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stress mining (LSE: EDV) is a gold miner listed on the FTSE 100. The stocks have performed well since they were promoted to the blue-chip index in March of last year. In fact, they are up 17% in the last six months alone, easily outperforming the broader market.
Linked to this is the recent rise in the price of gold, which today stands at $1,930 an ounce. However, I remain bullish on the precious metal and want to increase my exposure to it.
Does this gold share fit the bill?
The company
Endeavor Mining is the largest gold producer in West Africa with operations in Senegal, the Ivory Coast and Burkina Faso. It has six operating assets and more development projects in the pipeline.
The company produced 1.5m ounces (Moz) of gold in 2021, compared to 908,000oz in 2020. Revenue nearly doubled to $2.79bn from $1.42bn in 2020.
Last year it produced 1.4Moz of gold, slightly less than the previous year due to the sale of its Karma mine in Burkina Faso. This gold was produced at an AISC of $928 per ounce.
AISC is a measure of the cost of maintaining current mining operations, and this low cost gives Endeavor a competitive advantage over many other gold miners.
2022 marked the 10th consecutive year of meeting or exceeding its own guidance. He had net cash of $121 million at the end of December.
the dividend
Endeavor recently declared an interim dividend of $0.41 per share, contributing to a payment of $0.81 per share for the full year. Including share repurchases, the company has spent more than $600 million in shareholder returns since 2020.
With the stock at 1,865 pence today, this payment represents a dividend yield of 3.5%. That does not seem tempting when I can invest in BlackRock Global Mining Trustwhich offers me much more diversification and a higher dividend yield.
Still, there is significant scope for dividend growth and Endeavor Mining share price appreciation if gold prices continue to rise. So what are the chances of that happening?
Well, I think that investor interest in the safe-haven asset could continue to pick up this year as concerns about the global economy persist.
Also, interest rate increases may taper off later this year. If that happens but above-average inflation persists, I think it could actually trigger a bull market for gold. That would probably be a catalyst for the stock to rise substantially.
Will I buy the shares?
However, there are specific risks with this mining stock. The main one is that the company operates exclusively in West Africa, which has not always been politically stable. There has recently been an increase in local terrorist groups operating in the region, increasing the risks.
And then there is always a scenario where the price of gold crashes, which would affect the miner’s profit. I personally don’t expect that to happen, but it can never be ruled out.
Although I like Endeavour’s prospects, I won’t be buying the shares. Instead, I am considering an exchange-traded fund (ETF) that tracks the price of physical gold bullion. Yes, this would not give me any income. But I think it’s less risky than picking individual gold mining stocks.
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