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Gold prices and inflation often share a positive correlation, meaning that as inflation increases, gold prices generally rise as well. This is because gold is frequently sought after as a hedge against currency devaluation. Recently, despite inflation showing signs of easing alongside a cooling job market, the likelihood of a rate cut by the Federal Reserve has increased. This raises the question: Does gold still perform well in an environment where inflation is cooling?
The short answer is yes, as evidenced by gold's recent record highs. Gold typically performs well in low-interest-rate environments, which further enhances its reputation as a safe-haven asset. Additionally, significant central bank purchasing and ongoing geopolitical tensions continue to support the positive outlook for gold. December gold futures, which are the most actively traded contract, have increased by 18% on a year-to-date basis. Furthermore, global gold ETFs saw their highest monthly inflows in July, amounting to $3.7 billion, the most since April 2022. With anticipated Federal Reserve rate cuts likely to support higher gold prices, here are three dividend-paying companies from the mining industry that could benefit from this trend.
Newmont Mining
Established in 1921, Newmont Mining is one of the largest gold producers globally, with operations spanning North America, South America, Africa, and Australia. The company also produces silver and other byproducts, with a current market capitalization of $59.3 billion.
Newmont's stock (NYSE:NEM) has risen by 25.3% year-to-date and offers a dividend yield of 1.94%, based on its quarterly dividend of $0.25 per share. The company's results for the second quarter exceeded expectations in terms of both revenue and earnings. Sales increased by 64.1% from the previous year, reaching $4.4 billion, driven by a 19.4% year-over-year increase in the average realized gold price of $2,347 per ounce. Additionally, there were annual increases in the average realized prices for copper, zinc, lead, and silver. The company's earnings per share (EPS) for the second quarter jumped by 118.2% to $0.72, surpassing the consensus estimate of $0.62.
Gold production increased to 1.61 million tonnes from 1.24 million tonnes, with cash flow from operations rising to $1.66 billion from $763 million in the same period last year. The company ended the quarter with a cash balance of $2.6 billion, reflecting strong liquidity. Newmont also divested some of its non-core assets, selling its stream facility and offtake agreement on the Fruta del Norte Mine for $330 million. The company received $197 million in contingent payments from Batu Hijau and sold its deferred payment rights related to this Indonesian asset for $153 million in cash. These moves align with Newmont's focus on core operations while raising cash for capital deployment or debt reduction.
Agnico-Eagle Mines
Founded in 1957, Agnico-Eagle Mines (NYSE:AEM) is a leading gold producer with operations in Canada, Mexico, Finland, and Sweden. The company also produces silver as a byproduct and has a market capitalization of $41.0 billion.
Agnico-Eagle Mines' stock has surged by 50.8% year-to-date and offers a dividend yield of 1.95%, paid quarterly at a rate of $0.40 per share. The company reported strong second-quarter results, with revenue up by 20.9% from the previous year to $2.08 billion, driven by an 18.6% year-over-year increase in the average realized gold price of $2,342 per ounce. Adjusted EPS rose by 72.6% to $1.07, exceeding the consensus estimate of $0.92.
Gold production increased by 2.6% over the prior year to 895,838 ounces, while gold sales rose by 1.8% to 874,230 ounces. Cash flow from operations remained robust at $961.4 million, up 33.1% from the previous year. Although the company's short-term debt increased to $740 million from $100 million at the start of the year, its cash balance more than doubled to $921.9 million, indicating a strong liquidity position.
Agnico-Eagle Mines revised its production estimates for the Hope Bay project, increasing the expected annual output to 350,000-400,000 ounces from an earlier forecast of 250,000-300,000 ounces. The company's Upper Beaver project in Canada is expected to have a mine life of 13 years, with an average annual production of approximately 210,000 ounces of gold and 3,500 tonnes of copper. Additionally, Agnico-Eagle has gained exposure to the Oijarvi project in Finland, which hosts a resource of approximately 2.7 million tonnes and 2.02 million ounces of silver.
Barrick Gold
Founded in 1983, Barrick Gold (NYSE:GOLD) is among the largest gold mining companies globally, focusing on the exploration, development, production, and sale of gold and copper. The company operates several mines across North America, South America, Africa, and Australia, with a market capitalization of $35.7 billion.
Barrick Gold's stock has risen by approximately 14% year-to-date and pays a quarterly dividend of $0.10, translating to an annual yield of 1.96%. The company reported strong second-quarter results, with revenue up 12% year-over-year to $3.16 billion, driven by an average realized gold price of $2,344 per ounce, compared to $1,972 per ounce the previous year. Adjusted EPS rose by 72% from the prior year to $0.32, surpassing the consensus estimate of $0.27.
Although gold production decreased by 6% from the previous year to 948,000 ounces, cash flow from operations increased by 39.3% to $1.16 billion. Free cash flow saw a significant increase to $340 million from $63 million in the same period last year. Barrick Gold holds a 61.5% stake in Nevada Gold Mines, the world's largest gold-producing mine project, with the remaining ownership belonging to Newmont Group. The company has also demonstrated its ability to consistently replenish its reserves, achieving reserve replacement for the third consecutive year in 2023. Over the past five years, Barrick's gold reserves have grown by approximately 8%.
