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The Street
The Street
Dan Weil

Here's What Morningstar Thinks of Top Gold Stocks

With gold prices topping $2,000 an ounce, approaching the 2020 record peak, you might be wondering if there are any gold stocks worth buying.

If so, have a look at this. In light of the price surge, Morningstar has recommenced coverage of four major gold-miner stocks.

All of them received a no-moat rating from Morningstar analysts, which means they see no durable competitive advantages for the companies. They view two of them as undervalued and two as fairly valued.

Newmont (NEM)

Morningstar analyst John Mills puts fair value for the stock at $54. It closed Friday at $47.60.

“Newmont is the world’s largest gold miner, with a portfolio reflecting two major deals in recent years,” he wrote in a commentary.

“First, it acquired fellow gold producer Goldcorp…. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

Also, “it combined its crown jewel Nevada assets with Barrick Gold's in a joint venture called Nevada Gold Mines,” Mills said. Barrick is the operator, reducing costs given the proximity of mines owned by the venture. Newmont owns 38.5% of the partnership.

Barrick Gold (GOLD)

Mills puts fair value for the stock at $21. It closed Friday at $19.05.

“Barrick Gold is the world’s second largest gold miner by production,” he noted. “Its large portfolio of mines is a result of the 2019 acquisition of Randgold” and the joint venture with Newmont cited above.

“Around half of Barrick’s production is from locales with higher sovereign risk,” Mills said. “However, the company has a track record of working with local governments to ensure mines are generally run to western environmental standards.”

And it “returns wealth to local communities via jobs and procurement, on top of taxes and royalties,” he said.

Agnico Eagle Mines (AEM)

Mills puts fair value for the stock at $53. It closed Friday at $56.25.

“Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia,” he said. “That reflects the company’s focus on lower-risk jurisdictions.”

Its five cornerstone assets accounted for around two-thirds of the company’s production in 2022.

“While Agnico’s portfolio has some low-cost mines, … these are more than offset by its remaining, higher-cost mines,” Mills said. “The company’s average all-in sustaining [gold] cost of roughly $1,100 per ounce in 2022 places Agnico around the middle of the second quartile of the gold-cost curve.”

Kinross Gold (KGC)

Mills puts fair value for the stock at $5.20. It closed Friday at $4.96.

Kinross has production split roughly 70% in the Americas and 30% in West Africa. “Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the … gold it produced in 2022,” Mills said.

“Both mines are in the bottom half of the gold-cost curve. But we don’t consider them moat-worthy due to remaining mine lives of about a decade.”

Those mines are “more than offset by Kinross’ remaining higher-cost mines,” Mills said. Overall, the company sits around the 55th percentile of the gold-cost curve. 

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