Gold prices witnessed substantial gains recently, breaking their highest level of $2000 since March 2022 after weak economic data spurred safe-haven demand and expectations that the Fed might lose its hawkish stance. As miners’ profit margins and earnings tend to get a boost from rising gold prices, it seems wise to invest in quality gold stocks OceanaGold Corporation (OCANF), Torex Gold Resources Inc. (TORXF), and Dundee Precious Metals Inc. (DPMLF).
The price of gold tends to rise during periods of elevated inflation and economic uncertainty. Gold price recently raced to above the $2000 level for the first time since early 2022 as the dollar and yields fell, while weaker job openings report aided expectations that the Federal Reserve might loosen its stance on monetary policy tightening, despite growing concerns over oil-led inflation.
“We’re in this very positive backdrop for gold in which we have the slowing of economic data along with inflationary pressures remaining elevated,” said David Meger, Director of metals trading at High Ridge Futures.
The surprise output cut by OPEC+ this week has also led to a surge in oil prices, helping gold counter the usual pressure from expected interest rate hikes to rein in rising price pressures. This year might see gold’s price setting new record highs, with expectations of reaching $3,000 or even $4,000 per ounce.
Miners' profit margins and earnings tend to benefit significantly from the rising prices of gold, making investing in gold-mining stocks a more leveraged option than gold bullion. Investors’ interest in gold stocks is evident in the VanEck Gold Miners ETF’s (GDX) 19.4% gains over the past month.
Besides this, the market for gold mining is expected to reach $278 billion by 2027, growing at a 3% CAGR. Given the industry’s tailwinds, investors could consider buying fundamentally strong gold stocks OCANF, TORXF, and DPMLF.
Let’s now delve into the factors that make the featured stocks worthy of investment.
OceanaGold Corporation (OCANF)
Headquartered in Vancouver, Canada, OCANF produces gold and explores, develops, and operates mineral properties. The company uncovers deposits of gold, copper, and silver. Also, it invests in various projects, including the Didipio, Macraes, and Waihi, alongside the Haile gold project in the Philippines, New Zealand, and the United States.
On December 19, 2022, OCANF announced that the United States Army Corps of Engineers granted it a permit under Section 404 of the Clean Water Act, while the South Carolina Department of Health and Environmental Control issued the Mine Operating Permit on December 14, finalizing the state permitting process for the Haile Gold Mine expansion.
With the SEIS ROD, 404 Permit, and MOP in hand, the company should now be able to develop and operate an underground mine, expand its operating footprint, and increase waste containment and tailings storage capacity.
On December 13, the company reported the 2022 resource conversion program results at Wharekirauponga in New Zealand, the United States’ Haile, and the resource growth program at Didipio in the Philippines. The drill programs’ triumphs support the company’s goal of achieving nearby resource conversion and growth, leading to amplified production and revenue.
OCANF’s revenue increased 29.9% year-over-year to $967.40 million for the year that ended December 31, 2022. Its operating profit rose 31.4% year-over-year to $192.90 million. Also, the company’s net profit stood at $132.60 million, compared to a net loss of $3.70 million in the previous year’s period, while EPS stood at $0.18, compared to a loss per share of $0.01 in the prior year’s period.
The consensus revenue estimate of $982.75 million for the fiscal year (ending December 2023) reflects a 1.6% year-over-year improvement. Likewise, the consensus revenue estimate of $1.15 billion for the fiscal year 2024 indicates a 17% rise year-over-year. Moreover, the company topped its consensus revenue estimates in three of four trailing quarters, which is impressive.
The stock has gained 25% over the past month and 52.1% over the past six months to close the last trading session at $2.51.
OCANF’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
OCANF has a B grade for Value, Growth, and Quality. It ranks #3 in the 38-stock Miners - Gold industry.
In addition to the POWR Ratings I’ve just highlighted, you can see OCANF’s ratings for Stability, Sentiment, and Momentum here.
Torex Gold Resources Inc. (TORXF)
Based in Toronto, Canada, TORXF is an intermediate gold producer with operations in Mexico. The company’s core asset is the Morelos Gold property. Its principal assets include the El Limón Guajes mining complex, the Media Luna deposit, and other mining operations for silver, copper, and carbon deposits.
On March 23, TORXF announced the results of its 2022 drilling program at EPO. The infill drilling yielded intersections with grades surpassing the previous drilling in those areas. These results confirm the company’s optimistic outlook on supplementing Media Luna’s future production with Morelos Property's resources.
Also, on January 17, the company outlined its 2023 operational guidance and a five-year production outlook for the Morelos Complex. The company is actively pursuing key strategic initiatives, such as advancing and de-risking Media Luna, optimizing and extending ELG, and expanding reserves and resources.
With strong liquidity and cash flow forecasts, TORXF can fund these initiatives and maximize the potential of the Morelos Property. The company would invest approximately $39 million in exploration and drilling this year to increase the resource and reserve base and achieve its objective of filling the mill post-2027.
For the year that ended December 31, 2022, TORXF’s revenue increased 7.2% year-over-year to $216.50 million, while its earnings from mine operations grew 4.5% from the year-ago value to $69.90 million. Also, the company’s adjusted EBITDA rose 17.5% from the prior year’s period to $122.90 million.
Furthermore, the TORXF’s adjusted net earnings grew 18.2% from the prior year’s period to $38.30 million, and its EPS stood at $0.44, a 15.8% year-over-year increase.
Shares of TORXF have gained 23.6% over the past month and 117.9% over the past six months to close the last trading session at $16.77.
TORXF’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
TORXF has an A grade for Quality and a B for Growth, Value, and Stability. It has topped the 38-stock Miners - Gold industry.
Click here to access additional TORXF ratings for Sentiment and Momentum.
Dundee Precious Metals Inc. (DPMLF)
Based in Toronto, Canada, DPMLF acquires mineral properties and processes precious metals. The company owns and operates a gold, copper, and silver mine in eastern Bulgaria, a gold mine in south-eastern Bulgaria, and a custom smelter in Namibia. DPMLF also has interests in exploration and development projects in Ecuador, Serbia, and Canada.
On February 27, DPMLF reported the 2022 diamond drilling results on the Tierras Coloradas concessions located in the Loja province of Ecuador. The positive results indicate the presence of a well-mineralized vein system with significant potential for further exploration and development. Such developments should bode well for the company.
On February 16, DPMLF announced an improved three-year outlook that projects an average annual gold production of nearly 270,000 ounces, with higher production levels in 2023 and 2024 compared to previous estimates. The updated forecast also predicts a lower all-in-sustaining cost per ounce of gold sold from 2023 to 2025 due to increased gold volumes sold and higher by-product credits.
In the fourth quarter that ended December 31, 2022, DPMLF’s cash provided from operating activities came in at $49.30 million. As of December 31, 2022, the company’s balance sheet displayed a robust financial position, with $433.20 million in cash, an investment portfolio of $40.8 million, an undrawn $150 million RCF, and no debt.
Analysts expect DPMLF’s revenue to grow 20.4% year-over-year to $685.96 million for the fiscal year ending December 2023. The stock has gained 13.3% over the past month and 57.9% over the past year to close the last trading session at $7.50.
DPMLF’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Stability and Quality. Within the same industry, it ranks #2 of 38 stocks.
To see additional POWR Ratings for Value, Growth, Sentiment, and Momentum for DPMLF, click here.
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OCANF shares were trading at $2.52 per share on Wednesday afternoon, up $0.01 (+0.40%). Year-to-date, OCANF has gained 32.91%, versus a 6.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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