It has been quite a year, so much so that ‘2020’ is likely to become a byword among those who remember it decades hence. For investors, the key point has been volatility. The year started with modest gains in stocks, until it was derailed by the mid-winter coronavirus crisis. After the deepest short-term losses in Wall Street’s history, however, stocks rebounded – and hard. The bull run lasted more than 5 months. But now we need to ask, has it ended at last?
Since the beginning of September, the S&P 500 is down 6%, and the tech-heavy NASDAQ has lost 8%. Wall Street pros believe the rising trend in volatility is going to stay for now. To this end, even the most optimistic investors will look for ways to defend their portfolios in times like these.
And this brings up another question: Is there anything quite as good as gold? Gold has a long history as the ultimate store of value, the final safe haven for investment funds. Even in these days of fiat currency – perhaps especially in these days of fiat currency – gold retains its lustre as the original money, and gold coins still have that cachet.
Bearing this in mind, we used TipRanks’ database to identify three gold mining stocks that have received enough support from Wall Street analysts to earn a “Strong Buy” consensus rating.
SSR Mining, Inc. (SSRM)
We’ll start in Vancouver, Canada, where SSR Mining is a major gold and silver producer, with operations in both North and South America, as well as Turkey. The company’s proven reserves exceed 3 million ounces of gold at the Copler mine in Turkey, along with over 200,000 ounces per year in the US Marigold mine. The Canadian Seabee mine, in Saskatchewan, has another 500,000 ounces of recoverable gold.
Heading into 2020, SSR Mining started out with a strong quarter. Q1 earnings rose 3% sequentially, to 31 cents per share – but in Q2, as the coronavirus caught up, that number fell drastically, to a net loss of 2 cents per share. At the top line, revenues fell from Q1’s $164.5 million to $92.5 million.
Despite the earnings loss, SSRM has good news to report in the second quarter. The company finished Q2 with solid liquidity, reporting over $461 million in cash on hand. And, the company announced that it had completed the merger transaction with Alacer Gold, a process begun in the first quarter. The merger brings new assets in mines and management to SSR Mining.
5-star analyst Mark Mihaljevic, writing from RBC Capital, sees the merger and the long life of the company’s mines as the key points for investors to consider.
“We continue to believe that the merger-of-equals between SSR Mining & Alacer Gold has created a fundamentally stronger combined company with increased scale, strong free cash flow generation, and a robust balance sheet… With the addition of Copler, SSR’s average reserve life is estimated to increase to 10.5 years from 8.7 years, which is 17% longer than the peer group average of 9.0 years,” Mihaljevic noted.
Mihaljevic rates this stock as Outperform (i.e. Buy), and his $30 price target suggests it has room for 44% upside growth. (To watch Mihaljevic’s track record, click here)
The analyst consensus rating on SSRM is unanimous, based on 7 recent Buy reviews. Shares are selling for $20.72, and their average price target, at $29.67, matches the 43% upside potential of Mihaljevic’s stance. (See SSRM stock analysis on TipRanks)
Golden Star Resources (GSS)
Next up, Golden Star, is also Canadian owned, but its operations are in the Ghana, in West Africa. The company owns two mines in that country, and in 2Q20 produced a total of 50,600 ounces of gold, up 4.5% year-over-year.
The gold production turned earnings back positive from their corona-induced negative reading in Q1. At 9 cents per share, Q2 earnings were up 12 cents sequentially. The gains, in production and earnings, for the second quarter, come as the mines were able to get their personnel back to work with the waning of the COVID-19 crisis. In another important positive metric, GSS produced $27.1 million in cash flow for Q2, more than doubling Q1’s number.
The strong cash flow allowed GSS to reduce debt in Q2 by $4.7 million, and finish the quarter with a $3 million increase in cash on hand, to $45.1 million. Deep pockets and liquid assets, in turn, allowed GSS to keep up its active exploration budget and activities.
Covering this stock for H.C. Wainwright, 5-star analyst Heiko Ihle sees the company gaining from rising gold prices on the open market.
“We feel macroeconomic improvements related to precious metals are increasingly evident in the market… we note a variety of potential headwinds to continued strength in pricing, including less fear related to COVID-19, we nonetheless believe that longer-term economic impact from the recent pandemic has paved the way for strong pricing in the future,” Ihle opined.
To this end, Ihle rates GSS shares a Buy and sets a $6.80 price target, high enough to indicate a robust 49% one-year upside. (To watch Ihle’s track record, click here)
Wall Street agrees that GSS is a buying proposition. The stock gets a Strong Buy rating from the analyst consensus, based on 4 Buys and 1 Hold. The average price target, $5.12, suggests 12.5% upside from the share price of $4.55. (See GSS stock analysis on TipRanks)
B2Gold Corporation (BTG)
Last on today’s gold list is B2Gold, a small-cap miner, and another Canadian-based firm. B2G has operations in the Philippine Islands, Africa, and Central America. The company saw gains in 1H20, despite corona, and shares are up an impressive 66% year-to-date.
Turning to the revenues and earnings, B2G saw gains sequentially in Q1 and Q2. The Q1 numbers were $830 million on the top line, and 10 cents per share for earnings; in Q2, the company saw $441.9 in revenue and 11 cents EPS. Those solid numbers come in as the company reported Q2 sales of 257,100 ounces of gold at a price of $1,719 per ounce. This was up significantly from the year before. Second quarter cash flow grew by 154% year-over-year, to $454 million, mainly on the strength of higher prices.
The company has used its earnings and liquidity to double its dividend payment. In Q2, the company paid out 4 cents per common share, which gives a yield of 2.45%.
Brian Quast, 5-star analyst with BMO Capital, writes of B2G, “With a continued strong gold price, this strong balance sheet may set the stage for future dividend raises and/or development of some longer-term opportunities, such as Kiaka in Burkina Faso [...] Rolling our estimates forward by one quarter, driving stronger production at a higher gold price forecast, lifts our next-12-month cash flow estimates higher..."
Quast's price target, C$11.50, or US$8.64, supports his Buy rating and suggests an upside to the stock of 31%. (To watch Quast’s track record, click here)
All in all, with 8 Buys and only a single Hold set recently, BTG shares have a Strong Buy rating from the analyst consensus. The shares are selling for US$6.58, and their average price target of US$7.99 implies a 12-month upside of 21%. (See B2Gold’s stock analysis at TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.