Historically, gold has been viewed as a hedge against inflation and a store of value while offering portfolio diversification. In the last 15 months, gold prices have been on an absolute tear driven by several factors, making the yellow metal even more attractive.
According to a World Gold Council report, global gold demand reached an all-time high of 4,974 tonnes in 2024, setting a new value record of US$382 billion. This performance was driven by central bank purchases and increased investment demand. In fact, central banks acquired 1,045 tonnes of the precious metal in 2024.
Investment in gold saw substantial growth, rising 25% year over year in 2024 to 1,180 tonnes, the highest level in four years. This increase was tied to renewed interest in gold exchange-traded funds (ETFs), while traditional investments in physical gold bars and coins remained stable.
On the supply side, total gold production reached a new record of 4,794 tonnes, a 1% increase from 2023, due to growth in both mining output and recycling activities.
The World Gold Council expects increased interest from ETF investors and central banks to positively impact gold prices in 2025. It also emphasized that geopolitical uncertainties and economic challenges are likely to maintain gold’s appeal as a safe-haven investment and risk hedge in the near term amid falling interest rates.
While investing in gold ETFs is a good option for most investors, those with a higher risk appetite could consider buying shares of undervalued gold mining stocks. In recent years, several mining stocks have significantly trailed gold prices, making them attractive to value-seeking investors. One such TSX mining stock is B2Gold (TSX: BTO).
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Is the TSX mining stock a good buy right now?
Valued at a market cap of $4.75 billion, B2Gold is a gold producer with three operating mines in Mali, the Philippines, and Namibia. B2Gold’s performance in the third quarter (Q3) of 2024 showed mixed results across its operations. While the Masbate and Otjikoto mines continued to meet or exceed budget expectations, the Fekola mine experienced a weaker quarter due to equipment issues.
However, B2Gold expects significant production growth at Fekola in 2025, driven by improved grades and expanded operations, including underground production and regional ore trucking. Despite these challenges, B2Gold reported an operating cash flow of $118 million in Q3 and ended the quarter with $431 million in cash.
While gold prices are hovering near all-time highs, BTO stock is down 63% from its record levels, allowing you to buy the dip. Moreover, the ongoing drawdown allows shareholders to benefit from a tasty dividend yield of 6.3%, given its annual dividend per share of $0.16.
B2Gold has an annual dividend expense of roughly $211 million. Comparatively, its free cash flow is forecast at $442 million in 2025, indicating a payout ratio of less than 50%.
Analysts also expect adjusted earnings for the gold miner to expand to $0.41 per share in 2025, up from $0.21 per share in 2024. So, priced at 8.8 times forward earnings and 10.7 times forward FCF, the TSX stock is quite cheap, considering its growth estimates and high dividend yield.
Given consensus price target estimates, BTO stock is priced at a discount of 50%. If we adjust for dividends, cumulative returns could be over 55% over the next 12 months.
