Gold miners are back on investors’ radars.

After months of trading sideways, the yellow metal has broken the $1,700 per ounce as interest rate increases started to slow down.

Higher gold prices support gold mining companies’ valuations. These companies are “leveraged” to the price of gold. If the yellow metal’s price rises and the company’s expenses remain relatively steady, the extra upside that the  gold price provides will lead to higher revenue and net income.

Not all junior gold miners manage to stay profitable even in the best gold price environments, however.

But these three companies have successfully navigated the challenging environment of 2022. Not only did they manage to stay afloat, but all three of them also generated double-digit net income margins.

If you’re looking for the best junior gold mining stocks, these companies would be a good start.

Centerra Gold (CG.TO, CGAU)

Centerra Gold (market cap: $1.1 billion) is a gold mining company with its key projects, Mount Milligan and Oksut, located in British Columbia and Turkey, respectively.

The company’s flagship mine, Mount Milligan, produced over 54,000 ounces in the third quarter.

More importantly, Centerra’s all-in sustaining cost on a by-product basis (Centerra also produces copper) was just $729 per ounce.

Even as the price of gold hovered below $1,700, the company’s low cost helped it to stay profitable. Over the twelve months ended on September 30, its net income margin was 36.7%. This level of profitability, as well as a strong balance sheet with over $580 million in cash, allowed Centerra to not only weather the volatile gold price environment but also announce a dividend of about US$0.05 per share.

The company’s dividend yield is 4.2%, more than twice as high as that of the S&P 500.

Lundin Gold (LUG.TO, LUGDF)

Lundin Gold (market cap: C$3 billion) is another gold mining company that has successfully managed to stay profitable in 2022.

Lundin is the 100% owner of the Fruta del Norte gold mine in southeast Ecuador.

The company says that Fruta del Norte is one of the highest-grade and lowest-cost mines in the world.

In the third quarter, Lundin’s all-in sustaining cost was $807 per ounce of gold. This is an excellent result, which left a lot of “margin of safety” for the company’s operations. Even at lower gold prices, high grades and cost control allowed Lundin to generate a positive net income of about $84 million based on about $218 million in revenue.

This makes Lundin one of the most profitable gold mining companies.

Lundin anticipates that it will meet the higher end of its full-year production outlook. It plans to produce up to 460,000 ounces of gold in 2022.

At the same time, it estimates that its all-in sustaining cost will remain on the low side of its estimate, or at about $820 per ounce of gold sold.

K92 Mining (KNT.TO, KNTNF)

K92 Mining (market cap: C$1.8 billion) is a Canadian-listed gold mining company operating its Kainantu gold mine in Papua New Guinea.

It is a high-grade mine with almost 1.7 million ounces of gold equivalent and an average grade of 8.4 g/t AuEq.

Kainantu is also a relatively low-cost mine with an all-in sustaining cost of $909 per ounce.

In the quarter ended on September 30, the company recorded a net income of $3.1 million based on $36.4 million in sales.

Over the previous 12 months, K92 achieved a net income margin of 21.1%. This means that the company is among the most profitable gold miners listed in Canada.

The Takeaway

We are optimistic about junior gold stocks. As central banks slow down their tightening policy, gold may potentially appreciate further.

This will be good news for the gold mining sector that has had a challenging 2022, and the Canadian gold mining stocks should benefit from the next leg of the long-term bull market that we see coming.

However, as an investor, you need to pay attention to the companies able to turn a profit even when the long-term gold bull market takes a break and the yellow metal is trading sideways.

As a rule of thumb, looking at companies with an all-in sustaining cost (or AISC) of $1,000 per ounce or less is a good start. If they can keep their costs in check throughout the gold price cycle, they could potentially benefit from any upside in the price of their underlying commodity in the future.

We hope you find this research helpful.