Investors turned to safe haven gold last year to protect their wealth during the COVID-19-led economic slowdown. The precious metal came under relentless selling pressure after hitting all-time high in August 2020, however, due to investors’ optimism over a potentially robust global economic recovery spurred by the mass vaccination drive. Consequently, gold prices slid to $1,700 per ounce in March this year.
However, the yellow metal has rebounded sharply on worries surrounding rising inflation and is currently trading near $1,900. The government’s rescue spending and an improving job market have been boosting purchasing power, which is driving inflation. In fact, consumer prices in the United States have recently increased the most since 2009. According to Statista, the annual rate of inflation this year is expected to be 2.26%. Furthermore, because the Fed currently views any rise in inflation as temporary, the central bank may not change its easy monetary stance anytime soon.
So, while the recovery by the economy so far has boosted investors’ risk appetite, uncertainties continue to loom over the pace of recovery. As a result, gold’s demand as a safe-haven asset is increasing. Also, with the printing of money picking up pace globally and the Fed expanding its balance sheet, the dollar could weaken further, pushing gold prices higher.
Economists believe that gold’s secular bull market is far from over and the metal is well-positioned to break the $2,000-level again in the near term. So, we think fundamentally-sound gold mining stocks Centamin plc (CELTF), DRDGOLD Limited (DRD) and Jaguar Mining Inc. (JAGGF) may interest investors that are seeking to hedge their portfolios against market uncertainty. As direct beneficiaries of rising gold prices, these stocks could deliver solid upside in the near term.
Centamin plc (CELTF)
CELTF explores for, mines, and develops precious metals, particularly gold ore deposits, in Egypt, Burkina Faso, Côte d’Ivoire, Jersey, the United Kingdom, and Australia. Its principal asset is the bulk tonnage open pit Sukari Gold Mine project located in the Eastern Desert of Egypt. CELTF produced 452,320 oz of gold in 2020 and currently has 14.3 million oz of both measured and indicated reserves.
Last December, CELTF contracted with Egypt-based Capital Drilling LLC to complete a 120Mt waste-stripping program in the Eastern section of the Sukari mine over the next four years. As part of this increased open pit program, the company will continue to utilize its existing owner operator fleet and receive support in meeting its stated production targets in the future.
CELTF generated $190 million in revenues during the first quarter (ended March 31, 2021) from sales of 106,573 oz gold. The Sukari mine’s gold production for the quarter was 104,047 oz, increasing 53% sequentially, driven by improved open pit and underground mined grade, resulting in a 34% increase in feed grade. Moreover, CELTF reported a quarterly record 22.8 million tons of total material moved, driven by the commencement of the waste-stripping program.
CELTF closed yesterday’s trading session at $1.70, gaining 17.2% over the past three months. Its open pit ore mining in the last quarter focused primarily on the low to medium grade Stage 5 North area. As a result, total open pit ore mined for the quarter was 3.8Mt, a 6% increase sequentially. CELTF’s plant processed 3 Mt of ore during the first quarter, a 4% increase quarter-over-quarter. Notably, the metallurgical gold recovery rate came in at 88.6% for the quarter.
CELTF is a debt-free company that has adopted a long-term orebody stewardship model at Sukari. Management has revised the pit design to enhance value and lower risk, while implementing numerous exploration targets to extend its 12-year-plus mine life. Management further anticipates producing 400,000 to 430,000 oz of gold this year, with the results of its West African strategic review to act as a catalyst in the current quarter, followed by the Sukari Life of Asset Phase 2 later in the year.
CELTF’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an overall B rating, which equates to Buy in our proprietary rating system. CELTF also has a B grade of B for Value, Momentum and Quality. It is ranked #4 of 43 stocks in the Miners – Gold industry.
In total, we rate CELTF on eight different levels. To see additional POWR Ratings for Growth, Stability and Sentiment click here.
DRDGOLD Limited (DRD)
DRD is a South Africa-based gold mining company that is engaged in the surface gold tailings retreatment business. The company explores for, extracts, processes and smelts gold, but primarily recovers gold from surface tailings in the Witwatersrand basin in Gauteng province. DRD operates two segments–Ergo Mining Proprietary Limited (Ergo) and Far West Gold Recoveries (FWGR).
DRDO has been working on a definitive feasibility study and planning for Phase 2 of FWGR, its surface gold retreatment operation and treating old slime dams in the West Rand goldfields. As such, an amended design for the regional TSF was submitted for approval to the Department of Water and Sanitation in November 2020. No subsequent action in connection with the approval sought has been reported so far.
During the first six months of its fiscal year (ended December 31, 2020), DRD’s revenue climbed 41% year-over-year to R2.98 billion ($220 million), driven by the average Rand gold price rising 42% higher at R988,998/kg. DRD produced 2,984 kgs of gold during the second half of 2020, which was more than halfway towards achieving the upper range of its production guidance. Notably, 76% of output was contributed by the Ergo mine.
Overall gold production declined 2% during the period, due primarily to a 6% lower production of 715kg at Far West Gold Recoveries (FWGR). However, this was readily offset by the higher realized gold prices. In fact, throughput was 3% higher at 14.3Mt, contributed by the Ergo mine. DRD’s EPS for the period came in at R110.3, ($8.03) compared to the year-ago value of R47.2 ($3.44).
Shares of DRD closed yesterday’s trading session at $12.38, rising 36.5% over the past three months. In addition to making several leadership changes to its board, the company is projecting favorable operating performance in the current year. This is based on the design parameters of its Phase 2 in terms of volume throughput and deposition capacity that should position it strongly for regional consolidation. Furthermore, DRD is applying the same strategy to Ergo and is working to increase its deposition capacity also.
DRD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. DRD has a B grade for Momentum and Sentiment. The stock is ranked #6 in the Miners – Gold industry.
Beyond what I stated above, we also have given DRD grades for Growth, Value, Stability and Quality. Get all DRD’s ratings here.
Jaguar Mining Inc. (JAGGF)
JAGGF is a junior gold mining, development, and exploration company that operates in Brazil with three gold mining complexes and a large land package with significant upside exploration potential from mineral claims. The company’s principal operating assets are in the Iron Quadrangle, a prolific greenstone belt in the state of Minas Gerais and includes the Turmalina Gold Mine Complex and Caeté Mining Complex.
In March this year, JAGGF entered an agreement with Canada-based precious metals royalty and streaming company, Metalla Royalty & Streaming Limited (MTA), and completed the sale of its Net Smelter Return (NSR) royalty from gold production at the CentroGold Project located in Brazil to for a total consideration of up to $18 million.
JAGGF generated $31.7 million in revenues during the first quarter (ended March 31, 2021), rising 3% year-over-year. Its average realized gold price during the quarter was $1,793/oz, 20% higher than the same period last year. JAGGF produced 18,160 oz of gold during the quarter, while the company sold 17,677 oz of gold incurring an all-in sustaining cost $1,296 per ounce of gold sold. Its EPS for the quarter came in at $0.08, surging 300% from the year-ago value of $0.02.
JAGGF yesterday released updated, in-mine diamond drilling results completed at its Turmalina Gold Mine and Pilar Gold Mine, both located in Minas Gerais. The results confirmed the expansion of JAGGF’s consolidated mineral resource and mineral reserve growth potential. In fact, shares of JAGGF have returned more than 105% over the past year to close yesterday’s trading session at $5.60.
It is no surprise that JAGGF has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. JAGGF also has an A grade for Value and Quality. The stock is ranked #1 in the Miners – Gold industry.
Click here to see the additional POWR Ratings for JAGGF (Growth, Momentum, Stability and Sentiment).
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CELTF shares were unchanged in premarket trading Thursday. Year-to-date, CELTF has gained 2.22%, versus a 12.55% rise in the benchmark S&P 500 index during the same period.
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.