AIM gets boost from miners and gold bulls
The junior index is benefiting from a surge in gold mining shares and others. Here are the big winners.
28th July 2020 15:04
by Graeme Evans from interactive investor
The junior index is benefiting from a surge in gold mining shares and others. Here are the big winners.
Hot on the heels of a Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL)-inspired Nasdaq, the AIM junior index continues to benefit from exposure to a surging gold price and other smaller company nuggets.
Today's highlights included a surge of 24% for shares in European Metals Holdings (LSE:EMH) after it took a major step towards commercialising its Cinovec lithium resource. The proximity to Germany's motor manufacturers makes it a potentially exciting play on the electric vehicle market.
Ad agency M&C Saatchi (LSE:SAA) also rallied 15% after revealing another step in its recent trading recovery, helped by assignments ranging from social media sensation TikTok to BP and Bayer. The company now expects a small underlying profit for the six months to 30 June, adding that it is confident it will meet its next banking covenant test in September.
And one of the biggest stocks on AIM, Boohoo (LSE:BOO), was 3% higher as it set out the terms of reference for the independent review into working conditions in its Leicester supply chain.
The trio highlight the breadth of stocks available on AIM, which has just marked its 25th anniversary by outgunning London's larger benchmarks with a second-quarter performance on a par with the tech-laden Nasdaq in New York.
The AIM All-Share rose 29.5% between the end of March and June, compared with 30% for the Nasdaq 100, after big gains for the likes of Tesla and Apple, and just 9% for the FTSE 100 index.
As well as exposure to stocks on the frontline of testing for Covid-19, such as Novacyt (LSE:NCYT) and Genedrive (LSE:GDR), AIM has benefited from hosting a number of companies closely tied to the surge of gold prices to this week's record high.
Strong performers include Greatland Gold (LSE:GGP), whose shares have surged 700% this year as investors continue to see the potential of its Paterson exploration licences in north-western Australia. There's also Chaarat Gold (LSE:CGH), which is up 10p from April's 26p thanks to production improvements at its Kapan gold mine in Armenia.
The gold price today slipped back from Monday's record high of $1,943.93, meaning Greatland was down 7% at 14.1p and Serabi Gold fell 4% to 86.5p.
But the yellow metal still produced an AIM winner after the latest update from Goldplat (LSE:GDP) showed that the gold recovery specialist expects to report a profit for the year to last month. Its operations process the by-products of gold mining for blue-chip clients including Anglogold (NYSE:AU), Harmony (NYSE:HMY) and Goldfields.
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Supported by higher gold prices, Goldplat said its recovery operations turned in a quarterly profit despite losing 25 days of production due to Covid-19 restrictions in South Africa.
Shares rose 8% to 6.7p and are now back where they were in February after the company also reported that efforts to secure buyers for its mining and exploration businesses at Kilimapesa in Kenya and Anumso in Ghana were beginning to bear fruit.
The rally by Australia-based European Metals came as it unveiled a support and financing agreement with EIT InnoEnergy, which leads an alliance set up by the European Commission to create a sustainable battery cell manufacturing value chain in Europe.
The Cinovec project, which is a joint venture between European Metals and central European energy group CEZ, is currently funded up to 29 million euros. A recent feasibility study indicates that Cinovec has the potential to be the lowest cost hard rock lithium producer in the world.
Executive chairman Keith Coughlan said: “Cinovec is the largest hard rock lithium resource in Europe and is strategically located to produce lithium in Europe for Europe.
“The requirement for locally sourced raw materials for the e-mobility movement has become more apparent during Covid-19, and Cinovec is well positioned in close proximity to Europe’s manufacturers.”
At almost 19p, shares in European Metals have more than doubled from 8.9p in March.
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