Strategist John Teves from UBS believes that gold can touch $2,200 an ounce by the end of next year.
Similarly, analysts talk about gold touching $2,400 an ounce in 2024. It’s difficult to predict exact levels, but it’s clear that the outlook for gold and other precious metals is bullish. Blue-chip stocks in the gold mining space can be value creators.
Further, multiple rate cuts next year is the biggest reason to be bullish on precious metals. Of course, factors of geopolitical tensions and continued buying of gold by central banks is likely to support the rally.
Notably, gold has been in an extended period of consolidation around $1,800 to $2,000 an ounce. With strong support levels from a technical perspective, a 15% to 20% breakout rally seems likely. Therefore, let’s consider exposure to blue-chip as well as penny precious metal stocks for robust returns.
Hecla Mining (HL)
Hecla Mining (NYSE:HL) is the largest U.S. silver miner, with the company also having exposure to gold assets. After trending lower by 20% for year to date (YTD), HL stock looks attractive. Additionally, healthy dividend growth may be coming in 2024.
The current year has been disappointing for Hecla Mining with the suspension of mining activities at Lucky Friday. However, HL has guided for resumption of mining at Lucky Friday in early 2024. Further, the Keno Hill asset is likely to be a major contributor to production growth through next year.
Further, if associated with higher gold and silver prices, Hecla is positioned for robust growth in revenue and free cash flows. Also, the company’s all-in-sustaining-cost for silver mining is lower compared to peers. With potential dividend growth, HL stock will be positioned for re-rating.
Iamgold (IAG)
Iamgold (NYSE:IAG) is another penny precious metal stock that looks deeply undervalued. IAG is an easy double from current levels of $2.1 if gold trades around $2,200 to $2,400 an ounce in 2024.
First, Iamgold has a strong balance sheet profile. As of September 2023, the company reported a liquidity buffer of $1 billion. So, this provides ample flexibility for organic and acquisition driven growth. Recently, Iamgold acquired Vanstar Resources for a consideration of $31 million.
Secondly, the Cote gold project is 90.6% complete. With production from this asset commencing near year, Iamgold is positioned for robust production and cash flow upside. For Q3 of 2023, Iamgold reported operating cash flow of $37.5 million. So, given the upside in gold and production ramp-up, investors can expect annualized OCF of at least $200 million for 2024.
Orla Mining (ORLA)
Orla Mining (NYSE:ORLA) stock has witnessed a substantial correction of 35% YTD. However, the results have been encouraging. Certain investors remain bullish on a reversal for this penny precious metal stock. Also, the onset that Newmont Corporation (NYSE:NEM) holds 13.8% stake in Orla.
For Q3 2023, Orla Mining reported gold production of 32,425 ounces. Additionally, the company has revised the production outlook for 2023 on the upside to 110,000 to 120,000 ounces.
However, Orla has an all-in-sustaining-cost of $743 an ounce. In fact, in revenue of $60.3 million for Q3, the company generated free cash flow of $18.8 million.
Assuming production trends higher and gold upside sustains, Orla Mining will be positioned for annual FCF of approximately $100 million. This will provide Orla with the flexibility to invest in exploration projects or pursue acquisitions. Therefore, ORLA stock is attractive and poised for a sharp reversal rally.
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.
