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Summary
- New Covid-19 vaccine hopes from Pfizer sent gold and silver prices crashing.
- The gold futures dropped by over 5 per cent to US$1,854.40 and silver futures slid by 9.03 per cent to US$23.701.
- Investors are pulling out money from safe asset havens and getting back into aggressive markets.
New Covid-19 vaccine hopes from Pfizer has sent gold and silver prices crashing in the markets this week. As investors sold off safe assets and shifted investments to riskier assets, the gold futures dropped by over 5 per cent to US$1,854.40 on Monday, November 11. Silver futures declined by 9.03 per cent to US$23.701. Stocks of Canada’s biggest gold companies Barrick Gold Corporation (TSX:ABX) dropped over 12 per cent in the last two days while Kinross Gold Corporation (TSX:K) lost 11.5 per cent.
At the onset of the COVID-19 pandemic and resulting economic slowdown, investors resorted to panic buying of gold stocks, leading to massive rise in prices. Gold is considered a good portfolio diversifier during crisis times, since it has a low or negative correlation to other assets. The gold prices saw a record rise this year, crossing US$2000-mark during pandemic times as investors flocked to safe asset havens.
However, in March 2020, the demand for silver declined to outweigh decrease in supply, which led to sharp drop in silver prices by 12.6 per cent. As economies reopen, the production and industrial demand for silver is increasing.
A vaccine to fight the global pandemic is good news for most sectors, but not for gold stocks, which may now witness floundering prices. Investors are pulling out money from safe asset havens and getting back into aggressive markets.
Let us study the stock performance and financials of few gold and silver stocks on TSX: Barrick Gold Corporation (TSX: ABX), Kinross Gold Corporation (TSX:K), Fortuna Silver Mines Inc. (TSX:FVI), and Pan American Silver Corp. (TSX:PAAS)
Barrick Gold Corporation (TSX:ABX)
Current Stock Price: C$34.85
Toronto-based Barrick Gold Corporation is into gold exploration and development, operating mines in North and South America, Australia and Africa.
Barrick stock gained 44.48 per cent YTD. It currently has a dividend yield of 1.356 per cent.
In the third quarter of 2020, the company’s operating cash flow increased by 80 per cent quarter-on-quarter to US$1.9 billion and free cash flow by 151 per cent to US$1.3 billion. Total liquidity at the end of the quarter was US$7.7 billion, that includes a cash balance of US$4.7 billion. The company declared $0.09 quarterly dividend per share.
Current market capitalization of the firm is C$61.96 billion and earnings per share (EPS) of C$3.30. The stock holds P/E ratio of 11.40, P/B ratio of 2.142, P/CF ratio of 13.40 and debt to equity (D/E) ratio of 0.23. The stock has positive return on equity (ROE) and return on assets (ROA) at 13.56 per cent and 6.46 per cent, respectively.
Kinross Gold Corporation (TSX:K)
Current Stock Price: C$10.48
Canada-based Kinross Gold Corporation is one of the largest gold producers with 55.7 million ounces of silver reserves as of 2019-end. The company operates mines and is focused on Greenfield and brownfield exploration in North America, Russia and West Africa. The company uses the acquisition route to fuel expansion plans into new regions.
Current market capitalization of the company is C$13.18 billion and earnings per share is C$1.14. The stock up 70 per cent YTD. It holds P/E ratio of 10.00, P/B ratio of 1.732, P/CF ratio of 6.50.
The return on equity (RoE) and return on assets (RoA) of 20.46 per cent and 11.74 per cent, respectively. Quarterly dividend payout of US$0.03 is declared by the company with a dividend yield of 1.50 per cent.
For the third quarter of 2020 (period ended September 30) Kinross Gold Corporation reports capital expenditure of US$212.1 million. Its operating cash flow more than doubled to US$544.1 million in Q3 2020 and its reported net earnings quadrupled to US$240.7 million. The company’s cash and cash equivalents as of September 30, stood at US$933.5 million and total liquidity of US$2.5 billion.
Fortuna Silver Mines Inc. (TSX:FVI)
Current Stock Price: C$9.77
Canada-based Fortuna Silver Mines Inc is primarily engaged in the exploration, extraction and processing of silver, zinc and silver-gold products. The company reports 2.1 million ounces of silver produced and 12,791 ounces of gold in the third quarter of 2020. It will be declaring its financial results for the third quarter on November 12, 2020.
Current market capitalization of the company is C$1.79 billion and earnings per share (EPS) of C$0.01. The stock is bearish with 84.68 per cent gains YTD. The stock holds P/E ratio of 1,703.60, P/B ratio of 1.986, P/CF ratio of 25.70 and D/E ratio of 0.22. The stock has RoE of 0.17 per cent and RoA of 0.13 per cent.
In the second quarter of 2020 (period ended June 30) the company reported net loss of US$5.7 million in Q2 2020, as compared to net income of US$10.3 million in Q2 2019. The adjusted EBITDA of US$9.4 million and free cash flow from continuing operations of US$0.2 million. The sales declined from US$67.9 million in Q2 2019 to US$44.5 million in Q2 2020.
Pan American Silver Corp. (TSX:PAAS)
Current Stock Price: C$43.89
British Columbia based, Pan American Silver Corp is a mining and exploration company into the development of silver mines, and zinc, lead, copper, and gold.
The company earnings from mining operations in the third quarter of 2020 (period ended September 30) was US$124.6 million, and operating cash flow of US$292 million. The total revenue was US$300.4 million, net income was US$65.3 million. Net cash generated from operations was US$114.9 million.
During this quarter, the board of directors of the company increased the quarterly cash dividend from US$0.05 to US$0.07 per share, to total an approximate US$14.7 million in aggregate cash dividends per quarter. The stock has advanced by 42.68 per cent YTD.
Current market capitalization of the firm is US$9.22 billion. The stock holds P/E ratio of 139.70, P/B ratio of 2.882, P/CF ratio of 18.30 and D/E ratio of 0.05. The stock has RoE of 2.50 per cent and ROA of 1.81 per cent. The dividend yield is of 0.838 per cent.
