When This Gold Mining Stock Shines, It Will Shine Brighter Than Others

Published on: Mar 1, 2024
Author: Caroline Kong

Gold futures just hit a new closing high today (1 March), and given that the Federal Reserve should announce the start of interest rate cuts sometime in 2024, most analysts are optimistic that gold prices will continue to rise.

Rising gold prices mean that gold producers will sell gold at a higher price, which will boost the earnings and valuations of listed gold mining companies, driving the price of related gold mining stocks to climb.

Unfortunately, while the gold price is about to hit a new record high again, many gold producers’ stock prices are trading at great discount. And once investors start to realize the huge discounts available in gold mining stocks, investments in this sector could generate spectacular returns.

Take Agnico Eagle Mines (TSX:AEM), for example, a gold stock that has peaked above C$79 over the past 12 months, and at one point in mid-February fell to C$60, a drop of nearly 30 per cent in share price. However, this huge valuation discount must have attracted some investor interest, as this gold stock has just rallied to near C$68 in the last week or two.

On 26 February, RBC Capital analyst Josh Wolfson announced that he was maintaining his Buy rating on shares of Agnico Eagle Mines on the New York Stock Exchange (NYSE) and set a price target of $60.00 on the company’s stock, which closed at $48.02 the day before.

Third-quarter earnings released late last year showed that Agnico Eagle produced 850,429 ounces of gold at a production cost of $893 per ounce and all-in sustaining costs (AISC) of $1,210 per ounce. Adjusted net income was $0.44 per share and operating cash flow was $1.01 per share.

In addition to strong profitability, this gold stock offers a decent dividend yield of 3.3%. The company has also been operating quite smoothly recently, and management has reiterated its production guidance for 2024. Considering the upside prospects for gold prices this year and next, potential investors should be comfortable with this gold stock.

Mining is a capital-intensive industry and carries some investment risk. However, for a low-cost, high-quality gold producer like Agnico Eagle Mines, it’s still smart to buy when valuations are at low levels. The company currently trades at a price-to-earnings ratio of just 12.2 times, and the dividend looks safe and stable. If the gold price moves higher as expected this year, the dividend should have some room to grow.

If you’re interested in investing in mining stocks, you might want to keep an eye on this company: Silver Storm Mining Ltd. (TSXV:SVRS). Silver Storm Mining Ltd. holds advanced-stage silver projects located in Durango, Mexico. Golden Tag recently completed the acquisition of 100% of the La Parrilla Silver Mine Complex, a prolific operation which is comprised of a 2,000 tpd mill as well as five underground mines and an open pit that collectively produced 34.3 million silver-equivalent ounces between 2005 and 2019. The Company also holds a 100% interest in the San Diego Project, which is among the largest undeveloped silver assets in Mexico.

Disclaimer: Investing involves risk, and individuals should conduct thorough research and seek professional advice before making financial decisions. NAI is being compensated for this content. Materials contained in this content are for information purposes only and is not intended to constitute an offering of securities in any jurisdiction. Nothing on this content should be construed as an offer, solicitation or recommendation to buy or sell products or securities.

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