My 3 Best North American Gold Miners Viewed As Long-Term Investments

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Includes: ABX, AEM, NEM
by: Fun Trading

Summary

When it comes to gold miners, I have been holding long-term, essentially three gold miners. Barrick Gold, Agnico Eagle Mines and Newmont Mining.

Some analysts are predicting a short-term rise to $1,400/ Oz. However, on the other hand, gold could also fall back to the low 1,100's/ Oz, as well.

I recommend a buy on any weakness, which should be seen as an opportunity to build-up a solid gold holdings with a 5-year long-term horizon.

The gold rally

Gold rallied to a two-year high, and is still holding its ground as central banks moved to adopt looser monetary policies, in order to encourage growth after the surprise created by the Brexit victory on June 23, that shook the market unexpectedly. Gold closed a $1,367 an ounce, last week.

The general idea is that the UK, EU and world economies could all experience a steep slowdown. This thinking has triggered a rally to traditional safe-haven assets, such as gold, whereas, we have also witnessed a rebound in usual negatively-correlated assets, such as equities and the dollar.

To counterbalance somewhat these factors is a growing sentiment that interest rates, which are traditionally the main counterweight to gold, are expected to stay "lower-for-longer," and could drop further eventually.

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The Bank of England, the Chinese Central bank and even the bank of Japan could cut interest rates to spur a sluggish demand.

In the meantime, the US Federal Reserve is standing still, while assessing the impact of the Brexit to the world economy. This concerted action often translates to a boost to the gold price in the past.

Given an accommodative interest rate policy and ongoing economic uncertainty, gold could appreciate further in the coming weeks? Some analysts are predicting a short-term rise to $1,400 an ounce.

However, on the other hand, gold could also fall back to the low 1,100's an ounce, as well. The market is extremely volatile at the moment.

Many might decide to invest in gold-mining shares, which tend to follow closely the gold price - and can even rise at a much faster rate.

When it comes to gold miners, I have been holding long-term, essentially three gold miners.

  • Barrick Gold (NYSE:ABX)
  • Agnico Eagle (NYSE:AEM)
  • Newmont Mining (NYSE:NEM)

These three companies are producing a large amount of gold and have a worldwide portfolio of producing mines and projects.

1 - Barrick Gold.

This Canadian company also produces Copper.

ABX Detail production K Oz Au 1Q'16 4Q'15 1Q'15 -

AISC

1Q'16

Gold Strike 249 352 207 962
Cortez 247 312 133 876
Pueblo Viejo - 60% 172 134 135 675
Lagunas Norte 100 119 178 461
Veladero 132 159 149 991
Turquoise R. - 75% 50 61 49 709
Porgera - 95% 53 66 118 1064
Kalgoorlie - 50% 89 83 59 1271
Acacia - 63.9% 122 129 116 1117
Other mines 60 204 244 999
Others 4 0 2 861
Total 1,278 1,619 1,390 881
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Barrick Gold Corp., Financial snapshot:

Q1 2016 Q4 2015 Q1 2015

Shares Outstanding billion

1.165 1.165 1.165
Revenue in $ Billion 1.930 2.238 2.245

Gold production

M Oz

1.280 1.619 1.390
Copper production in M lbs 103 138 118

AISC/gold

AISC/copper

$/Oz

706

1.97

733

2.15

927

Realized gold price

$/ Oz

1,181 1,106 1,219

Realized copper price spot

$/ lbs

2.18 2.16 2.55

Net income

In $ million

(83) (2,622) 57

Net earnings per share

in $

(0.07) (2.25) 0.05

Adjusted net income

In $ million

127 91 62

Adjusted net earnings per share

In $/sh

0.11 0.08 0.05

Operating cash flow (NYSE:FCF)

$ million

451(181) 698 316

Total debt

in $B

9.126 9.765 12.605
Dividend per share $ 0.02 0.02 0.05

Impairment charges

$ million

1 3,407 5

Adj. EBITDA

in $ million

697 722 1,285

Cash and Cash equivalent in $ Billion

2.323 2.455 2.258
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2 - Agnico Eagle Mines .

The Canadian company also produces Silver, Zinc and Copper. You can get the 1Q'16 results here.

AEM Detail Production Oz Au 1Q'16 4Q'15 1Q'15 - Cash-cost per ounce - By-product 1Q'16
La Ronde 75,337 73,161 58,893 529
Lapa 21,709 19,929 25,920 668
Goldex 32,340 27,646 29,250 506
MeadowBank 72,311 102,580 88,523 788
C. Malartic 50% 73,613 72,872 67,893 557
Kittila 48,127 44,279 44,654 726
Pinos Altos 48,117 44,496 50,106 343
Creston Mascotta 11,551 13,933 12,448 460
La India 28,231 23,432 26,523 360
411,336 422,328 404,210 573
AISC on a by-product basis 797
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AEM Quick Q1'16 - Financial Snapshot:

Q1'16 Q4'15 Q1'15

Revenues

in $ million

490.531 482.93 483.60

Gold Production

in Oz

411,336 422,328 404,210

Realized gold price

in $

1,192 1,094 1,202

Cash provided by operating activities

in $ million

145.704 140.75 143.455

Net income

$ million

27.79 (15.54) 28.74

EPS - basic

$

0.13 (0.07) 0.13

AISC (by-product)

$/Oz

797 813 804

Sustaining CapEx

(Incl. Exploration)

in $ million

100.7

161

90.4

-

71.9

150

Cash and Cash equivalent (including restricted cash and short term investment)

in $ million

167.96 131.6 172.1

Long-term Debt

in $ million

1,064.75 1,118.19 1,220.1

Dividend per share

In $/share

0.08 0.08 0.08

Shares outstanding

in million

219.68 217.84 214.6
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3 - Newmont Mining Corp.

NEM details production K Oz Au 1Q'16 4Q'15 1Q'15 -

AISC

1Q'16

Carlin 206 226 229
Phoenix 56 45 55
Twin Peaks 136 106 121
CC&V 58 50 0
Total North America 456 427 405 876
Yanacocha (51.35%) 92 108 127
La zancia - 18 -
Merian - - -
Total South America 92 126 127 1006
Boddington 189 204 184
Tanami 104 95 99
Waihi - 12 41
Kalgoorlie 93 82 62
Batu Hijau (48.5%) 93 84 52
Duketon - 16 -
Total Asia Pacific 479 493 438 682
Ahafo 88 80 101
Akyem 114 121 115
Total Africa 202 201 216 698
Grand Total 1,229 1,247 1,186
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NEM - quick look at the financials:

Q1 2016 Q4 2015 Q1 2015
Basics

Total Revenues

$ billion

2.032 1.816 1.972

Net Income from operations

$ million

78 254 175

EPS

$/share

0.15 (0.48) 0.35

Adjusted Net income

$ million

182 20 229

Adj. EPS

$/share

0.34 0.04 0.46

Consolidated cash flow from operations

$ million

524 275 628

Free cash flow ("FCF")

$ million

227 (185) 344

Cash and cash on hand

$ million

2,461 2,782 2,598

Dividend

$/share

0.025 0.025 0.025

Consolidated EBITDA

$ million

803 435 815

Net Debt

$ billion (less cash)

3,393 3,305 3,854

Debt and long-term liabilities

$ billion

5,854 6,087 6.581

Share Outstanding

in Million

529.16 - -
Mining highlights

Gold Production in M Oz

Including CC&V mine (8/15)

1,229 1.247 1.213
Copper Production in K Lbs 38 39 37

CAS Cost applicable to sale Gold$/oz

Including CC&V mine (8/15)

638 680 614
CAS Cost applicable to sale Copper$/lb 1.05 1.18 1.35
Gold price Oz 1,194 1,084 1,203
Copper price $/Lb 2.02 1.86 2.34

AISC $ gold/oz

Including CC&V mine (8/15)

828 999 849

Capital expenditures

$ billion

0.297 0.460 0.284
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Commentary:

I have established my "gold miners" portfolio based on these three North American companies, essentially. A quick look at the comparative 6-month graph shows a major change, due to the gold price strong momentum, as I explained above.

Data 1Q'16

Revenue

$ million

Cash

$ million

FCF

$ million

LT Debt

$ million

Dividend per $/Year Debt/equity

AISC/Au

$/Oz Au

Production in K Oz
Barrick Gold 1,930 2,323 181 8,94 0,08 2,54 706 1280
Agnico Eagle Mines 0,491 168 45 1,065 0,32 0,58 797 411
Newmont Mining 2,032 2,461 227 5,37 0,10 1,16 828 1229
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There are multiple reasons why I believe these three companies should be considered as your "gold miner" long-term portfolio.

  • Impressive project pipeline,
  • Financial strategy based on reducing LT debt aggressively,
  • Solid Dividend,
  • Safe business environment,
  • low gold AISC (by-product).

However, the gold price is paramount, and it is risky to initiate a position at the moment. We are now in an uncharted territory, and gold could either continue its up trend to $1,400-$1,500/Oz or eventually collapse under $1,200/ Oz for a short while. The recent solid US labor data report could eventually derail the gold momentum.

In a preview of the report, the ADP non-farm employment change for June at 172,000 was above the 158,000 consensus. Unemployment claims between June 24 and July 1 at 254,000 were below the expected 269,000 and the psychologically important 300,000 mark.

The market continues to benefit from safe-haven investment flows in the wake of the UK vote to exit the EU, which has led to heightened uncertainty over global economic prospects and increased risk aversion.

Investors continued to pile into the precious metal, with holdings in the exchange-traded funds tracked by FastMarkets increasing by 3.62 tonnes to a fresh yearly high of 2,079 tonnes.

Thus, short term, we could experience some profit-taking, and I already took profit off the table, last week.

All three stocks have an RSI at or above 70, and are considered overbought. However, I recommend a buy on any weakness, which should be seen as an opportunity to build-up a solid gold holdings with a 5-year long-term horizon.

Disclosure: I am/we are long ABX, AEM, NEM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.