On Tuesday, gold closed at $1,558.35 per troy ounce on the London bullion market and at $1,556.65 per troy ounce on the Comex gold futures market, both up approximately 2% so far this year.
Gold outlook
Gold is projected to stay supportive throughout 2020, as there are several catalysts that are expected to work in its favor.
One is the low-yielding environment, because gold attracts investors who are looking for an alternative when bonds and other fixed-income securities perform poorly. Monetary authorities worldwide have been keeping interest rates low in order to stimulate economic expansion, so fixed-income securities don't offer much to investors at this time.
Further monetary easing policies will likely be enforced by the People's Bank of China to tackle the GDP growth deceleration resulting from the new coronavirus.
These factors all serve to push gold prices higher.
Alacer Gold
Investors who are interested in taking advantage of the next rally in the price of gold can do so by purchasing shares of Alacer Gold Corp. (ALIAF, Financial), a Denver, Colorado-based gold miner with mineral assets in central and eastern Turkey.
Over the last year, in which gold gained 20%, Alacer was one of the best performers in the industry, posting a 78% rise in its share prices and beating the VanEck Vectors Gold Miners exchange-traded funds (GDX, Financial) by 32%.
The U.S. miner will continue to post large returns in the quarters ahead as its production for full-year 2020 progresses towards the target of 400,000 ounces of gold. This will represent an improvement from the 391,231 ounces that the company produced from its 80% interest in the Copler mine in 2019.
The company sold 395,046 ounces of gold in 2019, which generated total gold sales proceedings of $552.5 million, adjusted attributable net profit of $109.9 million (or $0.37 per share) and operating cash flow of $255.2 million.
Alacer Gold is expected to generate higher free cash flow and see its financials gradually improve so that the company will be better positioned to unlock the growth potential that the Copler district offers to future exploration activities. The geographic area hosts proved and probable reserves of 3.7 million ounces of gold, grading 2.47 grams of metal per ton of ore.
The balance sheet had $233 million in cash on hand as of Dec. 31, 2019, which the company can use to fund activities to improve future oxide gold production at the Copler plant. The balance sheet also included $280 million in debt.
The stock doesn’t seem expensive, despite the significant upside in its share price, as it still trades below the 50-day simple moving average line. The share price of $4.35 at close on Tuesday is above the 100- and 200-day simple moving average lines.
The stock has a market cap of $1.29 billion, a price-book ratio of 1.57 versus the industry median of 1.5 and an enterprise value-EBITDA ratio of 7.13 versus the industry median of 8.82. The 52-week range is $2.30 to $5.97.
The stock has an overweight recommendation rating from Wall Street analysts with an average target price of $5.76 per share, which reflects a 34% upside.
Disclosure: I have no positions in any security mentioned.
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