Gold Mining Stocks That Should Soar Under President Donald Trump Lombardi Letter 2017-09-07 02:13:48 goldgold pricesbulliongold mining stocksPresident Donald Trumpgold prices There are a number of reasons why gold mining stocks should soar under President Donald Trump and why investors should remain bullish on gold in 2017. Commodities https://www.lombardiletter.com/wp-content/uploads/2017/02/Gold-Mining-Stocks-150x150.jpg

Gold Mining Stocks That Should Soar Under President Donald Trump

Commodities - By John Whitefoot, BA |
Gold Mining Stocks

Best Gold Mining Stocks

For those who are looking for gold mining stocks to invest in, the gold price forecast remains bright. In fact, gold prices are up roughly eight percent in 2017, at a three-month high of $1,240.00 per ounce. As a hedge against uncertainty, one might think gold is out of favor with the markets at record levels. Nothing could be further from the truth.

There are a large number of reasons why gold mining stocks should soar under President Donald Trump and why investors should remain bullish on gold in 2017. Some of the main reasons why gold prices could soar under President Trump include a weaker U.S. dollar, lowered expectations for an interest rate hike, an overvalued stock market, and both geopolitical and economic uncertainty.

First, gold is priced in U.S. dollars; as a result, it has an inverse relationship with the Greenback. When the U.S. economy is doing well and the dollar is strong, gold prices slip. While the U.S. was strong in the second half of 2016, thanks mostly to growing optimism about a Trump presidency, the U.S. dollar index lost more than three percent of its value in January. Optimistic investors were excited about a Trump presidency. Now that he’s in office, voters want to see results.

Fairly or not, America is getting a better feel for what Donald Trump has to contend with economically. January’s jobs data was solid, but wage growth has been virtually non-existent. No need to raise pay when people are desperately looking for full-time work.

Not surprisingly, the U.S. Federal Reserve failed to raise rates at its last meeting. Raising rates is a vote of confidence that the U.S. economy can withstand a hike. Holding rates steady suggests the economy can’t handle an increase. Inflation is not something the average American is ready for. This negative sentiment also helps weigh down the U.S. dollar.

Again, when the markets are doing well, gold tends not to. That’s because a strong stock market usually reflects a growing economy and strong quarter-after-quarter revenue and earnings growth. But this simply isn’t the case.

Soaring stock valuations are a result of artificially low interest rates. According to the Case-Shiller cyclically adjusted price-to-earnings (CAPE) ratio, the S&P is overvalued by more than 80%! The ratio has only been higher twice, in 1929 and 1999. If the current bull-market, which is the second longest in history, experiences a major correction or it crashes, investors will flock back to gold.

In addition to weak economic indicators out of China, Japan, and Europe, there is growing concern about Donald Trump’s “America First” platform. Will it lead to a trade war with China and Mexico? If it does, how will it impact consumer spending? And how will that hurt corporate America’s bottom line? A couple quarters of worsening economic data will also send investors back into gold.

Lest we forget the geopolitical tensions around the world. This includes growing tensions with North Korea, Iran, Russia, China. The U.S. may subscribe to the “no first use” principle of nuclear weapons, but I’m not so sure that countries like North Korea or Iran would.

Where are gold prices headed under President Trump in 2017? Gold might have a resistance level at $1,300.00, but it could easily break through that technical indicator. Any of these issues could send nervous investors back to precious metals like gold and silver. Some more so than others.

How should investors take advantage of gold’s bullish outlook? There may be a large number of different ways to invest in gold, but two remain the most popular: physical gold and gold mining companies.

While gold prices have advanced almost eight percent, gold mining stocks have been having an even better year, with the Market Vectors Gold Miners ETF (NYSEARCA:GDX) up almost 20% in the first seven weeks of the year.

Why do gold mining stocks outperform physical gold prices? It’s all about leveraging. If gold advances from $1,000.00 to $1,200.00, investors will be celebrating a 20% gain. The cheers are louder for gold miners.

If it costs a gold mining company $700.00 to mine an ounce of gold at $1,000.00, the profit is $300.00. But if gold prices climb to $1,200.00, the profit is $500.00. That’s a 66% increase in profits off of a 20% increase in the price of bullion.

What are the best gold mining stocks to invest in? Look for gold mining companies with revenue-generating properties in politically stable countries, an active exploration program and acquisition strategy, increased production, and lowered costs.

5 Best Gold Mining Stocks for 2017

Below are five gold mining stocks that could soar under President Trump.

This is not a list of “buy” recommendations, but it is a helpful place to begin your research before investing in gold mining companies.

Company Stock Price Market Cap
B2Gold Corp (NYSEMKT:BTG) $3.35 $3.21B
Yamana Gold Inc. (NYSE:AUY) $3.50 $3.28B
IAMGOLD Corp (NYSE:IAG) $4.75 $2.15B
Endeavour Mining Corp (TSE:EDV) $27.70 $2.59B
Goldcorp Inc. (NYSE:GG) $16.75 $14.21B

1. B2Gold Corp

Vancouver-based B2Gold Corp (NYSEMKT:BTG) is one of the fastest growing intermediate gold producers in the world. The company has four operating mines, one mine under construction, and numerous exploration projects. (Source: “About,” B2Gold Corp, last accessed February 13, 2017.)

The company’s four producing mines are: the Masbate open-pit mine in the Philippines; the Otjikoto open-pit mine in Namibia; and La Libertad and El Limon, both in Nicaragua. Construction of the company’s Fekola mine in Mali is projected to commence production in October 2017. (Source: “Producing,” B2Gold Corp, last accessed February 13, 2017.)

In 2016, B2Gold announced its eighth straight year of record gold production of 550,423 ounces. In 2017, it expects to report consolidated gold production of between 545,000 to 595,000 ounces. In 2018, with the inclusion of the first full-year of production at the Fekola mine, production is forecast between 900,000 to 950,000 ounces.

On February 5, B2Gold Corp announced record annual consolidated gold production of 550,423, surpassing the initial guidance of 510,000 to 550,000 ounces. In 2016, the company had record annual consolidated gold revenues of $683.3 million on record sales of 548,281 ounces, at an average price of $1,246.00 per ounce. (Source: “B2Gold Corp. Reports Record 2016 Gold Production; Fekola Project Mine Construction Ahead of Schedule and Now on Target for an October 2017 Production Start,” B2Gold Corp, February 5, 2017.)

Full-year consolidated cash operating costs are expected to be near the low end of the reduced cost guidance range of between $500.00 and $535.00 per ounce. Full-year all-in sustaining costs are expected to be near the low end of guidance of between $780.00 and $810.00 per ounce.

Trading near $3.35, B2Gold’s share price is up 42% year-to-date. Against rising gold prices, B2Gold’s record production and lowered costs should translate into record returns and a rising share price.

2. Yamana Gold Inc.

In July 2016, when gold was trading near $1,375.00 per ounce, Yamana Gold Inc. (NYSE:AUY) was trading near $6.00. With gold at $1,240.00, Yamana is at $3.50 per ounce. All things being equal, if gold prices rise 11% to that previous level, Yamana Gold’s share price could advance more than 70%.

Yamana Gold is a diversified company with seven operating mines, three mines in development, and a large number in the exploration phase. The company’s current or targeted production profile is of at least 130,000 ounces of gold per year. (Source: “Our Portfolio,” Yamana Gold Inc., last accessed February 13, 2017.)

Yamana Gold has total proven and probable gold reserves of 15.89 million ounces, proven and probable silver reserves of 99.09 million ounces, and total proven and probable copper reserves of 3.05 million pounds. (Source: “2015 Mineral Reserves,” Yamana Gold Inc., last accessed February 13, 2017.)

According to preliminary 2016 operational results, Yamana expects to produce 1.27 million ounces of gold, seven million ounces of silver, and 116 million pounds of copper. All-in sustaining costs are projected to be $914.00 per ounce. At the end of the third quarter of 2016, Yamana had cash and available credit of $1.1 billion. (Source: “Yamana Provides Preliminary 2016 Operational Results,” Yamana Gold Inc., January 11, 2017.)

3. IAMGOLD Corp

IAMGOLD Corp (NYSE:IAG) is a mid-tier gold mining company with five operating mines on three continents. It also has one development project and five properties in the advanced exploration stage.

The gold mines in production are the Westwood gold mine in Quebec, Canada; the Rosebel gold mine in Suriname, South America; the Essakane project in Burkina Faso, West Africa; and the Sadiola Gold Mine and Yatela property, both in Mali, West Africa. Together, the company expects to produce between 770,000 and 800,000 ounces of gold in 2016. (Source: “Projects,” IAMGold Corp, last accessed February 13, 2017.)

Producing gold mines on three continents deliver an average annual production rate of 800,000 attributable ounces of gold. Moreover, since 2013, reduced expenses and improved productivity has helped cut costs by more than $174.0 million. (Source: “Operating Mines,” IAMGold Corp, last accessed February 13, 2017.)

In January, IAMGOLD announced preliminary operating results for 2016 and guidance for 2017. In 2016, IAMGOLD produced 813,000 ounces of gold, above the previous guidance of 770,000 to 800,000 ounces. Total cash costs are expected to be within guidance of $740.00 to $770.00 per ounce, while all-in sustaining costs are projected to be within guidance of $1050.00 to $1,100.00 per ounce. The company ended 2016 with approximately $750.0 million in cash, cash equivalents, and restricted cash. (Source: “IAMGOLD Exceeds Production Target and Expects To Achieve Cost Guidance for 2016; Planned Production to Increase in 2017 with Lower All-In Sustaining Costs,” IAMGOLD Corp, January 16, 2017.)

For 2017, IAMGOLD expects to produce between 845,000 and 885,000 ounces of gold. Total cash costs are projected to be between $740.00 and $780.00 per ounce, with all-in sustaining costs expected to be between $1,000.00 and $1,080.00 per ounce.

On January 26, 2017, IAMGOLD announced the positive results of a preliminary economic assessment for its Côté Gold Project in Northern Ontario. This clears the way for the company to initiate applications on permits to support development following the completion of a pre-feasibility study. (Source: “IAMGOLD’s Côté Gold Project: An Excellent Option for Future Growth,” IAMGold Corp, January 26, 2017.)

Since taking over the project, the mine’s indicated resources has increased nine-fold to eight million ounces, with another one-million-ounce inferred resource. The pre-feasibility study will be completed by the end of the second quarter of 2017.

Based on the preliminary economic assessment, the project would have a 21-year mine life, producing, on average, 302,000 ounces of gold annually at an average cash cost of $564.00 per ounce and all-in sustaining costs of $686.00 per ounce.

4. Endeavour Mining Corp

The Endeavour Mining Corp (TSE:EDV) share price has been bullish since the start of 2016 and didn’t experience the same sort of sell-off that many gold mining stocks did in the second half of the year.

Since the start of 2016, Endeavour’s share price has increased 160%. Over the first seven weeks of 2017, Endeavour’s share price has advanced 37.5%. Despite the strong gains, Endeavour Mining has a lot of room to run in 2017 under President Donald Trump.

Endeavour is a major pure West-African multi-operation gold mining company, operating five mines in Côte d’Ivoire, Burkina Faso, Mali, and Ghana. In 2017, it expects to produce between 600,000 and 640,000 ounces of gold, with all-in sustaining costs of $860.00 to $905.00 per ounce. (Source: “Houndé Project, Burkina Faso,” Endeavour Mining Corp, last accessed February 13, 2017.)

The company is currently building its Houndé project in Burkina Faso, which is expected to commence production in the fourth quarter of 2017. Once in production, it is expected that this new mine will be the company’s flagship operation, with annual production of 190,000 ounces of gold with all-in sustaining costs of $709.00 per ounce over a 10-year mine life.

The development of the Houndé project is expected to increase Endeavour’s group production to 900,000 ounces and decrease its average all-in sustaining costs to $800.00 per ounce by 2018. The company anticipates that further exploration will extend the property’s development life by more than 10 years.

In January, Endeavour reported record fourth-quarter production and said that the company met its 2016 guidance. It also announced that it expects additional production growth and a reduction in costs in 2017. (Source: “Endeavour Posts Record Performance in Q4, Meets 2016 Guidance and Expects Further Production Growth and AISC Reduction in 2017,” Endeavour Mining Corp, January 23, 2017.)

Fourth-quarter gold production increased 20% over the previous quarter to 175,000 ounces, with all-in sustaining costs improving four percent to $865.00 per ounce. In 2016, the company reported record production of 584,000 ounces, a 13% increase over the 517,000 ounces in 2015. Full-year all-in sustaining costs were at a record low of $895.00 per ounce.

Free cash flow increased by 60% to $135.0 million. The company’s year-end net debt decreased from $144.0 million to just $25.0 million. Endeavour is well positioned to finance growth projects with $335.0 million in available sources of cash and cash equivalents.

5. Goldcorp Inc.

Like the gold mining sector in general, the Goldcorp Inc. (NYSE:GG) share price followed the same trajectory as physical gold. It soared in the first half of 2016 but gave up ground in the second half, ending 2016 up 14.7%, at $13.60. That momentum has carried into 2017; so far, Goldcorp’s share price has increased 22.7% to around $16.75.

Thanks to the company’s strong balance sheet and high quality asset portfolio, Goldcorp is another gold mining company that could see its share price soar under a Donald Trump presidency.

Goldcorp is one of the largest gold mining companies in the world with a strong portfolio of safe, low-cost production properties in Canada, the U.S., and Latin America. The company has four operating mines in Canada, two mines in Mexico, and four in Central and South America. Goldcorp also has a pipeline of organic growth projects.

It provides a modest annual dividend of 0.48% or $0.08 per share.

Goldcorp produces more than 2.5 million ounces of gold annually and has more than 42 million ounces of gold in proven and probable reserves. It also owns 693.9 million ounces of proven and probable silver reserves, and 8.55 billion pounds of copper reserves. (Source: “Reserves and Resources Table,” Goldcorp Inc., last accessed February 13, 2017.)

Goldcorp has yet to release its fourth-quarter and full-year 2016 results. If history is any indicator, 2017 will be another good year for Goldcorp. In 2015, gold production totaled 3.46 million ounces, a 20% increase over the 2.87 million ounces in 2014. All-in sustaining costs were $894.00 per ounce, a six-percent improvement over the $949.00 per ounce in 2014. (Source: “Financial Highlights,” Goldcorp Inc., last accessed February 13, 2017.)

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