Double-dip recession. Eurozone crisis. US debt. It's little wonder that markets have been tumultuous of late, but all this uncertainty has brought good tidings for gold.
The precious metal seemingly knows no boundaries as it flits(To move about rapidly ) from high to high, having finally smashed through $1,600 an ounce this week to set a new record.
Jitters(nervousness) over the ongoing eurozone debt crisis, coupled with a weaker US dollar and concerns for the country's debt ceiling, spurred a rally in flight-to-safety trades.
And further concerns for the state of the global economic recovery have only fuelled analysts' belief that gold's sparkle is far from diminishing.
Commerzbank analyst Carsten Fritsch explained:
"The fact that gold is much more than just a commodity is common knowledge to the market.
"Its current performance shows that gold is not only a hedge against inflation, an indicator of fear or an 'anti dollar'. It is, in fact, a currency that is largely dependent on financial and economic indicators and is currently profiting from the weakness of the two major currencies and the US dollar.
"Although temporary setbacks are possible given the current euphoria, the climate remains favourable for gold."
Economists at Capital Economics expect gold to hit $2,000 next year, but admit they would not be surprised "to see prices reach this level sooner and then rise significantly".
For more on the outlook for prices, and why Angus Murray, CEO of Castlestone Management, thinks gold bullion is the one to wathc over the next 12 months, watch: Emerging markets to drive precious metals prices.
It's hardly surprising then that investor appetite for this market has been growing. Seen as the key way of gaining exposure to movements in the price, investors have continued to flock to gold miners, with AIM stocks proving particularly popular across the map.
Gold miners performed well last year, as the spiralling gold prices provided strong upward price support and investors sought exposure to the movements in price. In 2011, it looks like investors are focusing on companies that can demonstrate growth in resources and thus strong production growth.
Angelos Damaskos, chief executive of Sector Investment Managers and fund advisor to the Junior Gold Fund, commented: "Continued rise in investment demand will result in the gold price rising to higher levels. Gold mining companies should therefore see growth in cash flow and profitability that should re-rate their share prices. The companies with efficient, growing operations, strong balance sheets and active exploration programmes should outperform both the sector and the gold price."
We take a look at a handful of companies operating around the globe to see what they can offer investors.
Goldplat
Junior gold miner Goldplat (GDP) has spread its wings across Africa, which has fast become the gold mining hot spot du jour.
The company has built up a solid portfolio of projects, including two gold recovery operations in South Africa and Ghana and three brownfield gold development projects in Kenya, Ghana and Burkina Faso as it seeks to achieve its target of becoming a mid-tier gold producer in Africa.
Shareholders have enjoyed a steady stream of positive news flow recently, helping its shares to rise over 40% during the past year.
In an operational update in April, the company assured investors that recent developments across its projects were encouraging as it eyes up further growth throughout the rest of 2011.
While its two gold recovery operations continue to generate important revenues for the company, churning out some 25,000 ounces per annum, it is the exploration and development of brownfield projects which really excites Goldplat.
At its Kilimaapesa Gold project in Kenya, it has defined a maiden resource of 1.65 metric tonnes at 2.44 grams/tonne of gold for 129,000 ounces which it intends to increase and upgrade towards the 0.5 million mark by the end of this year.
Meanwhile, at its Nyieme gold project in Burkina Faso, Goldplat is busy with its drilling programme aimed at proving up its production potential. A 2,500-metre resource drilling campaign is underway which looks to drill the entire strike as well as explore 11 additional target areas previously defined.
"The company expects first drill results to be released in the third quarter of 2011 and, in turn, a JORC compliant resource upgrade to be calculated by the end of the year. From this, Goldplat believes investors will start to see significant value uplift traction of this highly prospective target," a spokesperson for the company told Interactive Investor.
In line with its strategy of expanding its brownfield projects portfolio, the company recently added the Banka Gold Mining Lease in Ghana to its belt. The 10-year renewable mining lease spans an area of 29 square kilometres and Goldplat expects to convert and raise the existing gold resource to a JORC compliant status.
Tom Elder, analyst at WH Ireland, said: "Goldplat continues to make progress towards adding significant mining assets to its portfolio. The company also has a long history of profitability and is highly cash generative. Goldplat is a compelling investment case on an asset, earnings and prospectivity basis."
Elder has tagged the stock with a 'buy' recommendation.
For more on the wider appeal of the Dark Continent to the mining industry, visit our Focus on mining Africa.
Vatukoula Gold Mines
On the other side of the world operates Vatukoula Gold Mines (VGM). The company owns 100% of the Vatukoula Gold Mine in Fiji which contains 680,000 ounces of gold reserves and 4.3 million ounces of gold resources.
The mine has been producing for more than 70 years, but was closed in 2006 by its previous owners due to the low gold price and poor maintenance. However, the lure of the precious metal and indeed rising prices prompted Vatukoula to re-open it in 2008.
But much like the price of gold itself, this particular AIM-listed miner is partial to volatility, having watched its shares soar towards the end of 2010 and then take a tumble from January onwards. The share price now sits some 5% down on the year.
In June, it unveiled a disappointing decrease in third quarter production as it switched its focus to developing underground infrastructure to help sustain long-term production.
As a result, the mine made a net loss of £2.8 million for the quarter, compared to a profit of £2 million during the same period of last year.
Chief executive David Paxton explained:
"While the effect of the increased development has been to reduce the underground recovered grade, we are building the essential underground infrastructure to provide for sustainable long-term production."
Vatukoula believes that development is a "crucial part" in allowing it to mine at a consistent grade.
But analysts at Collins Stewart warn: "The company is confident the current focus on development is set to establish the mine for sustainable long term production, however Vatakoula also states that the increased development rate has not yet produced sufficient mining areas underground, suggesting the turnaround in the operation remains some quarters ahead."
Despite this, Vatukoula seems convinced in its future plans. It is planning to ramp up production to 100,000 ounces per annum by the second quarter of the next financial year. In tandem, its cash costs per ounce are expected to fall in line with this ramp up.
Additionally, the company remains fully committed to its exploration programme, which has to date identified near surface, mineralised deposits and both down dip and along strike extensions of two of the current ore bodies.
Tom Elder, analyst at WH Ireland, adopts a positive stance on the company:
"Vatukoula has a significant orebody in a global context and it additionally has many of the attributes that are attractive in a gold miner; a large high grade-resource base and plentiful near mine prospectivity.
"We believe the shorter-term operating picture is clouding the true prospects of the mine, thus the company. We reiterate our 'buy' recommendation."
Read: Three plays for gold exposure for more firms hoping to make their corner of the world the next big thing in gold.
* This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
No comments:
Post a Comment