The gold price has rallied in 2018, rising from under $1,250 per ounce in mid-December to trade at nearly $1,350 as of Monday (February 19).
Most experts have a positive outlook for the price this year, and analysts at Raymond James recently released a list of their current gold stock picks.
The analysts expect gold production to be flat to down slightly year-on-year in 2018, with production growth coming from new mines operated by miners such as New Gold (NYSEAMERICAN:NGD), Yamana Gold (TSX:YRI) and Atlantic Gold (TSXV:AGB).
Raymond James notes that despite its modest expectations for production, balance sheets have improved for many companies and they are starting to focus on reinvestment.
“We expect a key theme emerging from year-end reporting and 2018 guidance will be increased exploration budgets as companies increasingly focus on development pipelines and areas of production growth,” the analysts noted.
Read on to learn which five gold stocks the analysts are looking at and why they have potential. Raymond James notes that “investors should consider this report as only a single factor in making their investment decision,” and recommends further consultation with an investment advisor.
1. Agnico Eagle Mines (TSX:AEM,NYSE:AEM)
Current price: C$54.12; 2018 YTD: -7.07 percent
Agnico Eagle Mines increased its gold production forecast for 2018 last week, raising it from 1.5 million ounces to 1.53 million ounces. The firm expects to reach first production from its Meliadine gold project in Nunavut in Q2 2019, which it says is one quarter ahead of schedule.
The company’s board has also approved an expansion under which it will add a 1,044-meter deep shaft at its Kittila mine in Finland, as well as raise mill throughput by 25 percent, to 2 million tonnes per year. Agnico says the expansion will be phased in over four years and is expected to increase gold production by 50,000 to 70,000 ounces per year at a reduced operating cost beginning in 2021.
2. Newmont Mining (NYSE:NEM)
Current price: US$39.11; 2018 YTD: +4.24 percent
Newmont Mining has operations in Africa, North America, South America and Australia, and it made Fortune’s 2018 World’s Most Admired Companies list. In December, the company improved its gold production guidance for 2018 to betweeb 4.9 and 5.4 million ounces.
“Our five-year guidance reflects steady performance, portfolio and balance sheet improvements, and gives us the means and confidence to target a dividend increase of at least 50 percent in 2018,” said company President and CEO Gary J. Goldberg, an American Mining Hall of Fame inductee.
3. Alamos Gold (TSX:AGI,NYSE:AGI)
Current price: C$7.04, 2018 YTD: -15.49 percent
Alamos Gold reported record annual gold production of 429,400 ounces in 2017, a 10-percent increase from 2016. In January, it increased its guidance by 16 percent over 2017 to between 480,000 and 520,000 ounces of gold. The increase in production reflects the inclusion of the Ontario-based Island gold mine, which Alamos remains focused on expanding through additional exploration.
Alamos has raised its global exploration budget by 50 percent from 2017, to $36 million, with 80 percent of that amount focused on Island and its Mulatos mine in Mexico. The firm has three operating mines in North America, as well as two in Mexico, in addition to a number of development-stage projects in Canada, Turkey, Mexico and the US.
4. Detour Gold (TSX:DGC)
Current price: C$13.11; 2018 YTD: -11.3 percent
Detour Gold expects its 2018 production to be between 600,000 and 650,000 ounces of gold, an increase of 9 percent from 2017. The company operates the Detour Lake mine in Ontario and plans to drill key targets at its Detour Lake and Burntbush properties with an exploration budget of $10 million this year.
Company President and CEO Paul Martin said the firm generated $115 million of free cashflow in 2017, and used $88 million to repay debt. “Management continues to evaluate the options for improving its production and cash flow profile by bringing ounces forward from 2021 and 2022. This assessment is expected to be completed in the second quarter of 2018,” Martin added.
5. Alacer Gold (TSX:ASR)
Current price: C$2.24; 2018 YTD: +0.45 percent
Alacer Gold is planning for the start of its new sulfide plant, which is over 75 percent complete with dry commissioning underway; it is on schedule to achieve first gold pour by Q3 2018. Rod Antal, Alacer’s president and CEO, said the project will be delivered under budget as the capital cost estimate “progressively decreases,” going from $744 million to $705 million.
Antal added that the company met its production guidance for 2017, producing 168,163 ounces and surpassing its all-in sustaining cost guidance at $686 per ounce.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.