Historically, gold has been viewed as a store of value and a hedge against inflation. For centuries, it has enabled investors to accumulate significant wealth, and even in 2024, gold remains a vital investment option. Typically, gold has an inverse relationship with interest rates; as rates are expected to decrease multiple times, gold should continue to attract investment. Additionally, geopolitical tensions and increased central bank purchases are likely to serve as tailwinds for gold in the short term.
Mining companies focus on the exploration, extraction, and processing of mineral and metal deposits. During periods of economic expansion, the demand for these materials is high. However, in challenging environments, a decline in demand can lead to falling commodity prices and cash flow for mining companies. Given the cyclical nature of the industry, it’s crucial to focus on those companies that can navigate challenges or even thrive during economic downturns.
Taking these factors into account, you might consider paying immediate attention to two quality Canadian mining stocks.
Wheaton Precious Metals (TSX: WPM), with a market capitalization of CAD 41.6 billion, is a company that sells precious metals in Canada and other international markets. It markets gold, silver, palladium, and cobalt mines.
In the first half of 2024, Wheaton Precious Metals produced over 305,000 ounces of gold equivalent and is expected to reach a production guidance target of 550,000 to 620,000 ounces of gold equivalent by the end of the year.
The company’s revenue for the second fiscal quarter increased from $265 million in the same period last year to $299 million. Rising commodity prices led to a 22% year-over-year growth in gross profit for the June quarter, reaching $186 million.
With over $540 million in cash and $2 billion in unused revolving credit facilities, Wheaton has the flexibility to fund its outstanding commitments and has the capacity for acquisitions.
This Canadian mining stock may seem expensive, with a price-to-earnings ratio of 38. However, considering the generally anticipated price targets, adjusted earnings are expected to grow annually by 18.9% over the next five years.
Barrick Gold (TSX: ABX), with a market capitalization of $50.6 billion, is a global mining giant. Over the past five years, Barrick has returned nearly $5 billion to shareholders through dividends and buybacks. Since the end of 2019, the company has reduced its net debt by $3.5 billion and reinvested $8 billion in capital expenditures.
Barrick Gold pays an annual dividend of $0.40 per share, with a forward yield of nearly 2%. Rising gold prices are expected to expand Barrick’s adjusted earnings from $1.15 per share in 2023 to $2.09 per share by 2025. The stock has a price-to-earnings ratio of 13.5, which is 10% lower than the general target price in October 2024.
