3 Winning Precious Metals Stocks for 2017

Today’s losers can be tomorrow’s winners. Tahoe Resources Inc. (TSX:THO)(NYSE:TAHO) and two others can help you win big in 2017 and beyond.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Now that precious metals stocks are depressed, it’s time to determine the potential winners. If you’re not convinced yet, check out this article, in which Fool writer Nelson Smith discussed five reasons why gold could shoot much higher in 2017.

I believe there’s a good chance that Goldcorp Inc. (TSX:G)(NYSE:GG), Silver Wheaton Corp. (TSX:SLW)(NYSE:SLW), and Tahoe Resources Inc. (TSX:THO)(NYSE:TAHO) can be winners.

Goldcorp

The large gold miner operates in politically stable and low-risk jurisdictions. Moreover, the company is awarded an investment-grade S&P credit rating of BBB+ and has a low debt/cap of 16%.

Over time, Goldcorp has improved its operations, and doing this has lowered its cost of operations and should lead to higher cash flows and a higher share price.

Most importantly, the company’s all-in sustaining costs of producing gold are expected to be US$850-925 per ounce. That’s below the price of gold, which has stayed above US$1,050 per ounce for the year and is about US$1,132 currently.

Since 2011 Goldcorp shares have declined 60%. Now trading below $17 per share, the miner is priced at a discount from its book value and from its long-term normal price-to-cash flow multiple.

canadian gold coins_16-9

Silver Wheaton

If you want exposure to precious metals with lower risk, you can consider Silver Wheaton, the world’s largest precious metals streaming company.

There’s no exploration risk in the company because it partners with mining companies by making an upfront payment. In return, it buys a percentage of their future silver or gold production at a predetermined price, so it profits from the difference between the cost and the actual precious metals prices.

In 2015 Silver Wheaton paid US$4.17 per ounce of silver and US$393 per ounce of gold and had cash margins of 73% and 66%, respectively.

Silver Wheaton has a portfolio with about 25 years of mine life based on reserves. So, the company is set to remain profitable across various stages of the precious metals cycle.

Tahoe Resources

For those of you with an above-average appetite for risk, consider Tahoe Resources: a mid-cap precious metals miner, which was founded by Kevin McArthur, who was the former president and CEO of Goldcorp until his retirement in 2008.

Tahoe Resources aims to produce 20-21 million ounces of silver and 370,000-430,000 ounces of gold this year with all-in sustaining costs of $8-9 per ounce for silver and $950-1,000 per ounce for gold.

Miraculously, the company has maintained its monthly dividend since the end of 2014, and it offers the biggest yield of the three at 2.7%.

Tahoe Resources also maintains a strong balance sheet with little debt. For example, its current assets were nearly two times its current liabilities in the last quarter. Now that the shares have retreated 45% from its recent high in July, it makes for an attractive entry point.

The takeaway

All three companies can shoot much higher in 2017 and beyond if precious metals prices head higher. Some analysts believe Goldcorp, Silver Wheaton, and Tahoe can rise 50%, 70%, and 80%, respectively, from current levels. However, it will likely take several years and more ups and downs before that can happen.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Goldcorp. The Motley Fool owns shares of Silver Wheaton. Silver Wheaton is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Man data analyze
Dividend Stocks

3 Inflation-Resistant TSX Stocks to Buy Right Now

These inflation fighters will see you through this trying time and could double your portfolio in the next decade!

Read more »

Canadian Dollars
Dividend Stocks

Passive-Income Investing: How You Can Churn Out $445/Month for the Rest of 2022

Canadians crushed by inflation should look to make big passive income in 2022 with stocks like Freehold Royalties Ltd. (TSX:FRU)…

Read more »

calculate and analyze stock
Dividend Stocks

2 TSX Stocks to Buy With Dividends Yielding More Than 3%

Are you looking for some great income stocks that can provide growth, too? Here are two stellar TSX stocks to…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

Dividend Lovers: 3 U.S. Stocks You Haven’t Heard About

Don't just stick to Canadian companies for a great dividend, consider these U.S. stocks you probably haven't even heard of.

Read more »

money cash dividends
Dividend Stocks

How to Invest $10,000 Over the Next 5 Years

Those looking to put $10,000 to work in this rather uncertain and volatile market may want to consider these three…

Read more »

TFSA and coins
Dividend Stocks

TFSA Investors: 2 Incredible Deals to Buy in August

Here are two TSX stocks investors can consider for their TFSA contribution this year.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

These 3 TSX Stocks Have Doubled Over 3 Years: Can They Do It Again?

Three TSX stocks whose share prices have doubled in three years are well-positioned to repeat history and reward investors with…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Smart Buys: 2 Low-Profile Value Stocks With Strong Upside

Two low-profile value stocks with strong upside are smart buys if you’re looking for investments outside the energy sector.

Read more »