Should I buy this FTSE 100 gold stock?

Mining Business (LSE: EDV) is a gold miner listed on the FTSE 100. The shares have performed well since they were added to the blue-chip index in March last year. In fact, they’re up 17% over the past six months, easily outperforming the broader market.

Related to this is the recent rise in gold prices, which have reached $1,930 per ounce so far. However, I am still bullish on precious metals and want to increase my exposure to it.

Do these gold stocks fit the bill?

Company

Endeavor Mining is the largest gold producer in West Africa, operating in Senegal, Ivory Coast, and Burkina Faso. It has six operating assets and more development projects in the works.

The company expects to produce 1.5 million ounces (Moz) of gold in 2021, compared to 908,000oz in 2020. It almost doubled revenue to $2.79 billion from $1.42 billion in 2020.

Last year, it produced 1.4Moz of gold, slightly lower than the previous year due to the disposal of the Karma mine in Burkina Faso. This gold is produced at an all-in sustaining cost (AISC) of $928 per ounce.

AISC is a measure of the cost of maintaining current mining operations, and these low costs give Endeavor a competitive advantage over many other gold miners.

2022 marks the tenth consecutive year of meeting or beating its own guidance. It had net cash of $121m at the end of December.

Dividends

Endeavor Company paid a dividend of $0.41 per share last year and an annual dividend yield of $0.81. Including share buybacks, the company has spent more than $600m on shareholder returns since 2020.

With shares at 1,865p today, this payout represents a 3.5% dividend yield. That doesn’t seem surprising when I can invest BlackRock World Mining Trustwhich offer greater diversification and higher dividend yields.

However, there is significant scope for dividend growth and share price appreciation for Endeavor Mining as gold prices continue to rise. So what are the chances of that happening?

Well, I think investor interest in safe-haven assets may continue to increase this year, as concerns about the global economy remain.

Also, interest rate hikes may slow later this year. If that happens but above-average inflation persists, I think that could lead to a bull market for gold. That will be the catalyst for the stock to go up a lot.

Should I buy the stock?

However, there are special risks with this mining stock. The main thing is that the company operates exclusively in West Africa, which is not always politically stable. Recently there has been an increase in local terrorist groups operating in the area, which increases the risk.

Then there is a scenario where the price of gold rises, which will benefit the miners. I personally don’t expect that to happen, but it can’t be denied.

Although I like Endeavor’s prospects, I wouldn’t buy the stock. I would instead consider an exchange-traded fund (ETF) that tracks the price of physical gold. Yes, this will not pay any income. But I think it’s more risky than picking individual gold mining stocks.