, and Finland. The company operates through Northern Business and Southern Business segments and is headquartered in Toronto, Canada.
On November 10, AEM announced that Institutional Shareholder Services (ISS) had recommended that the company’s shareholders vote “For” in its merger of equals with Kirkland Lake Gold Ltd. (KL). If approved, the merger is expected to create transactional synergies and drive the expertise required for operational expansion.
On November 2, the company provided updates on exploration at several of its sites, including the LaRonde Complex, Odyssey Underground Project at Canadian Malartic, and its Kirkland Lake Project. The strong drilling results from these sites reflect AEM’s significant explorations and potential expansion.
For the nine months ended September 30, AEM’s revenues from mining operations increased 30.1% year-over-year to $2.87 billion. Its net income for the period and net income per share improved 43.7% and 42.9%, respectively, from the same period last year to $440.19 million and $1.80.
A $2.61 consensus EPS estimate for the current year (fiscal 2021) indicates a 40.3% year-over-year increase. Likewise, the $3.88 billion consensus revenue estimate for the current year reflects a 23.5% improvement from the prior year. Furthermore, AEM has an impressive surprise earnings history; it has topped consensus EPS estimates for three of the trailing four quarters.
The stock has gained 6% in price over the past month and 6.3% over the past five days to close yesterday’s trading session at $56.96.
Of the nine Wall Street analysts rating AEM, six have rated it Buy, while three have rated it Hold. The 12-month median price target of $74.04 indicates a 30% potential upside. The price targets range from a high of $97.65 to a low of $50.43.
Kinross Gold Corporation (KGC)
KGC acquires, develops, and explores gold properties located primarily in the United States, the Russian Federation, and Brazil. Based in Toronto, Canada, the company engages in extracting and processing gold-containing ores and producing and selling silver.
On November 11, White Gold Corp., a gold exploration company, reported that an updated mineral resource estimate for the VG deposit on its QV project confirmed near-surface Inferred Resources of 267,600 ounces of gold (5,264,000 tonnes at an average grade of 1.62 g/t gold). The exploration programs were backed by partners Agnico Eagle Mines Limited (AEM) and KGC. Thus, the project could prove to be beneficial to KGC.
On November 10, KGC announced a $0.03 quarterly dividend per common share, payable to shareholders on December 15. This reflects the company’s stable cash position.
In July, the company signed a definitive agreement with the Government of Mauritania, highlighting the continuation of tax exemption on fuel duties and repayment of approximately $40 million in VAT refunds. The agreement is expected to strengthen the company’s constructive relationship for continuing mining operations in Mauritania.
KGC’s metal sales were $862.50 million in the third fiscal quarter, ended September 30. The company’s adjusted net earnings attributable to common shareholders and adjusted net EPS for the period stood at $90.20 million and $0.07, respectively.
The Street’s $0.80 EPS estimate for the next year (fiscal 2022) reflects a 95.1% year-over-year increase. Likewise, the Street’s $4.85 billion revenue estimate for the coming year indicates a rise of 25.2% from the current year.
KGC’s stock has gained 19.8% in price over the past month to close yesterday’s trading session at $6.79. It has gained 9.3% over the past five days.
All four Wall Street analysts that rated KGC have rated it Buy. The 12-month median price target of $8.05 indicates an 18.6% potential upside. The price targets range from a low of $6.00 to a high of $9.00.
B2Gold Corp. (BTG)
BTG, based in Vancouver, Canada, is a gold producer that primarily operates on three mines located in Mali, the Philippines, and Namibia. The company also holds a major interest in the Kiaka Project in Burkina Faso.
On October 25, BTG announced that it has agreed to sell 100% of the outstanding shares of Volta Resources (Cayman) Inc., the holder of an 81% interest in the Kiaka gold project located in Burkina Faso, to West African Resources Limited (WAF). Under the agreement, BTG is expected to receive a considerable amount and significant royalty interests, which should improve its cash position.
And on October 18, a Canadian exploration company, Aurion Resources Ltd., announced that BTG had issued a notice to exercise its right to acquire an additional 19% interest in the Finland joint venture, increasing its total interest to 70%. The acquisition should add to BTG’s operational capability.
For its third fiscal quarter, ended September 30, BTG’s gold revenue increased 4.9% year-over-year to $510.86 million. Its cash provided by operating activities grew 6.8% from the prior-year quarter to $320.28 million, while the company’s cash and cash equivalents balance came in at $546.51 million, up 49.5% from the same period last year.
Analysts expect BTG’s EPS to increase 12.8% year-over-year to $0.44 for the coming year (fiscal 2022). And a $1.82 billion consensus revenue estimate for the next year reflects a 3.3% increase from the current year.
BTG’s stock has gained 20.1% in price over the past three months and 29.7% over the past month to close yesterday’s trading session at $4.67.
Of the four analysts rating BTG, three have rated it Buy, while one has rated it Hold. The 12-month median price target of $6.65 indicates a 42.4% potential upside. The price targets range from a high of $8.00 to a low of $4.60.
Yamana Gold Inc. (AUY)
AUY is a precious metals producer that engages in gold and silver production and holds development-stage properties and land positions across the Americas, including Canada, Brazil, Chile, and Argentina. The company is headquartered in Toronto.
On October 28. AUY’s declared a $0.03 per share quarterly dividend (annual $0.12 per share), payable to shareholders on January 14, 2022. The move is an indication of the company’s ability to pay back its shareholders.
And on September 13, the company reported positive initial drill results at its Wasamac project in the Abitibi-Témiscamingue Region of Quebec, Canada. The results align with AUY’s objective of sustaining 200,000 ounces per year of production from the region.
AUY’s revenue increased 2.9% year-over-year to $452.20 million in its third fiscal quarter, ended September 30. Its cash flow from operations before changes in non-cash working capital rose 2% from the same period last year to $202.90 million. And its net EPS was $0.03 for the period.
The $0.30 consensus EPS estimate for the next year (fiscal 2022) indicates a 3.4% year-over-year increase. Likewise, the $1.85 billion consensus revenue estimate for the coming year reflects a 2.2% improvement from the current year.
The stock has gained 10.3% in price over the past month and 7.9% over the past five days to close yesterday’s trading session at $4.49.
Five out of the seven analysts that rated AUY have rated it Buy, while two have rated it Hold. The 12-month median price target of $6.89 reflects a 53.5% potential upside. The price targets range from a high of $9.20 to a low of $4.00.
Click here to check out our Gold and Silver Industry Report for 2021
AEM shares were trading at $57.44 per share on Friday afternoon, up $0.48 (+0.84%). Year-to-date, AEM has declined -18.04%, versus a 26.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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