Best Mining Stocks
Top 10 Mining Stocks for Summer 2016
On Thursday, I wrote to you with my recommendations for adding physical precious metals to your portfolio. Specifically, I mentioned that the Canadian Maple Leaf series is probably the best choice for investors right now.
But today, I want to direct your attention to several precious metal mining and exploration stocks. Let's start with a few gold stocks...
Barrick Gold (NYSE: ABX) is the largest and probably most well known major gold producer in the world. Fundamentally, I really don't like Barrick as a play due to the company's massive debt liability — which still sits at about $10 billion.
Despite its debt, however, shares of ABX have increased nearly 150% since December 2015. And I simply can't argue against that kind of gain.
As I mentioned to you in Energy and Capital back in March, I've learned through the course of my investment career that sometimes it's best not to over-think things. Because at the end of the day, your most profitable stock picks are going to be those that the majority of investors also pick.
And the simple fact that Barrick is the largest and probably most well known major gold producer means it's going to be one of the very first companies that come to the minds of the majority of investors. So despite the company's massive debt, ABX is probably a good bet to leverage rising gold prices.
Among other major gold miners that I fundamentally like a lot better is Goldcorp (NYSE: GG). Goldcorp is a very well known senior gold producer with one of the lowest production costs in the industry.
The company has an impressive portfolio of high-quality assets located in geopolitically stable jurisdictions in North and South America. Goldcorp produced a total of 3.46 million ounces of gold in 2015 with all-in sustaining costs (AISC) averaging $894 an ounce.
Like many other major gold producers, Goldcorp's production is expected to slightly dip this year to range between 2.8 and 3.1 million ounces. Nevertheless, I expect that a recovery in CME gold prices will push shares of GG back over $20 in short order.
Royalty and streaming gold companies are another great way to leverage rising metal prices. These companies do not produce gold. Rather, gold royalty and streaming companies own several small revenue interests in gold-producing mines.
The major upside for gold royalty and streaming is less exposure to risk. Projects with high risk can be managed out of the portfolio.
The most well known gold royalty company is Royal Gold (NASDAQ: RGLD). The company currently owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development-stage projects.
During Royal Gold's last fiscal quarter, the company received revenue of $93.5 million from sales of 79,025 gold-equivalent ounces, an increase of 30% compared to a year ago.
Shares of RGLD have pulled back from over $62 at the beginning of this month to under $55 today. However, I expect shares to top $60 again in no time at all.
Sandstorm Gold (NYSEMKT: SAND) is another gold royalty and streaming company that I like as a play on rising precious metal prices right now. The company is much smaller and less known than Royal Gold, with a portfolio of 131 streams and royalties, of which 20 of the underlying mines are producing.
During the first quarter of 2016, Sandstorm received revenue of $13.4 million on attributable sales of 11,381 gold-equivalent ounces.
Shares of SAND have lost over 20% as the price of CME gold has dipped back to $1,220 an ounce. Nevertheless, I expect SAND to bounce right back over $4.50 as physical gold prices recover.
Staying within the realm of royalty and streaming companies but moving more into silver, I want to direct your attention to Silver Wheaton (NYSE: SLW).
Silver Wheaton is actually the world's largest precious metal streaming company in the world by market cap. The company derives approximately 60% of its revenue from the sale of silver and approximately 40% of its revenue from gold sales.
Silver Wheaton currently has 20 precious metal purchase agreements with 15 operating partners, including majors like Barrick Gold and Goldcorp.
Along with most other gold and silver–focused companies, SLW has pulled back a bit from a 52-week high at the end of April. But I expect to see shares pop back over $20 in short order.
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Another silver producer that I also like as leverage on rising silver prices is one that we've traded here in Energy and Capital in the past: Tahoe Resources (NYSE: TAHO).
Tahoe is a mid-tier mining, development, and exploration firm focusing on silver and gold production with three main assets in Guatemala and Peru. The company's flagship property is one of the largest silver mines in the world, producing 20.4 million ounces of silver in concentrate last year. To read my complete write-up of Tahoe Resources that I published back in March, click here.
Moving away from gold and silver for a minute, I also want to check out Stillwater Mining (NYSE: SWC). Stillwater is the only U.S. producer of platinum and palladium.
During the first quarter, Stillwater produced a total of 137,300 ounces of platinum and palladium, a slight increase over 1Q 2015. The company also received revenue from processing 154,200 ounces of recycled palladium, platinum, and rhodium — an increase of 41.9% over 1Q 2015.
Both platinum and palladium have been oversold over the past few weeks. Platinum has slipped below the $1,000/oz. level, while palladium is back below $550 an ounce. As a result, shares of SWC have fallen from over $12 a share to under $10 today. SWC is not my favorite mining stock. But I think we can expect a small gain over the next several weeks as precious metal prices recover.
All of the companies we've talked about so far have been large, major precious metal producers or royalty and streaming companies. But I also want to point you to some much smaller precious metal production and exploration companies.
First, I want to take a look at McEwen Mining (NYSE: MUX). The company is named after its chairman and primary owner, Rob McEwen.
Mr. McEwen has been a dominant force in the gold industry for over two decades. He is the founder and former CEO of Goldcorp and has been recognized by various organizations including the Canadian government itself, which gave him the Order of Canada, the second highest honor for merit in the system of orders, decorations, and medals of Canada.
McEwen Mining's current precious metal producing assets include 49% of the San José silver-gold mine located in Argentina and a project called El Gallo 1 (which is part of a larger mining complex project) in Mexico. Together, these mines produced 154,000 gold-equivalent ounces for McEwen Mining in 2015.
I also want you to check out New Gold (NYSEMKT: NGD). New Gold is a mid-tier gold mining company with a portfolio of four producing assets and two significant development projects. Additionally, the company owns 100% of the Rainy River and Blackwater projects, as well as a 4% gold stream on the El Morro project located in Chile.
During the first quarter of 2016, New Gold produced 90,811 ounces of gold and 25.4 million pounds of copper. For the year, the company expects to produce between 360,000 and 400,000 ounces of gold, between 81 and 93 million pounds of copper, and between 1.6 and 1.8 million ounces.
I really like both McEwen Mining and New Gold to leverage rising precious metal prices, although they are both a bit riskier.
Lastly, I want to direct your attention to at least one small-cap junior exploration play. And this is one that I own myself...
Sandspring Resources (TSX-V: SSP) is a junior gold and copper exploration and development company with an enviable project in Guyana, South America.
The Toroparu gold/copper project currently has NI 43-101 compliant gold reserves (proven and probable) of over 4.1 million ounces, plus 211 million pounds of copper reserves.
Back in May 2013, a pre-feasibility study was completed for the Toroparu project that outlined the design of an open-pit mine producing more than 200,000 ounces of gold annually over an initial 16-year mine life.
The focus for the company now will be the completion of the final feasibility study on the Toroparu, which is expected to be completed at the end of the year.
If the final feasibility study shows similar results to the pre-feas, I believe Sandspring will be in a great position for a buyout. I own several thousand shares of this stock myself, and I'm expecting to see big returns.
Here's a complete list of the stocks we've talked about today...
|Company||Ticker||Market Cap||Last Price||Comment|
|Barrick Gold||NYSE: ABX||$19.16B||$16.59||Largest, most well-known gold major|
|Goldcorp||NYSE: GG||$13.92B||$16.63||Senior, low-cost producer|
|Royal Gold||NASDAQ: RGLD||$3.58B||$55.05||Most well-known gold royalty company|
|Sandstorm Gold||NYSE: SAND||$513.04M||$3.50||Up-and-coming gold royalty firm|
|Silver Wheaton||NYSE: SLW||$8.01B||$18.16||Largest gold and silver royalty/streaming firm|
|Tahoe Resources||NYSE: TAHO||$3.63B||$11.79||Major silver producer|
|Stillwater Mining||NYSE: SWC||$1.19B||$9.76||Only U.S. platinum/palladium producer|
|McEwen Mining||NYSE: MUX||$636.67M||$2.25||Smaller producer with savvy management|
|New Gold||NYSE: NGD||$1.90B||$3.75||Mid-tier gold miner with royalties|
|Sandspring Resources||TSX-V: SSP||$46.54M||$0.44||Junior explorer and developer with 4.1 Moz gold reserve|
I believe precious metal prices are on the verge of a major upside breakout. Take a look at the companies we've talked about today.
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