Gold miners are basically trendless in 2017. The GDX (GDX) is trading between 21.00 and 25.50 points in the last 8 months. At a certain point in time the gold market will become attractive again. When is that and how to prepare for it? Related to that, should gold miners be on your buy list in 2018?
To the first question, when the gold market will become attractive, the answer is that nobody knows. So that makes it much more important to be prepared, so the question how to prepare is the only relevant question to answer.
As gold continues its bear market after it hit a triple top this month we can only act based on the assumption that gold will be flat or bearish in the foreseeable future. With that in mind the key question we are trying to solve has a simple but outspoken answer: accumulate the leading gold mining shares. That is the strategy smart investors are applying.
In this article we identify 3 gold miners to buy on every dip in 2018. Note: when it comes to silver miners, our favorite is without any doubt First Majestic as explained earlier. This article, however, is focused on gold miners.
#1 Richmont Mines is a mid-tier gold miner with a market cap of $620M. It got acquired by Alamos Gold in September, and is waiting a final shareholder decision in November. Richmont Mines shareholders will receive Alamos Gold shares in return. The premium is significant: 14.20 CAD which is 11.50 USD (still an upside of 15 percent based on the latest closing price).
This stock has a healthy P/E of 45x and and EPS of 0.22. A great stock to buy on every dip, although Richmont Mines shares will cease to exist anytime soon and replaced by Alamos Gold.
#2 Klondex Mines has a similar market cap as Richmont Mines. P/E is 85x, the EPS is lower at 0.04, short float ratio is 8%. These financials are maybe not great, but the stock got a hard hit recently and so it is back at the lower area of its rising channel. This stock is not as attractive as Richmont but still a great buy on dips.
Probe Metals is a junior miner with a market cap of $152M. It is still not profitable (-0.15 EPS) but has great prospects specifically on its flagship property Val-d’Or East which it is exploring and shows promising grades.
Though Probe Metals entered a longer term consolidation area it definitely is worth buying on any dip. The risk is higher than the other 2 gold miners because this stock is still in exploration phase.