Investors looking for safety nets can’t avoid scanning the mining sector for gold stocks. The price of the world’s most precious metal climbed above US$2,000/oz in early March 2022. As of this writing, the quoted price is $US1,770/oz or 13% lower from its peak.
Still, the recent Commodity Briefing Service: Gold report from the S&P Global Market Intelligence said the sentiment for gold investment has risen over the past two months. The reasons are higher inflation and increasing geopolitical risks.
Moreover, the global mined supply of gold and physical demand is likely to remain robust through year-end 2022 until 2026, notwithstanding the macroeconomic and inflationary pressures. Today, three TSX gold stocks could be your inflation busters.
Top-of-mind choice
On the TSX, Barrick Gold (TSX: ABX)(NYSE: GOLD) is the top-of-mind choice. It’s the largest in Canada and one of the leading gold producers globally. The large-cap gold stock ($40.37 billion market capitalization) also pays a decent 2.28%. While ABX is down 4.33% ($22.69 per share) year to date, you’d still have an ideal hedge against inflation.
According to Mark Bristow, Barrick Gold’s president and CEO, the current share price isn’t reflective of the stock’s inherent value. He enumerates the compelling reasons to invest in Barrick. Apart from the strength of the balance sheet, the asset base boasts peerless quality.
Furthermore, management’s long-term strategy has been successful because its implementation plans are reality based. More importantly, Barrick Gold’s six tier-one gold mines have unparalleled leverage if gold prices remain elevated due to geopolitical and economic fears.
Because of the robust operating, free cash flows and strong net cash position, Barrick declared a new performance dividend policy. The inaugural move doubled the base dividend. Management expects to meet its production guidance for 2022 on account of the steadily increasing gold and copper production.
Outperformers
The materials sector where mining stocks belong is down 11.19% year to date. However, two small-cap gold stocks outperform the broader market. Mandalay Resources (TSX: MND) and Aris Gold (TSX: ARIS) are the top price performers so far in 2022 with gains of 22.08% and 23.18%, respectively.
Mandalay described the Q1 2022 results as healthy owing to the 146% year-over-year increase in adjusted net income versus Q1 2021. According to its president and CEO Dominic Duffy, the $259.93 million company has reached a net debt-free position. The gold stock trades at $2.82 per share.
Aris Gold’s US$3.24 million earnings from operations in Q1 2022 were 147% higher from Q1 2021. Notably, net income reached US$3.07 million compared to the US$7.33 million net loss in the same quarter last year. This $256.37 million mining company creates value from its mining operations and projects in Canada and Colombia.
The current share prices of Mandalay and Aris Gold are $2.82 and $1.86, respectively. Based on market analysts’ forecasts, the return potential in 12 months are 77% and 128%, respectively.
Usual safety net
The yellow metal has always been a safety net, especially when volatility in the stock market is high. If the demand for physical gold soars again like in 2021, expect gold stocks to climb as well. Barrick Gold is the preeminent choice, while Mandalay and Aris Gold are excellent second-liners.
