Precious metals have been in an uptrend for year-to-date on the back of multiple factors. With the bull run likely to sustain, it’s a good time to buy precious metal penny stocks for quick returns.
Let’s first talk about the catalysts for upside in gold and silver. First, despite relatively stubborn inflation, multiple rate cuts are on the cards in the next 12 months. Easy money policies translate into a weaker dollar, which is positive for gold and silver.
Further, globally, geopolitical tensions are escalating. Investors tend to seek refuge in hard assets, translating into higher demand for gold.
Central banks have been buying gold for reserve diversification. This factor is likely to support a sustained rally for precious metals.
Let’s, therefore, talk about three precious metal penny stocks that will benefit from higher realized prices. As cash flows swell for these companies, valuations will adjust on the upside.
IAMGOLD (IAG)
Considering the growth outlook, IAMGOLD (NYSE:IAG) is among the most undervalued precious metal penny stocks to buy. IAG stock has rallied by 55%, with gold trending higher in the last six months. However, the stock can still double from current levels in the next 12 to 18 months.
The first positive for IAMGOLD is strong fundamentals. As of Q4 2023, the company reported a liquidity buffer of $754.1 million. Investing in an attractive exploration pipeline that includes Côté, Gosselin, Nelligan and Chibougamau districts provides flexibility.
The second major positive is the commencement of production from Côté gold asset in March. It’s considered among Canada’s largest gold mines and has a mine life through 2041. IAMGOLD expects production of 220,000 ounces to 290,000 ounces from the current year from the asset. This will translate into a significant production bump-up. With higher gold prices, IAMGOLD is positioned to deliver robust operating cash flow during the year.
Hecla Mining (HL)
After a rally of 21% in the last month, Hecla Mining (NYSE:HL) stock trades just above $5. I believe that it’s still a good time to accumulate with the silver mining company positioned for growth and cash flow upside.
Recently, Hecla Mining announced production numbers for Q1 2024. Silver production was 4.2 million ounces, which was higher by 43% on a year-on-year basis. Further, gold production for the quarter was 36,592 ounces.
Two factors supported upside in silver production. First is the resumption of mining activity on Lucky Friday. Further, the production ramp-up continued at the Keno Hill asset.
Hecla has also reaffirmed the guidance to produce 17 million ounces of silver this year. Production is expected to increase to 20 million ounces by 2026. Silver has been a laggard in the precious metal rally. Once the metal catches up, I expect a strong upside in EBITDA and cash flows.
NovaGold Resources (NG)
NovaGold Resources (NYSE:NG) stock traded at 52-week lows earlier this year at $2.23. NG stock is already higher by 40% from those levels at $3.14. I expect the positive momentum to sustain with the stock remaining undervalued.
As an overview, NovaGold has 39 million ounces of gold contained in measured and indicated resources. The company’s Donlin gold asset is in Alaska, the second-largest gold-producing region in the U.S. The company expects Donlin’s gold asset to be one of the highest annual gold producers in the Americas.
Of course, the project is still in the development stage, and it will be a few years before the asset is commercialized. However, I expect NG stock to trend higher on two catalysts. First, sustained upside in gold that translates into higher after-tax net present value of the asset.
It is securing financing for the completion of the project in the next few years. It’s worth noting that NovaGold ended Q1 2024 with cash reserves of $118 million. This provides ample flexibility for near-term capital investments.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.