Since the nadir of late March, the gold price has added more than US$500 an ounce, a rise of around 33%, which makes it one of the best performing asset classes of the year.
It seems that the old and oft-repeated adage of the gold bulls, that gold is a safe-haven in a crisis, has once again been borne out, and that as cash and other assets decline in relative and real value, gold is once again the place to be.
Andwith gold now pushing past US$2,000, those companies that mine and explore for it are enjoying a stellar run on the markets.
What’s been really remarkable is the value that has been created at the top end, which runs into the billions of dollars. Thus, for example, Barrick Gold is now worth over US$50bn, whereas in June it was worth a little less than US$45bn, and in late March, not much more than US$30bn. These are huge numbers for a gold sector had that looked like it was in for a period of long-term stagnation after the end of the third round of quantitative easing in the middle part of the last decade.
There had already been some movement before the coronavirus crisis, as markets fretted about US-China relations an anaemic growth. But the coronavirus really set the price moving, as governments the world over began an unprecedented new round of money printing. Petropavlovsk, Pure Gold
There’s more than one way to play a market, though. Holders of physical gold are sitting on pretty gains of more than 33%, that is, if one is still using the US dollar as a benchmark currency.
But holders of mid-tier companies like Centamin PLC (LON:CEY), Evolution Mining (ASX:EVN), or Pure Gold Mining (CVE:PGM)(LON:PUR) are sitting on much larger gains. In the case of Centamin and Pure the share price rise booked over the past 12 months has been over 100%, while Evolution isn’t far off.
Australian boom set the stage
And it’s actually in Evolution’s home stomping ground of Australia that the action initially got underway. Because although the gold price may be hitting record levels in US dollar terms right now, in Aussie dollar terms, it’s been doing so for some time. And that in turn has led to an ebullience in the Australian gold scene that the rest of the world is only just beginning to catch up to.
In part, this has been helped along by the recent successes of Kirkland Lake Gold (TSE:KL)(ASX:KLA) at the Fosterville mine in Victoria. But it’s also been buoyed by exploration successes scored by the likes of Greatland Gold (LON:GGP) and Newcrest (ASX:NCM) in the Paterson region and elsewhere in Western Australia. Activity in both states is humming along, and the corporate manoeuvring has been underway for some time.
One of the more recent examples is Shandong Gold’s battle with Nordgold for control of Cardinal Resources (ASX:CDV), with Shandong at this stage currently holding the upper hand. But watch this space – both for more on the fate of Cardinal, which has now recommended shareholders accept the Shandong offer, and for new signs of corporate activity bubbling up.
Possible contenders for involvement could be Kirkland Lake itself, although it’s still busy digesting its recent acquisition of Detour, St Barbara Mines (ASX:SBM), also digesting an acquisition, and Pantoro (ASX:PNR), which owns the ancient and renowned Central Norseman project.
Meanwhile, larger and larger sums of money are becoming available for expansion and growth. One of the most recent raises comes from Tietto Minerals (ASX:TIE), which is currently in the processing of bringing in A$62.5mln of new money.
Meanwhile, over in Canada…
In the context of the current gold price, the strong share price performances of the mid-tier companies isn’t surprising. Companies like Endeavour Mining, (TSE:EDV), Alamos Gold (TSE:AGI), Centerra (TSE:CG), Eldorado (TSE: ELD), B2Gold (TSE:BTO) and New Gold (TSE:NGD) have all done well.
But success at the higher end of the market is now generating success lower down, as the huge amount of cashflow that the big producers are now generating feeds into efforts to find the next big mine that will be used to replenish current production.
Companies like Roxgold Inc (TSX: ROXG), which has just has reported promising new exploration drilling results from the its Boussoura project in southern Burkina Faso, and Pure Gold, with its assets in Red Lake in Ontario, Canada, represent two ends of the same spectrum: a tendency of Canadians to find success in their own back yards, and a tendency for the more intrepid to generate value further afield too.
Kincora Copper (CVE:KCC) has assets in Australia and Mongolia, and has been gaining traction recently, and other companies to watch include Midas Gold (TSE:MAX), with assets in Idaho, GoGold Resources Inc (TSE:GGD), with assets in Mexico, Liberty Gold (TSE:LGD), also with assets in Idaho, Lydian International (TSE:LYD), with assets in Central America, Great Bear Resources (CVE:GBR), with assets in Red Lake, Rokmaster Resources (CVE:RKR), with assets in British Columbia, Getchell Gold (CNSX:GTCH), with assets in Nevada, Commander Resources (CVE:CMD), with assets across Canada and Mexico, and White Gold (CVE:WGO), which is the largest landholder in the Yukon.