Gold (GCZ24) has long been a go-to investment for those looking to protect their wealth from economic ups and downs. And with prices hovering around $2,470 per ounce, up 14.5% YTD, it's clear why. Analysts think it could even hit $3,000 before too long, and expected rate cuts are likely to add support as the U.S. dollar softens. It's no wonder investors are turning to gold mining stocks to get in on the action.
Billionaire John Paulson, who famously predicted the housing market crash in 2008, is one of them. He's got a stake in three gold mining stocks trading under $10: Equinox Gold Corp (EQX), NovaGold Resources Inc. (NG), and Perpetua Resources Corp (PPTA). Along with the billionaire's seal of approval, these stocks have “buy” ratings from analysts and are trading below their average price targets, making them a tempting opportunity for investors who want to follow in Paulson's footsteps.
So, are these under-$10 gold stocks a good fit for your portfolio? Let's take a closer look to find out.
1. Equinox Gold Corp (EQX)
Equinox Gold Corp (EQX) is a Canadian gold producer on the rise. It boasts a diverse portfolio of eight operating mines across the Americas. The company's game plan is to acquire, explore, and develop gold properties, aiming to boost production through both organic growth and strategic buys.
Over the past year, EQX has lagged gold's gains, up just 2.7% in the last 52 weeks, and 1.8% YTD.
With a market cap of $1.99 billion, EQX's forward P/E ratio of 12.18 hints at potential undervaluation. EQX doesn't pay dividends, focusing instead on growth and reinvestment.
In Q1 2024, Equinox Gold had mixed financial results. They reported $11.4 million in income from mine operations, but faced a net loss of $42.8 million, or $0.13 per share. Adjusted EBITDA was $52.2 million, and cash flow from operations before working capital changes was $47.7 million. Capital expenditures included $44.6 million in sustaining and $69.3 million in non-sustaining investments, highlighting their commitment to growth and improvements.
A big move for Equinox was completing the acquisition of the remaining 40% stake in Greenstone Gold Mine GP Inc. from Orion Mine Finance Management LP. This gives them full ownership of the Greenstone Mine in Ontario, Canada, potentially boosting production. To fund this, they secured a $500 million three-year term loan, showing their knack for accessing growth capital.
Analysts are generally positive on EQX, with a consensus "Moderate Buy" rating. Out of 9 analysts, 4 recommend a “strong buy,” one suggests a “moderate buy,” and four advise a “hold.”
The mean target price of $7.56 suggests a 51.8% upside from the current price, reflecting confidence in Equinox Gold's growth prospects. With plans to nearly double gold production, EQX is a promising under-$10 stock.
2. NovaGold Resources Inc. (NG)
NovaGold Resources Inc. (NG) is all about exploring and developing its flagship Donlin Gold project in Alaska, one of the safest places for mining. Partnered equally with Barrick Gold Corporation (GOLD), NovaGold aims to responsibly and sustainably develop this massive gold deposit, which holds about 39 million ounces of gold.
The stock has been on quite the wild ride over the past year, and is currently up 106.7% over the last 52 weeks, and 48.6% YTD. NG is valued at $1.38 billion by market cap.
In Q2 2024, NovaGold reported a net loss of $13.7 million. However, the financials are still strong, with nearly $53 million in cash and $60 million in term deposits. The company plans to spend around $31 million this year, with $14 million earmarked for the Donlin Gold project.
NovaGold is also making strides in community partnerships in the Yukon-Kuskokwim (Y-K) region. They've finalized their 17th Shared Values Statement and held their third Subsistence Community Advisory Committee meeting in Aniak.
They're planning projects to monitor and enhance salmon populations, showing their commitment to environmental stewardship and social responsibility. This dedication to responsible mining could smooth out the permitting process and boost their reputation.
Analysts are optimistic about NovaGold, with 1 recommending a “strong buy” and 2 suggesting “hold.” The consensus is a “moderate buy,” with a mean target price of $6.70, offering a 61% upside from the current price.
John Paulson's firm holds 22 million shares, valued at about $82 million, making him one of the most prominent stakeholders. With such a significant investment from a seasoned billionaire, NovaGold looks like a compelling opportunity for those eyeing North America's gold fields.
3. Perpetua Resources Corp (PPTA)
Perpetua Resources Corp (PPTA) is making waves in the mining industry with its Stibnite Gold Project in Idaho, USA. This project aims to restore an abandoned mine site while producing both gold and critical minerals like antimony, essential for a low-carbon future.
The stock has been quite the performer, delivering a 71.6% gain over the past 52 weeks. In 2024 alone, it's up a whopping 83%. The company has a market cap of $375 million.
In Q1 2024, Perpetua reported a loss of 5 cents per share, missing estimates by a cent. They haven't generated revenue yet, as they're still advancing the Stibnite project through permitting.
However, they've made significant strides in securing funding, including conditional approval for $34.6 million in additional funding and potential debt financing of up to $1.8 billion from the Export-Import Bank of the United States. They also secured $8.5 million from Franco-Nevada Idaho Corporation through a new royalty agreement. Stay tuned for another update on PPTA's financials when the company issues its next quarterly update, expected later this week.
Analysts are optimistic about Perpetua Resources, with all 3 in coverage recommending a “strong buy.”
HC Wainwright & Co. recently raised their price target to $13.25, and Roth MKM to $10. The mean target price for PPTA is now $12.75, suggesting a massive 119.8% upside. John Paulson’s $103 million investment in Perpetua highlights the potential he sees in this dual-focused mining company.
Conclusion
Investing in gold mining stocks like Equinox Gold Corp, NovaGold Resources Inc., and Perpetua Resources Corp offers a unique opportunity to tap into the potential of the gold market while benefiting from the strategic insights of a billionaire investor, like John Paulson. These stocks, all trading under $10, not only provide a chance to invest in a rock-solid asset, but also come with promising growth prospects and solid fundamentals.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
