Global shares and oil slid on Monday while safe-haven gold surged as the spread of the coronavirus outside China darkened the outlook for world growth with infections and deaths rising in South Korea, Italy and the Middle East.
Reports from Citi this week suggested that the firm believes higher gold prices are in store for investors. Market “jitters” could bring investors to put more money into safe-haven assets. Obviously, gold would be a potential way for investors to hedge risks to the downside. As all investors know, gold is the classic hedge against equity volatility and general fears about economic stability.
In the short-term, Citi increased its 6-12 month target on gold to $1,700 per ounce. In addition, it gave a 12-24 month outlook of $2,000/ounce.
Gold stocks has already started showing great momentum and will likely continue this week as well. Due to this impressive rally in the gold, it could be worthwhile for investors to have a look at Newmont Corporation (NYSE: NEM) and Brookmount Explorations, Inc. (OTC: BMXI).
Last week, Newmont Corporation (NYSE: NEM) surged to its highest in more than seven years following better than forecast Q4 results, as the assets it acquired last year from Goldcorp helped it nearly double adjusted profit to $410M.
Analyst Michael Jalonen recently said Newmont is making good on its capital return pledge after the company raised its dividend by 79% starting in April. Newmont also plans to boost its share buybacks by up to $1 billion. Jalonen said Newmont’s impressive project pipeline, robust free cash flow and solid balance sheet make it his top North American senior gold producer stock pick for 2020. Bank of America has a Buy rating and $52 price target for Newmont Corporation stock.
Brookmount Explorations Inc. (OTC: BMXI) currently owns and operates two gold production facilities in Northern Indonesia and is also in the process of reviewing acquisitions of additional operations in Indonesia and the Philippines. The Company’s existing operations comprise of two key sites:
The first facility is a 50 hectare reserve and onsite processing facility located in a high grade volcanic hosted sediment body in the district of Talawaan, adjacent to the airport at Manado, regional capital. This facility, which has been in operation for 4 years, comprises ball mills (ore crushers), 5 high capacity floatation tanks, tailing ponds and off site smelting operations. Ore is excavated from strategic locations on the property based on existing ore distribution data as well as onsite drill tests. Geologist estimates put remaining reserves at over 2 tonnes (70,000oz) or approx. $180mm at current gold prices.
The facility also processes ore from 3rd party mining operations on a contract basis contributing up to 35% of monthly revenue. The operation has been cash flow positive since the beginning of 2018 and generated revenue of over $3mm in the first 3 quarters of 2019, with net earnings in excess of $1.2mm.”
A second site west of Manado with 2 contiguous areas totalling approximately 17 HA of high grade volcanic hosted ore has also begun production Average ore grade of this property is in excess of 1.5g/tonne. In conjunction with its Taiwanese operating partner at this facility and at a cost of over $500k, the Company has recently completed construction of state of the art heap leaching facilities on this site, comprising a 25,000 tonne leach pad, together with associated infrastructure and has recently commenced processing operations at this site.