It’s been a breakout year for gold, with a rally of 18% year-to-date. Silver has also surged in the recent past with, year-to-date returns outperforming that of gold. Clearly, sentiments are positive for precious metals. Holding physical gold or silver is one way to benefit from the potential bull market. Another way is to consider precious metal stocks to buy that are still trading at attractive levels.
However, the first point to discuss is the outlook for precious metals in the next 12 to 18 months. In my view, gold and silver will likely remain in an uptrend during this period. The biggest factor is the possibility of multiple rate cuts in the given time horizon. Expansionary policies will likely translate into a weaker dollar, and precious metals will benefit.
I must add that factors of geopolitical tensions will support the precious metal rally. It’s worth noting that central banks have been buying gold as a part of their reserve diversification. With a positive outlook, let’s discuss three precious metal stocks to buy.
Newmont (NEM)
Newmont (NYSE:NEM) stock has remained sideways in the last 12 months even as gold trends higher. I see this consolidation as a golden opportunity to accumulate. A forward P/E of 13 looks attractive for this 2.25% dividend yield stock. If gold trades above $2,500 an ounce and sustains around those levels, NEM stock is poised to double before the end of 2025.
As of 2023, Newmont reported 128 million ounces of gold reserves and 155 million ounces of resources. With a portfolio of 10 tier-one assets, the company expects profitable gold production into the 2040s. Further, with an investment-grade balance sheet and strong liquidity buffer, the company is positioned to make aggressive capital investments.
With gold at $2,400 an ounce, Newmont is also positioned for robust cash flows. For Q1 2024, the company reported an operating cash flow of $1.1 billion (excluding one-off item of stamp duty tax payment). The annual OCF is, therefore, likely to be in the range of $4.5 billion to $5 billion. I expect healthy dividend growth besides value creation through share repurchase.
Barrick Gold (GOLD)
Barrick Gold (NYSE:GOLD) is yet another gold mining stock that has remained sideways in the last 12 months. However, GOLD stock has been in an uptrend in the recent past, and I expect the positive momentum to sustain. Besides attractive valuations, GOLD stock offers a dividend yield of 2.24%, and I expect healthy dividend growth on the back of higher realized prices.
Specific to the business, Barrick expects a sustained upside in gold equivalent production to seven million ounces by 2030. That would imply a 30% upside in production from current levels. Therefore, the company is positioned to benefit from higher realized prices coupled with production growth.
Another point to note is that the all-in-sustaining cost for gold production in 2024 is likely at $1,388 an ounce. For next year, the AISC is expected to decline to $1,259 an ounce. If gold trades at $2,500 an ounce, the company will be positioned for robust free cash flows. That will provide ample headroom for aggressive capital investments.
Hecla Mining (HL)
I would consider exposure to Hecla Mining (NYSE:HL) stock as the company is the largest silver miner in the United States. HL stock is already trending higher on the back of a sharp rally in silver. I expect the positive momentum to sustain on the back of company-specific growth catalysts.
As an overview, Hecla Mining has a high-quality reserve base with reserves life of more than 10 years. Total silver reserves at the end of 2023 were 238 million ounces.
An important point to note is that Hecla reported a silver production of 14.3 million ounces last year. Hecla is expecting to boost production to 20 million ounces by 2026. The next few years will likely be good in terms of production growth.
The upside in production comes at the right time, and Hecla will benefit from higher realized prices. That will translate into robust cash flows and healthy dividend growth.
At the same time, the company’s financial flexibility will increase. This is important to mention, as Hecla has pursued acquisitions to boost growth. The most recent being that of ATAC Resources in Canada, which has added a 700-square-mile land package.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.