Five gold stocks on the London Stock Exchange amidst the Coronavirus scare -GGP, POG, CGNR, POLY, FRES

The coronavirus pandemic has brought down business activities across the world to a grind. The London Stock Exchange has seen one of its worst rundowns since the beginning of the epidemic as has not been seen for a while. As more and more companies issue revenue and profit warnings, it is highly likely that the markets will remain subdued for an elongated period of time. Investors during these times look for alternative asset classes where they can park their money; The asset prices either remain stable or have an inverse relationship with stock market performance. Gold prices since the beginning of January 2020 till the beginning of March have already registered a growth of more than 10 per cent and so have the prices of several such precious metals which enjoy the status of a strong alternative investment asset class.

Gold has traditionally been used as an effective hedging instrument against the risks of inflation, deflation economic shocks and currency devaluation because of its property of being accepted in lieu of currency across political and economic boundaries. Gold, during large parts of the last millennia, had been used as a currency and the most valuable metal till the advent of platinum, rhodium and other such metals due to their niche industrial applications. Replaced mostly by paper currency in that role, gold, however, continued to enjoy its status as one of the most highly valuable metals mostly on account of its ornamental value and as a risk-hedging instrument to protect against financial and economic distress.

Gold producing companies thus enjoy a period of good fortune during times of war, recessions and events like the current global coronavirus pandemic, when an exponential rise in gold prices are registered. The stocks of these companies as a consequence are also some of the most sought after during these periods and represent a bright spot within a stock exchange when everything else looks gloomy or morbid. Today, we look at five gold stocks listed on the London Stock Exchange and how have they performed since the beginning of 2020.

1. Greatland Gold Plc (LON:GGP) is a Western Australia, and Tasmania based gold mining and production company. The company has five mining projects in the country, which include the Warrentinna project, the Firetower project, the Bromus project, the Ernest Giles project and the Havieron project.

The stock of the company which was trading at GBX 1.83 on 2 January 2020 rose to a high of GBX 5.68 on 11 February 2020 registering a growth of 210.00 per cent during the period. Since then, however, the prices have climbed down and are currently trading at GBX 2.86, which is still 56.00 per cent higher than the 2^nd January 2020 price.

A spate of good news regarding excellent drilling results from its Warrentinna project in Tasmania, Australia has been the reason behind the uptrend of its stock other than the recent spike in world gold prices.

2. Petropavlovsk Plc (LON:POG) is a London Stock Exchange-registered Russian gold mining and production company. With most of its operations based in the Far East of Russia, it is one of the major gold mining companies in Russia, in terms of production, reserves and resources.

The stock of the company has been performing well, after a minor fall at the beginning of January 2020. The prices of the stock as on 2 January 2020 was GBX 12.70, which fell to GBX 12.12 on 10 January 2020; since then it rose to close at the peak of GBX 22.00 on 4 March 2020 registering a growth of 81.51 per cent. The prices have fallen since to be currently trading at GBX 15.88, which is a growth of 25.00 per cent compared to the beginning of the year price as on 2 January 2020.

The price of the stock of the company has grown in the past couple of months, mostly on account of the strength in international prices of gold.

3. Conroy Gold and Natural Resources Plc (LON:CGNR) is the United Kingdom registered gold mining company that has a focus on Ireland and Finland. The company has a 100 per cent interest over an area in Ireland that is estimated to have 8.8 million ounces of gold deposits. The company has in the recent past, drilled several exploration holes which have confirmed the assertions.

Since the beginning of 2020, the stock of the company has been on an exponential growth path. The stock of the company, which was trading at GBX 6.05 on 2 January 2020 climbed to a peak of GBX 17.75 on 4 February 2020 registering a growth of 193 per cent during the period. Prices have since climbed down to the current trading level at GBX 9.50, which is still a growth of 57.02 per cent compared to the price of 2 January 2020.

The highly encouraging drilling results of the company’s exploratory drilling campaign has been the primary reason for its strong stock price performance other than the recent general strengthening of international gold prices.

4. Polymetal International PLC (LON:POLY) is a Cyprus based gold and silver mining and production company. Â The company has a portfolio of nine high-quality mines having a low-cost asset base, and low-cost operations in Kazakhstan and Russia. The company currently the largest gold production company in Russia. The company is listed on the London Stock Exchange and is a member of the FTSE 350 index and is also listed on Moscow Stock Exchange.

The shares of the company were trading at GBX 1,191.50 on 2 January 2020 and rose to a high of GBX 1,345.00 on 24 February 2020 registering a growth of 12.88 per cent. Prices of the stocks have fallen since and are currently trading at GBX 1,129.00 which is a fall of 5.2 per cent compared to 2 January 2020 prices.

The company is one of the largest gold companies listed on the London Stock Exchange, and its stock is a component of the FTSE 100 index. The adverse price movement on international gold prices has been the main reason for the recent fall in its stock price.

5. Fresnillo PLC (LON:FRES) is a Mexico based precious metals exploration and production company. The company is mainly interested in gold and silver and produces the same from two of its mining assets in the country from the seven licenses that it holds. Out of the rest five, two are in the development phase and three in the exploration phase. The group became a listed company on the London Stock Exchange only in 2008, and its stock is a component of the FTSE 250 index.

The shares of the company were trading at GBX 664.00 on 2 January 2020 and rose to a high of GBX 735.00 on 24 February 2020 registering a growth of 10.67 per cent. Prices of the stocks have fallen since and are currently trading at GBX 641.70 which is a fall of 0.3 per cent compared to the 2 January 2020 prices.

The adverse price movement of international gold prices has been the main reason for the recent fall in its stock prices.

The international prices of gold have been weakening for the past two weeks. The US Federal Reserve has reduced its interest rates twice in the past fortnight, whereby it has been reduced to a low of 0-0.25% per cent. Prices of most of the gold stocks could, thus, experience weakness in the next couple of weeks.