Best gold and silver stocks

How to compare gold and silver stocks

Gold miners all do the same thing – explore, develop and produce gold and other precious metals – but there are numerous ways to compare them and find opportunities.

• Location: The location of its mines is key for two reasons. The first is the regulatory and political environment of the country it operates in and the second is the impact it will have in terms of foreign exchange. For example, a mine in Russia has to operate very differently to one in the US, and is more exposed to the impact of forex as its gold sales and results will have to be converted.
• Gold production, prices and all-in sustaining costs: These determine the margin that a miner makes on each ounce of gold it produces. The amount of gold produced and average prices will determine revenue, while the all-in sustaining cost (AISC) determines how much profit it makes on each ounce it sells. The AISC is particularly important for measuring profitability.
• Type of project: There are many ways to mine or extract gold, and the method used will play a big role when it comes to costs. For example, an underground mine tends to offer higher grades of gold but are much more costly to develop and operate than an open pit.
• Ore reserves: The amount of gold left to be mined is integral when evaluating the future prospects of a miner. They must ensure they have enough reserves to keep producing for years to come and avoid the risk of running out. A miner with a large reserve will be able to demand a higher value than one with a small one. Reserves represent gold-bearing ore that is known to exist but yet to be mined.
• Mineral resources: One step further are mineral resources, which are reserves that are known to be able to be extracted economically. These hold a higher weight than reserves and are closely watched by investors.
• Grades: Reserves and resources will also be graded. For example, a miner could boast grades of 5.0 grams of gold per tonne of ore. The higher the grade the better as more gold can be mined from less ore, which is quicker, cheaper and easier for a miner. Gold grades can vary wildly.
• Dividends: Gold producers are known for paying dividends and these can be analysed in traditional ways, such as the dividend yield. Most miners set themselves a payout ratio against earnings or cash flow to give investors an idea of its policy, and this means they can move in line with results year-by-year. It is worth noting what currency the company pays its dividend in as this may have to be converted into the investor’s desired currency.

You can better understand how the mining industry works by reading our extensive piece on the lifecycle of a mine and step-by-step guide to mining commodities.

How to buy and trade gold and silver stocks

It is important to remember that investing in or trading a gold mining stock is not the same as trading gold as a physical asset. While movements in gold prices do translate to the share prices of the stocks that mine the stuff, many other variables impact the value of a gold mining stock.

Read more on how to trade precious metals like gold and silver

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Top gold and silver stocks to watch

Let’s have a look at some of the best gold and silver stocks from around the world.

Top UK gold and silver stocks

There are many gold and silver mining stocks listed in London, ranging from some of the largest players in the world to small-cap and junior firms. Below is a list of the largest stocks.

1. Polymetal International
2. Fresnillo
3. Centamin
4. Petropavlovsk
5. Hochschild Mining

Polymetal International

Polymetal International is a gold and silver producer operating predominantly in Russia but also in Kazakhstan. It has nine operational mines that have delivered consistent growth over the last five years and are currently producing around 1.6 million ounces of gold equivalent each year, alongside a number of future growth projects.

Production is expected to remain broadly flat in 2020, while the AISC is set to edge slightly higher than the $866 per ounce reported in 2019. It has a policy to pay out 50% of underlying earnings in dividends, which have grown steadily over the years, and it is also known for making special distributions.

Fresnillo

Fresnillo is the leading producer of gold and silver in Mexico, with seven mines producing around 61.8 million ounces of silver, 922,500 ounces of gold and significant volumes of lead and zinc in 2019. It also has three mines in development and six earlier-stage exploration projects. Fresnillo’s unique point is its silver production. Although gold and silver prices are correlated, there are occasions when they become uncoupled and this can make Fresnillo an interesting stock for traders.

Production dropped and failed to meet expectations in 2019 due to lower than expected ore grades, severely impacting profits. As Fresnillo has a policy to payout 33% to 50% of post-tax profit in dividends, the performance meant a much lower payout for investors last year. However, its primary focus is on improving the efficiency and profitability of its existing projects, which means production will ‘stabilise in 2020 and start increasing during 2021’ as a result.

Centamin

Centamin mines gold from its flagship Sukari gold mine in Egypt that opened in 2009 and has become a behemoth that produces around 500,000 ounces per year. With 7.3 million ounces in reserves, the mine has the potential to run at its current output for at least 15 years and the company hopes that can be expanded further. It is exploring for further resources in the Ivory Coast and Burkina Faso.

Production from Sukari was 2% higher year-on-year in 2019 at 480,529 ounces and that is set to grow to 510,000 to 540,000 ounces in 2020. A number of changes were made to the senior management last year, including the appointment of a new chief executive officer (CEO) Martin Horgan. He co-founded Toro Gold which developed the Mako Gold mine in Senegal before being sold-off to Resolute Mining in August 2019. The new CEO has already outlined his ambition to wean Centamin off its reliance on Sukari to become a ‘multi-asset gold producer’.

Petropavlovsk

Petropavlovsk is another firm digging for gold in Russia, with a particular focus on the Amur region. It has three gold mines named Pioneer, Albyn and Malomir, as well as the Pressure Oxidation facility (POX Hub) that can treat its refractory gold reserves and that of third parties. The POX Hub is a distinguishing feature for the company as it is only one of two facilities in the whole of Russia. Having opened in 2018, the POX Hub is not expected to reach full capacity until 2021.

As Petropavlovsk deals with third-party gold, it is better to concentrate on sales numbers rather than production. Total gold sales were up 39% in 2019 to 514,000 ounces thanks to the start-up of the POX Hub. It has already started to double capacity at the facility and said output in 2020 should rise to 620,000 to 720,000 ounces. The company was recently added to the FTSE 250 and revealed it is considering dual-listing in Moscow.

Hochschild Mining

Hochschild Mining has producing mines in Peru and Argentina that recorded output of 477,400 ounces of gold equivalent in 2019, with two of its mines hitting all-time production records. It also has ‘advanced and growth’ projects in Peru and Chile. Due to the considerable volume of silver it produces, Hochschild deals in silver equivalent ounces rather than gold equivalent ounces.

Production in 2019 was better than expected and totalled 38.7 million silver equivalent ounces, ahead of its 37 million ounce target. However, output is expected to dip to 36 million ounces this year and costs are forecast to rise.

Top international gold and silver stocks

There are even larger gold and silver mining stocks outside of the UK. Gold stocks are common on most major stock exchanges but countries like the US, Canada and Australia are among the most popular listing destinations for miners around the world.

1. Newmont
2. Barrick Gold
3. Newcrest Mining
4. AngloGold Ashanti
5. Kinross Gold
6. Gold Fields
7. Agnico Eagle Mines
8. Kirkland Lake Gold
9. Northern Star Resources

Newmont

Newmont is the largest publicly-listed gold miner in the world, having produced 6.3 million ounces in 2019. It is one of the few that can truly claim to have a global presence with mines in Africa, Australia and North and South America. It is also diverse by producing significant volumes of silver, copper, zinc and lead. Production was set to stay broadly flat in 2020 but guidance has been withdrawn because of the coronavirus. However, it still hopes to produce between 6.2 million to 6.7 million per year over the period 2021 to 2024 – with a focus on lowering costs (the AISC in 2019 was $966 per ounce) rather than increasing output. It has already said it will increase its dividend, which is paid quarterly, in 2020, and payouts could be bolstered by the $1.4 billion in asset sales it hopes to make this year.

It recently said its gold reserves reached a new record high of over 100 million ounces at the end of 2019 – a staggering increase from just 65.4 million ounces a year earlier – after acquiring Goldcorp and forming a new joint venture with Barrick Gold called Nevada Gold Mines.

Barrick Gold

Barrick Gold is a large producer of both gold and copper from mines located in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia. It is aiming to produce between 4.6 million to five million ounces of gold in 2020 as well as 440 to 500 million pounds of copper.

Barrick Gold has been another miner to overhaul its board, including Mark Bristow, the founder of Randgold Resources, taking over as CEO after the two businesses merged in 2018. This has seen a new ten-year plan be launched that has put its North American assets at the core of the business, with the ambition of becoming the ‘world’s most valued gold company’. The joint venture with Newmont plays a big part in that, and Barrick is the controlling entity.

Newcrest Mining

Newcrest Mining has mines in Australia, Canada and Papua New Guinea. Its interim results covering the last six months of 2019 showed it produced 1.1 million ounces of gold at an AISC of just $880 per ounce. It is hoping to produce between 2.35 and 2.5 million ounces of gold over the full year.

Newcrest has a policy to payout 10% to 30% of free cashflow in dividends with a minimum payout of 15 cents per share.

AngloGold Ashanti

AngloGold Ashanti is headquartered in South Africa and has operations in Africa, South America and Australia. It produced 3.3 million ounces of gold in 2019 and also produces by-products like silver in Argentina and sulphuric acid in Brazil.

Its operational performance was strong last year and, alongside favourable pricing, this allowed the miner to lift its dividend, reduce debt and invest in its operations. Guidance for 2020 of 3.05 million to 3.3 million ounces suggested output would dip this year and it warned costs would rise – but the coronavirus means it has withdrawn that guidance and that the situation could be worse this year. It is worth noting that AngloGold Ashanti pays its dividends in South African Rand (ZAR), which are then translated to USD, so investors need to watch the currency pair carefully.

Kinross Gold

Kinross Gold is a Canadian-headquartered miner with operations in the US, Brazil, Chile, Ghana, Mauritania and Russia producing around 2.5 million ounces of gold equivalent per year. Over half of its output comes from the Americas and three mines alone account for 61%.

Kinross Gold has successfully met its production guidance for the last eight years and said output this year was set to dip to 2.4 million ounces while costs were to fall. But, although the miner has seen no impact from the coronavirus to date, it has still withdrawn that guidance. Still, production in 2021 will be higher than 2019 and stay around the 2.5 million ounce level in 2022, when it expects costs and capital expenditure to fall further.

Gold Fields

Gold Fields has nine producing mines in Australia, Peru, Chile, South Africa and across West Africa that produce around 2.2 million gold equivalent ounces each year as well as 31,200 tonnes of copper. Higher production and prices twinned with lower costs meant headline earnings soared in 2019.

It said the benefits of recent investments should continue to come through in 2020 and deliver a 5% rise in annual production and a 2% fall in the AISC. However, the coronavirus has impacted its operations and it has warned it could happen again in the future, but says it has enough liquidity to survive interruptions for a ‘considerable period of time’.

Agnico Eagle Mines

Agnico Eagle Mines is a gold miner operating in Canada, Finland and Mexico, with a suite of exploration projects in each of those countries as well as the US and Sweden. It produced 1.78 million ounces in 2019 after opening two new mines and expects that to rise significantly again in 2020. It was initially hoping to grow output by 18% by 2022 and said its quarterly dividend should follow suit.

However, the coronavirus is negatively impacting both output and costs and Agnico has said annual output in 2020 should be between 1.63 million to 1.73 million ounces, rather than the 1.875 million ounces it was originally targeting. Still, its ambition to produce 2.05 million ounces in 2021 and 2.1 million ounces in 2022 remains intact.

Kirkland Lake Gold

Kirkland Lake Gold produces around 1.5 million ounces of gold each year from five producing operations, underpinned by three core projects: the Macassa and Detour Lake mines in Canada and the Fosterville mine in Australia. Output hit an all-time high in the final three months of 2019 and then again in the first quarter of 2020, and that will be further boosted by the acquisition of Detour Gold that completed at the end of January. It had set guidance for output to stay broadly flat this year but has withdrawn it as a result of the coronavirus.

Still, the company is determined to stick to its recent plan to ‘enhance shareholder value’, including the repurchase of shares, a doubling of the quarterly dividend and asset sales.

Northern Star Resources

Northern Star Resources has slowly built up its production base through acquisitions over the past ten years, transforming from a one-mine outfit producing 100,000 ounces a year to a three-mine company with an annual output of around 840,500 ounces. All of its operations are in Australia apart from one in Alaska that it recently acquired to expand its geographical footprint.

It was aiming to produce 920,000 to 1.04 million ounces of gold in the year to the end of June 2020 but has withdrawn this after the coronavirus started impacting operations, with output 10% to 15% lower than expected in the first three months of 2020. Unlike most, it has not been able to maintain payouts during the current crisis after deferring its interim dividend announced in