Gold remains a key hedge many investors look to for stability in this increasingly volatile market. However, gold miners are an even higher-leverage play on this sector that many are starting to consider.
As gold prices rise, which they have been of late, gold miners tend to outperform to a greater degree than the underlying prices of precious metals. That’s because these producers experience an outsized benefit from operating leverage, as most of their costs remain fixed while their revenue takes off. Thus, gold miners are often viewed as one of the top ways for gold bulls to see growth from this sector.
With that said, picking the right gold miner to invest in can be difficult. Here’s why I think Agnico Eagle (TSX:AEM)(NYSE:AEM) and Equinox Gold (TSX:EQX)(NYSE:EQX) are two top gold miners to consider right now.
Top gold miners: Agnico Eagle
Agnico Eagle is a Canada-based gold miner with production spread across Canada, Mexico, and Finland. This company’s 50% stake in the Malartic mine is what many investors are after. Indeed, via a merger with Kirkland Lake Gold, Agnico Eagle is now one of the top Canadian gold miners in the market, holding an excellent portfolio of high-yield and high-volume mines.
Over time, Agnico eagle has produced consistent cash flow for shareholders. This has allowed the miner to pay a dividend every year since 1983. Indeed, in this sector, that’s not so commonplace. Accordingly, income investors looking at Agnico’s 2.8% dividend yield may want to consider the dividend-growth potential with this company.
Like other gold miners, I expect to see dividend hikes on the horizon for Agnico. This miner is pumping out cash in an incredible fashion. And with gold production expected to increase to between 3.2 and 3.4 million ounces this year, with an all-in sustaining cost of between $1,000 and $1,050 per ounce, there’s a tremendous amount of room for both dividend growth and capital appreciation.
Like Agnico Eagle, Equinox Gold is a Canada-based gold miner with operations spanning multiple countries. That said, Equinox focuses completely on the Americas, with projects in Canada, the U.S., Mexico, and Brazil.
This top gold miner operates seven gold miners and has seen considerable insider buying over the past year. Insiders appear to be growing increasingly optimistic about Equinox’s prospects. I can’t say I blame them.
This company’s recent results highlight some compelling growth prospects for Equinox over the medium term. The company is making tremendous progress toward achieving a target of around one million ounces per year. Accordingly, despite cash flows of $321 million on more than 600,000 ounces of gold produced this past year, investors are rightly banking on these numbers taking off in the years to come.
For gold bulls, both Agnico and Equinox present excellent growth opportunities in this market. These are two top-tier gold miners I think are undervalued relative to their upside right now. Accordingly, those taking the long view on this sector may want to consider these stocks at these levels right now.