The Motley Fool

Forget the gold price! I’d buy this FTSE 100 mining stock

Image source: Getty Images.

The gold price has surged in recent months. Following this performance, some investors may have bought into the yellow metal ahead of further positive news. 

However, there are other ways to invest in the gold price without buying gold directly. Owning mining stocks, such as the FTSE 100 and FTSE 250 companies listed below, may be the perfect alternative. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Gold price play 

Owning mining stocks like FTSE 100 mining group Fresnillo (LSE: FRES) could be a better way to invest in gold without having to buy the yellow metal itself. 

Thanks to the performance of precious metals this year, Fresnillo has earned itself a place in the ranks of the top-performing blue-chip stocks. It is up around 80% year-to-date. If the gold price continues to increase, this trend may continue.

According to its latest trading update, the company produced 26.8m ounces of silver in the first half of 2020 and 381,319 of gold. These figures were slightly below last year’s performance due to disruption caused by the coronavirus pandemic. 

However, the higher gold price should more than compensate for the drop in production. Last year it cost the company around $850 to produce an ounce of gold and around $2 per ounce of silver. At the current gold and silver prices of $1,860 an ounce and $23 per ounce, respectively, it looks as if the business is making a healthy profit on its operations. 

City analysts are forecasting an impressive 25% increase in the company’s earnings per share for 2020, followed by a rise of 57% for 2021. This implies the stock is trading at a forward PEG ratio of 0.7, suggesting the shares may offer a wide margin of safety at current levels. 

What’s more, unlike gold, Fresnillo also offers a dividend. The stock currently supports a dividend yield of 1.1%, which could hit 1.6% next year, according to the City. 

Petropavlovsk

Petropavlovsk (LSE: POG) could be another way to invest in the gold price. Just like Fresnillo, the company has seen demand for its shares surging recently as investor sentiment towards gold mining companies has dramatically improved. 

Its production has jumped this year. According to its latest trading update, gold production rose 42% in the first half of 2020. This timely increasing output will, according to analysts, translate into net income of $164m this year, up from $27m in 2019. 

Based on these projections, the stock is currently dealing at a price-to-earnings ratio of just 7.8 and PEG ratio of 0.3. These numbers suggest the stock offers a wide margin of safety at current levels, which means it could produce high total returns for investors in the years ahead. 

As such, it may be a good idea to buy a share of Petropavlovsk as the gold price continues to rise. It may produce higher returns over the next few years compared to the precious metal as company production continues to increase and costs fall. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.