Gold is one of the most successful investment classes in 2020, its value per ounce (around 31 grams) having risen by just under 30% since the turn of the year. The price constantly hit new record highs during its ascent, even cracking the magic USD 2,000 barrier for the first time at the beginning of August. At the highest level to date, a troy ounce was trading at USD 2,072. The progress of the precious metal is currently benefiting from a range of factors. Alongside economic uncertainty due to the coronavirus pandemic, the weak dollar is also stoking fears of a currency devaluation. Low interest rates are likewise playing a role, since the lower the yields on bond markets are, the more attractive gold becomes. Nothing is likely to change any time soon in terms of the last two drivers, because the Federal Reserve's monetary plan envisages low base rates for the long term. In a recent analysis, the Bank of America is anticipating that the price of gold will even cross the USD 3,000 barrier in the medium term.
The rising price of the precious metal is also lightening the mood for mining stocks. The capitalisation of the two Canadians, B2Gold and Kinross Gold, for instance, has climbed by more than two thirds since the start of the year. The latter is geographically diversified, with mines spanning the whole world from Brazil through the USA to Russia. They enable Kinross to produce the equivalent of around 2.5 million troy ounces of gold a year. The precious metal rally has also had a positive impact on the group's most recent results. Despite a slight decline in production, turnover from metal sales grew by one fifth in the second quarter to reach USDbn 1.01. The rising gold rate has also led to a tangible 53% increase in the margin per ounce, putting it well above the 31% climb in the average price realised for gold. This in turn has delivered a significant boost to profits, with earnings per share improving to USD 0.16 from USD 0.06 for the same period the previous year. Kinross managed to beat analysts' expectations both in sales and in profits.
Industry colleague and compatriot B2Gold can even look back on a record quarter. The Vancouver-based company posted gold sales of USDmn 442, corresponding to an increase of 65% compared with the second quarter of 2019. B2Gold also achieved a new high of USDmn 238 for cash flow from ordinary activities, a rise of no less than 156%. Unlike Kinross, the mining group was able to increase its gold production, and by a solid 15%. Shareholders are to participate in the success, B2Gold having announced a doubling of its quarterly dividend to USD 0.04.
On the other side of the ocean, too, balance sheets of mining groups are showing high growth rates. It is not just big players such as Newcrest Mining, however, that are profiting from the gold rush: small and medium-sized gold producers are also in the ascendant. Among the medium-sized companies down under is Silver Lake Resources, for instance, which is engaged in extracting copper as well as the coveted precious metal. Then there is Evolution Mining: the Australians produced some 750,000 ounces in the 2019/20 financial year completed at the end of June, just under the previous year's level. The curve is to climb again in the years ahead. The Sydney-based group would like to increase production to 850,000 ounces by 2023. Meanwhile, production costs per ounce of gold are set to decline – while a corresponding AISC figure of AUD 1,240 to 1,300 is expected for the current financial year, this is to fall to AUD 1,125 to 1,185 by 2023. The company regards itself as a leader in the global ranking of the lowest-cost gold producers. Stockbrokers are enthusiastic: the Evolution Mining share price has already risen by almost a half in 2020, while that of Silver Lake Resources has actually shot up more than 60%.
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