Golden opportunities: 7 companies for adding gold exposure to your portfolio
The price of gold has remained stubbornly high, defying its usual inverse relationship with interest rates. While high-yielding bonds typically become a preferred safe haven during interest rate hikes, demand for gold has stayed strong. Speculation has grown that China and Russia might be stockpiling gold as a means of diversifying assets away from the influence of the US. Additionally, concerns about an impending recession have bolstered demand for safe havens, with gold also being viewed as a valuable hedge against inflation.
As central banks consider slowing down the pace of rate hikes or even implementing rate cuts, gold could see further gains in the near future, reestablishing its traditional inverse correlation with interest rates and potentially surpassing its previous all-time high set in August 2020 at US$2,074.88. Indeed, many mainstream analysts and asset managers are now forecasting gold to reach US$2,500 and beyond. The recent decline in the US dollar, impacted by changing market expectations for Fed hikes, has also enhanced gold's appeal, as it becomes more affordable for buyers using other currencies, especially in developing countries.
Indeed, central banks and sovereign wealth funds throughout the developing world have been stockpiling gold, from aforementioned Russia and China who may be hedging against existing or possible future sanctions, to Turkey, Argentina, Pakistan, Qatar, and many others that are seeing rising economic and geopolitical uncertainty.
In this context, investors may be looking to follow central banks' example and diversify their portfolios with gold and gold-related equities. In our view, small and mid-cap gold miners are particularly attractive options as they often provide broader exposure to the precious and critical metals sector, which is set for continued growth amid the EV/renewables revolution.
Below are 7 companies we recommend investors consider for adding gold exposure to their portfolio:
Hummingbird Resources
() is an Africa-focused gold explorer listed on AIM since 2010. The company currently has two core gold projects, the Yanfolila Gold Mine in Mali, and the Kouroussa Gold Project in Guinea. In addition, it has a 51% controlling interest in the Dugbe Gold Project in Liberia with joint venture partner Pasofino Gold.
Hummingbird recently announced first gold pour at Kouroussa. The mine was commissioned in early May 2023, and having achieved first gold pour, is now expected to ramp up to commercial production during H2 2023. Kouroussa is Hummingbird's second operating gold asset in West Africa, expected to produce an average of 120,000 to 140,000 oz of gold in its first 3 years of commercial production, and an average of 100,000 oz per year over its current life of mine (LOM) at an AISC profile of c. US$1,000 per oz.
With Kouroussa operational, Hummingbird's production has more than doubled to 200,000+ oz per year, transforming it into a multi-asset, multi-jurisdiction gold producer. With first gold pour achieved ahead of Q2 schedule, the company is now focused on ramping up to name plate production, expected in H2 2023.
Underpinned by a US$17.1m fundraise completed in March, further exploratory drilling is taking place at Kouroussa with potential LOM upside expected in H2 2023. A more detailed update on company-wide FY 2023 guidance is expected later this year.
At Yanfolila, Hummingbird's other West African asset in Mali, performance improved significantly in Q4 2022 and Q1 2023 following production challenges last year. Yanfolila is now cashflow positive with a view to bringing its underground mine online by the year-end for a full year of production in 2024.
In its most recent full-year results for FY22, Hummingbird reported sales of US$143.3m (FY21: US$156.6mn) from 80,445 oz of gold sold at an average price of US$1,782/oz (FY21: 87,553 oz sold at an average price of $1,788/oz), with an additional US$7.0m (FY21: US$6.2m) of revenue generated from sale of Single Mine Origin (SMO) gold. Gold production was 28,264 oz at an AISC profile of US$1,248 per oz, leading to a materially improved group EBITDA of c. US$11m for Q4 2022.
Hummingbird's reserves increased significantly to 4.13 million ounces (Moz) in FY22, compared to 1.12 Moz in FY21, following extensive drilling campaigns completed at Yanfolila and Kouroussa in 2021 being converted into Reserves, and the completion of a Definitive Feasibility Study (DFS) in June 2022 on Dugbe in Liberia.
Dugbe's DFS was completed by JV partners Pasofino Gold and showcased a high pre-tax NPV of US$690m, a significant 2.76Moz reserve base, long life of mine of 14 years, with upside given material exploration potential available, and a low AISC profile of US$1,005 per oz.
With Yanfolila's performance materially improving and Kouroussa operational, Hummingbird is at a value inflection point. After a tripling of its reserves to 4.1Moz last year, the company has strong momentum into H2 2023 and beyond.
Alba Mineral Resources
' () mineral exploration portfolio is comprised of gold, graphite, ilmenite, base metal and iron ore projects in the UK and Greenland. Alba's focus is on on unearthing and developing high-value projects that have benefited from previous mining. In its most recent half-year results, the company reported significant progress across its portfolio.
Having now acquired full ownership of the Clogau-St David's Gold Project in north Wales, Alba made significant progress in identifying valuable high-grade gold resources at the Lower Llechfraith and Main Lode Extension targets. Next, investors should expect a submission of updated technical reports and permit applications in September.
Furthermore, Alba's exploratory efforts at Clogau-St David's historic waste tip have yielded promising results, indicating the potential for profitable standalone mining. Following clearance from Natural Resources Wales (NRW), the company dug five pits in a 400m2 area to collect samples, with independent assaying of these revealing impressive gold grades of up to 11.35 g/t, with an average grade of 3.50 g/t across the samples, consistent with Phase 1 findings.
The gold was found to be concentrated in the finest extracted material from the waste tip, as indicated by size fraction analysis. Presently, Alba is conducting an economic assessment of the waste tip's potential, with the intention of developing a comprehensive mining plan and submitting a formal application for gold extraction from an estimated 4,000 tonnes of fines material.
At the company's other exploration licences - the Gwynfynyndd Gold Mine located north of Clogau and the wider 188 km2 Dolgellau Gold Exploration Project (DGEP) - Alba is advancing plans for more exploration work to define resources in previously unmined areas. These include a new high-grade regional gold target, Hafod Owen, which was identified in July 2021, with grab samples grading up to 24 g/t.
In summary, steady progress across Alba’s portfolios is encouraging, and the company has expressed confidence in gaining the necessary permits to take its now-100%-owned Welsh gold projects to production.
Alba is also majority owner of () whose flagship Amitsoq asset in Greenland has been confirmed one of the highest-grade graphite deposits in the world. Amitsoq has a resource estimate of 23.05 Mt at an average grade of 20.41% graphite, following January's 3x resource increase.
The European Raw Materials Alliance has endorsed the Amitsoq project as a "graphite resource of global importance" that will "enable the European Union to achieve a certain level of independence for the electrical vehicle supply chain". Previously, GreenRoc had confirmed that Amitsoq graphite could be purified to exceed the EV battery requirement of 99.95%. With global demand for graphite expected to soar, Amitsoq's vast deposit is set to play a key role in the transition to Net Zero.
Rockfire Resources
() is a precious, base metal, and critical mineral explorer with mostly 100%-owned gold/silver/copper assets in Australia, and a zinc/lead/silver asset in Greece. The company has continually added value to its portfolio through acquisitions and upgrades of JORC-compliant mineral resources in its core commodities. Rockfire's portfolio comprises of:
The Plateau deposit in Queensland with a JORC resource of 131,000 oz of gold and 800,000 oz of silver, using a 0.5g/t Au cut off, with 53,000 oz within the top 100m from surface. The Molaoi deposit in Greece has a JORC resource of 210,000 tonnes of zinc, 39,000 tonnes of lead and 3.5 million oz of silver, using a 4% Zn cut off. Finally, Rockfire's Copperhead deposit in Queensland has a JORC resource of 80,000 tonnes of copper, 9,400 tonnes of molybdenum and 1.1 million oz of silver, using a 0.13% CuEq. cut off.
While Rockfire's gold assets are significant with 131,000 oz of gold at Plateau, the company is a good polymetallic investment to add to a commodities or renewables portfolio aiming to gain from the expected surge in demand for critical metals essential to achieving Net Zero targets. Rockfire is perhaps best known for its flagship Molaoi polymetallic deposit in Greece, which continues to make headlines.
Most recently, Rockfire reported that its geotechnical drilling programme at Molaoi uncovered yet more high-grade zinc, lead, and silver with peak values of 29.8% Zn, 3.3% Pb, 204.0g/t Ag. The results elicited a strong reaction from investors who have pushed shares 94% higher year-to-date.
Malaoi has improved its prospectivity with each geotechnical hole drilled. Rockfire's predicted position and depth of the zinc lodes has continued to prove its geological model correct, and the high grades of zinc have outperformed expectations. Assay results from 2 remaining holes are expected in the coming months. In addition to the strong zinc continuity found so far, particularly encouraging is the positioning of the deposits, which tracks the findings of the Greek government from the 1980s.
Rockfire acquired the Molaoi deposit in March 2022 and on 23 May 2022 delivered a maiden JORC mineral resource of 2.3 million tonnes @ 11 % ZnEq for 250,000 tonnes of ZnEq. In August 2022, Rockfire announced that metallurgical test work on the Molaoi historical core returned recoveries of zinc (89% Zn) and lead (74% Pb). Additionally, commercially saleable grades of zinc (57% Zn), silver (856 g/t Ag), lead (63.6% Pb), germanium (117 g/t Ge), copper (2.62% Cu) and gold (0.52 g/t Au) were readily returned.
Positive results from Molaoi continue to support Rockfire's rapid timeline to production. Based on results so far, we expect a resource upgrade soon, followed by a feasibility study later this year. In addition to the high grades of zinc and other metals recovered, the confirmation of multiple lodes should result in a significantly increased tonnage and future profitability of the project.
Financially, Rockfire reported a narrowed loss of £614k in FY22 compared to £907k in FY21. The capex invested in Molaoi's exploration is set to yield significant revenues once production commences, offering a clear path to profitability.
Chaarat
() is an AIM-listed gold producer that owns the Kapan operating mine in Armenia as well as the Tulkubash and the Kyzyltash gold projects in Kyrgyzstan.
In its recently announced FY22 results, Chaarat said its flagship Kapan mine in Armenia had produced 62,800 gold equivalent ounces (AuEq koz) compared to its FY22 production guidance of 56-62 koz. Mined tonnes increased by 8% from last year to 649,311 and reserves increased by 25% as a result of the extensive drilling campaign carried out in H2 2021 to end of Q3 2022.
In Kyrgyzstan, development of the Tulkubash project awaited financing pending discussions, and at Kyzyltash test work by SGS Lakefield showed strong recoveries for all 3 methods employed, to be used in an economic trade-off study to determine the best processing option.
Post-period, Chaarat signed a non-binding letter of intent in May 2023 with Xiwang International for a potential equity investment of US$250m. Also in 2023, working capital facility arrangements were put in place with a short-term loan provider. US$2.0m has already been drawn down with a further US$2.0m available.
Looking ahead, Chaarat expects 50-55 koz of own production plus 5-10 koz of 3rd party production at Kapan in FY23. Resource definition drilling is continuing at Kapan East Flank with results expected later this year. The company is also taking steps to mitigate the adverse foreign exchange rate impact on Kapan operations, expecting a stabilisation of costs in 2023. Financing options are being considered for the Kyrgyz projects.
Chaarat's financial performance in FY22 was lacklustre with largely unchanged revenues and a wider loss of US$8.6m. This was largely due to the unfavourable economic environment in Armenia in 2022, with a 23% appreciation of the Armenian Dram resulting in an EBITDA decrease of 52% compared to FY21. Furthermore, higher energy costs and inflationary pressures exacerbated by the war in Ukraine resulted in substantially higher costs.
Still, Chaarat exceeded its FY22 production guidance and revenues remained stable. Should the company manage to stay funded in the medium-term, we expect long-term profitability based on Kapan's economics and further exploration potential, and promising results from Kyrgyzstan. In the short term, Chaarat offers an attractive value proposition.
Wishbone Gold
() is an AIM-listed gold and precious metals explorer with 3 major assets in Australia - two located in the Pilbara region of Western Australia, and the third in the Mingela-Charters Towers region in Queensland.
The company’s flagship project is Red Setter, considered to be analogous to Newcrest's Telfer mine 13km to the southwest. Red Setter is a Havieron-style gold prospect. Cottlesloe, 35km south east of Red Setter, has deposits visible at surface of silver and lead - metals which are essential for battery and EV production.
In Queensland, the Wishbone II project has almost doubled recently with the addition of Wishbone VI. The area is believed to host deposits similar to the Ravenswood mine located to the southeast. Wishbone's RC drill programme at Wishbone II and IV took place last year with good copper and gold mineralisation found throughout multiple holes drilled.
In its most recent results for FY22, Wishbone reported a year of progress with positive development across its Australian portfolio. The 2022 exploration season began in March with obtaining additional Heritage Clearance surveys on Red Setter and Cottesloe. Wishbone said its drill programme on Red Setter produced positive results with every hole drilled, returning grades of copper or gold with "significant intercepts", although it did not detail the results. Furthermore, Wishbone acquired the Anketell project in 2022, completing magnetic modelling over the promising large anomaly in the centre of the tenement.
In April 2023, Wishbone highlighted a a survey that determined that Red Setter is an analogue of Newcrest's Telfer mine located 13km away. The significance of this is that Telfer is a major deposit with low, but viable grades across a large area, contrasted with Greatland's Havieron project, which is a high-grade deposit within a much smaller area than Telfer or Red Setter. Both types of deposit are equally viable as has been shown with the long-term success of the 20 million oz of gold mined from Telfer.
Overall, Wishbone saw promising results from its extensive drill programmes in 2022 at Red Setter and Wishbone II and IV. In 2023, the company also acquired the acreage at Cottesloe East, contiguous to the existing Cottesloe project, for its prospectivity and strategic location. Based on reports so far, the company's assets appear to hold significant value. Wishbone's losses last year narrowed to £1.1m from £1.2m the year before, with cash at the year-end of £1.45m.
Serabi Gold
() is a Brazil-focused gold explorer. The company's primary interests are its 100%-owned Palito Mining Complex and recently acquired Coringa Gold Project, both located in the Tapajos region of northern Brazil. Combined gold production from Palito is currently at c. 40,000 oz per year, while the Coringa project is forecast to reach c. 38,000 oz per year.
Both mines are narrow vein underground operations with mined ore grades typically between 7.0 g/t and 9 g/t being achieved. The company acquired Coringa in December 2017 and is currently in the process of obtaining permits needed to commence the development of a plant, which had been acquired by the previous owner.
Serabi's gold production in Q2 2023 totalled 8,518 oz, a 6% improvement from Q1 2023. Mined grades were 6.94 g/t gold, the highest since Q3 2021, with grades at Palito averaging 6.68 g/t gold, and grades at Coringa averaging 7.83 g/t gold. Coringa's buildout continued to progress, with development ore transported to Palito's plant contributing over 2,000 oz of total gold production for the quarter.
Serabi is also collaborating with Vale Exploration Alliance on a new project at the Matilda copper porphyry prospect, with first phase drilling completed comprising of 7 holes for 3,200m. Samples results are pending, and a second round of drilling is planned.
The company is on course to meet its full-year production guidance of 33,500-35,000 oz. Cash held on 30 June 2023 was US$13.3m compared to US$7.2m six months ago.
Shanta Gold
() is an East Africa-focused gold producer. Alongside its Tanzanian assets - the New Luika Gold Mine and the Singida Gold Project - Shanta also owns the West Kenya Project in Kenya with defined high-grade resources and prospecting licences.
Shanta shares recently jumped on record Q2 production from its East African assets, following first gold pour at Singida on 30 March 2023. Total production jumped to 29,403 oz, up 92% from Q1 2023. New Luika production rose 26% quarter-on-quarter, and Singida contributed 10,065 oz after production commenced in March.
Net debt of US$8.7m was also down 54% from US$19m in Q1 2023, and adjusted EBITDA was up 209% to US$23.2m quarter-on-quarter. AISC exceeded expectations at US$904/oz from US$1,181/oz in Q1 at New Luika, and US$579/oz from US$736/oz in Q1 at Singida.
Cash jumped to US$25.0m on 30 June 2023 from US$11.5m in Q1, including a US$4.0m undrawn working capital facility. The company maintained its ambitious 2023 production guidance of 90,000-98,000 oz gold.
Overall, Shanta's Q2 performance validated its M&A and diversification strategy. With an adjusted EBITDA increase of 209% on Q1, a material increase in production and improved liquidity from Singida, record production at New Luika, and further room for growth at Singida and West Kenya, there is significant upside for Shanta Gold.
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The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.