Record gold price triggers mining sector earnings upgrades

The rush to FTSE 250-bound Pan African Resources (LSE:PAF) and the blue-chip Endeavour Mining (LSE:EDV) continued today after gold scaled new heights as 2025’s best-performing asset class.

The London market’s limited exposure to the 45% rise for gold and silver prices over the past year also includes Mexico’s Fresnillo (LSE:FRES) and South America’s Hochschild Mining (LSE:HOC). Two Antofagasta (LSE:ANTO) mines produce copper concentrate containing gold and silver.

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Delistings by gold companies in recent years have included Acacia in 2019, Polymetal and Petropavlovsk in 2022 and Centamin following its 2024 acquisition by AngloGold.

The gold price today traded above $3,650 an ounce, having just posted its best weekly performance since April after poor US labour market figures fuelled speculation of more Federal Reserve interest rate cuts before the year-end.

Falling yields reduce the opportunity cost of holding the zero-yielding asset, while the volatile geopolitical environment, higher government debts, persistent inflation and the much weaker US dollar have reinforced gold’s status as long-term portfolio diversifier.

Central banks also remain enthusiastic buyers, leading UBS Global Wealth Management to forecast that gold demand will rise by 3% this year to its highest level since 2011.

The bank’s base case is for a price of $3,700 an ounce by next June, but it said $4,000 an ounce cannot be ruled out in a risk scenario where geopolitical or economic conditions deteriorate.

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Berenberg agrees that the gold price is well supported in the current geopolitical and market backdrop, adding that silver has outpaced gold following a 10% rise in the past month.

Individual price forecasts are under review, but at spot prices its modelling indicates 19% mark-to-market earnings upgrades for its precious metals coverage in 2026.

For West Africa-focused Endeavour, this leads to a 22% upgrade to 2026 underlying earnings.

The bank said: “The shares continue to offer attractive upside, we think, with the ability to both grow volumes and return excess capital to shareholders due to a rapidly deleveraging balance sheet.”

Berenberg adds that Fresnillo is an attractive way to gain exposure to the silver price, which is at its highest level since 2011. The bank expects the miner to declare another sizable special dividend with its 2025 results, offering further shareholder return upside.

Fresnillo shares have risen 240% this year compared with 90% for Endeavour.

Pan African Resources, which has operations in South Africa and Australia, is now AIM’s fifth-largest company after more than doubling its market capitalisation to £1.4 billion this year.

It announced plans yesterday to transfer its listing to the main market, making it the first precious metals addition to the main board since Endeavour listed in 2021. It will be large enough for inclusion in the FTSE 250, placing it alongside Hochschild Mining.

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The company is due to report annual results on Wednesday, but has already said it expects to increase annual gold production for the year to next June by about 40% to between 275,000 and 292,000 ounces.

Its gold production has been completely unhedged since 1 July, meaning it is able to fully benefit from the current record high gold prices.

Chief executive Cobus Loots said the main market listing represents a natural continuation of Pan African’s growth, providing it with access to a deeper pool of capital and opportunity to enhance liquidity as it pursues its growth ambitions.

He added: “Over the last decade, we have consistently grown both organically and through acquisitions while returning capital to our loyal shareholders.

“We are currently benefiting from the strong gold price environment which we expect will enable us to be fully de-geared (from a net debt perspective) during the course of 2026.”

Berenberg said it envisages further upside from Pan African, both in the form of volume growth as well as shareholder returns as the balance sheet moves to net cash in 2025-26.

It remains Hold rated on Hochschild, reflecting operational risks and the fact it continues to see better value elsewhere. The miner recently scaled back output guidance after its Mara Rosa mine in Brazil was affected by heavier-than-usual seasonal rainfall and contractor performance issues.