Gold Miners 2021 - Predictions, Highlights, Industry Outlook, Breakdowns

January 06, 2021 / Article Link

The gold industry is seeing a strong start of the new year capitalizing on the gold price rally fueled by COVID-19 pandemic induced safe-haven demand since mid 2020. However, progress on rollout of vaccines could rein in gold prices. For the time being, looming prospects of a dwindling supply and higher demand will eventually drive prices north, which bode well for gold-miners.

Mining stocks have registered handsome gains amid the uncertainty. Mid-tier and junior gold miners like Agnico Eagle Mines, B2Gold, Yamana Gold and Seabridge Gold are poised well backed by their strong balance sheets and efforts to lower costs.

The industry is currently dealing with depleting resources, declining supply in old mines and lack of new mines. Larger players are staying away from new development projects as they are inherently risky and capital intensive. So, it is reasonable to expect an eventual demand-supply imbalance that will drive gold prices. This is, of course, good news for the industry over the long haul.

The scarcity of new discoveries and depleting existing resources also mean that miners prefer to build up reserves through acquisitions rather than digging for new ones. Only companies that have the capital to fully fund new discoveries are at are inherently risky and capital intensive.

To this end, mid-tier and small gold miners are more versatile to procure the capital they need for new projects. They are also the ones to benefit the most from the rising gold prices as their gold stocks rally as well.

When looking for suitable mining stocks to invest in at the beginning of 2021, analysts point Seabridge Gold. The Toronto-based company engages in acquisition and exploration of gold properties located in North America. It strives to provide shareholders with exceptional leverage to a rising gold price. The company is advancing on its major gold projects, KSM and Courageous Lake. Its plans also include further exploration of the Iskut, Snowstorm and 3 Aces projects for selling or entering into joint venture arrangements with major mining companies.

It is worth mentioning that KSM is the world’s largest undeveloped project by gold resources. The recent acquisition of Snowfield is expected to increase KSM’s existing reserves and enhance the company’s mining stock. Seabridge is also debt free and its mining shares have appreciated 55.2% in the past years. It currently carries a Zacks Rank #2 (Buy).

The COVID-19 has dramatically changed existing business models and disrupted supply chains. Right now, investors in junior gold mining companies have a shot at serious profits because of the resilience of their operations and the continuous demand for the yellow metal.