The COVID-19 virus outbreak has certainly made investors uneasy, and the idea of a deadly global pandemic is cause for concern. One traditional safety trade for investors is to buy gold or gold mining stocks. The SPDR Gold Trust GLD is up 3.8% so far in 2020, but the VanEck Vectors Gold Miners ETF GDX is down 2.7%.
If the new coronavirus spreading in China ultimately triggers a global economic downturn, gold prices may spike, sending gold miner margins and profits soaring.
Some gold miners are better investments than others. Here are seven gold miner stocks to buy, sell and hold, according to Bank of America.
Buy: Newmont Corporation NEM
Analyst Michael Jalonen recently said Newmont is making good on its capital return pledge after the company raised its dividend by 79% starting in April.
Newmont also plans to boost its share buybacks by up to $1 billion. The company is also refreshing its brand, changing its name from Newmont Goldcorp to Newmont Corporation.
Jalonen said Newmont’s impressive project pipeline, robust free cash flow and solid balance sheet make it his top North American senior gold producer stock pick for 2020.
Bank of America has a Buy rating and $52 price target for NEM stock.
Buy: Freeport-McMoRan Inc FCX
Freeport-McMoRan is the world’s largest publicly traded copper producer and the eighth-largest gold producer.
Analyst Timna Tanners recently said Freeport’s 2020 cost guidance was disappointingly high, but risks associated with the company’s shift from open pit mining to block cave mining now appear to have subsided. Tanners expects profits will normalize by 2021 once all the costs associated with the transition have passed.
Ultimately, she said the transition will lead to higher production, lower costs and more byproduct credits from gold.
Bank of America has a Buy rating and $14 price target for FCX stock.
Buy: Agnico Eagle Mines Ltd AEM
Agnico Eagle is a mid-tier Canadian gold mining company that operates multiple mines in Canada, Finland and Mexico. Jalonen recently said Agnico has entered a period of cash harvesting following several years of aggressive investment. Management said that cash will be used for internal investment, paying off debt and raising the stock’s dividend.
Now that construction at Amaruq and Meliadine is complete, Jalonen said Agnico is well-positioned for significant free cash flow growth. Agnico is guiding for 2020 gold production growth of 10%. Bank of America has a Buy rating and $74 price target for AEM stock.
Sell: AngloGold Ashanti Limited AU
AngloGold has 14 gold mining operations in 10 countries. Analyst Patrick Mann recently said AngloGold management is making all the right moves in focusing on returns, but the stock is overvalued following its 44.6% gain in the past year.
An unpredictable global regulatory environment creates cash flow uncertainty, particularly regarding AngloGold’s operations in the Democratic Republic of Congo and Tanzania, the analyst said.
A sale of the company’s South African operation at fair value would be a bullish catalyst for the stock, he said.
Bank of America has an Underperform rating and $18.40 price target for AU stock.
Hold: Kinross Gold Corporation KGC
Kinross is one of the world’s largest gold producers, with operations in the U.S., Brazil, Russia and West Africa. Kinross is guiding for 2.4 million gold equivalent ounces of production in 2020.
Net debt dropped from $1.47 billion in the third quarter to $1.25 billion in the fourth quarter. Kinross generated about $100 million in cash from asset sales last quarter and Jalonen is projecting $427 million in free cash flow in 2020.
Bank of America has a Hold rating and $5.85 price target for KGC stock.
Buy: Barrick Gold Corp GOLD
Barrick just reported an impressive fourth-quarter earnings beat and raised its dividend by 40%. Jalonen said Barrick’s gold production outlook for 2020 is in-line with his expectations and at the high end of the company’s previous guidance, and its copper division is on solid ground as well. Barrick ended 2019 with 71 million ounces of gold reserves, up 14.5% from a year ago.
The company used its $429 million in free cash flow to fund its dividend hike and pay down debt in the fourth quarter, the analyst said.
Bank of America has a Buy rating and $22 price target for GOLD stock.
Buy: B2Gold Corp. BTG
B2Gold is a global gold producer with operations focused in the Philippines, Namibia and Mali. It also has 50% ownership of the Colombian Gramalote gold project.
In January, analyst Lawson Winder added the Gramalote project to his valuation, and estimated its value at about $250 million, or 24 cents per B2Gold share.
Gramalote should begin production in late 2023 and boost 2024 production by about 25%, the analyst said. B2Gold has a strong cash position to fund growth and return capital to shareholders, he said.
Bank of America has a Buy rating and $4.75 price target for BTG stock.
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