While the latest inflation figures suggest an easing from last year's highs, the prospect of it reaching the Federal Reserve's 2% target in the near term remains slim. In light of this persistent inflationary situation, officials are still considering the option of implementing additional interest rate hikes.
In such a scenario, investors could consider buying three fundamentally robust gold mining stocks, Harmony Gold Mining Company Limited (HMY), B2Gold Corp. (BTG), and Dundee Precious Metals Inc. (DPMLF), which are well-equipped to capitalize on the industry tailwinds.
In August 2023, the Consumer Price Index (CPI) showed an annual inflation rate of 3.7%, mainly driven by increased energy costs and related services. However, when excluding food and energy costs, inflation decreased to 4.3%, remaining well above the Federal Reserve's 2% threshold.
Despite some positive signs like disinflation in shelter costs, the Fed may consider an additional interest rate hike in November to expedite reaching its inflation goal. Currently, it is widely anticipated that the Fed will keep interest rates steady at its upcoming September 20 meeting, as indicated by recent statements and interest rate futures forecasts.
Gold is often deemed a reliable asset during periods of economic upheaval, currency devaluation, or geopolitical instability, consistently preserving its value. Given the looming prospect of further interest rate hikes, investors may consider expanding their investment in gold as a safeguard against inflation. This strategic move could fuel an upward trajectory in gold prices.
Moreover, in 2023, gold demonstrated growth in value, surpassing 5%. It is worth highlighting that earlier this year, the price of gold came remarkably close to reaching historic highs, exceeding $2,000 per ounce. Additionally, UBS’ outlook for gold price remains optimistic, with expectations of gold reaching $2,100 per ounce by the end of the year and further advancing to $2,200 per ounce by March 2024.
Furthermore, the increasing interest in gold is particularly evident in nations like China and India, driven by cultural and economic factors that magnify the demand for jewelry during festive celebrations and wedding ceremonies, which bodes well for the gold mining industry.
In 2022, the worldwide gold mining market boasted an estimated value of approximately $198 billion, and it is projected to reach around $260 billion by the year 2030, with a CAGR of 3.5%.
Given the solid industry prospects, let us dive into the fundamentals of the featured Miners – Gold stocks beginning with number three.
Stock #3: Harmony Gold Mining Company Limited (HMY)
Headquartered in Randfontein, South Africa, HMY engages in the exploration, extraction, and processing of gold. The company also explores for uranium, silver, copper, and molybdenum deposits. It has eight underground operations in the Witwatersrand Basin; an open-pit mine on the Kraaipan Greenstone Belt; and various surface source operations in South Africa.
HMY’s trailing-12-month ROCE of 14.88% is 75.5% higher than the 8.48% industry average. Its trailing-12-month ROTC of 13.01% is 132.6% higher than the industry average of 5.60%. Furthermore, the stock’s trailing-12-month net income margin of 9.78% is 50.4% higher than the industry average of 6.51%.
For the fiscal year, which ended on June 30, 2023, HMY’s revenue increased 15.5% year-over-year to R49.28 billion ($2.61 billion), while its gross profit rose significantly from the year-ago value to R9.74 billion ($515.80 million).
Moreover, the company’s net profit and operating profit amounted to R4.88 billion ($258.43 million) and R7.09 billion ($375.47 million) versus a net loss and operating loss of R1.01 billion ($53.49 million) and R755 million ($39.98 million) in the same period last year, respectively.
Street expects HMY’s revenue and EPS for the fiscal year ending June 2024 to increase 8.5% and 35.3% year-over-year to $2.86 billion and $0.60, respectively.
HMY’s revenue has improved at a CAGR of 18.9% and 19.2% over the past three and five years, respectively. Additionally, its EBIT and total assets have grown at CAGRs of 155.6% and 8.6% over the past three years, respectively.
Over the past year, HMY’s shares have surged 92.7% to close the last trading session at $4.22.
HMY’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Value. In the 39-stock B-rated Miners – Gold industry, it is ranked #8. Click here to see HMY ratings for Momentum, Stability, Sentiment, and Quality.
Stock #2: B2Gold Corp. (BTG)
Headquartered in Vancouver, Canada, BTG operates as a gold producer with three operating mines in Mali, the Philippines, and Namibia. In addition, the company has a 25% interest in Calibre Mining Corp.; and approximately 19% interest in BeMetals Corp.
On September 5, BTG declared a quarterly dividend of $0.04 per share payable to its shareholders on September 29, 2023.
The company’s annual dividend of $0.16 translates to a yield of 5.19% at the current price level, while its four-year average dividend yield is 2.91%. Also, its dividend payouts have grown at a CAGR of 62.2% over the past three years.
On April 19, BTG announced the acquisition of all outstanding common shares of Sabina Gold & Silver Corp. This strategic acquisition grants BTG the ownership of Sabina’s Back River Gold District, situated in Nunavut, Canada.
With the completion of the Sabina acquisition and the attainment of the Back River Gold District, BTG achieves a significant landmark in its mission to establish an economically viable and socially conscious senior gold mining enterprise. The company aims to incorporate a top-tier, high-quality gold project with abundant-grade reserves into its global portfolio.
BTG’s trailing-12-month gross profit margin of 60.49% is 114.2% higher than the 28.25% industry average. Its trailing-12-month EBITDA margin of 54.81% is 217% higher than the industry average of 17.29%. Furthermore, the stock’s trailing-12-month net income margin of 15.59% is 139.6% higher than the industry average of 6.51%.
For the fiscal second quarter that ended June 30, 2023, BTG’s gold revenue increased 23.3% year-over-year to $470.85 million, while its gross profit grew 61.4% from the year-ago value to $190.32 million.
The company’s adjusted net income and EPS rose 89.6% and 75% year-over-year to $85.80 million and $0.07, respectively. In addition, its operating income improved 62.7% from the year-ago value to $159.14 million.
The consensus revenue estimate of $484.96 million for the third quarter (ending September 2023) reflects a 23.5% year-over-year improvement. The consensus EPS estimate of $0.07 for the current quarter indicates a 143.9% rise year-over-year.
BTG’s revenue has grown at a CAGR of 10.1% and 17.3% over the past three and five years, respectively. Likewise, its total assets have improved at a CAGR of 14.9% over the past three years.
The stock has gained 2.3% over the past month to close the last trading session at $3.13.
BTG’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Sentiment, and Quality. Within the same B-rated industry, it is ranked #3. Click here to see the other ratings of BTG for Momentum and Stability.
Stock #1: Dundee Precious Metals Inc. (DPMLF)
Based in Toronto, Canada, DPMLF is a gold mining company that engages in acquiring mineral properties; and exploring, developing, mining, and processing precious metals. It owns and operates a gold, copper, and silver mine located east of Sofia, Bulgaria, and a gold mine in southeastern Bulgaria.
On August 1, DPMLF declared a quarterly dividend of $0.04 per common share, payable to its shareholders on October 16, 2023.
The company’s annual dividend of $0.16 translates to a yield of 2.66% at the current price level, while its four-year average dividend yield is 1.60%. Additionally, its dividend payouts have grown at a CAGR of 58.7% over the past three years.
The stock’s trailing-12-month gross profit margin of 41.93% is 48.5% higher than the 28.25% industry average. Its trailing-12-month EBITDA margin of 43.92% is 154% higher than the industry average of 17.29%. Furthermore, DPMLF’s trailing-12-month net income margin of 13.88% is 113.3% higher than the industry average of 6.51%.
DPMLF’s total revenue for the second quarter (ended June 30, 2023) increased 24.6% year-over-year to $167.52 million, while its adjusted EBITDA came in at $86.65 million, up 26.2% from the year-ago value.
The company’s adjusted net earnings and adjusted EPS grew 86.9% and 94.1% year-over-year to $62.20 million and $0.33, respectively. Furthermore, its free cash flow rose 70.9% from the prior-year quarter to $70.45 million.
Analysts expect DPMLF’s revenue for the third quarter (ending September 2023) to increase 33.1% year-over-year to $171.20 million, while the company’s revenue for the fiscal year ending December 2023 is projected to increase 17.4% year-over-year to $668.78 million.
Over the past three years, DPMLF’s revenue and net income have grown at CAGRs of 5.1% and 115.7%, respectively. Likewise, its EPS grew at a CAGR of 118.3% over the same period.
DPMLF’s shares have surged 33.6% over the past year to close the last trading session at $6.13.
It’s no surprise that DPMLF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Growth, Value, and Stability. Out of 39 stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have DPMLF’s ratings for Momentum and Sentiment. Get all DPMLF ratings here.
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BTG shares were trading at $3.23 per share on Friday afternoon, up $0.10 (+3.19%). Year-to-date, BTG has declined -7.46%, versus a 16.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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