What Are Gold Mining Stocks?
People invest in gold because it’s stable, reliable, and, most importantly, an asset they can bank on during an economic crisis. On the other hand, investors who find putting money in the precious metal a bit too safe usually skew to stocks.
Then, another category of investors wants the best of both worlds: the reliability of gold and the opportunity to scale the value of their portfolio with company shares. Let’s welcome gold stocks into the discussion!
A gold stock is essentially a share in a publicly listed company that’s into the gold business in some way or the other, such as mining, streaming, etc. To help you understand the concept better, we’ll be discussing the following:
- A complete overview of gold mining stocks
- How the stock prices move/fluctuate
- Top gold mining stocks or companies to invest in and more
If you’ve been shunning gold stocks because you didn’t understand them well enough, this piece shall be your primer. Read on.
Table of Contents
Gold Mining Stocks: A Detailed Intro
A gold mining stock represents one share unit of a gold mining firm. The stocks trade on traditional exchanges like every other publicly listed company. You can buy the stocks via an IPO (initial public offering) or when they’re already trading on the market.
A gold mining stock doesn’t signify gold ownership, but it means you own a specific portion of the gold mining firm you’ve bought stocks of and are entitled to the company’s profits per your holdings in the business.
If you’re looking to buy units of real gold through a stock exchange, look at gold ETFs backed by physical gold instead.
Kindly note, all gold mining stocks are gold stocks, but all gold stocks are not gold mining stocks. In other words, the term “gold stock” could also denote a gold ETF (exchange-traded fund) or a gold mutual fund. The ETF trades on the stock market like a regular stock, but a gold fund doesn’t.
Read more: Gold vs Platinum Investments
Gold Mining Stock Price Movements
The value of gold mining stock moves in direct correlation to gold prices. But then it also depends on what those increasing or decreasing costs of gold mean to the company.
When the gold mining firm profits, the value of the share increases. When it experiences losses, the price goes down. Gains or losses are determined by moving gold prices. Other aspects such as the number of active mining projects it has on hand, production costs, quality of top-level leadership, etc., are also reflected in the stock prices.
The state of the financial market or the currency value could also influence the stock’s price. Since gold is denominated in American dollars, there’s a clear relationship between the two. In other words, if the dollar value rises or falls, there is an impact on the price of gold. And that influence shall have a cascading effect on the stock’s worth.
Since dollar value isn’t the only determinator, inflation, interest rates, supply and demand, and monetary policy are other factors impacting gold prices and, as a result, the value of gold mining stocks.
5 Best Gold Stocks to Buy
Gold mining is a massive undertaking. The precious yellow metal is a scarce commodity, and, with time, the paucity becomes a lot more evident. Companies struggle to discover new gold or do not mine gold like they used to. Therefore, investing in stocks of gold miners is a decision that you can’t make in haste.
The following companies have been in the business for years and have proved their mettle repeatedly. If you’re looking to invest in the best gold stocks, the following are your options (in no particular order):
(Since stock prices and their movements are volatile, we’ll not state share prices here.)
Barrick Gold Corp. is arguably the most well-known gold mining company globally. With over 14.5 million shares bought and sold on average in a trading session, the Canadian firm is a precious (no pun intended) business with a more than $35 billion market value.
Barrick Gold has 14 gold mines, with six mines being “tier one” or having an expected lifespan of at least a decade. Those high-tier mines produce a minimum of 500,000 ounces of gold every year. Moreover, the company constantly explores and acquires fresh land to develop new mines. While at it, it ensures those new swathes of land it procures provide long life expectancy and optimal operating margins.
Due to its market value and ability to produce gold in massive numbers, Barrick’s revenues, net income, and growth have been strong consistently. In 2020 the company’s returns hit the $12.5 billion mark, up from $9.7 billion in 2019. Although the coronavirus crisis had a role to play, the jump in revenues also speaks about Barrick Gold Corporation’s resilience.
Barrick acknowledges its shareholders’ patronization through dividends. Between 2015 and 2020, the stock’s dividend yield has averaged 1.04%, ranging between 0.4% and 2.56%. More than everything else, liquidity is a key determinant of a stock’s investment friendliness. And, as alluded to above, Barrick Gold sits pretty at the top in that regard.
Kirkland Lake Gold pulls more than a million ounces of gold from the ground a year. The firm’s core activities are in the mines of Australia and Canada. It has two top-quality mines in Canada, and one in Victoria, Australia. All three mines exhibit solid in-mine growth prospects. Moreover, the company owns the land adjoining these mines, which provide excellent exploration opportunities too.
For top gold stocks that offer dividends at regular intervals, Kirkland’s tradition of paying quarterly dividends without fail shall grab most investors’ interests. Besides the regularity of the payments, the dividend payouts have gone up over the years too. The yield is between 0.24% and 1.96%, or 0.71% on average.
The company’s revenue in 2020 was $2.46 billion, almost two times the $1.38 billion it generated the previous year. The produce was 640,467 ounces, exceeding its own expectations. The trading volumes of close to 1.5 million shares are also numbers one cannot scoff at. Though not the biggest company by sheer market value, it’s a solid stock, nonetheless.
Wheaton Precious Metals streams low-cost, high-quality, long-life assets. The company invented the “gold streaming” model. Streaming is essentially a company signing a contract with a mining firm to buy all or a portion of its production at a pre-set, discounted price. The assenting mining company benefits from upfront financing for its exploration activities.
As of 2021 end, Wheaton had 24 partners, including Newmont, Glencore (GLNCY), Barrick Gold, and Vale (VALE). The streaming has provided Wheaton more than $2 billion in cash flow, exceeding the company's expectations when striking those deals.
The firm distributes 30% of its cash flow as dividends, which increases with rising gold prices. It was 5 cents per share in 2015. In the fourth quarter of 2021, the dividend rose to 15 cents. There is some volatility, however. In 2013, for instance, the dividend was 14 cents. The brighter side is that the trajectory has been upward for years.
Wheaton has an undrawn debt facility. Of the $9 billion invested, the company has recovered close to $8 billion. Its remaining assets are currently valued at $19 billion, with Salobo (Vale) being its biggest single asset, making up 36% of its NAV. Then there is also a couple of major near-term mining projects in their beginning stages.
With a $47 billion market cap, Newmont Mining is the largest gold mining firm in the world, bigger than Barrick. And it’s American. With more than 30,000 people on roll, the company manages some of the world's biggest gold mines, goldfields, and gold reserves. It owns 22 mines.
Like Barrick Gold Corporation, Newmont Mining continually develops new mines, thereby broadening its reach and not getting affected negatively by the depleting mining activity at its existing mines. Newmont and Barrick have, in fact, come together to set up the Nevada Gold Mines together. Newmont’s gold reserve base is mainly situated in top-tier jurisdictions.
Unsurprisingly, Newmont generates massive numbers complemented by a robust balance sheet and strong dividends. In 2020, Newmont’s revenues were around $11.5 billion. That was a considerable increase from its 2019 revenues of $9.75 billion. The dividend yields have been around 1.21%, with the range being 0.24% to 3.11%.
From an investment perspective, Newmont Mining may seem a bit overvalued, but that’s a premium the biggest players in any industry usually benefit from. With close to six million active trading shares, a Newmont stock is hard to overlook.
Headquartered in Johannesburg, South Africa, AngloGold Ashanti is a gold mining firm with exploration activities, projects, and operations in nine countries. It’s the biggest gold producer in Africa and the third-largest in the world. The company mined more than three million ounces of the yellow metal in 2020. Besides producing gold, the company also makes sulfuric acid and silver in South America.
In the first quarter of 2021, the firm reported year-over-year growth of 42%, which amounts to $0.48 a share or $203 million. The quarter’s revenue was $979 million, moving up from $905 million in the same quarter the year prior. By 2025, the company expects its gold production to hit 3.4 million ounces a year.
The company acquired Corvus Gold Inc. in January 2022, with the latter having projects in Nevada. As AngloGold also has operations in the state, the acquisition resulted in the consolidation of the two projects. Considering its current performance and prospects, we recommend investing some money in this gold stock too.
Besides the above, here are a few other gold mining companies that you may consider investing in:
- Franco-Nevada (FNV): Franco-Nevada is a gold streaming and mining company headquartered in Toronto, Canada. The company attracts general investors as much as it catches the attention of gold investors. Franco’s portfolio is deep, comprising 403 assets. Its results were pretty strong in the first quarter of 2021, with a net income of $160 million.
- Newcrest Mining (NCM): The Australian mining behemoth owns Pretium Resources, an intermediate gold producer. Newcrest’s primary operations are at Brucejack Mine—a top-grade underground mine situated in British Columbia. Throughout 2021, the stock was beaten down and shunned by the market. But with several analysts appearing bullish about the stock, there is upside potential.
- Calibre Mining (CXB): Based out of Canada, Calibre Mining Corp. is a gold producer with mining operations in South and North America. The company has multiple gold-producing mines in Nicaragua, spanning thousands of hectares. It also helms the Nevada-based Pan Gold Mine. After the Fiore Gold Ltd. acquisition, the multi-asset company gained a 100% stake in mining activities in regions such as Nevada and Washington.
Rio Tinto (RIO): Boasting 60 major mining operations in 36 nations, Rio Tinto is one of the largest mining companies in the world. It mines gold, silver, and other minerals. Although mired in some controversies around its mining in Australia’s aboriginal heritage sites in 2020, that hasn’t impacted its revenues and margins much, if its numbers are any indication.
The mining firms mentioned above are some of the biggest gold-producing companies in the world, but they aren’t equals or do not guarantee the same, consistent results. Some could fare better than others. Therefore, pick your stock wisely, after deliberation.
The above list introduced you to the companies to base further research on. Once you’ve picked your stock, be patient and forget about your investment, as gold mining is a long-drawn process, and the fruits of the labor shall take time to bore. To summarize, gold has always been a profitable investment for people who’ve embraced it for the long haul. Similar is the case with gold mining stocks too.