Gold prices have rallied in recent months, as investors expect interest rates to fall in 2024. Moreover, a sluggish global economy and geopolitical tensions have also acted as key drivers for the yellow metal this year.
Historically, gold has an inverse relationship with interest rates and the equity markets, allowing investors to diversify their portfolios and lower overall risk. As an asset class, gold has been viewed as a store of value and a hedge against inflation as the precious metal has thrived amid periods of economic downturns.
With this in mind, here are two gold mining stocks you can consider buying as gold prices continue to trade over US$2,000/ounce.
Barrick Gold stock
Valued at a market cap of $39 billion, Barrick Gold (TSX: ABX) is the largest gold producer in Canada. With exploration and development projects in five continents, Barrick Gold should be part of your equity portfolio if you are bullish on gold.
Despite a slower-than-expected ramp-up at the company’s flagship organic growth project in the Dominican Republic, Barrick Gold expects to exceed 800,000 ounces in gold production next year. Moreover, it remains on track to increase gold equivalent production by 30% by the end of this decade.
Barrick Gold aims to increase production levels in the fourth quarter (Q4) of 2023 and should end the year with a production of more than four million ounces. Further, copper production is on track to achieve Barrick Gold’s guidance of 420 million to 470 pounds in 2023.
Higher gold prices allowed Barrick Gold to report operating cash flows of more than US$1 billion in Q3, an increase of 35% year over year. Moreover, free cash flow rose to US$359 million while adjusted earnings grew by 26% to US$0.24 per share.
Further, Barrick Gold pays shareholders an annual dividend of $0.54 per share, indicating a forward yield of 2.4%. With a payout ratio of roughly 50%, Barrick Gold has enough room to increase dividends going forward. Its debt-free balance sheet has enabled the mining giant to more than triple dividends in the last five years.
Newmont Mining stock
Valued at $60 billion by market cap, Newmont Mining (TSX: NGT) also offers you a tasty dividend yield of 4.2%. A U.S.-based mining heavyweight, Newmont has mining assets in the Americas, Australia, and Africa.
It recently completed the acquisition of Newcrest, allowing it to benefit from pre-tax synergies of US$500 million each year. It also expects the acquisition to increase cash flows by US$2 billion in the next two years.
Newcrest expects the big-ticket deal to consolidate its position as a mining leader on the back of 10 tier-one operations located in low-risk jurisdictions. Its acquisition of Newcrest and higher commodity prices should allow Newcrest to increase sales from US$16 billion in 2023 to US$22.7 billion in 2024.
The company’s balance capital allocation priorities and non-binding dividend payout have allowed it to pay over US$5 billion in dividends to shareholders in the last four years.
Priced at 14 times forward earnings, Newmont stock trades at a discount of almost 100% to consensus price target estimates.
