Gold investors finally have something to cheer about! After years of underperformance, gold has finally broke out to the upside.
For the first time in years, the S&P/TSX Global Gold Index beat the S&P/TSX Composite Index with annual returns of 39% in 2019. And considering the COVID-19 pandemic wreaked havoc on the global economy in 2020, gold had a very successful year as well, up 24.61%.
Considering gold makes up a ton of Canadian stocks on the TSX, it's important for the Index that they succeed.
Why has gold, and Canadian gold stocks in general, made a comeback?
Market volatility, especially with the stock market crash in 2020. We've seen Canadian tech stocks and gold stocks soar due to insecurities in the economy.
If you're new to buying stocks in Canada, you may not know that gold has long been considered a safe haven for investors in times of uncertainty.
In the face of recent volatility and uncertain geo-political environment, investors have begun to once again warm to the precious metal. This bodes well for the top gold stocks.
There is also another catalyst that can support gold’s price. Industry experts believe we reached peak gold in 2017, which means that moving forward, world gold extraction will decline. There has been a significant decrease in exploration and the lack of reserve replacements has experts leaning bullish.
So as a result, lets look at some of the best opportunities in terms of Canadian gold stocks in the market today.
What are the top Canadian gold stocks to buy right now?
5. Argonaut Gold (AR.TO)
We are starting the list with the smallest of the bunch (in terms of market cap) with Argonaut Gold (TSE:AR). The company has been among the best gold stock performers through the first six months with gains north of 10%.
It also happens to be very attractively valued. The company has forward PE of only 11, and a PEG ratio below 0.3 – one of the lowest in the industry. This is a sign that the company’s stock price is not keeping up with expected growth rates.
The company has three producing assets assets (El Castillo, La Colorado and Florida Canyon) with two more in development, including the much anticipated Magino project in Ontario. Construction is progressing well, and it expects to deliver first production in early 2023.
Argonaut is expected to grow production by 13% to 230K ounces at the mid-range in Fiscal 2021 while costs are expected to remain stable. It looks to reach 300-500K ounces over the next few years, while costs are expected to trend downwards – especially when Magino comes online.
The only drawback with Argonaut is higher-than average AISCs in the $1,200 range. The good news is that costs are expected to trend downwards. A big portion of that cost reduction will come from Magino which is targeted to average low AISCs of $711/oz in the first 5 years of operation.
Argonaut Gold 5 year performance
4. Barrick Gold Corp (ABX.TO)
From one of the smallest, to the world’s largest - Barrick Gold (TSX:ABX), is once again worthy of being among the top gold stocks in the country. The company has struggled in 2021 as Q1 production came in below expectations and was lower YoY. However, this was mainly due to planned maintenance, and the company expects second half production to outpace the first half.
Barrick is also making significant progress in reducing its debt. For the first time in years, the company has a negative debt to cash ratio.
That’s right, the company’s debt, net of cash is sitting at -$500M as of end of Q1. That is down from $3.5B only two short years ago.
Another interest aspect that many investors don't know about is that Barrick has exposure to copper. In fact, ~22% of production is copper and given the current copper bull cycle, Barrick is well positioned to benefit.
It is also worth noting that Barrick has recommitted to returning cash to shareholders. On top of having a mini three-year dividend growth streak, the company announced plans to return additional cash to shareholders via return of capital distribution. The first $250M tranche at $0.14 per share was announced in May along with its dividend of $0.09 per share.
The company expects to announce two additional $250M return of capital distributions by the end of the year. Those will be announced in August and November respectively. In total, it expects to return $0.42 per share to investors, which effectively gives it a forward yield of 3.5% - one of the highest in the industry.
The company’s merger with Randgold Resources was a positive and is expected to lead to stronger cash flows, cost savings and lower debt costs. It also led to an increase in its quarterly dividend.
Barrick Gold 5 year performance
3. B2Gold (BTO.TO)
Despite being include in our list a few times, B2Gold (TSX:BTO) hasn’t quite delivered to the extent we believed it would.
However, we can’t ignore the company’s valuation, growing production profile and lowering cost profile.
If the company has such an attractive profile, then why has it struggled? One of the main reasons is the fact the company was unable to renew its exploration license for the Menankoto property.
The Menankoto property forms part of the Anaconda area and is located close to the Fekola mine license area.
Fekola is one of the company’s low-cost, flagship assets that achieved commercial production in 2017. While the company is continuing to negotiate with the Mali government, it certainly puts a damper on the company’s outlook and does beg the question as to the safety of its Fekola mine.
These are the risks when investing in companies that have assets in less safe geo-political jurisdictions. That being said, the company has come out and said the Fekola mine has “not been affected in any way."
Recent price weakness has led to B2Gold being a value play. According to Ycharts, it is the top ranked gold stock in terms of valuation scoring a perfect 10 of 10. Accordingly, it is trading at a 25% discount to historical averages.
If you can handle a higher risk profile, B2Gold may offer the highest upside in the industry. Analysts have a one-year target of $9.50 per share which implies ~75% upside from today’s prices.
Also worth noting, since the Menankoto news, no analyst has downgraded the company and they remain strong believers and 14 of 16 analysts rate the company a buy.
B2Gold 5 year performance
2. Wesdome Mine (WDO.TO)
Wesdome Mine (TSX:WDO) has been one of the better performing gold stocks in 2021. Ranked fourth with returns just north of 12%, Wesdome caught many by surprise – except Stocktrades Premium members.
Wesdome has been feature in our Top 20 stock screener for some time now as the company blends growth and value. While it is not as cheap as it once was, it still has room to run.
The company is currently trading a 30% discount to historical averages and at a ~20% discount to its 52-week high of $15.00 per share.
Analysts have similar views, and the average one-year price target of $14.29 implies ~19% upside.
With 100% of assets located in Canada, it is one of the safest gold stocks to own in terms of geo-political risk. It has a fully funded capital program in which it looks to expand reserves at its two flagship properties: Kiena and Eagle River.
Kiena is expected to meaningfully contribute to production in the third quarter and is a key growth driver for the company. Kiena is expected to have average annual production of approximately 80,000 oz. It is also a low cost mine, with average AISCs of $675/oz.
Thanks to Kiena, total revenue is expected to grow by 55% next year and earnings should more than double. These are the highest expected growth rates among all mid-to-large cap gold stocks.
Wesdome 5 year performance
1. Franco Nevada Corp (FNV.TO)
Franco Nevada‘s (TSX:FNV) recent performance has justified its position as the number gold stock in the country. When the pandemic was causing mine shut downs, Franco Nevada’s business model was allowing it to outperform.
It continues to do so through the first half of 2021 and is one of only a few gold stocks in positive territory in 2021. It is by far the best performing large cap as its double-digit returns trounce the double-digit losses experienced by the majority of its large cap peers.
Why the big outperformance? As we’ve discussed many times before, Franco Nevada is a streamer and in a bearish environment, streamers will outperform producers. The first half of 2021 is yet another example of this.
Year in and year out, Franco Nevada is a pillar of consistency. While the company’s exposure to oil & gas has certainly helped during oil’s current bull run, it’s still very much a gold streaming play. Management aims to have 80% of its revenues come from precious metals.
The greatest advantage to owning a streaming company is that it is not saddled with the high costs of capital expenditures and operational mining costs. This allows the company to generate considerable cash flows.
While many gold stocks are now re-introducing dividends or have re-established themselves as dividend growth stocks, Franco-Nevada is the most reliable dividend growth stock in the industry.
It was the only one to maintain its growth streak during the last bear market and is a Canadian Dividend Aristocrat having raised dividends for 12 straight years. That streak will be extended to 13 as the company raised the dividend by 15.38% this past May.
Reliability is key in this sector, and Franco Nevada is as reliable as it gets.
Franco Nevada 5 year performance
Bitcoin Soars to Highest in 5 Months as Correlation With Gold Turns Negative
The price of bitcoin hit the highest in over five months, as an increasing number of traders dived into the
The post Bitcoin Soars to Highest in 5 Months…
The price of bitcoin hit the highest in over five months, as an increasing number of traders dived into the cryptocurrency in hopes that it would once again soar to the record highs witnessed earlier this year.
Bitcoin was up by more than 1% on Tuesday morning before settling to just above $56,000, marking a weekly gain of over 15% and the highest since May. The latest rally is the result of a number of factors, particularly the fading of concerns regarding regulatory efforts in the US and China, as well as the SEC potentially approving the first bitcoin ETF.
In the meantime, according to Ned Davis Research strategist Pat Tschosik, the one-year correlation between gold and bitcoin has been steadily declining, and is about to turn negative, suggesting that the prices are no longer moving in unison. “Bitcoin could be seen as the preferred inflation hedge if the dollar and real rates are rising,” Tschosik told CNBC.
Information for this briefing was found via CNBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
The post Bitcoin Soars to Highest in 5 Months as Correlation With Gold Turns Negative appeared first on the deep dive.dollar gold inflation correlation
Stocks Stink As Curve Pancakes On Stagflation Fears
Stocks Stink As Curve Pancakes On Stagflation Fears
It was another choppy day in the market which saw an overnight attempt to recover from…
It was another choppy day in the market which saw an overnight attempt to recover from losses get sabotaged at the open when a sell program knocked spoos lower and the result was a rangebound, directionless grind for the rest of the day as the continued pressure of negative gamma prevented a move higher, and since they couldn't rise, stocks sold off closing near session lows.
Granted, there was the usual chaos in the last 30 minutes of trading, when a huge sell program was followed by an almost identical buy program...
... but it was too little too late to save stocks from another down day.
While the Russell, energy stocks and banks managed to bounce and drifted in the green for much of the day - perhaps as investors looked forward to good news from JPMorgan tomorrow when the largest US bank kicks off earnings season - the rest of the market did poorly with most other sectors in the red.
Earlier today we noted that the SPY remains anchored by two massive gamma levels, 430 on the downside and 440 on the upside...
... however that may soon change. As SoFi strategist Liz Young pointed out, "It's been 27 trading days since we hit a new high on the S&P 500. The last time we went this long was...exactly this time last year. New highs happened on Sept 2nd, both years, before a pause."
In rates we saw a sharp flattening with another harrowing CPI print on deck tomorrow which many expect to roundly beat expectations...
... with the short end rising by 3bps, a move that was aided by a poor 3Y auction which saw a slump in the bid to cover and a plunge in Indirect takedown, while the long end tightened notably, and 10Y yields on pace to close 4bps lower.
The dollar went nowhere, and while oil tried an early break out and Brent briefly topped $84, the resistance proved too much for now and the black gold settled down 31 cents for the day at 83.34 although WTI did close up 4 cents, and above $80 again, at $80.54 to be precise. Still, with commodity prices on a tear, it's just a matter of day before Brent's $86 high from October 2018 is taken out.
With stocks failing to make a new high in over a month, investor sentiment has predictably soured with AAII Bulls down to the second lowest of 2021, while Bearish sentiment continues to rise.
There is another reason sentiment has been in the doldrums: traders are concerned that price pressures and supply-chain snarls will drain corporate profits and growth, and expect disappointment from the coming earnings season which according to Wall Street banks will be a far more subdued affair compared to the euphoria observed in Q1 and Q2. Quarterly guidance, which improved in the runup to the past four reporting periods, is now deteriorating, with analysts projecting profits at S&P 500 firms will climb just 28% Y/Y to $49 a share. That’s down from an eye-popping clip of 94% in the previous quarter.
Meanwhile, adding to the downbeat mood, Atlanta Fed President Raphael Bostic finally admitted that inflation is not transitory, and the Fed should proceed with a November taper amid growing fears that inflation expectations could get unanchored. Earlier in the day was saw that 3Y consumer inflation expectations hit a record high 4.3% confirming that the Fed is on the verge of losing control.
Vice Chair Richard Clarida agreed and said that conditions required to begin tapering the bond-buying program have “all but been met.”
Finally, the IMF delivered more bad news today when it cut its global GDP forecast while warning that inflation could spike, and cautioned about a risk of sudden and steep declines in global equity prices and home values if global central banks rapidly withdraw the support they’ve provided during the pandemic. In short, the world remains trapped in a fake market of the Fed's own creation.
Carbon prices are on the rise and businesses already decarbonising are ahead of the pack
Remember the carbon tax? Back in 2012 PM Julia Gillard got slammed for putting a price on carbon emissions, and … Read More
The post Carbon prices are…
Remember the carbon tax?
Back in 2012 PM Julia Gillard got slammed for putting a price on carbon emissions, and the heat is on current PM Scott Morrison with the issue set to be a hot topic at the Glasgow Climate Conference later this month.
Many governments around the world have either introduced an Emissions Trading Scheme (ETS) or imposed carbon taxes – because carbon pricing is one of the most effective ways of reducing greenhouse gas emission levels on the domestic and international level.
With ETS, governments set the quantity of emissions permitted and let the market find the market-clearing price.
For carbon taxes, governments impose a tax on emissions and then let the market find the market-clearing quantity of emissions.
According to CRU Group research analysts Clifton Hoong and Frank Eich, ETSs come out on top.
“When comparing their respective contributions in addressing greenhouse gas (GHG) emissions, ETS does come out top, covering 16.1% of global GHG emissions, almost three times the 5.5% that carbon taxes cover,” they said.
The UK and Europe have adopted emissions trading schemes and even China – the world’s largest carbon emitter – launched a nationwide ETS in July after experimenting with regional ETSs.
And in Singapore, a new global carbon exchange, Climate Impact X, is expected to launch by the end of the year.
Carbon prices are set to rise
The analysts said that the sharp increase of the carbon price on the EU ETS over recent months gives an idea what might be in store in the years and decades ahead.
“In 2021, European carbon taxes averaged $42/tCO2, which is relatively cheaper compared with the $56/tCO2 average that has been traded in the EU ETS so far in 2021,” the analysts said.
“We have conducted a survey of recent carbon price forecasts published by international organisations, governments, think tanks and corporates to get a sense of where carbon prices are headed.
“The range of forecasts is huge, but we should not be surprised to see a global carbon price of around $100/tCO2 by 2030 and around $300/tCO2 by 2050 if the world gets serious about climate change mitigation.”
And as carbon prices keep rising, commodity markets across the value chain will need to adapt.
“In some markets, carbon prices have been rising rapidly over the recent past and are forecast to do so for years to come,” Hoong and Eich said.
“The commodities markets across the value chain will need to prepare for and adapt to these new prices.”
EU and UK carbon market outlook
The EU was first to launch a major ETS in 2005 and by making carbon permits an increasingly scarce ‘good’, the EU is raising the market-clearing carbon price.
“These measures appear to be delivering,” CRU said.
“Having in the past frequently been criticised for being too low to make a difference, the EU ETS carbon price has increased sharply since the beginning of the year, reaching a new record €65/tCO2 (i.e., $75/tCO2) on 26 September.”
And word on the street is that the UK Government might have to step in and intervene in its national carbon market in December if crises remain elevated through November, given the current energy crisis causing the prices to average £58.36 per metric tonne in September.
“Even small increases in energy or fuel costs frequently lead to protests or even social unrest,” Hoong and Eich said.
“How to sell the necessity of increasing the price of energy to the electorate in the name of climate change mitigation when increasing prices are deeply unpopular and – often – also considered to be socially unfair?
“The latest spike in European natural gas prices is a reminder of that.
“Finding a way through this conundrum will be one of the biggest challenges for policymakers in the years ahead.
“As the recent outcome of the Swiss referendum on tougher climate change legislation forcefully demonstrates, we should be ready for major setbacks on the way to net zero over coming years.”
Commodities markets will have to adapt
“Major setbacks are not the same as abandoning the ambition and the commodities markets – just like all other sectors of the global economy – will need to prepare for and adapt to higher carbon prices,” the analyst said.
“The likely dramatic increase in carbon prices in the future will have fundamental implications for many parts of the economy, more so for businesses in the carbon-intensive industries.”
But not all players will be affected equally.
“For those industries where switching electricity to a low-carbon alternative is a solution (e.g., mine sites, aluminium production), the transition could be ‘relatively’ simple and at lower cost,” Hoong and Eich said.
“By contrast, changing the way how a key raw material is produced (e.g., hydrogen for ammonia) will likely prove more challenging and, almost certainly, more costly.
“Where a wholesale shift in technology is needed (e.g., hydrogen steel production), the transition will potentially be painful.
“Even operations that are already low carbon as a result of access to low-carbon electricity (e.g., hydro feeding aluminium smelters) will see cost inflation as supply contracts are renegotiated in the context of rapidly rising electricity prices.”
Businesses already decarbonising will benefit
The analysts said that often implementing decarbonisation plans means a significant upfront investment in electrifying energy inputs, integrating renewables and reducing the carbon footprint.
That cost is a barrier to transformation for many businesses – but inaction isn’t the way to go,” Hoong and Eich said.
“Implementing these decarbonisation plans often incurs substantial upfront investment cost, which can act as a barrier to transformation.
“Up to now this made the alternative route of action – doing nothing – attractive to many.
“But as the opportunity cost of doing nothing increases as carbon prices go up, this alternative route will become increasingly unattractive.
“Those who have already placed their bets on hefty investments to decarbonise their production operations are starting to reap the benefits as the cost of carbon continues its way up.
“We should expect others to follow suit.”
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