AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
In 2023, the divergence between the stock price and the fundamentals of Canadian gold producer Barrick Gold (TSX:ABX) became increasingly evident. The company reported a production cost of $1334 per ounce of gold, with realized gold prices at $1948, driving a 200% increase in earnings per share to $0.72. However, the price of this Canadian gold stock is close to its 52-week low of $18.65.
Furthermore, Barrick Gold anticipates an increase in gold production for the year 2024, and its balance sheet remains robust, with a net debt of only $578 million.
The company’s free cash flow has grown by 50% to $646 million, allowing continued distribution of a quarterly dividend of $0.10 per share. Barrick Gold’s profits heavily depend on the price of gold, and as a result, the company offers a performance-based dividend: for every additional $500 million in net cash, the company will issue an extra $0.05 dividend on top of the $0.10 base. It is expected that Barrick Gold will return to its 2022 dividend levels, which were higher than those paid out in 2023.
Since January 15th, the price of this Canadian gold stock has dropped by 16.5%, approaching its low point in October 2023. Japan and the UK are facing economic downturns, while the price of gold has surpassed $2000. During economic downturns, the price of gold, a safe-haven asset, typically rises. Gold is an ancient form of currency and exchange medium, globally recognized. Therefore, when a country’s currency depreciates, gold often attracts investors due to its intrinsic value.
The trend in Barrick Gold’s stock price reflects this observation, as it has risen by 25% from its low point in October amidst soaring inflation rates. The company expects the price of gold to remain above $1900 in 2024, supporting a range-bound stock price. However, if the US economy also enters a downturn, investors will likely heavily invest in gold to protect their assets, causing the stock price to surge suddenly after a pullback.
Barrick Gold’s stock is not only a solid investment in gold but also offers diversification within investment portfolios. The stock’s price is currently relatively low, indicating low downside risk. In the event of an economic downturn, this stock could serve as a hedge, potentially increasing by up to 80%. However, if the global economic downturn is not severe, the stock price may still rise by 20% to 25%. In any case, buying on a dip is a reasonable strategy.
Nevertheless, investors should not have excessively high expectations for long-term performance of this gold stock; a more prudent strategy might involve short-term selling.
