Even more remarkable is that this rally may still be in its infancy.
Why invest in gold now?
Precious metals such as gold have always served as a hedge against inflation, recession or any form of market volatility. In short, when the market begins to show signs of volatility, investors will turn to the perceived safety of precious metals.
That increase in demand drives up the price of those precious metals in the market, which in turn increases profit margins for miners. This is especially true for miners who are already active and have largely fixed operating costs.
In other words, these gains translate directly into increasing profit margins.
Looking back on this year, there is the perfect trifecta.
Inflation is still a topic that is being discussed. Interest rates are going down. Market volatility and geopolitical issues persist.
Together, that makes for a perfect backdrop for those looking for Canadian gold stocks to invest in now.
Here’s a look at two stocks for investors to consider that offer rising cash flows, better balance sheets and even growing dividends.
Barrick Mining
Barrick Mining (TSX:ABX) is one of the largest precious metals miners in the world. The company has a diversified portfolio of activities spanning several countries and continents.
Barrick is also diversified in terms of production. The miner not only produces gold, but also other metals. In fact, in the most recent quarter, Barrick announced the production of 829,000 ounces of gold and 55,000 tons of copper.
That helped the company generate a record $2.4 billion in operating cash flow and a whopping $1.5 billion in free cash flow.
Production in that quarter was 4% higher than in the previous period. It also prompted Barrick to increase its quarterly base dividend by 25% to $0.125, while also announcing a performance dividend of $0.05 per share.
For investors looking at Canadian gold stocks, Barrick is an option that’s hard to ignore.
Lundin Gold
While Barrick is the big heavyweight, based in Vancouver Lundin Gold (TSX:LUG) is a mid-tier, high-margin gold producer. Lundin manages an impressive portfolio of assets, including the world-class Fruta del Norte mine in Ecuador.
That mine represents one of the highest quality gold deposits currently in production in the world.
Lundin’s production numbers are also impressive.
In its most recent quarter, Lundin reported record net income of $208 million, or $0.86 per share. The miner reported all-in maintenance costs of $1,036 for the quarter, well below the average realized gold price of $3,634 per ounce.
For potential investors, that difference is enormous and crucial. The difference represents the cost of mining versus the cost of selling the metal produced. And given the gap between the two, Lundin is well positioned for growth even if gold prices fall.
Looking ahead, Lundin is one of the Canadian gold stocks that should be on every investor’s radar. The impressively high-performing assets in Lundin’s portfolio, combined with low operating costs, make this an excellent long-term option to consider.
Investing in Canadian gold stocks
Both Barrick and Lundin offer investors plenty of opportunities to participate in the current rally in Canadian gold stocks. Barrick’s stability and diverse, large-cap portfolio, and Lundin’s high-quality, high-margin assets provide a good mix for any investor.
In my opinion, a small position in one or both of these investments is justified as part of a larger, well-diversified portfolio.
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