Make Kitco Your Homepage

Gold stocks to watch following the failed insurrection in Russia

Commentaries & Views

Gold markets are starting to show signs of improvement following the failed insurrection attempt by the Wagner Group, a Russian paramilitary organization led by mercenaries and a de facto private army of Yevgeny Prigozhin, a Russian businessman.

While the insurrection was a short-lived stint that saw the group get within 200 kilometers of Moscow on Saturday, June 24, investors have since shifted their focus toward U.S. Treasuries and commodities, with Russia at the center of attention as the country remains a major energy and grains supplier.

Following the events that took place over the weekend, spot gold prices climbed 0.3% to $1,926.19 per ounce during the early hours of Monday morning, June 26. The U.S. gold features experienced similar improvements, with performance rising 0.3% to $1,936.00

Prices for gold bullion remain close to three-month lows, as investors and traders continue to assess the possibility of more interest rate hikes by the U.S. Federal Reserve. With the potential of more hikes for the year still on the table, many remain hawkish over the prospects of sticky inflation and weaker employment data.

A combination of geopolitical tensions, which have since calmed, and the Federal Reserve battling to bring core inflation down to their 2% mark, investors and traders are currently assessing the potential safe haven of the yellow metal, as prices remain moderate, but still below their earlier peaks of the year.

Five Gold Stocks To Follow

Given current circumstances, it’s been a tumultuous year of events, not only have tensions between Ukraine and Russia intensified, but a banking crisis led on by the collapse of Silicon Valley Bank (SVB) and the debt ceiling crisis have led many investors and traders to rather shift interest to commodities to help buoyant their portfolios.

Against the backdrop of micro and macroeconomic challenges, investors and traders remain positive that ongoing improvement in the stock market could help pull them out of the woods and regain their losses from the previous months.

While market headlines were dominated by the S&P entering a new bull market at the start of June, investors remain in an uneasy position, with many claiming that a similar situation took place in 2008 several months before markets crashed.

As commodity prices continue to see steady improvements, perhaps the last half of the year will see more investors and traders adjust their position concerning gold stocks.

Gold Fields

South African-based Gold Fields (NYSE: GFI) is considered to be one of the world’s biggest gold mining companies, with operations in Australia, Ghana, Peru, and South Africa.

Despite major headwinds echoed throughout the global economy, Gold Fields has significantly increased its portfolio over the last 12 months, acquiring Yamana Gold, a Canadian-based gold mining company for $6.7 billion back in May 2022.

With the potential to grow its flagship assets, and the acquisition of Yamana, which operates gold, silver, and copper mines in Argentina, Brazil, Canada, and Chile, Gold Fields is on track to deliver gold production between 2.25 - 2.30 million ounces in its upcoming fiscal 2023 guidance report.

The last several weeks have seen GFI share track at a growing pace, with performance to date already gaining 31.98% since the start of 2023. However, June's performance has slumped, on the back of growing costs and inflation, with share prices down just under 3%. Currently, GFI consensus marks it as a Strong Buy, with the potential to experience 8.3% year-over-year (YoY) growth.

Torex Gold Resources

Throughout much of the year, investors have held a lukewarm position on Torex Gold (OTCMKTS: TORXF), as the Canadian-based company showcases an impressive Return on Equity (ROE), with a reported 16% ROE compared to the overall industry average of 10%.

While it’s quite impressive to see that the company has seen several months of steady performance, reporting increased revenue and profits for the fiscal 2022 year, already this year is shaping up to be another healthy year for the company, with impressive net income growth of 49% over the last five years.

Stock performance has been difficult, with prices sliding 22% during the early weeks of May, before trending upward again. The start of June presented the same difficulties, with TORXF down by 11%, but have since started gaining momentum again.

Perhaps one of the more significant traits of Torex Gold is that it holds enough cash to cover most of its debt. The high solvency percentage is good news for investors and traders that’s looking for a long-term investment opportunity, and hold onto shares that continue to experience improved earnings-per-share (EPS) growth.

Royal Gold

Royal Gold (NASDAQ: RGLD) is steadily making its way to the top again after share prices slid 7% since the start of June, and around 2.41% to date. Nonetheless, the company has seen strong financials, with a steady portfolio performance, improved revenue, and operating cash flow following its fiscal year for 2022.

The company has a robust financial position, with $170.4 million in revenue up by 5% from 2021, and cash flow jumped by 7% for the same period to more than $108 million.

Overall, Royal Gold has strong financials, and the revenue split for last year was divided among gold (71%), copper (14%), and silver (12%).

Earlier in June this year, the company announced it has entered an agreement with ACG Acquisition Company Limited, which would allow them to acquire new royalties on both the Serrote and Santa Rita mines in Brazil.

The agreement is expected to see Royal Gold receive roughly 8,000 GEOs, starting May 1 2023 until the close of the year. Between 2024 and 2028, the company anticipated an annual average of 14,000 GEOs for the period.

Given its current position and healthy financial position, Royal Gold gives an upside to investors that are looking for a gold stock that holds a promising performance but improved forward-looking guidance.

Alamos Gold

Canadian-based Alamos Gold (NYSE: AGI) had already managed to fulfill ~26% of its annual production guidance following its Q1 2023 report.

Going forward, the company is expected to surpass its annual guidance, seeing gold production (per ounce) jumping 30% in Q1 2023 compared to the same period last year. Elsewhere, gold sales (per ounce) have also increased between Q1 2023 and Q1 2022.

On the stock market, things have been shaken up in recent months, and while AGI shares have seen incremental price declines, recent activity in the global gold market has helped AGI prices steadily build up an improved performance.

To date, prices are up by 13% and could see another peak later in the year, following a yearly high of $13.81 per share in the early days of May.

Something to look out for is the company’s increasing land package after the successful acquisition of Manitou Gold, which helped to more than triple Alamos’ land package around the Island Gold Mine. The acquisition also comes with the potential of further exploration of the Michipicoten Greenstone Belt which could significantly boost its annual production output.

Franco-Nevada Corporation

Franco-Nevada (NYSE: FNV) is perhaps the full package, seeing no debt and more than $2.2 billion in available capital as of March 31, 2023, following its most recent quarterly earnings report.

What’s more, the company generated roughly $209.8 million in operating cash flow during the first half of the year, and booked 16 consecutive dividend increases, with the most recent being $0.34 per share.

Looking elsewhere, the company has a diverse royalty and streaming portfolio by asset and further diversifies its operations by the number of operators and countries it has under management.

Considering its sustainable business model and balance sheet, Franco-Nevada holds long-term optionality in several metals including gold, nickel, and copper, among other precious metals.

While Franco-Nevada might sit on top of a strong portfolio of assets, revenue performance was down 18.4% during Q1 2023 due to lower GEO earned from precious metals, and lower oil, gas, and iron ore prices.

To date stock prices are steadily climbing, with a 0.72% improvement, however, with macro turbulence sending shockwaves across the market, prices could see improvement in the coming months, however, the consensus for FNV is placed on Hold.

Franco-Nevada is a solid investment for those seeking gold mining companies that have a healthy portfolio of diversified assets and royalties, not to mention that the company is constantly looking to further innovate and increase its GEO placements across different global markets.

Final take

While there are several upsides to the commodity market, the risk factor could perhaps be downplayed by current events, leading investors and traders to seek out more sustainable investments amid shaky macroeconomic conditions and political tension among major commodity markets.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.