Since the start of the year the price of gold has risen by 9.2%. This has caused a number of gold miners to record increasing share prices during the same time period. Although President Trump’s spending plans have not yet come to fruition and global inflation is not as high as many investors had anticipated, there remain a number of risks present which could send the price of gold higher.
For example, political risks in the US and Europe could lead to greater uncertainty, while increased spending in the US and the ECB’s quantitative easing programme may produce higher inflation over the medium term. In such conditions, the price of gold could perform relatively well. That’s why these two gold miners could be worth buying for the long run.
Encouraging progress
SolGold (LSE: SOLG) updated the market on Friday regarding assay results from its copper-gold porphyry project in Ecuador. Assay results from Hole 23R at Cascabel were delayed in the laboratory, but Hole 24 intersected at 160 metres and it represented a robust mineralising porphyry system at depth. Hole 25 intersected at 776 metres and it includes a high-grade panel of intense bornite mineralisation.
As well as an update on its Cascabel project, SolGold also reported that its application to list on the Toronto Stock Exchange (TSX) has been successful. This could help to provide the company with a trading platform for Canadian investors, which could increase demand for its shares over the medium term.
Having risen by 65% since the start of the year, investor sentiment towards SolGold appears to be extremely positive. Increases to the price of gold could help to push it further, while its asset base appears to have the potential to deliver improving financial performance in future years.
Solid growth potential
While SolGold is a relatively small business which is not yet turning a profit, fellow gold miner Fresnillo (LSE: FRES) offers rising bottom-line growth over the next couple of years. It is expected to report a rise in its earnings of 28% in the current year, followed by growth of 32% next year. This is clearly dependent upon how the gold price performs, but with the company also being the world’s largest silver miner, it does have more diversity than a pureplay gold miner.
Furthermore, Fresnillo trades on a price-to-earnings growth (PEG) ratio of just 0.8 at the present time. This suggests that there could be additional upside potential following its share price growth of 31% since the start of the year.
As well as capital growth potential, Fresnillo offers a bright future as an income stock. Dividends are expected to rise by 32% next year. This puts the company on a forward yield of 1.8% and with dividends covered more than twice by profit, further growth could be on the horizon.
