Gold Review: Petropavlovsk PLC Plunges But African Barrick Gold PLC Gains Strength

goldAfter hitting a peak of $1,345 per ounce last week, gold has slipped steadily lower and is down by 3.2% on last week’s peak, at $1,302 per ounce.

The main routes by which investors gain exposure to gold are exchange-traded gold funds such as the $33bn SPDR Gold Trust (NYSE: GLD.US) ETF, which has fallen by 3.2% over the last five trading days to $124.97, leaving it up by around 6% so far this year.

Similarly, a London-listed alternative, Gold Bullion Securities (LSE: GBS), has fallen by 2.8% to $124.70 over the last week, leaving it up by around 5% so far in 2014.

Gold miner update

Two FTSE 250-listed miners have seen contrasting fortunes over the last week.

Petropavlovsk (LSE: POG) has moved sharply lower, shedding 15% and falling to 34p over the last week, as fears over the firm’s ability to repay $310m of debt due next year, and remain within its banking covenants, have resurfaced.

Petropavlovsk’s share price popped above 40p on 7 July following a statement from management reassuring investors that its guidance for this year remained unchanged, but shareholders are clearly nervous ahead of the firm’s next scheduled trading update, on 22 July.

Heading the other way is African miner African Barrick Gold (LSE: ABG), which has climbed 7% to 242p over the last week, and is expected to report earnings of $0.27 per share this year, putting it on a forecast P/E rating of 15, with strong earnings growth pencilled in by analysts for 2015.

African Barrick is also expected to increase its dividend by 70% to 5.2 cents this year, after cutting the payout by 80% in 2013. Perhaps African Barrick’s big advantage over its Russian peer Petropavlovsk is its lack of debt — while Petropavlovsk has net gearing of 110%, African Barrick reported net cash of $140m at the end of 2013, giving it a far more solid base for a return to profitability.

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Roland Head has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.