The gold price is racing toward a record high, but one small gold company is doing better than the rest.
A gold price seemingly intent on breaking the US$2,000 an ounce barrier continues to provide investors with encouragement to mine a rich seam of London market opportunities.
Today's big riser was Altus Strategies (LSE:ALS), whose shares jumped as much as 164% this morning to a high of 82p after it announced a positive economic assessment for its 100% owned Diba gold project in western Mali. Altus said it believed it had only “scratched the surface” in terms of Diba's potential.
But it's not just AIM-listed stocks such as Altus and other more speculative plays that are offering favourable exposure to the yellow metal, with £8 billion-rated Polymetal International (LSE:POLY) and Petropavlovsk (LSE:POG) among the best-performing larger cap stocks so far this year.
Another stock attracting significant attention in recent months has been Greatland Gold (LSE:GGP), which has four main projects in Western Australia and two in Tasmania. Its shares were up another 8% today and have risen 700% so far this year as investors continue to see the potential for its Paterson exploration licences in a region it describes as “exciting and highly prospective”.
The share price gains have been aided by a gold price that's now at a nine-year high of around $1,866 an ounce. Alongside a flight from risk due to a recent surge in the number of coronavirus cases, investors also turned to gold after Tuesday's breakthrough on European stimulus efforts heightened the prospect that real interest rates will go even lower.
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Gold is up roughly 25% in price from its 2020 low in March, with private investors as much as central banks keen buyers of the asset. As a safe place to put money in periods of economic uncertainty, it's likely that gold will remain on a firm footing for some time.
The price has never breached the $2,000 threshold, but as more countries including the UK move closer to negative interest rates there's still every chance it may do so.
It's not just the rising price benefiting mining companies, however, with the improved margins also reflecting falling costs as local currencies collapse in the face of the Covid-19 pandemic.
Beneficiaries have included Petropavlovsk following a fall in the value of the rouble.
The company, which used to be known as Peter Hambro Mining and is one of the oldest Russian stocks on the London Stock Exchange, operates in the far east of the country through three active gold mines. Its gold production improved 22% in 2019, leading to a 45% surge in underlying earnings to US$264 million.
Petropavlovsk shares were today 6% higher at more than 30p, having risen by over 130% so far this year. Polymetal, which is a top-10 global gold producer but also offers exposure to silver through its assets in Russia and Kazakhstan, was up 3% at a new record of 1,725p.
For Altus, its shares rose sharply today after results from its Diba project showed a positive economic assessment for an open-pit oxide gold mine, with strong cashflow and rapid payback. Based on a $1,500 gold price, it said it had the potential for a pre-tax valuation of $115 million and an internal rate of return of 728% with payback of 6.2 months.
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Believing that Diba has considerable growth potential, CEO Steven Poulton said the company now intended to drill test seven other targets within 7km of the Diba hill deposit. He added:
“We believe we have only scratched the surface on Diba's potential to generate substantial value for our shareholders and look forward to providing updates in due course."
As a project generator, Altus differs from other mining companies by having vested interests in a number of exploration and development projects across Africa. Royalties are generated on its own discoveries as well as through financings and acquisitions with third parties, meaning sustainable long-term income for the company and a greater risk and reward balance.
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