Gold is nearing record highs and may be on its way to breaking the historic US$2,000 per ounce mark.
Earlier this week, prices held firm above US$1,920 per ounce.
The only time it has risen so far is a week ago when the price briefly hit US$1,930.
At just over £1,550 an ounce, the sterling price also hit a record high, but last spring saw investors invest more as Russia’s invasion of Ukraine coupled with turmoil in Britain’s domestic politics encouraged investors to invest. increased towards its current level. Go to Shelter Assets.
But more creative UK investors aren’t just buying physical gold or ETFs.
Value: Gold may be on its way to breaking the historic US$2,000 an ounce mark. Earlier this week, prices held firm above US$1,920 an ounce.
They are also moving to equities.
The reason is simple.
Most gold mining companies have a reasonably fixed cost base.
Inflation can move things around a bit, especially when businesses are overly dependent on oil for their energy costs.
But in general, once the overall cost of producing an ounce of gold (total cost of maintenance) is established, it often remains fairly stable.
This means that any significant increase in the price of gold, such as the roughly US$300 per ounce increase since November, will translate directly to margins.
Big gold mining companies like Endeavor and Barrick are doing well. But heavyweight investors are already exposed to these.
Mid-sized companies and small producers such as Caledonia Mining, Pan-African Resources, Ariana Resources, Charat Gold, Resolute, Scot Gold, Shanta and Serabi tend to see real growth.
However, it often lags behind as market sentiment catches up with fundamentals and investors determine exactly where the best returns are.
Of course, no two gold miners are the same. This is where stock picking skills come back into the equation.
Gold companies offer the production of safe-haven assets with corresponding operational risk and, in some cases, the downside of jurisdictional risk.
However, some companies have a better track record than others in this regard, and having an experienced team backing them will be key to making the right choice in this space.
In South Africa, both Caledonian mines (1,135 pence) and Pan African (18 pence) are attractive and well-seasoned, with a long track record of successful gold production and decades of operating experience in Zimbabwe and South Africa respectively. proud of
Not an easy jurisdiction at the best of times, but these companies make it work.
Caledonia has just completed expanding production at its long-lived blanket mine in southern Zimbabwe and is now also absorbing the country’s largest untapped gold resource acquisition.
Through the ups and downs of Zimbabwe’s recent history, it has managed to continue to operate to the extent that it is now an important player at the national level.
Pan-African also has many years of operating experience in South Africa and continues production at some of the country’s most historic mines.
The CEO of Cobus Loots has a background in Black Economic Empowerment and extensive experience in dealing with South Africa’s powerful mining associations.
Over the years, Pan-African has maintained annual production around 200,000 ounces, and while the mine has not always been easy, the company has managed to find its way.
Shanta (12p) has also had a long run of strong performances at mines in Tanzania, but has experienced occasional glitches and, like Caledonia, has provided significant advantages to its production profile in the form of millions of ounces of exploration. The possibility of crossing national borders.
In North Africa, centamine (116p) sees and loses support in Egypt, while in Ethiopia, KEFI (0.75p) appears to be finally getting its long-awaited True Kapi project on track.
Other existing London-listed producers worth a look include Chaarat (10.9p), which has operated a mine in Armenia for some time and has benefited greatly from its development in Kyrgyzstan. will be Serabi (38p) produced in Brazil. Australia’s Resolute (16p), which has a long production record in West Africa. Local champion Scott Gold (40.5 pence) has a small mine in the Grampians.
And kudos to Ariana Resources (3.4p) for their interest in small scale production in Turkey.
Ariana has kept her course over the years when other powerful names have fallen, delivering substantial returns to shareholders.
Stock prices have also risen significantly over the past few years, although aside from the cash paid out when deals go well, the stock has shown only a faint revaluation in response to recent gold strength.
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