Gold as an alternative investable class of asset has been in prominence for some time now. It is preferred as a risk-hedging instrument and finds a place in the portfolios of large institutional and other sophisticated investors. Prior to the paper currency age, it was used widely in the form of coins as minted currency in almost all countries of the world. After the advent of the paper currency, however, it became a valuable investable asset with pricing characteristics inversely proportional to other forms of assets like equity shares of corporates. Centred around this property, investors often prefer to park their money when stock markets go down and take money out of gold to invest in equities when stock markets go up.
Stocks of gold producing companies thus are very keenly looked into during times of stock market turmoil. These companies enjoy good fortunes when gold prices go up and vice versa when gold prices go down. During the current turmoil due to the threat of the coronavirus epidemic looming large all over the world gold prices have been trending strong for the first two months of 2020. Today, we look at five small gold mining companies listed on the AIM segment of the London Stock Exchange and how they have been performing since the beginning of the year when the threat from the virus was first detected in the Wuhan province of China.
- Shanta Gold Ltd – (LON: SHG) Shanta Gold Ltd is a gold exploration, mining and production company with a focus on East Africa. The company currently holds exploration licenses covering approximately 1,500 square kilometres in Tanzania and currently has defined ore resources on the New Luika project in the country. The company’s flagship New Luika Gold Mine went into production in 2012 and has increased its production over the period, in 2019 it produced 84,506 ounces of gold. The company is part of the AIM segment of the London Stock Exchange.
The stock of the company has been performing well, since the beginning of January 2020. The price of the stock on 2nd January 2020 was GBX 9.65, since then it rose to close at the peak of GBX 12.85 on 24th February 2020 registering a growth of 33.16 per cent. The prices have fallen since to be currently trading at GBX 10.40, which is a growth of 7.77 per cent compared to the beginning of the year price as on 2nd January 2020.
The strengthening international prices of gold had been helping the company since the beginning of the year; however, the sudden rate cut by the US Federal Reserve led to fall in prices of its shares in the middle of March 2020. The stock has been on an upward trajectory since.
- Cora Gold Ltd – (LON: CORA) Cora Gold Ltd is an exploration stage, gold exploration and mining company. It has several projects under various stages of development in Mali and Senegal in West Africa. The company has a number of gold exploration permits with a total area in excess of 1,200 square kilometres. The company groups these permits into three project areas namely: The Sanankoro Project Area- in southern Mali within the Yanfolila Gold Belt, The Yanfolila Project Area- in southern Mali within the Yanfolila Gold Belt and Diangounte Project Area- in western Mali /eastern Senegal, within the Kedougou-Kenieba Inlier, also known as the ‘Kenieba Window’.
The stock of the company, which was trading at GBX 5.63 on 2nd January 2020, climbed to a peak of GBX 6.63 on 24th February 2020 registering a growth of 17.76 per cent during the period. Price has since climbed down to the current level at GBX 4.74, which is a loss of 15.80 per cent from the price on 2nd January 2020.
The excellent results from the company’s drilling campaign in the Sanankoro Project has been the primary reason for its strong stock price performance other than the recent strengthening of international gold prices.
- Serabi Gold Plc – (LON: SRB) Serabi Gold Plc is a Brazil focused Gold mining and production company. The company has two principal projects there. The Palito Mining Complex, a mine which has produced nearly 40,000 ounces of gold in 2019 and the Coringa gold project which is currently in the licence receiving phase and is expected to enter production by the fourth quarter of 2021
The stock of the company, which was trading at GBX 65.00 on 2nd January 2020, rose to a high of GBX 94.00 on 24th February 2020 registering a growth of 44.61 per cent during the period. Since then, however, the prices have climbed down, and the stock is currently trading at GBX 69.00, which is still 6.15 per cent higher than the price on 2nd January 2020.
The company is getting closer to getting a mining Licence after the Coringa public hearing. Should everything go as per plan, the company will be able to double production in a couple of years. This is the driving force behind the share price of the company.
- Highland Gold Mining Limited – (LON: HGM) Highland Gold Mining Limited is a Jersey-based gold mining and production company with mining interests in Russia. The company’s mining interests are in the region of Mnogovershinnoye and Belaya Gora, and the names of the licences are Taseevskoye, Unkurtash, Lubov, Kekura and Klen.
The shares of the company were trading at GBX 197.20 on 2nd January 2020 and rose to a high of GBX 232.80 on 24th February 2020 registering a growth of 18.05 per cent. Prices of the stocks have fallen since and are currently trading at GBX 188.60, which is a fall of 4.3 per cent from the price on 2nd January.
The adverse price movement on international gold prices has been the main reason for the recent fall in its stock prices.
- Chaarat Gold Holdings Limited – (LON: CGH) Chaarat Gold Holdings Limited is a British Virgin Islands domiciled mining and mineral exploration company with a particular interest in gold. It owns the Kapan operational mine in the country of Armenia as well as the Tulkubash and Kyzyltash Gold Projects in the country of Kyrgyzstan. The company is currently working on a plan of building a leading emerging markets gold company which is initially focused on Central Asia and the FSU growing organically and through selective merger and acquisitions.
The shares of the company were trading at GBX 35.20 on 2nd January 2020 and rose to a high of GBX 39.20 on 29th January 2020 registering a growth of 11.36 per cent. Prices of the stocks have fallen since and are currently trading at GBX 25.00, which is a fall of 28.97 per cent from the prices on 2nd January.
The strengthening of international gold prices had been the main reason for its stock price strengthening since the beginning of 2020; however, since the Federal Reserve of the United States cut its rates the share prices have not been able to recover.