Analysts Look at Benefits of Buying Gold Stocks Or Physical Gold
June 23, 2021 at 08:45 AM EDT
Palm Beach, FL – June 23, 2021 – According to some gold professionals there are many benefits to buying gold stocks instead of the physical metal. The main draw is that these companies offer the potential of leveraged upside to the price of gold. When prices rise, these companies can increase their gold production and grow their total sales. Gold stocks are the publicly trading stocks of companies and funds focused on gold. The industry mainly comprises mining companies that dig up and sell gold. But it also includes gold streaming and royalty companies, which act as middlemen in the sector. These companies pay an up-front fee to a mining company in exchange for a percentage of the mine’s revenue or the right to purchase its future production at a fixed cost. Finally, gold investors can also purchase shares in gold-focused exchange-traded funds (ETF), which hold either physical gold or shares of mining companies. Buying and selling physical gold in any form — bars, coins, medals, or even jewelry — is the most direct way to participate in the gold market. However, buying physical gold also means you have to pay relatively high commissions due to the market being less liquid than the stock market and also bear additional costs and risks related to the transportation, storage, and insurance of the precious metal. An article in Motley Fool spoke to this issue saying: “Gold stocks – especially gold streaming stocks offer the highest return potential among gold investment options because, in theory, a company’s share price should eventually reflect its operational and financial growth. That means that shares of a fundamentally strong gold company that’s maximizing returns on invested capital and is committed to shareholders can earn strong returns for investors, even in low-price environments for gold. Of course, investing in stocks is itself risky, and gold stocks are no different. Active stocks in the mining markets this week include Golden Independence Mining Corp. (OTCQB: GIDMF) (CSE: IGLD), Barrick Gold Corporation (NYSE: GOLD) (TSX: ABX), Hecla Mining Company (NYSE: HL), Kirkland Lake Gold Ltd. (NYSE:KL) (TSX:KL), Franco-Nevada Corporation (NYSE: FNV) (TSX: FNV).
Gold exchange-traded funds (ETFs) are a more convenient and cost-effective means of investing in gold stocks, especially for those who lack the inclination or time to research specific gold companies. A gold ETF offers broad exposure to the sector by holding either shares of gold companies or physical gold. Because of the availability of ETFs, you don’t have to be a stock-picking guru to participate in the gold industry’s upside.” It concluded: “Given these differences, investors need to weigh the rewards against potential risks to choose the right gold stock or ETF for their situation.”
Golden Independence Mining Corp. (CSE: IGLD.CN) (OTCQB:GIDMF) BREAKING NEWS: GOLDEN INDEPENDENCE INTERSECTS 1.89 G/T GOLD AND 6.9 G/T SILVER OVER 50 FEET AT INDEPENDENCE PROJECT – Golden Independence (the “Company”) is pleased to announce results from the initial six drill holes of the recently completed 12 hole 7,425 foot Phase II RC drill program at the Independence project, south of Battle Mountain, Nevada. Six holes of the Phase II RC drill program targeted the main oxide gold zone and six holes targeted the intrusive gold target. Results for two holes from the main oxide zone and four holes from the intrusive gold target include:
“The highlight results above are the first two of six holes testing the main oxide zone in the area of AGEI-32 from the Phase I RC drill program. As expected, we are seeing good long intervals in excess of 0.5 g/t gold with shorter +1 gram intervals within it: 195 feet of 0.66 g/t gold containing a shorter 50 foot interval of 1.89 g/t gold and 150 feet of 0.68 g/t gold containing a shorter 45 foot interval of 1.52 g/t gold.” commented Golden Independence President Tim Henneberry.
“Golden Independence continues to intercept both plus half-gram plus gold and higher-grade material in the main oxide gold zone.” stated Golden Independence CEO Christos Doulis. “The results of all 12 holes from our recently completed Phase II RC drill program will be incorporated into a resource update as part of an upcoming PEA on the 537,300 ounces of gold in the Measured and Indicated categories and 147,300 ounces of gold in the Inferred category that make up the near-surface portion of our recently released maiden NI 43-101 compliant Mineral Resource Estimate. ” he continued. CONTINUED… Read this entire release for the Golden Independence news at: https://www.financialnewsmedia.com/news-igld/
Other recent developments in the mining markets include:
Barrick Gold Corporation (NYSE:GOLD) (TSX:ABX) recently confirmed that the per share amount of the first $250 million tranche of a return of capital distribution totaling $750 million to be paid on June 15, 2021 will be $0.1405117, based on the number of issued and outstanding shares as of the May 28, 2021 record date.
This follows the approval by shareholders at Barrick’s Annual and Special Meeting on May 4, 2021, of the total $750 million return of capital distribution. The remaining distribution of $500 million is expected to be effected in two equal tranches to shareholders of record on dates to be determined in August and November 2021.
On June 15, 2021, Barrick will also pay a previously declared dividend of $0.09 per share for the first quarter of 2021 to shareholders of record at the close of business on May 28, 2021. “Our overall return to shareholders for 2021 is one of the highest in the industry and marks another milestone in our journey towards our objective of building the world’s most valued gold company,” said senior executive vice-president and chief financial officer Graham Shuttleworth.
Kirkland Lake Gold Ltd. (NYSE:KL) (TSX:KL) recently announced that it has entered into an automatic share purchase plan (the “ASPP”) with its designated broker to facilitate repurchases of Kirkland Lake Gold’s common shares (the “Shares”) under its previously announced normal course issuer bid (“NCIB”). The ASPP is intended to allow for the purchase of Shares under the NCIB at times when the Company may not ordinarily be permitted to purchase its shares due to regulatory restrictions and self-imposed blackout periods.
Under the current terms of the NCIB previously announced which commenced June 9, 2021, Kirkland Lake Gold can purchase up to 26,694,051 Shares until the expiry of the NCIB on June 8, 2022.
Pursuant to the ASPP, the designated broker may purchase up to 5,000,000 Shares until the expiry of the NCIB on June 8, 2022. Such purchases will be determined by the broker at its sole discretion based on the purchasing parameters set out by the Company in accordance with the rules of the Toronto Stock Exchange (the “TSX”), applicable securities laws and the terms of the ASPP. The ASPP has been pre-cleared by the TSX and shall be implemented effective today, June 21, 2021. The ASPP will terminate on the earlier of the date on which: (i) the NCIB expires; and (ii) the Company terminates the ASPP in accordance with its terms.
Franco-Nevada Corporation (NYSE: FNV) (TSX: FNV) had previously acquired 14.7% of Vale’s outstanding Participating Debentures (“Royalty Debentures”) from the Brazilian Development Bank (“BNDES”) and the Government of Brazil for $538M. The Royalty Debentures provide holders with life of mine net sales royalties on Vale’s Northern and Southeastern Iron Ore Systems and on certain copper and gold operations (together, the “Royalty”). This transaction provides royalty exposure to some of the world’s largest and most profitable integrated iron ore mines with reserve weighted mine lives of 30 years and potential for multiple additional decades through reserve growth. The Royalty covers a total of 15.6 thousand square kilometers of mineral properties held by Vale in Brazil, also offering exposure to a number of development properties. The Royalty currently generates an annualized pre-tax cash yield of 10% based on acquisition cost and the most recent semi-annual Royalty Debenture payment. The amount of production capacity subject to the Royalty is expected to grow by approximately +60% by 2026 which would imply an 8% yield on investment at that time, assuming consensus long term iron ore prices.
Franco-Nevada has also accumulated a 9.9% equity investment in Labrador Iron Ore Royalty Corporation (“LIORC”). The position was acquired over a number of years for a total investment of C$93M, representing an average cost of C$14.72/share, versus recent trading of approximately C$38/share. An investment in LIORC functions as a flow through of income from its royalty and equity interest in the Iron Ore Company of Canada’s(“IOC”) Carol Lake mine operated by Rio Tinto in Labrador. Reserves at Carol Lake are sufficient to sustain mining for 24 years and resources indicate potential for further multi-decade extensions. Since starting to accumulate the position, Franco-Nevada has recouped more than 95% of its original investment (inclusive of Q1 2021 dividends declared and to be paid April 26, 2021). Our LIORC investment is generating an annualized cash yield of 27% based on acquisition cost and the most recent dividend payment. Franco-Nevada has no intention of increasing the position at current prices.
Hecla Mining Company (NYSE: HL) recently released its Q1 2021 exploration results. Highlights Were: Midas exploration at Green Racer Sinter intercepted high-grade gold and silver mineralization over a 1,000-foot strike length and a 1,250-foot dip extent in the Sinter Vein, as well as two new mineralized footwall structures. Significant intercepts include more than 5 oz/ton gold over 13 feet estimated true width (see Table A for full results). All are open for expansion; Midas’ plan of operations amendment expands to allow greater access to multiple targets on the Green Racer Sinter and East Graben Corridor; and San Sebastian exploration drilling on the El Bronco Vein expanded mineralization over a strike length of 1,500 feet. While at the El Tigre Vein, vein textures indicate drilling was high in the epithermal system, warranting further deeper drilling.
“Our early exploration results, just two miles from the mine portal, validates our thesis that despite its long high-grade production history, there remains significant untouched potential at Midas,” said Phillips S. Baker, Jr., President and CEO. “The recent high-grade intercept grading 5.52 oz/ton gold and 8.9 oz/ton silver over 20.3 feet drilled (13.1 feet estimated true width) is one of the best exploration drillholes in North America in the past year.”
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