The gold price is at $2,028 right now.
That’s up more than $300 in the past six months.
And in rand terms the price of gold is at an all-time high.
So, with gold this high – which gold stocks are benefitting the most?
Three gold stocks benefitting from the price boom
Gold stock #1 – DRD Gold
DRD Gold’s share price is up a whopping 119% in the past six months!
This is on the back of the company’s latest quarterly update released on 8 may 2023:
- Gold production increased 4%
- The average gold price the company received is up 11% in rands
- Earnings before interest, tax, depreciation and amortisation is up a whopping 54%
- All in sustaining costs are down 6%
Simply put – the company is producing more gold. It costs less to produce this gold and it is receiving more cash for each ounce.
That’s the sweet spot any gold producer wants to be in.
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A Must-Have Investment for 2023
There’s been a clear shift in investing since the pandemic. Rising interest rates are driving investors out of growth and tech stocks and into hard assets.
…and one of the big winners has been commodities.
Commodities performed well in 2021 and 2022, with rising energy prices from the war and the drive to achieve nett zero.
And the war has made fossil fuels more expensive, exposing the need for energy security.
But this energy shift is going to need massive amounts of mining.
You see, EVs, wind mills, solar panels, etc. all use more critical materials than internal combustion vehicles or coal and natural gas power generation:
It’s why the world is currently in a race to secure critical minerals for the transition.
So, if you’re looking for opportunities in this space, Josh Benton has identified five different plays to profit from the 2020’s commodities boom.
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Gold Stock #2 – Anglogold Ashanti
Anglogold is up 71% in the past six months.
The company is also a dividend payer, and it paid R8.15 in dividends over the past year – for a 1.5% dividend yield.
But perhaps the big driving force behind the company is the fact that, in partnership with Gold Fields, it is planning on creating Africa’s largest gold mine!
Gold Fields would hold two-thirds of the venture that would combine the operations of its Tarkwa mine with those of AngloGold’s neighboring Iduapriem,
the companies said in a joint statement.
Gold Fields and AngloGold have shifted their focus to more profitable mines in Ghana, Australia and Latin America as the sector in South Africa dwindles.
Gold Fields would operate the combined venture, which would have an average annual output of almost 900,000 ounces for its first five years.
To put that in perspective – Pan African Resources produces around 200,000 ounces of gold between ALL of its operations combined. This single mine will produce around four to five times that much!
“This combination puts together two parts of the same world-class ore body, allowing us to share skills and infrastructure to significantly enhance every aspect of this mining operation, from exploration and planning, to mining and processing,” AngloGold CEO Alberto Calderon said.
Gold Stock #3 – Pan African Resources
Pan African Resources is up 34.60% in the past three months, and nearly 20% in the past month alone.
The company forecast gold production of 195,000 – 205,000 ounces of gold production for the year. It’s all in production cost is around $1,291 per ounce – so at a gold price north of $2,000 it is immensely profitable.
The company has also committed to a huge growth project.
It is planning on building a new gold tailings retreatment facility at its Mintails
Project. The project has a life of mine between 13 and 21 years. The deal cost
Pan Af only R50 million, and it will be able to add 50,000 ounces of gold
production to its bottom line per year – at $1,900 per ounce the projects rate of return is 23%. So, at a price north of $2,000 it is worth a lot to the company.
Pan Af has secured funding for the project by forward selling the first two years’ worth of gold production at around $1,909/oz. That’s below the current gold price, but it secures the company the funding it needs for the R2.5 billion project – without the need of having to take on too much debt.
Construction will commence in June 2023, and steady state production should take place around December 2024. This is definitely one to keep an eye on.
Will the price of gold continue rising?
Gold is one of the oldest stores of value in the world. This ‘safe haven’ asset is a go to for investors during recessions.
It’s not a perfect indicator and depends on a lot of different economic factors, so it can be useful to see what the economic data and the Fed are doing to predict if gold might go up or down.
As for recent data, the signs are pointing to the brakes squealing on the economy – and a potential recession as a result.
Add in turmoil in the banking industry worldwide – and there’s even more reason for investors to flee to its safety.
Should inflation stay high and interest rates are paused, then gold is an option for an investor’s new best friend.
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