Amid the countless trillions in new Federal Reserve policy stimulus seen over the past few weeks, something that has spawned a money printer meme as people awaken to the realities of fiat debasement, precious metals have been enjoying some attention. Physical metal shortages are being widely reported as Swiss refineries shut down operations because of the COVID-19 outbreak.
The divergence between physical and paper gold prices has widened to the point that people are questioning the efficiency of the market and whether the physical shortages will persist.
While physical and paper gold have their problems, I think there is an opportunity in gold and silver stocks right now. Prices are still pretty beaten up after years of neglect. And these companies have legal rights to proven metal reserves in the ground — providing a hard floor of valuation support.
Here are five worth a look that are trading for less than $10 a share:
Gold Fields (GFI)
Gold Fields (NYSE:GFI) is a gold producer with operations in Chile, South Africa, Ghana, Australia, and Peru. Overall, it operates eight mines with an annual gold-equivalent production of 2.2 million ounces as well as gold mineral reserve of roughly 48 million ounces. The company was founded in 1887 and is based in South Africa.
Shares of the company rallied more than 16% in trading on Wednesday to push back up and over its 50-day moving average, closing back in on the high set back in February.
Management has been focused on investing counter-cyclically, laying the groundwork for a surge of cashflow as metals prices rise. Net cash flow from operations totaled $249 million in 2019. Gold reserves continue to rise as well.
Kinross Gold (KGC)Kinross Gold (NYSE:KGC) shares recovered back over their 200-day moving average this week, returning to the middle of a trading range going back to 2016. A return to the highs set back in 2010, which was the last time precious metals were going crazy, would be worth a 4x move from here.
The company operates in the United States, Russia, Brazil, Chile, and Africa. Its proven and probable reserves included roughly 26 million ounces of gold as well as 54 million ounces of silver.
When the company last reported results on Feb. 12, earnings of 13 cents per share beat estimates by three cents on a 26.7% rise in revenues. Analysts at Credit Suisse resumed coverage of the stock back in January with a “neutral” rating.
Yamana Gold (AUY)
Yamana Gold (NYSE:AUY) shares are testing above their 200-day moving average, working to recover from a 50% peak-to-trough decline suffered from the late February high to return to the middle of a trading range going back to 2016. Moving back to the high set in late 2012 would be worth more than a 5x gain from here. As you wait, the company pays a 1.47% dividend yield. The company operates throughout Canada and South America and was founded in 1980.
When the company last reported results on Feb. 13, earnings of three cents per share matched estimates on a 20.1% decline in revenues. Cash flow has been accelerating nicely, rising nearly 90% in the fourth quarter from a year ago, despite a drop in revenues as net debt fell to the lowest level since the middle of 2013.
NovaGold (NYSEAMERICAN:NG) shares are testing above their 50-day moving average, looking ready to retest their prior highs set in late February. The company operates in the United States and Canada with the Donlin Gold property in Alaska as its primary asset. And it’s a good one, with 39 million indicated ounces compared to an average of 7.3 million for other mines in its category and an ore rate of 2.2 grams per ton vs. 1.1 gram per ton for the industry average.
Because of the mine’s quality and its long-expected life (at nearly 30 years) the math works in its favor very quickly if gold prices keep rising. A doubling of prices would result in a 20x increase in the net present value of the property.
Alamos Gold (AGI)
Shares of Alamos Gold (NYSE:AGI) are testing a recovery above their 50-day and 200-day moving averages, setting up a push back to the August highs that would be worth a gain of roughly 30% from here. The stock is shrugging off two recent analyst downgrades from Credit Suisse and Bank of America Merrill Lynch. Profitability has been improving alongside a steady rise in revenues and cash flow.
The company operates throughout North America, with its primary property the Young-Davidson mine in Ontario, Canada. It also holds interests in portfolio stage properties in Turkey. The company was formerly known as AuRico Gold and was founded in 2003.
As of this writing, William Roth did not hold a position in any of the aforementioned securities.