The economic shock waves caused by the coronavirus from China have created an opportunity in precious metals. This is especially true for gold. Cash was king when the virus first hit, but soon after, price of gold gained traction. This is because gold is commonly viewed as a safe-haven investment. And when gold moves up in price, resource stocks usually do too.
This was dramatically demonstrated on March 23, when the gold price posted its biggest one-day dollar-denominated gain ever. This was spurred by the U.S. Federal Reserve’s suggestion that it will conduct unlimited purchases of assets, including Treasury and mortgage-backed securities.
This could, in theory, be capitalized on through a position in physical gold. However, the spike in demand has made it difficult and cost-inefficient to buy gold from dealers now. Therefore, you might consider accumulating shares of resource (i.e., gold mining) stocks. It’s best to look for companies with fairly positive cash positions, low all-in sustaining costs, and robust mineral production. Here are three stocks, then, that could break out amid the gold rush of 2020.
Resource Stocks to Buy: AngloGold Ashanti (AU)
If positive cash flow is important to you (as it ought to be), then AngloGold Ashanti (NYSE:AU) stock should be on your radar. The company’s free cash flow nearly doubled with a 90% year-over-year increase in 2019. AngloGold Ashanti also hiked its annual dividend payout by a whopping 74%.
As Chief Executive Officer Kelvin Dushnisky summed it up, “We’re generating strong cash flow from our operations, and that’s allowing us to increase returns to shareholders, strengthen our balance sheet and invest in our ore bodies.”
Moreover, AngloGold Ashanti reported all-in sustaining costs of just $992 per ounce of gold. Of course, that’s significantly below the spot price of gold. Plus, the company managed to produce 3.281 million ounces of gold last year. If it’s anything like last year, then AngloGold Ashanti could have a truly amazing 2020.
Kinross Gold (KGC)
Another worthy resource sector investment is Kinross Gold (NYSE:KGC) stock. Like AU stock, KGC checks all of the most important boxes. Kinross Gold’s fiscal position is strong, as the company’s cash and cash equivalents increased by 65% year-over-year in 2019.
Not only that, but the company’s adjusted operating cash flow increased by 37% during that time, while its liquidity increased to $2 billion during the fourth quarter. And the company really stepped up its mining activity during this time, having increased its year-over-year production to 2.5 million mineral ounces.
Furthermore, Kinross Gold’s production costs are quite reasonable. Guidance for last year’s all-in sustaining costs indicated just $995 per gold ounce. The guidance for this year is even lower at $970 per ounce. That’s a winning formula if you’re anticipating higher gold prices this year.
If you want to invest in a huge and famous resource company, take a close look at Newmont (NYSE:NEM) stock. With a market cap of $37 billion and daily trading volume in the millions, you could ride the gold wave of 2020 with an industry leader.
Starting with Newmont’s balance sheet, the long-term outlook looks positive as the company expects around $10 billion of free cash flow over the next five years (assuming a perfectly reasonable $1,500 gold price). And if you’re in the market for a consistent mineral producer, Newmont indicates a stable production outlook of 6.2 to 6.7 million ounces per year.
Perhaps the main feature of Newmont, though, is its low production costs. The company has indicated 2020 all-in sustaining costs of $975 per gold ounce, and it gets even better from there. In fact, Newmont predicts a decline to just $800 to $900 per ounce by 2023. Extracting gold from the ground at that price is a real bargain, making NEM stock a serious potential winner for resource-market investors.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.