Gold miners are one of the worst-performing sectors this year. However, inflation and government policy remain supportive. Taylor Dart explains why you should consider buying these miners trading at cheap valuations: SSR Mining (NASDAQ:SSRM), Newmont (NEM), and Hecla Mining (HL).It’s been a disappointing year thus far for the Gold Miners Index (GDX (NYSE:GDX)), with the ETF down more than 10% year-to-date and more than 30% from its new highs 12 months ago. Given the backdrop with high inflation readings and continued money printing, the returns are even more disappointing, causing many to abandon the sector altogether in search of greener pastures. Fortunately, despondence breeds opportunity, and any time that a sector is the most hated it’s been in years, it’s time to be open-minded about a potential bottom in the market and much better returns ahead. This bodes well for the GDX over the medium-term, especially because this correction in the ETF this different. Unlike past corrections, the average GDX constituent is in much better financial shape, is paying a dividend, and is generating significant free cash flow with gold prices above $1,600/oz. In this update, we’ll look at three names that stand out as buy-the-dip candidates, with these being SSR Mining (SSRM), Newmont (NEM), and Hecla Mining (HL).
(Source: TC2000.com)
Hecla Mining, SSR Mining, and Newmont all offer differing exposure to the metals space. One is a silver producer, the second is a silver & gold producer, and the latter is the largest gold producer in the world. However, they all share one key trait, industry-leading margins with some of the best cost profiles in the sector. In Newmont’s case, the company has recently seen inflationary pressures but continues to benefit from silver/copper by-products which are pulling its costs down. In Hecla’s case, the company is one of the highest-grade silver producers globally and the only large-scale silver producer operating out of solely Tier-1 jurisdictions. Finally, SSR Mining has recently beefed up its production profile, merging with Alacer Gold to create a diversified global producer with gold production in the United States and Canada, silver production in Argentina, and gold/copper production in Turkey. Based on recent estimates, these companies are all trading at less than 18x FY2022 earnings estimates despite 40% plus margins while also returning considerable value to shareholders through dividends and buybacks. Let’s take a closer look at each company below: