Gold is a crisis asset. Uncertainty in the global economy results in investors buying gold as it is considered as the most secure investment option. This makes gold into a safe haven. Gold prices have soared since late April as the pandemic wreaked havoc in global markets. Every time a stimulus is unveiled by the government, gold prices have surged due the possibility of inflation going up.
Higher gold prices increase profitability of gold stocks as their margins go up. This has resulted in most gold stocks being valued higher than they were prior to the crisis, so much so that stock price charts closely resemble the chart of the commodity.
With talks of more stimulus expected in the USA, and the uncertainty around the elections, we expect gold prices to surge higher as we enter the tail end of the year.
Australian gold stocks have always been popular among investors due to the large gold reserves found in the country and below are a few ASX gold stocks that we hold in our portfolio:
Saracen Mineral Holdings (ASX: SAR)
The Perth based gold mining firm operates 3 mines in the Kalgoorlie region of Western Australia – The Carosue Dam Operation (CDO), The Thunderbox Operation (TBO), and Super Pit. The firm owns 100% interest in CDO and TBO, while Super Pit is operated with 50% interest. These high quality assets make Saracen one of top ASX gold stocks.
Saracen has had a good performance in FY2020. Both TBO and CDO have seen increases in production volumes and the addition of the Super Pit has further boosted the year’s performance. The firm’s very capable management team is aggressive in its growth strategy and are taking full advantage of high gold prices. The guidance numbers also complement the aggressive growth strategy of the firm as it targets increase in production volumes and reserves in FY2021.
Revenue and Earnings growth has been exceptional with 93% and 104% increases from FY2019, respectively. The financial health of the firm is a sign of strength as assets exceed liabilities and credit default risk is low. The capital structure consists of 78.2% equity and 21.8% debt – further enhancing its financial health.
The latest news to come out of Saracen is the merger between the firm and Northern Star (ASX: NST). The news broke out on the 6th of October 2020 as Northern Star and Saracen agreed on a $16 billion merger. The stock surged 9.58% on the back of the announcement as investor moods were high for the potential the future holds.
Evolution Mining Limited (ASX: EVN)
Evolution Mining Limited operates five 100% owned gold mines – Cowal in New South Wales, Mt Carlton and Mt Rawdon in Queensland, Mungari in Western Australia, and Red Lake in Ontario, Canada. Along with gold, EVN also explores for silver and copper deposits. It remains one of Australia’s largest low cost gold producers.
EVN reported a 29% growth in revenues in FY2020. The higher gold price boosting revenues and earnings. Cowal underground mine and the Red Lake transformation project is set to boost performances in the next 3 years.
The firm holds enough cash to manage any short-term debt obligations. The long-term financial health if the firm is secure, while the capital structure shows 80% equity – another sign of strength. EVN paid a fully franked dividend of 16 cents per share in FY2020, a 68% increase from FY2019.
EVN is a gold stock with solid past performance, high growth potential for the future, and quality assets – making it one of the best Australian gold stocks to hold on to.
Regis Resources Limited (ASX: RRL)
Regis Resources in our opinion has been one of the best gold stocks to buy in 2020. Regis operates in Western Australia and New South Wales via 2 projects – Duketon and McPhillamys. The Duketon Project has 3 operational mines, while McPhillamys Gold Project was acquired in 2012.
RRL is a consistent performer. The firm reported growth in earnings and profits in FY2020. The firm maintained an EBITDA margin of 53% due to the soaring gold prices. The firm has been on a rising growth trend for the past 6 years as its assets have performed magnificently well.
The current gold levels of the firm are 7.7Moz in resources and 3.6Moz in reserves. RRL management team comes with bags of experience. The firm is known to be one of the low-cost gold producers in the world. The guidance set by Regis shows the company is looking to take advantage of the high gold prices as it has allocated $60m as growth capital for FY2021.
The short-term and long-term financial health of the firm is strong. Regis is capitalised 95.7% by equity and just 4.3% by debt – a sign of strength and flexibility during uncertain times.
Regis has shown fast growth, and momentum for most of 2020. The stock presents good upside potential and has a high chance of fetching some good returns.
ASX is home to gold stocks with high growth forecasts. The commodity’s bull run is expected in the near future amid economic uncertainty and we believe this is a good time to add gold stocks to your portfolio. Our equity research reports cover the above ASX gold stocks and some others in further detail – assisting you to pick the best Australian gold stocks for your portfolio.
