5 Best Gold Stocks in Canada 2022: Hedge Your Portfolio

Gold has an almost mythical aura surrounding it. As an investor, you might be interested in gold for a number of reasons

I admire gold for its ability to be a hedge when the economy is weak. In 2020, when the economy got ravaged by the pandemic, gold reached an all-time high price of $2,064 a troy ounce. 

But instead of investing in the actual metal, I prefer the liquidity of gold stocks. If you are looking for the best gold stocks in Canada, this article may give you some contenders.

Five Best Gold Stocks In Canada

Best Gold Stocks In Canada infographic

There are several ways and metrics an investor can use to analyze the stock and identify whether or not those stocks are a good fit for their portfolio. 

Based on what an investor’s investing style is, they may be interested in long-term holdings, value-picking (buying when stocks are very cheap), dividend stocks, or growth stocks.  Some investors prefer to analyze stocks on their fundamentals, while others prefer technical analysis.

Every type of investor might see different gold stocks differently. I’ve tried to create a list of stocks that would rank well on most metrics and would be a valuable addition to most investors’ portfolios (no matter the type). 

Before we discuss the stocks, there are a few terms you might want to know about. A few different types of gold companies are:

  1. Mining: Gold companies that develop mines, extract gold and sell it at the current market price.
  2. Royalty: These companies give money to gold mining companies to fund and run their operation. In return, they get a percentage of the revenue the mine and mining company generates.
  3. Streaming (Not the Netflix kind!): Streaming companies also give money to gold mining companies for creating and running their mines. In return, they get to buy the gold that comes out of the mines at a lower price (instead of the current market price). 

1. Franco Nevada Corp Stock

franco nevada logo

Ticker: FNV
Type of gold invested: Royalty, Streaming 
Market Cap: $33.21 billion (Dec 2021)

Franco-Nevada is a Toronto-Based company that owns royalty and streams in gold mining. The company started out in 1983 as a gold exploration company. It was acquired by US-Based Newmont Corporation – the largest gold company in the world, in 2002. In 2007, it started trading on TSX as an independent company. It’s one of the largest companies in its sector. 

While the company does delve into royalties and streaming from other sectors too, about 80% of its revenue comes from precious metals, most prominently, gold. By 2020, the company had royalties and streaming agreements in 297 mining assets in three stages of development, i.e., Producing, advanced, and exploration. 

It’s one of the best gold stocks in Canada because 1) It’s a dividend aristocrat that has been increasing its dividends for over a decade. 2) It’s a relatively stable stock and performs well even when the economy is strong. 3) It has decent capital appreciation potential.

Since its inception, the company and the stock have been outperforming the commodity (gold), and most other gold equities are trading on the TSX. It has a solid balance sheet, mostly because it has very few liabilities and a wealth of assets.

The assets that the company has invested in are also geographically well-distributed. Most of its revenue-generating assets are in Latin America (39%), the US (23%), and Canada (21%), and the rest are in Africa and Australia. 

2. Barrick Gold Corp Stock

Barrick Gold logo

Ticker: ABX
Type of gold invested: Mining 
Market Cap: $42.26 billion (Dec 2021)

Barrick Gold is one of the two largest gold companies trading on TSX (by market cap). It’s a mining company that produces gold and electric-gold (Copper). The company was founded in 1983 by Peter Munk. The company has the distinction of being bought by Warren Buffett, one of the most renowned investors in history, as well as one of the most avid gold-haters. Still, Berkshire Hathaway invested a substantial amount in this golden company and became the eleventh-largest shareholder.

The company has mining operations in 13 countries in North and South America, Africa, Papua New Guinea, and Saudi Arabia, and 16 operating sites. The company wholly owns eight of them and has a substantial stake in the rest. Six of the mines the company runs are Tier one, which means they produced 500,000+ ounces a year for at least ten years. In 2019, Barrick Gold joined some of its assets in Nevada, with Newmont, to create a subsidiary that’s 61.5% owned and operated by the company. 

Apart from being one of the largest gold companies in the world, it also pays dividends. The payout and frequency are erratic, but a small payout is still better than no payout, or only counting upon capital appreciation. The company runs several high-quality and potent mines, and if exposure to gold is your primary goal, a company with such benevolent mines and considerable reserves deserves a place in your portfolio. 

3. Kirkland Lake Gold Ltd Stock

Kirkland Lake Gold logo

Ticker: KL
Type of gold invested: Mining 
Market Cap: $13.83 billion (Dec 2021)

Kirkland Lake Gold is a Toronto-based gold mining company that started out as a consulting and investment company and turned into a mining company in 2001. It operates primarily in two countries, Canada and Australia. The name refers to the town (Kirkland lake town), where its first major mine and site of exploration “Macassa Mine” is. It’s also one of the three most prominent assets that the company is currently operating in and Detour lake mine (also located near Northern Ontario) and Fosterville Mine in Australia. 

The company focuses primarily on gold exploration and finding and developing valuable, long-term income (and gold) producing assets. The company has a strong balance sheet and typically, significant cash reserves on hand, and minimal debt. This means even when the stock market is going strong (which isn’t usually a good time for gold), the company doesn’t come under any financial stress. The target production for the year 2020 was around 1.35 million oz of gold. 

The company also pays dividends. The yield and payouts aren’t very consistent, but for generous years, the payout can be sizeable enough. Kirkland Lake Gold also has decent capital growth potential. Considering how the stock spiked around the market crash of 2020, the stock seems like an excellent bet when the stock market as a whole is weak. 

4. B2Gold Corp. Stock

B2Gold Corp. logo

Ticker: BTO
Type of gold invested: Mining 
Market Cap: $5.19 billion (Dec 2021)

B2Gold Corp markets itself as a “senior low-cost international gold producer.” The company, founded in 2007, primarily operates in Mali, Namibia, the Philippines, and Colombia. It’s Vancouver-based, and apart from trading on TSX, the company also trades in NYSE and Namibian stock exchange. The company was formed by Bema Gold executives when the latter was about to be acquired by Kinross Gold, another giant in the precious metal business.

Currently, the company has three operating gold mines: Fekola Mine in Mali, which produces twice as much gold as either one of the other two mines (about 400,000 ounces each year). Masbate mine in the Philippines gives out around 200,000 ounces a year, and Namibia’s Otjikoto mine produces between 150,000 and 200,000 ounces every year. A major mine is under development in Colombia. 

Thanks to its mostly international operation and high cost of development, the company usually has a sizeable amount of debt on its books. Thankfully, a significant amount of cash reserves typically balance things out. It doesn’t have a long and strong dividend history, but when it did offer dividends, the yield was more generous than the other stocks on this list. Since its inception, it hasn’t been a very consistent growth stock. Still, the capital growth potential of B2Gold (especially when gold is powerful) is on par with many leaders in the sector.

 5. Abitibi Royalties, Inc. Stock

Abitibi Royalties, Inc. logo

Ticker: RZZ (TSXV)
Type of gold invested: Royalty 
Market Cap: $336 million (Dec 2021)

The smallest company on this list is also from the junior exchange (The Venture Capital Exchange) and is another royalty company like Franco-Nevada. It spun out of a mining company, Golden Valley Mines, in 2011. The company focuses on royalties to minimize the inherent risk of cost depreciation and expenses associated with mining, and pride itself in developing profitable royalty agreements that help the company create value for its shareholders. It also pays dividends. 

The company owns royalties in Canadian Malartic Mines – Canada’s largest producing mine, at all stages. It also owns near mine royalties for 13 gold mines. As a royalty company, its assets are not as formidable or sizeable as mining companies are, but the company also doesn’t have any significant liabilities. This results in a strong balance sheet. The company also doesn’t carry debt. 

Despite its small scale, the company is considered among some of the most formidable royalty companies in the country. While its dividend yield is generous enough, a good reason to invest in this company is its capital growth potential. It showed remarkable growth in the 2010-2020 decade. 

Investing in Gold Strategy

Gold has a place in almost every investment portfolio. Investors that have different asset classes in their portfolios might even consider holding the actual metal. 

But most stock investors prefer to invest in gold stocks rather than the metal itself. There are various reasons why investing in gold is a sound strategy, but the three most prominent benefits are simply its universality, strength against fiat currency, and hedging against market crashes.

Gold can undoubtedly be considered a global currency because it holds its value no matter where you are using it. And though the days of using golden coins are behind us, its global acceptance hasn’t changed. Also, when local currencies weaken, gold usually stays strong and holds its value. 

This is why many traditionally wealthy families consider it an amazing way to pass on their wealth through gold. But the reason most people seek to invest in gold is that it provides a hedge against market downturns. When the stock market plummets, gold usually soars.

Despite its many benefits, gold usually doesn’t deserve to be the primary commodity/asset-class in your portfolio. A healthy proportion is 10% or less of gold or gold stocks in your portfolio. It’s volatile (though not as much as silver), and while it holds its value, it doesn’t “grow” its value as much as the stock market does. Too much gold might weigh your portfolio down when the economy is strong, but a small amount of gold or gold stocks might act as your safe haven if everything else fails. 

How to Buy Gold Stocks in Canada

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Many investors tend to invest in gold stocks when the metal is soaring high, which usually means overpriced gold stocks. 

If you know that you want to add some gold stocks in your portfolio, a good strategy is to wait for the economy to strengthen and gold to become a bit cheaper, so you get the best deal for your money.

Best Gold Stocks in Canada
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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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