With gold prices rising in recent months and market watchers expecting more upside ahead, now is a great time to scour for gold equities that could take advantage of the upswing in prices. In this article, we will take a closer look at AngloGold Ashanti (NYSE: AU) and Kirkland Lake Gold (KL.TO) to find out which one of the two is a better bet.
AngloGold is in a phase of transition right now as the company is looking to shed non-core assets in order to focus on its more profitable assets. As a result, the company’s production has been going downhill of late.
In 2017, AngloGold’s production came in at 3.75 million ounces of gold. This was followed by 3.4 million ounces of gold production last year. This year, AngloGold Ashanti anticipates production between 3.25 million and 3.45 million ounces of gold, which means that its output will decline slightly as compared to last year’s levels.
But there is an upside to the company’s decision of letting its non-core assets go in the form of an improving cost profile. AngloGold Ashanti’s all-in sustaining costs were down 7% in 2018 to $976 per ounce. This year, the company is expecting its all-in sustaining costs to fall between $935 to $995 per ounce, which means that the cost profile is about to get better in 2019.
As such, AngloGold investors can expect an improvement in the company’s cash margin per ounce of gold because of lower costs and an increase in the price of the yellow metal. This could eventually help the stock deliver upside as the year progresses.
Kirkland Lake Gold
Kirkland Lake is a fast-growing gold miner that aims to regularly hit nearly 1 million ounces in production from this year onward. Kirkland Lake’s 2018 output came in at just over 723,000 ounces, so the company has an ambitious outlook for the coming years.
But it won’t be surprising to see Kirkland Lake actually delivering this impressive growth thanks to its high-grade assets such as Fosterville. At the end of last year, the Fosterville mine held 2,720,000 ounces of mineral reserves at a grade of 31.0 grams/tonne of gold. This represents a massive improvement over the mine’s mineral reserves of 1,700,000 ounces at a grade of 23.1 grams/tonne of gold as at Dec. 31, 2017.
Thanks to such high grades, Kirkland Lake should be able to increase its production profitably in the coming years. The company is looking at all-in sustaining costs of $540 per ounce of gold sold for the year, which would be significantly lower than the year-ago period’s figure of $685 per ounce.
So, Kirkland Lake Gold investors can expect stronger profitability from the company because of its high-grade asset base and the rise in gold prices. The company’s execution has been solid so far and it looks well-placed to achieve its ambitious production target in the future.
Similarly, investors shouldn’t discount AngloGold either as it is a more established player that’s looking to get its house in order. More importantly, it would be doing the same in a profitable manner, so investors looking for stable gold equity should also consider AngloGold Ashanti along with the fast-growing Kirkland Lake.
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