Financial markets, so the saying goes, are driven by fear and greed – fear when times are tough, greed when times are good.
Today, fear is in the ascendant – and so is gold.
Gold is the classic safe-haven investment. It does not depend on economic cycles. It does not rely on government whimsy. And it protects investors against inflation.
So it’s hardly surprising that gold has almost doubled since inflation reared its head after the pandemic, and has risen by more than 14 per cent since President Trump was elected in November. The precious metal topped $3,000 (£2,315) an ounce last week – a record high. And seasoned observers believe there is more to come, with a maverick in the White House, global crises erupting and growing talk of recession in America itself.
Central banks have been buying gold at unprecedented levels, adding more than 3,000 tons to their coffers over the past three years and expressing continued enthusiasm this year too. Asian investors have also been snapping up gold bars and coins and, in recent months, US investors have joined the party, homing in on gold-focused funds at a rate not seen since Russia invaded Ukraine in 2022.
There is still time to earn handsomely from gold, particularly by investing in undervalued gold miners
The tsunami of interest begs one key question: is it too late to ride this wave?
The short answer is, no. There is still time to earn handsomely from gold, particularly by investing in undervalued gold miners.
Like the metal itself, gold mining stocks are rising in price. Many, however, have been neglected for so long that they can still offer plenty of upside to the canny investor.
Pan African Resources
Almost half the gold ever mined in history has come from South Africa, and Pan African owns one of the oldest mines in the country
Pan African Resources is one such company. The firm operates in South Africa and recently expanded to Australia. It is profitable, growing and pays a dividend – a rarity among smaller gold miners.
Almost half the gold ever mined in history has come from South Africa, and Pan African owns one of the oldest mines in the country, Barberton, an underground site that has been in production since 1886. Despite its long life the mine remains highly productive and expected to deliver about 65,000 ounces of gold this financial year alone.
A second long-established mine, Evander, is also part of the Pan African stable, and is expected to produce 30,000 ounces this year.
Underground mining is far safer than it used to be, but production is costly and can be challenging.
Boss Cobus Loots has expanded into other fields, therefore, recouping gold from old mines and acquiring a highly prized site in Australia’s Northern Territory. He completed the shrewd deal last year, buying Tennant Consolidated Mining Group from private equity investors who were keen to make an exit.
Huge and sparsely populated, the Northern Territory is the real outback, but there’s gold aplenty in the region and Tennant has a goodly share. Loots secured a keen price and moved quickly to make the most of it. A restored processing plant should be up and running within the next few weeks and production will begin thereafter, ramping up in earnest during the year to June 2026.
Almost wherever there are mines, there are so-called tailings – liquid slurry left over after miners have extracted metal from ore.
These tailings can be dirty and polluting, but they also contain traces of valuable minerals. Loots and his team calculated that they could add to their annual production and improve their environmental credentials by turning tailings waste into gold. This treatment does not just create ‘green’ gold, but is also far less expensive than underground mining, providing a material boost to Pan African’s profits.
The group started at Barberton and has since acquired two more sites in South Africa, jointly expected to produce more than 100,000 ounces of gold this year.
Overall, Pan African says it expects to deliver about 210,000 ounces of gold in the year to June, rising to around 290,000 in 2016. This is an increase of almost 40 per cent, with further gains expected in future.
Increased production, greater efficiency and a rising gold price create a potent cocktail, and brokers predict strong growth in profits this year and next, accompanied by attractive dividends, with 1.7 cents (1.3p) pencilled in for this year, rising to 1.9 cents (1.5p) next.
Midas verdict: Pan African shares are 38p and are expected to gain ground as production increases. Investors who buy now should reap the benefits.
Traded on Aim Ticker: PAF
Contact: panafricanresources.com or 00 27 11 243 2900
Greatland Gold
Six years ago Greatland discovered Havieron, a high-grade gold and copper mine in the east Pilbara region of Western Australia
Northern Star Resources is Australia’s second largest gold miner. Worth more than £15 billion, the group’s share price rose around ten-fold between 2014 and 2019, when Shaun Day was chief financial officer. Now Day is at the helm of Greatland Gold, an Aim-listed miner whose share price is expected to spike this year and beyond.
Major gold discoveries are few and far between these days, but six years ago Greatland discovered Havieron, a high-grade gold and copper mine in the east Pilbara region of Western Australia.
It’s one of the most exciting projects of recent times, with a total resource of more than 7 million ounces of gold and a pile of copper thrown in for good measure. But the area needed developing and Greatland could not go it alone, so Australian giant Newcrest came in as a partner, taking a 70 per cent stake in the mine.
Everything changed late last year. Newcrest was acquired by American mining group Newmont, the new owners wanted to streamline operations and Greatland was given the chance to take full control of Havieron, alongside Telfer, a neighbouring mine and processing plant.
Day seized the opportunity with both hands.
The deal was completed in December and is set to transform Greatland from the minority owner of a development site into a fully fledged miner, producing gold from Telfer and moving towards production at Havieron.
Newcrest even left substantial stockpiles at Telfer, allowing Greatland to generate some healthy profits from the start. Day plans to extend the mine as well, creating plenty of opportunities for future production. And Telfer has one of the largest processing plants in Australia, supporting growth there and at Havieron, expected to emerge as one of the top producers in the country.
Moving to production does not come cheap, and Day is hoping to borrow more than £500 million in bank debt to achieve his ambitions, but the potential is clear, lenders seem keen and production costs should be low once the mine is up and running. Day also intends to list Greatland in Australia alongside AIM, a move that should bolster the share price over here as investors Down Under pitch into the stock.
Midas verdict: Greatland shares are 9.7p and the business is valued on the stock market at £1.2billion. Many gold experts believe the price should increase considerably from here, as Day proves his mettle and Aussie investors come on board. With big plans ahead and serious money at stake, these shares are not for the cautious but they could deliver rich rewards, particularly with gold at current levels.
Traded on Aim Ticker: GGP
Contact: Greatlandgold.com or Gracechurch group on 0204 582 3500
Wheaton Precious Metals
On Thursday, Wheaton Precious Metals unveiled a 20 per cent increase in net profits to $640million
Wheaton Precious Metals is in a class of its own. Founded just over 20 years ago, the Canadian firm lends money to gold and silver miners around the world, in return for a share of their bounty at cut-price rates.
Starting with one asset in 2004, Wheaton now has partnerships with 18 productive mines and 29 in exploration or development.
In most of those deals, Wheaton is offered precious metals at 20 per cent of the prevailing price so chief executive Randy Smallwood will continue to make money even if gold prices fall.
Profits are also driven by the volume of metal produced, and this came in at the equivalent of 635,000 ounces of gold last year, a new record.
Smallwood now expects to increase production to 870,000 ounces by 2029, a plan which will mean robust annual results for several years.
On Thursday, the group unveiled a 20 per cent increase in net profits to $640million, accompanied by a 4 per cent increase in the dividend to 62 cents (48p).
Brokers forecast robust profit growth this year too, with a decent uplift in the dividend to 69 cents (53p).
Several deals have been signed in recent months and more are on the cards, as Wheaton has plenty of cash, a network of industry contacts and a record of wise investments.
Midas verdict: Midas recommended Wheaton in September when the shares were £47.95. Not cheap by any measure, but this is a pedigree business and the stock has since risen to £56.37. Brokers at Peel Hunt suggest a target price of more than £59, making this a quality, long-term investment.
Traded on main market Ticker: WPM
Contact: wheatonpm.com or 001 844 288 9878
Serabi Gold
Serabi owns two gold mines in the north of Brazil
According to Brazilians, ‘Brazil is not for beginners’. Aim-listed Serabi owns two gold mines in the north of the country, and chief executive Mike Hodgson has been through plenty of tough times, with Serabi shares bouncing up and down along the way.
Midas recommended the shares in 2022 at 39p – by last summer they had risen to 69p and now are riding high at £1.53.
The soaring price reflects a 13 per cent increase in gold production to nearly 38,000 ounces last year, a 45,000-ounce target for 2025 and 60,000 ounces in sight for next year.
The group’s mines, Palito and Coringa, are both in production and close enough to share processing systems.
Coringa has a longer shelf life but is operating under a temporary licence. Hodgson hopes to secure a full permit within the next year but regulation can be painstakingly slow.
Midas verdict: Serabi shares soared to £1.79 in February, fell back to below £1.40 this month and are now rising again. Optimists believe there is more to come and Hodgson is certainly ambitious for growth. Cautious investors might heed those Brazilian voices and bank gains at £1.53.
Traded on Aim Ticker: SRB
Contact: serabigold.com or 020 7246 6830
Golden Prospect Precious Metals
Golden Prospect Precious Metals invests in a basket of smaller gold mining firms
Golden Prospect Precious Metals invests in a basket of smaller gold mining firms, most of which are already in production.
The group deliberately selects lesser stocks and its reach is wide. Companies are listed in London, North America and Australia, and their mines stretch from Cambodia to Canada.
Spreading risk across a range of businesses and regions has delivered results and shares have risen consistently over the past few years.
Management believe there is more on the cards, as many miners remain relatively cheap.
Midas verdict: Golden Prospect has an impressive record and offers investors access to a global collection of miners. At 44p, the shares should deliver long-term gains.
Traded on main market Ticker: GMP
Contact: ncim.co.uk/golden-prospect-precious-metals-ltd or 020 7201 6900
