Gold Mining Stocks to Consider Buying Despite a Coup D’état in Mali

Paul Dykewicz

Gold mining stocks to consider buying despite a coup d’état in Mali during August have fallen in price to give investors a chance to purchase the shares at a discount compared to just a few weeks ago.

There are three gold mining stocks to consider buying despite the bloodless coup d’état in Mali that ousted President Ibrahim Boubacar Keita, who first won election in 2013 to fill a leadership void that followed a March 2012 coup in the country. Keita won re-election in 2018 to continue his regime but he proved unable to remedy a range of deep problems that includes 49% of Malians living in “extreme poverty,” based on data from the United States Agency for International Development (USAID).

Another big challenge is that 65 percent of Mali’s total land area is desert or semidesert, forcing most economic activity to stay confined to areas along the Niger River, according to the USAID, an independent U.S. government agency that is primarily responsible for administering civilian foreign aid and development assistance. The fourth coup d’état in Mali since 1960, when the country gained its independence from France, came on Aug. 18 when a group of armed military members surrounded Keita, setting the stage for his announcement on state television the next day that he was stepping down, dissolving the general assembly and his own government.

3 Gold Mining Stocks to Consider Buying Despite a Coup D’état

Three of the world’s top 12 gold mining stocks operate in Mali and are taking different paths after the ousting of Keita, who said during his Aug. 19 television address that he wanted to avoid any bloodshed. The mutinying soldiers, reportedly led by Col. Malick Diaw, deputy head of the country’s Kati military camp, and another commander, Gen. Sadio Camara, also detained the nation’s Prime Minister Boubou Cissé.

A spokesman for the soldiers who seized the country’s leaders, amid international condemnation of the coup, called for “a civil political transition leading to credible general elections.” Whoever ends up as the next president will face daunting problems that include a poor economy worsened by the COVID-19 pandemic, highway banditry, a jihadist insurgency, alleged corruption and growing public unrest. 

Keïta, who suffered a minor stroke in the days following the coup, left a hospital in Mali’s capital of Bamako after a two-day stay on Thursday, Sept. 3, to receive further treatment in the United Arab Emirates’ capital of Abu Dhabi. Representatives of the regional multi-nation Economic Community of West African States (Ecowas) and the United Nations (UN) held talks with the coup leaders to allow Keita to leave the country temporarily before an expected return to Mali within 15 days of his departure, according to the BBC.

3 Gold Mining Stocks to Consider Buying Despite Mali’s Coup

Toronto-based Barrick Gold Corporation (NYSE:GOLD) and AngloGold Ashanti Limited (NYSE:AU), of Johannesburg, South Africa, announced on Aug. 31 that they accepted an offer of $22-27 million in cash to sell their 80% controlling interest in Mali’s Morila mine to publicly traded Mali Lithium Limited (ASX:MLL), of Perth, Australia. With the Morila mine becoming a tailings retreatment operation since 2014 and winding down operations for final gold production in 2021, the transaction was not caused by the coup, according to Barrick Gold. 

The deal to sell the Morila mine, announced 10 days after the coup began on Aug. 18, provides the equal partnership between Barrick Gold and AngloGold Ashanti with an exit strategy that will remove the political risk inherent in operating a business in a country that is undergoing upheaval. The final sale price will depend on adjustments at the time the deal is closed, possibly as soon as October, and meeting conditions that include approval of the transaction by the government in Mali, which owns the other 20% of the Morila gold mine.

In contrast, Vancouver, Canada-based B2Gold Corp. (NYSE:BTG) reported on the day of the resignation that it will continue to operate its Fekola mine in Mali unimpeded as it monitors the nation’s “evolving political situation.” B2Gold’s Fekola mine is the second-largest gold producer in Mali behind Barrick Gold’s Loulo-Gounkoto mine. Barrick Gold, the largest miner in Mali, confirmed its Loulo-Gounkoto mine operation — consisting of 9% of the company’s expected production this year — remained unaffected by the coup. 

Gold Mining Stocks to Consider Buying Despite Coup in Africa

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Mali is Africa’s fourth-biggest gold miner and its output rose to 71.1 tons in 2019, while the government earned revenue of 403.6 billion CFA ($734,311,051) from gold mining companies. Mali uses the West African CFA franc as its currency, as do seven other independent states in West Africa: Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Niger, Senegal and Togo.

AngloGold Ashanti, B2Gold, Perth, Australia-based Resolute Mining, London’s Hummingbird Resources and Tortola, British Virgin Islands-based Cora Gold reported that their operations and staff were unaffected. However, the share prices of each one of their stocks, including the latter three that are traded on the London Stock Exchange, fell on Aug. 19 after the coup.

On that day, the bigger companies’ share prices held up better than the smaller ones, as Barrick Gold dipped 2.7%, AngloGold Ashanti slid 4%, B2Gold fell 8.8%, Resolute Mining dove 11.7%, Hummingbird dropped 9.4% and Cora Gold slipped 9.3%.

Assessing 3 Gold Mining Stocks to Consider Buying Despite a Coup

The gold mining companies are not directly comparable because they are taking divergent paths to extract value from their current mining assets in Mali. The financial stakes are high as silver and gold, respectively, have soared 48.51% and 27.02% this year through Sept. 8 to beat all of the U.S. stock market indexes. 

The precious metals have outperformed the NASDAQ Composite, jumping 20.90%; the S&P 500, rising 3.13%; and the Dow Jones Industrial Average, dipping 3.64%, also through Sept. 8. The strong rise of silver and gold followed $6-trillion-plus in COVID-19 aid from federal stimulus and Federal Reserve actions.

A recent pullback in gold and silver prices gives investors on the sidelines a second chance at purchasing precious metals, as well as their related stocks and funds.

Big Gold Mining Stocks to Consider Buying Despite Coup in Mali

Barrick Gold and AngloGold Ashanti, the world’s second- and third-largest gold mining companies, announced on Aug. 31 that the new ownership of the Morila mine would bring access to additional resources and a different approach about how the infrastructure could be used to extend the life of its mining operations. The sale would free Barrick Gold to focus on its strategy of discovering, developing, owning and operating Tier One assets, its officials said.

The Morila mine first produced gold in October 2000 and laid the foundation for Randgold Resources, the mine’s original owner, to develop into one of the world’s biggest precious metals mining companies. The large mine, once known as “Morila the Gorilla,” produced 6.9 million ounces of gold and paid more than $2.5 billion to its stakeholders through taxes and dividends.

Billionaire Warren Buffett announced in mid-August that his investment company Berkshire Hathaway (NYSE:BRK.B) had bought half a billion dollars of Barrick Gold stock. Buffett traditionally has avoided investing in gold, but the current investing climate is gaining the attention of people who previously looked elsewhere for profitable opportunities.

Chart courtesy of www.StockCharts.com

3 Gold Mining Stocks to Consider Buying Despite Coup and Risks

“This is a classic transaction that tells us a lot about where we are in the commodity cycle, said Hilary Kramer, host of a national radio program called Millionaire Maker” and head of the GameChangers and Value Authority advisory services.

Senior mining companies such as Barrick Gold dig for profits, Kramer said. The company is seasoned at pursuing big projects efficiently and, when needed, will put transformational initiatives together by collecting the right property package and allocating production to squeeze the best overall return out of every pound of ore, she added.

Sometimes that means selling the ore to someone eager to roll the dice, which is the role junior mining companies take, Kramer said.

Columnist and author Paul Dykewicz interviews money manager Hilary Kramer, whose premium advisory services include 2-Day TraderTurbo Trader, High Octane Trader and Inner Circle.

GOLD: 1 of 3 Gold Mining Stocks to Consider Buying Despite Coup

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Barrick Gold Corp. (NYSE:GOLD) recently produced a 38% share price gain and a 213% profit in call options in less than two months as a recommendation in the Fast Money Alert investment advisory service. Barrick Gold turned into a top performer in the trading service co-led by Mark Skousen, PhD., and stock picker Jim Woods, who also heads the Successful InvestingIntelligence Report and Bullseye Stock Trader advisory services. 

Paul Dykewicz interviews Jim Woods before the COVID-19 crisis.

Skousen, a Presidential fellow at Chapman University who also leads the Forecasts & Strategies investment newsletter, has been advocating the purchase of gold mining stocks since 2019. He cited the large deficit spending of countries around the world, easy-money policies to keep interest rates low and government stimulus programs as catalysts for gold and silver prices.

Barrick Gold has more than doubled in price in the past year, beating the SPDR Gold Shares fund (NYSE:GLD), among others, said Skousen, who also leads the Five Star Trader, Home Run Trader and TNT Trader advisory services. The company has $3.3 billion in cash as a financial cushion to back its $5.5 billion in long-term debt, added Skousen, whose accomplishments include receiving the inaugural Triple Crown in Economics in 2018 and ranking as one of the 20 most influential living economists.

The company further offers a dividend yield of 1.10%. Barrick Gold’s consensus forward price-to-earnings ratio is 24.33.

Mark Skousen, a descendant of Benjamin Franklin, meets with Paul Dykewicz.

In addition, Barrick Gold last year produced 5.5 million ounces of gold, achieved profit margins above 40% and earned $4 billion on revenues of $9.7 billion. Wall Street has taken notice, with TD Securities raising its rating of Barrick Gold to a “buy” on April 1, when the brokerage set a price target of $28. Another upgrade occurred on March 26 when Deutsche Bank initiated a “buy” on Barrick Gold and gave the stock a price target of $25. GOLD already has topped both price targets in just months.

AngloGold Is a Gold Mining Stock to Consider Buying Despite Coup

AngloGold Ashanti, a recommendation in Skousen’s Five Star Trader advisory service, has more than one dozen properties in Africa, North and South America and Australia. The company sold its last gold mine in South Africa to Harmony Gold (NYSE:HMY) earlier this year and now has no operations in South Africa.

Like Mali, South Africa has been politically unstable. In 1970, South Africa was the top gold producer in the world by a wide margin. South Africa now is just the world’s eighth-biggest producer of gold. Since AngloGold combined with Goldfields in 2004, it has expanded its gold-producing properties well beyond South Africa.

With rising gold and silver prices, as well as improved ways to reduce costs, AngloGold’s profit margins now exceed 10%. Its revenues rose 26% in the past year to reach $3.9 billion, while its earnings skyrocketed 287% to $619 million. The company has $1.3 billion in cash, with only $2.9 billion in long-term debt.

Chart courtesy of www.StockCharts.com

Value-Priced Gold Mining Stock to Consider Buying Despite Coup

AngloGold sells “more cheaply” than its rivals Barrick Gold and Newmont Gold (NYSE:NEM), since it is headquartered in South Africa, Skousen said. The stock now is selling for an estimated 12 times earnings for 2020 and has a price/earnings-to-growth (PEG) ratio of 0.54. Anything less than 1 is considered excellent, added Skousen, who also heads the TNT Trader and Home Run Trader advisory services.

The company offers a modest dividend yield of 0.32%. AngloGold’s consensus forward price-to-earnings ratio is 10.27, less than half Barrick Gold’s ratio, offering investors a better value.

AngloGold mines have weathered the COVID-19 crisis and are increasing profits and cash flow. On Sept. 1, Christine Ramon, who had been the company’s chief financial officer, succeeded Kelvin Dushnisky as the chief executive officer.

B2Gold Is a Gold Mining Stock to Consider Buying Despite Coup

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Interest in gold is fueled by the most aggressive monetary and fiscal policies since 2008, Skousen said. In his Forecasts & Strategies investment newsletter, he is recommending B2Gold Corp. a mid-tier Canadian gold mining company.

The stock briefly topped $7 a share before it pulled back after the political coup in Mali. Despite its share price slipping recently after the coup, B2Gold officials said the company’s operations at its Fekola mine are continuing normally and the Malian government’s 20% stake in the operation gives it a financial interest in preserving operations at the mine and the safety of employees.

B2Gold offers a dividend yield of 2.48%. Its consensus forward price-to-earnings ratio is 13.26, nearly half of Barrick Gold’s ratio and just above the one of AngloGold Ashanti.

Chart courtesy of www.StockCharts.com

3 Gold Mining Stocks to Consider Buying Despite Coup Add Volatility

Investors can profit from rising precious metals prices by purchasing shares in mining companies, said Bob Carlson, chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. But beware that the share prices of mining companies are “far more volatile” than the value of gold and silver prices themselves, he added.

Carlson, who also leads the Retirement Watch advisory service, said investors should remember that mining company shares are affected by reasons other than the price of precious metals. Such variables include a company’s debt level, management skill, labor issues and COVID-19 risks, he added.

Pension fund Chairman Bob Carlson answers questions from Paul Dykewicz in an interview before social distancing became the norm after the outbreak of COVID-19.

Even though gold prices and mining stocks have slipped recently, the situation should reverse soon, said Rich Checkan, president and chief operating officer of Asset Strategies International, a full-service tangible asset dealer in Rockville, Maryland.

Rich Checkan, president, Asset Strategies International

The global COVID-19 pandemic’s huge human toll includes 27,477,869 cases and 896,127 deaths globally, along with 6,326,696 cases and 189,639 deaths in the United States, with Mali reporting 2,882 cases and 271 deaths, as of Sept. 8. America has amassed the most cases and deaths by far of any country in the world, including China, where COVID-19 originated. 

Gold mining stocks to consider buying despite the coup d’état in Mali have the potential to produce outsized returns compared to the U.S. market indexes in the months ahead. But the political instability in Mali adds heightened risk to the gold mining companies operating there.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others.

 

 

 

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