Gold is a precious metal that is viewed as a hedge against inflation and a store of value. It has enabled investors to derive inflation-beating returns over several decades, providing them with diversification and reducing portfolio risk.
Gold is an alternative asset class with an inverse relationship with interest rates and equities. Given the U.S. Federal Reserve is likely to cut interest rates three times next year, gold prices should move higher in the near term. Additionally, gold thrives amid periods of volatility, making it an attractive option for those expecting the economy to enter a recession in 2024.
With these factors in mind, here are two gold mining stocks you can consider buying right now.
Agnico Eagle Mines stock
Valued at $36 billion by market cap, Agnico Eagle (TSX: AEM) is among the top gold mining companies globally. Agnico Eagle aims to maintain a high-quality project pipeline, allowing it to increase gold production consistently over time.
In the third quarter (Q3) of 2023, Agnico Eagle reported payable gold production of 850,429 ounces at a production cost of US$893 per ounce with an all-in-sustaining-costs (AISC) of US$1,210 per ounce. It reported an adjusted net income of US$0.44 per share while operating cash flow per share was higher at US$1.01 per share.
With a strong mineral reserve base, Agnico Eagle is the third-largest gold producer in the world. It has five operating gold mines, including two of the 10 largest mines globally. In the first nine months of 2023, it has increased revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by more than 10% year over year. Further, it has a robust pipeline of growth with two advanced stages of exploration projects.
Agnico Eagle ended Q3 with $355 million in cash and $1.1 billion in undrawn credit lines, providing it with the flexibility to navigate an uncertain macro environment. The mining giant also pays shareholders an annual dividend of $2.15 per share, translating to a forward yield of 3%. These payouts have more than tripled in the last five years due to its widening earnings base.
Priced at 24 times forward earnings, the TSX mining stock trades at a discount of 20% to consensus price target estimates.
Franco-Nevada stock
A gold-focused royalty and streaming company, Franco-Nevada (TSX: FNV) provides you with exposure to some of the largest gold mines across geographies. Similar to other royalty companies, Franco-Nevada is asset-light and enjoys enviable profit margins. It reported sales of $310 million in Q3 of 2023 with an EBITDA of $255 million, indicating a margin of 82.4%.
Franco-Nevada generates 78% of its revenue from precious metals and the rest from commodities such as oil and natural gas. Canada and the U.S. account for 31% of sales, followed by South America at 29%, Mexico at 28%, and other regions at 12%.
With $2.3 billion in available liquidity, Franco-Nevada is well-capitalized and pays shareholders an annual dividend of $1.85 per share, indicating a yield of 1.3%. Priced at 31 times forward earnings, Franco-Nevada stock trades at a discount of 34% to consensus price target estimates.
