Gold prices may have edged 7% higher so far this year, but several gold mining stocks have lagged behind the yellow metal by a substantial margin. Prudent investors should consider this mismatch an opportunity, especially if they can find fundamentally strong gold miners at attractive prices. Two such gold stocks worth looking at today are Goldcorp (NYSE:GG) and Newmont Mining Corp (NYSE:NEM).
At the same time, there's another side of the story that belongs to gold mining stocks that have kept pace with gold prices, thus proving to be great investment options for investors looking to leverage rising gold prices. Agnico Eagle Mines (NYSE:AEM) is a fine example.
As each of these three gold mining companies are at an interesting growth juncture, let's dive a little deeper to see why they deserve your attention today.
An all-rounder gold stock
Having lost almost 14% value in the past six months, Goldcorp shares are now trading at historically low price-to-cash flow (P/CFO) from operations of 12 times. At this price, the gold mining stock looks compelling for two reasons: Goldcorp's ongoing restructuring and recently unveiled growth plans.
Last year was an important year for Goldcorp, as it swung to profits -- versus a loss in 2015 -- and brought down its all-in sustaining costs (AISC) by 4% to $856 per ounce of gold. While Goldcorp still has a lot to do to catch up to rival Barrick Gold (NYSE:ABX) -- which slashed its AISC by 12% to $730 an ounce last year and is the lowest-cost publicly listed gold company today -- it has its plans in place, as evidenced by its 20-20-20 strategy. Under the plan, Goldcorp aims to increase both its gold reserves and production by 20% and bring down its AISC by 20% by 2021.
Overall, Goldcorp packs a punch with its rising production, declining costs, and one of the strongest balance sheets in the industry -- all of which are signs of an outperformer gold mining stock in the making.
An attractive gold proposition
Newmont Mining is barely in the green this year and is down about 17% in the past year. Because of this, the stock is trading at a pretty attractive P/CFO of 7 times. Newmont's wider-than-expected losses for FY 2016 reported earlier this year didn't go down well with investors, but the loss was largely a result of one-time impairment charges. The gold miner is otherwise on a strong growth trajectory.
In April, Newmont set the pace for a strong year when it reported 9% higher gold production for the first quarter as it commenced production at two mines. The miner is now advancing at least three projects to production phase, including a couple in Ghana and Tanami in Australia. With that, Newmont's gold production could rise 5% at the midpoint this year. In the longer run, Newmont should be able to double its mine life and cut down AISC by $100 per ounce in the coming five years.
Newmont also has a lot of leeway to invest in new projects, as it generated free cash flow worth $1.6 billion in the past 12 months and sports a comfortable debt-to-equity ratio of 40%. Meanwhile, management's recently adopted new dividend policy of paying a fixed dividend amount for different gold price points reflects its commitment toward shareholders. Putting it all together, Newmont's strong asset base and balance sheet to back its growth moves should likely reward investors in the long run.
This hot gold stock has a lot of steam left
After running up 9% year to date, there are enough reasons to believe that Agnico Eagle will maintain its momentum.
To start, Agnico pulled off a strong FY 2016 when it boosted production while trimming AISC and debt. In its fourth quarter, Agnico sprung a surprise when it struck gold at some deposits in two of its mines in Canada (Meliadine and Meadowbank) and reversed asset impairment charges on each. Both mines are expected to start production by the third quarter of 2019, driving Agnico's total gold production up to 2 million ounces by 2020. For perspective, the company produced 1.66 million ounces of gold last year.
Another impressive point about Agnico is that its reasonably low AISC of $824 per ounce in 2016 made it one of the lowest-cost gold producers in the industry. Meliadine and Meadowbank's low cost profile should further boost Agnico's margin and cash flows. As it is, Agnico has been free cash flow-positive in four out of the last five years, and that's no mean feat in the gold industry.
To top it all, Agnico rewarded shareholders with a 25% dividend increase last year and holds an incredible record of 35 years of dividend payments. Agnico's dividends have a lot of room for growth, which is yet another reason -- aside from the miner's growth prospects and low costs -- why the stock still looks compelling today at 12 times price-to-operating cash flow for investors with a long-term view.