If you haven’t noticed, gold prices have been on a tear this year. Precious metals like gold are soaring to new highs, and Canadian gold stocks followed suit.
Even more remarkable is that this rally may still be in its infancy.
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Why invest in gold now?
Precious metals like gold have always acted as a hedge against inflation, recession, or any sort of market volatility. In short, when the market begins to show signs of volatility, investors will turn to the perceived safety of precious metals.
That increase in demand drives up the price of those precious metals on the market, which, in turn, increases the profit margins for miners. This is especially true for miners that are already operating and have largely fixed costs of operations.
In other words, those gains translate directly into expanding profit margins.
Looking back on this year, there’s the perfect trifecta.
Inflation is still a topic being discussed. Interest rates are coming down. Market volatility and geopolitical issues remain.
Together, that forms a perfect backdrop for those seeking Canadian gold stocks to invest in right now.
Here’s a look at two stocks for investors to consider that offer rising cash flows, improving balance sheets, and even growing dividends.
Barrick Mining
Barrick Mining (TSX: ABX) is one of the largest precious metal miners on the planet. The company boasts a diversified portfolio of operations that spans multiple countries and continents.
Barrick is also diversified in terms of production. The miner produces not only gold but other metals as well. In fact, in the most recent quarter, Barrick announced the production of 829,000 ounces of gold and 55,000 tonnes of copper.
That helped the company generate a record-setting US$2.4 billion in operating cash flow and a whopping US$1.5 billion free cash flow.
Production during that quarter came in 4% higher than the previous period. It also led Barrick to hike its quarterly base dividend by 25% to US$0.125, while also announcing a performance dividend of US$0.05 per share.
For investors looking at Canadian gold stocks, Barrick is an option that is too hard to ignore.
Lundin Gold
Whereas Barrick is the large blue-chip heavyweight, Vancouver-based Lundin Gold (TSX: LUG) is a mid-tier, high-margin gold producer. Lundin operates an impressive portfolio of assets, including the world-class Fruta del Norte mine in Ecuador.
That mine represents one of the highest-grade gold deposits currently in production on the planet.
Lundin’s production numbers are also impressive.
In the most recent quarter, Lundin reported record net income of US$208 million, or $0.86 per share. The miner reported all-in sustaining costs of $1,036 for the quarter, far below the average realized gold price of US$3,634 per ounce.
For prospective investors, that difference is huge and key. The gap represents the cost of mining over the cost of selling the produced metal. And given the gap between the two, Lundin is well-positioned for growth even if the price of gold drops.
Looking ahead, Lundin is another one of the Canadian gold stocks that should be on every investor’s radar. The impressive high-performing assets in Lundin’s portfolio, coupled with its low cost of operations, make this a great long-term option to consider.
Investing in Canadian gold stocks
Both Barrick and Lundin provide ample opportunities for investors to join the current rally on Canadian gold stocks. Barrick’s large-cap stability and diverse portfolio, and Lundin’s high-quality and high-margin assets, provide a good mix for any investor.
In my opinion, a small position in one or both is warranted as part of any larger, well-diversified portfolio.
