You know the real secret to getting wealthy over the long term? Buying asset classes at periods of extreme pessimism. And right know you can’t get more pessimistic than gold stocks. As the price of gold has fallen and fallen, many gold miners have been absolutely obliterated.
Gold miners — as represented by the Market Vectors Gold Miners ETF (GDX) — have dropped about 24% year-to-date. That fall has been driven by the continued bearish narrative for gold prices.
With the U.S. economy humming along, inflation running at zero and the ghosts of the credit crisis now haunting somewhere else, gold doesn’t seem to make much sense now. But that could be just the opportunity that value investors were looking for.
Over the long term, many of the same bullish trends for higher gold prices and gold stocks do still exist. Mine supplies are dwindling, and demand from places like China and India are still rising. The yellow metal still offers plenty of diversification benefits, too. And now the various top gold stocks and gold miners trade for a song and a dance.
Here are three glittery gold stocks and miners for deep value investors to buy today.
Gold Stocks to Buy: Goldcorp (GG)
When it comes to gold stocks, Goldcorp (GG) has always been one of the best and most-cost efficient miners around. And that’s exactly what investors want to help navigate the current gold price malaise and get them through to the eventual rebound.
GG’s portfolio of large mines located in stable countries has helped it drive costs downwards. During Goldcorp’s latest reported earnings, its all-in sustaining costs came in at $848 per ounce. That’s down from $1,066 only a year ago, and that cost would be closer to just $800 per ounce after excluding impairments at two of its facilities.
With gold basically hovering around that $1,050 mark, those costs look great for GG stock. Goldcorp is making money even at today’s low prices.
And yet, GG shares have slid hard this year — mostly on the back of its recent dividend cut. But that cut had nothing to do with earnings or cash flows. Cash flows at GG remain robust, and the firm continues to pay a healthy 2% dividend. That cut had more to do with keeping powder dry for more M&A activity and to fortify its financial position.
That cash — along with its $1 billion credit facility — will come in handy as GG can now swallow smaller rivals on the cheap.
Gold Stocks to Buy: Agnico Eagle (AEM)
As we said before, cash costs are what matters these days when it comes to gold stocks. The lower the better. And Agnico Eagle (AEM) may just give previously mentioned Goldcorp a run for its money.
During its latest quarter, AEM reported that its all-in sustaining costs were around $759 per ounce. That’s down substantially from $1,059 per ounce reached during the third quarter of 2014. Part of that huge drop in cost comes from its smart joint venture with smaller gold miner Yamana Gold (AUY).
The pair was able to snag Osisko Mining away from Goldcorp — a buyout that included the world-class Malartic mine in Quebec. The mine is one of the largest in Canada and featured plenty of long-lived reserves. Perhaps more importantly, it was already humming along in terms of production and didn’t need to be developed.
As a result, the deal instantly added to AEM’s bottom line. In fact, the buyout helped Agnico realize record production and strong cash flows. Those cash flows have trickled their way back to investors via a steadily increasing dividend payment. Agnico Eagle has paid a dividend every year since 1983.
Low costs, rising cash flows and decent dividend make AEM one of the best gold stocks to buy today.
Gold Stocks to Buy: Newmont Mining Corp (NEM)
Surprisingly, Newmont Mining Corp (NEM) shares are still in the black for 2015 — a rarity among gold stocks. However, NEM is down around 30% from its summer peaks. And that fact is what makes it attractive to investors.
NEM is one heck of gold producer, and it continues to see rising production. Those increases in production have helped it weather the lower overall price for gold. The gold stock’s third-quarter profits managed to increase 2.8% because of the higher volume. But the story at Newmont isn’t just about rising production.
Just like the other gold stocks on our list, NEM continues to see cash costs fall.
This year, NEM’s all-in costs are $840 per ounce. But additional cost cutting measures and rising mine production volumes will keep that number low despite inflationary pressures on CAPEX costs. Newmont estimates that it will see cash costs of $900 to $960 per ounce in 2016, while 2017 should see cash cost of around $850 to $950.
Those low costs plus rising production helps keep the cash flowing at NEM — cash that has become a steady stream of dividends and has allowed Newmont to repay its debt load. Ultimately, that cash flow will allow NEM stock to thrive during the downturn.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.