The price of gold has shot up close to $2,000 per ounce. This could benefit gold stocks.
Here, I’m going to highlight three gold stocks I believe are worth a closer look right now. I think these companies are likely to benefit from higher gold prices.
A gold giant
First up is Newmont Corporation (NYSE: NEM), which is listed in the US. The largest gold miner in the world, it has operations in North and South America, Australia and Africa.
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Last year, Newmont produced 6m ounces of gold. And for 2023, it has given guidance of between 5.7m and 6.3m ounces. All-in sustaining costs (a widely-used cost metric across the gold mining industry) are expected to be between $1,150 and $1,250 per ounce this year. This means the company should do well while prices are above $2,000 per ounce.
It’s worth noting that in February, Newmont tried to acquire Australia’s largest gold producer Newcrest Mining for $17bn. The offer was rejected. However, the two companies are now reportedly engaged in talks to come to an agreement. If they can strike a deal, it would extend Newmont’s lead as the world’s largest producer.
Newmont shares currently have a price-to-earnings (P/E) ratio of around 23 and offer a prospective dividend yield of around 3.2%. I see both valuation and yield as relatively attractive, given the company’s size and scale.
Insider buying
The next stock I want to focus on is Centamin (LSE: CEY), which is listed on the London Stock Exchange. It mainly operates in Egypt at the Sukari Gold Mine.
For 2023, Centamin said it expects to produce between 450,000 and 480,000 ounces of gold. All-in sustaining costs are expected to range $1,250-$1,400 per ounce of gold sold. These costs are well below current prices.
One thing that’s worth highlighting here is that both Centamin’s CEO and CFO have bought company stock in the last month. This is very encouraging. These kinds of top-level directors tend to have an excellent understanding of their companies’ prospects.
The forward-looking P/E ratio here is about 13, while the yield is near 4%. I see some value in the stock at those levels.
A cheap gold stock
Finally, in the small-cap space, I think Pan African Resources (LSE: PAF) looks interesting right now. It’s a gold miner with operations in South Africa.
For the year ending 30 June, Pan African Resources expects to produce 195,000-205,000 ounces of gold. It hasn’t provided all-in sustaining costs guidance for the year. However, for the six-month period to the end of 2022, costs were $1,291 per ounce – significantly below current prices.
One reason to be bullish here is that the stock currently has a very low valuation. At present, the forward-looking P/E ratio is just 5.5. At that valuation, I see room for share price appreciation.
Higher-risk shares
It’s worth pointing out that gold stocks are higher-risk investments. Gold mining is a complex business. There are a lot of things that can go wrong. As a result, gold stocks don’t always rise when prices of the commodity are climbing.
My advice to investors looking at gold stocks is to own plenty of other stocks as well for diversification.
