The TSX’s mining sector offers cheap but excellent buys in Q3 2021. A $5 investment could significantly grow if invested in B2Gold (TSX:BTO)(NYSE:BTG) or Jaguar Mining (TSX:JAG). Both stocks are trading at deep discounts, although the return potentials in the next 12 months could be 95% or more based on analysts’ price forecasts.
The basic materials sector has replaced energy as the underperforming sector in 2021. Nevertheless, according to S&P Global Market Intelligence, the near-term outlook for the mining industry remains strong. Gold prices are forecasted to remain elevated in the post-pandemic due to pent-up demand. The long-term outlook is equally bright because of critical raw material needs as global energy transitions.
B2Gold from Vancouver is a low-cost international senior gold producer. Besides its three operating gold mines (Mali, Namibia, and the Philippines), the $4.94 billion company has several developments and exploration projects in Colombia, Finland, and Uzbekistan.
The global pandemic affected operations, although B2Gold has held up well throughout the crisis. Gold revenue in the first half of 2021 declined 12% versus the same period last year, while net income fell 22%. The cash operating costs also went up during the period due to lower production and higher input costs.
Management said that for the full year 2021, B2Gold remains on track to meet the upper end of its gold production target. The company expects to end the year with a total production of between 970,000 and 1,030,000 ounces. B2Gold has a solid financial position and adequate liquidity towards the second half of 2021.
The not-so-impressive financial results reflect on the mining stock’s performance. Still, the current share price of $4.69 (-33% year to date) is a good entry point. Market analysts see a potential capital gain of 97% to $9.25 within a year. Your overall return should be significantly higher if you factor in B2Gold’s 4.23% dividend.
Stable with uncertainties
Jaguar Mining continues to underperform thus far in 2021. At $4.10 per share, investors are down 49.21%. Despite the underperformance, market analysts maintain a strong buy rating. They predict a 95% return potential to $8.01 in the next 12 months.
Like B2Gold, this $296.9 million junior gold mining company from Toronto is a dividend payer. The dividend yield of 3.9% (down from 6.07%) should be sustainable given the low payout ratio (37.94%). Business is stable, although Jaguar’s financial results in the first half of 2021 aren’t impressive.
Jaguar’s total revenue slid 7%, while net income dropped dramatically by 71% compared to the first half of 2020. As a result, management decided to reduce dividends and reinvest a large portion of earnings back into the business.
The company operates in a prolific greenstone belt in Minas Gerais, Brazil, called the Iron Quadrangle. Mineral exploration in the state has been ongoing since the 16th century. The location is close to Belo Horizonte, the commercial centre for Brazil’s mining industry. Jaguar has set up a world-class infrastructure for its mining operations.
Your $5 can earn in two ways
While gold reached new highs in 2020, economic recovery somehow brought its price down. According to industry analysts, expect the gold market to dance back and forth in 2021. Still, B2Gold and Jaguar Mining are great options if you have limited funds to invest. You can earn in two ways: from dividends and capital gains.
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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.