FN Media Group Presents Oilprice.com Market Commentary
London – November 5, 2019 – 2020 could be a golden year. After one of the most geopolitically charged years in recent memory, gold is now set to soar. Prices began to bounce back in 2019, and as trade wars and conflict in the Middle East took hold, investors started racing back to their favorite safe haven asset. Mentioned in today’s commentary includes: Barrick Gold Corporation (NYSE:GOLD), Newmont Goldcorp Corporation (NYSE:NEM), Kirkland Lake Gold Ltd. (NYSE:KL), Wheaton Precious Metals Corp. (NYSE:WPM), Rio Tinto Group (YSE:RIO)
Gold stocks were depressed for years. But as worries of dwindling gold supplies—“peak gold”—and geopolitical uncertainty took root, investors began to bet on a major gold run.
Goldman Sachs has predicted that there are only twenty years of gold left. Goldcorp’s chairman claimed that all major gold reserves have already been found. And with no sign of a solution in the U.S.-China trade war and no end in sight for Brexit, economic uncertainty is only worsening.
With that in mind, here are 5 gold trends to watch closely:
#1 Follow The Profits
The world’s second most profitable and valuable gold miner, Barrick Gold Corp. (NYSE:GOLD), has had a block buster year, breaking the 30 billion market cap mark and attempting a hostile takeover of its major rival Newmont Mining (NYSE: NEM). The announcement shocked markets, and if it had gone through it would have been a $17.8 billion acquisition.
The deal failed in the end though, with the two companies agreeing to partner up on a potential find in Nevada, with a two-thirds share for Barrick. The venture has the potential to unlock nearly $5 billion over the next 20 years. So the biggest name in gold mining is about to get even bigger.
After reporting 4.5 million ounces in gold last year, Barrick claimed that Nevada could yield a further 76 million ounces. The upside here is undeniable. Barrick’s stock is already up 32% this year, and as gold markets become increasingly bullish, the results should keep getting better. It didn’t matter that the Newmont venture fell through, and with the joint venture in Nevada adding even more value – the good times should keep rolling for Barrick.
#2 Ancient Gold In Europe’s Second Largest Mine
It may not be as big a name as Barrick, but Euro Sun (ESM, CPNFF) has made one of the biggest acquisitions of the year. This ancient Roman gold mine deep in the forests of Romania is ready to regain its historic fame. And Euro Sun Mining Inc. (ESM, CPNFF) is holding the key to its success.
The scale of this resource is undeniably immense, with the Rovina Mine measuring in as the 2nd biggest gold mine in all of Europe. It has 400 million tons of ore, yielding 10.1 million ounces of gold equivalent. To put that in perspective, the profits from this find are estimated at $550 per ounce…and that’s with a total haul of $5.5 billion over the mine’s lifetime.But it isn’t just the mine that makes Euro Sun special.
While there are literally HUNDREDS of mines scattered across Europe, with many of them containing hundreds of millions of tons of accessible ore, getting a license for any of the ancient mines is near impossible.
Inside the European Union, it can be insanely difficult to get the necessary licenses due to a litany of regulations. Rovina is renowned within gold markets, with Barrick having sank $20 million into the project. But even with the backing of the biggest gold company in the world, the owners couldn’t get the necessary licenses and had to abandon the find. That’s when Euro Sun swooped in for the kill.
Euro Sun took its time to get the necessary permits and licenses from the Romanian government, knowing full well that the payoff would be worth it. Finally, in November 2018, it did the impossible and obtained the first Romanian mining permit since 2003.
The reaction to their success was unanimous, with GMP noting that Rovina has “robust economics and upside…If another ounce is never found, Euro Sun already owns a potentially extremely robust project.”
Cantor Fitzgerald supported the work of GMP when it completed its own estimate in early 2019. Their estimate stated that Rovina “carries strong economics on a standalone basis.” After securing this license and the attention of the entire mining industry, the only thing left to do was to wait for the gold markets to soar. Cantor Fitzgerald short-term target for Euro Sun is a remarkable $2.10. That’s over a 500% increase from its current price. But GMP is even more ambitious: they believe Euro Sun is worth $3.00, an increase of over 800%.
The company’s stock leapt up by 20% on the back of one small announcement. And as gold markets get more bullish and the company continues to develop, it is only going to get better. Investors are already waiting for opportunities in gold, with the Chinese having put some big money into mining, laying down a cool $1.4 billion to acquire an asset with nearly none of the qualities Rovina can boast.
It might not be long before Euro Sun (ESM, CPNFF) gets targeted by a big investor…and it’s stock would then become solid gold.
#3 The World’s Largest Gold Miner
From fighting off a hostile takeover from Barrick, to acquiring Goldcorp to become the world’s biggest gold miner, Newmont Mining (NYSE:NEM) has had a remarkable year. Newmont made the announcement in January, part of a slew of M&A deals among the gold miners, taking advantage of depressed valuations. And while the Newmont-Barrick merger died, the now-$32 billion market cap giant is ready to ride the looming bull run.
Being the biggest in the market is always a positive when it comes to a bull run, and Newmont is going to exploit its position as much as it can in the near term. It’s one-third share in the joint venture launched with Barrick in Nevada, a deal that could yield $5 billion over twenty years, is yet another source of value for this giant.
In 2018, Newmont announced that “first gold” had been produced at its Merian mine in Suriname, South America. That mine contains reserves of a further 1.5 million ounces with annual production expected to average between 400,000 and 500,000 ounces in the first five years. It’s a great time to be the number one in gold.
#4 Shocking Growth
This major gold miner has a market cap of $9 billion and has risen 91 percent in this year alone. Part of the reason for the climb was that Kirkland posted some huge numbers for last year, reporting 724,000 ounces of gold produced and exceeding its quarterly production record by 28%.
Another advantage Kirkland has is that it is hyper focused. It has lasered in on only Canada and Australia. Its portfolio is low-risk and high-value, one that looks even more attractive with the good news from 2018.
Kirkland has a Zacks ranking of #1. The Zacks Consensus Estimate for earnings in 2019 has risen 52%, and project four-year growth of 47%. And it doesn’t intend to slow down any time soon.
It plans to expand operations in Canada, sinking more than $100 million into exploration, confident that “peak gold” predictions won’t come to pass. The company’s Canadian workforce is set to grow by the thousands, once a new shaft is sunk at the Macassa mine. Look to Kirkland for more exciting news as the year nears its end.
#5 Diversified Mining
Rio Tinto (NYSE:RIO) is one of the world’s biggest miners and is also in the gold business. This mining giant made a huge discovery in February, uncovering what could be its next massive copper-gold mine in Western Australia.
Part of Rio’s $250 million exploration program, things are looking very good for the company. It will likely be able to scale up its operation quickly, thanks in large part to the company’s ample resources.
While it delayed production on a mine in Mongolia, moving the planned expansion from early 2020 to the third quarter 2021, the Western Australia discovery will help it in the meantime. Like other gold stocks, Rio Tinto was ticking up this year, but the trade war between the U.S. and China has knocked it down. When gold really starts to roar though, it will be sure to follow suit.
Rio was named the most innovative company according to Boston Consulting Group, thanks in part to its high-tech mine in Pilbara, Western Australia.
#6 Streaming Gold
Wheaton Precious Metals Corp. (NYSE:WPM) is a company with its hands in operations all around the world. As one of the largest ‘streaming’ companies on the planet, Wheaton has agreements with 19 operating mines and 9 projects still in development. Its unique business model allows it to leverage price increases in the precious metals sector, as well as provide a quality dividend yield for its investors.
Recently, Wheaton sealed a deal with Hudbay Minerals Inc. relating to its Rosemont project. For an initial payment of $230 million, Wheaton is entitled to 100 percent of payable gold and silver at a price of $450 per ounce and $3.90 per ounce respectively.
Randy Smallwood, Wheaton’s President and Chief Executive Officer explained, “With their most recent successful construction of the Constancia mine in Peru, the Hudbay team has proven themselves to be strong and responsible mine developers, and we are excited about the same team moving this project into production. Rosemont is an ideal fit for Wheaton’s portfolio of high-quality assets, and when it is in production, should add well over fifty thousand gold equivalent ounces to our already growing production profile.”
By. Meredith Taylor
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