US Stocks: Where are the "gold mining" opportunities? Barclays recommends these two gold mining stocks

According to the latest report from Barclays Bank, a banking giant, which was recently obtained by the Zhītōng Finance APP, the focus is on the North American mining industry, particularly gold miners in the United States.

In the report, Matthew Murphy, a five-star analyst at the bank, pointed out the negative factors facing the industry, including the downward trend in the eurozone economy, among others. However, he also added that US mining companies are expected to perform well with sustained support from gold demand.

"We expect that even in the case of a slight deterioration in commodity prices, most of the companies we cover will show slightly better performance in the second quarter. With the continued slowdown in the economy, our view on gold is more positive than copper," wrote Murphy.

In terms of individual stocks, Murphy sees the potential for double-digit gains in the following two stocks.

Newmont Mining

Newmont Mining (NEM.US), one of the world's largest gold producers, is one of the gold mining stocks favored by Barclays. The company has a market value of $34 billion and, although it also produces silver, copper, lead, and zinc, its main business is gold mining. Headquartered in Colorado, Newmont Mining is active in North and South America, as well as in Australia and the West African country of Ghana.

Although Newmont Mining was the world's largest gold producer in 2022, according to the company's recently reported second-quarter financial results for 2023, its gold production declined by 17% compared to the same period last year. The main reason for this decline was the temporary suspension of operations at the Penasquito gold mine in Mexico due to a workers' strike. In addition, the Cerro Negro gold mine in Argentina and the Akyem gold mine in Ghana also underperformed, resulting in lower-than-expected performance.

As a result, the company's revenue and profit for the second quarter fell short of expectations. Revenue declined by 12.4% YoY to $2.68 billion, $220 million lower than the general expectation. Adjusted earnings per share were $0.33, significantly lower than the expected $0.47.

The stock fell 6% on the trading day following the release of the earnings report, marking the largest single-day decline since July 2022.

Nevertheless, Newmont Mining is still actively expanding its business. To this end, the company reached an agreement in May of this year to acquire Australia's Newcrest Mining Limited for approximately $19.5 billion. Newmont Mining will acquire 100% of Newcrest's shares, which will give it control over Newcrest's asset portfolio. The transaction is expected to be completed in the fourth quarter, and the merged entity will have the highest concentration of tier-one mining assets globally.

Looking ahead, Murphy from Barclays is impressed by Newmont Mining's intrinsic potential and writes in the company's outlook, "We predict that over the next five years, Newmont Mining's average gold production will increase by approximately 40%, and copper production will increase by approximately 300%. We expect that nearly two-thirds of gold production will come from 10 tier-one assets (before considering any portfolio rationalization). We expect cash costs and all-in sustaining costs (AISC) to increase slightly after the transaction (approximately 2-3%), reaching approximately $740 per ounce and approximately $1,015 per ounce, respectively. However, as Newmont Mining implements comprehensive optimization work to unlock its full potential, cash costs and AISC will increase over time." "

Murphy maintains a "buy" rating for the stock with a target price of $61, indicating a potential 41% increase in the next year.

Wall Street is generally optimistic about Newman Mining. The stock is covered by a total of 11 analysts, with 8 rating it as a buy, 2 as a hold, and 1 as a sell, resulting in a consensus rating of moderate buy. The average target price is $56.84, suggesting a 31% upside potential in the next 12 months.

Eagle Mining

Barclays' second choice in the gold mining sector is Eagle Mining (AEM.US) based in Toronto. The company has been in operation since 1957 and controls a series of mining projects in Canada, Mexico, Finland, and Australia, as well as high-quality development projects in the United States and Colombia. Eagle Mining produced over 3.1 million ounces of gold in 2022, with a production cost of $843 per ounce.

Production cost is an important indicator for investors to consider, especially compared to the trading price of gold. At the end of last year, the trading price of gold was close to $1800 per ounce. Currently, gold is priced at around $1961 per ounce in the commodity market.

Eagle Mining will announce its second-quarter performance on Wednesday, July 26th. However, its current strong financial condition can be understood from its first-quarter performance. The company's first-quarter production data remained strong, producing 812,813 ounces of gold with a total cash cost of $832 per ounce and an AISC of $1125 per ounce. Based on this, the company achieved a total revenue of $1.51 billion, exceeding expectations by $21.6 million. Earnings per share reached $0.58, exceeding expectations by $0.09.

The company's operating cash flow reached $1.30 per share, and it announced a dividend payout of 40% for the first quarter. Eagle Mining currently has a dividend yield of 3.2% and has been regularly paying dividends since 1983.

Looking ahead, Eagle Mining expects its annual gold production to reach 3.24 to 3.44 million ounces, with AISC between $1140 and $1190 per ounce.

Analyst Matt Murphy sees several avenues for sustained profitability in his research on the stock, primarily from the company's mining operations in Canada. Murphy mentioned Eagle Mining, saying, "While we view the current Canadian Malartic and Odyssey plans as the base case, we have considered nearby lower-grade open-pit mines and further (regional) higher-grade underground resource expansion scenarios. Our preliminary estimate is that these scenarios could increase asset net value by approximately $1-3/sh (3-9%) with our current assumptions, and the lower-grade open-pit mine actually provides more upside potential. We can also see a scenario where the life of the East Gouldie deep mine is extended; however, due to the extended life until 2042, along with exploration costs, the current value may be reduced."

" Murphy rates the stock as "Buy" with a target price of $61, indicating a potential upside of 17% in the coming months.

The stock has received unanimous strong buy ratings from Wall Street analysts. The average target price is $64.63, suggesting a potential increase of 23% in the next year.