An 18% rise in the price of gold since the start of the year has provided a favourable backdrop for the shares of London’s 30-odd listed gold explorers and producers. The majority have posted strong positive gains.
With plenty of macro factors offering continuing support for the gold price, including a doveish turn on interest rates by central banks, which UK gold stocks have momentum as star performers?
The table below shows the three top risers of the year to date (YTD), as well as their annualised 5- and 10-year returns.
|Company||Market||Share price (p)||Market cap (£m)||YTD return (%)||5yr return (%)||10yr return (%)|
|Trans-Siberian Gold (LSE: TSG)||AIM||86.5||75||153.3||50.4||16.4|
As you can see, all three stocks are listed on London’s junior AIM market, with Panthera and Xtract very much in the microcap category.
Panthera is an exploration and development company with key assets in India and West Africa. Despite the impressive 236.5% rise to 8.75p YTD, the shares are 56% below their 20p price at listing on AIM less than two years ago.
Xtract Resources is of a similar ilk but seems to have been around forever. At times, its prospects have looked promising but, as those 5- and 10-year annualised returns show, it’s been a serial disappointer.
These microcaps are far too speculative for my risk appetite. However, £75m-cap Trans-Siberian Gold (LSE:TSG) is more interesting, particularly as its YTD performance builds on decent longer-term returns. I’ll come back to Trans-Siberian after first looking at the top-performing stocks YTD on London’s Main Market, summarised in the table below.
|Company||Index||Share price (p)||Market cap (£m)||YTD return (%)||5yr return (%)||10yr return (%)|
|Hochschild Mining||FTSE 250||202||1,033||30.4||7.9||0.0|
|Polymetal International||FTSE 250||985||4,630||22.7||17.7||—|
As you can see, these Main Market stocks have delivered very decent returns YTD, which is what you’d hope for from what are essentially geared plays on the gold price.
I’ve tipped all three of these stocks in the fairly recent past, as well as currently-unloved FTSE 100 giant Fresnillo (down 27.5% YTD). I think a mini portfolio of profitable and dividend-paying gold and silver miners mitigates the impact of such things as geo-political or operational troubles at any one company. I’ve never looked at the aforementioned AIM-listed Trans-Siberian Gold before, but on examination, it looks very buyable to me for such a portfolio.
Mid-tier gold producer in the making
Trans-Siberian has made good progress since production commenced at its low-cost, high-grade Asacha mine, in 2011. The mine is located in Kamchatka in Far East Russia.
In 2018, it delivered record annual production of 42,128 ounces, and record revenue of $59.8m (£49m at current exchange rates) and earnings per share of $0.113 (9.26p). At the current share price of 86.5p, the trailing price-to-earnings ratio is an undemanding 9.3.
Dividends have become a feature in recent years. The board declared an ordinary dividend of $0.018 (1.394p) and a special of $0.052 (3.979p) last year. The trailing yield is 1.6% on the ordinary and 4.6% including the special.
Management sees good exploration potential in the area of its Asacha mine, and also holds the licence for the development of the Rodnikova deposit, one of the largest gold fields in South Kamchatka. Its ambition to become a premier mid-tier gold producer is credible, in my book.
G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.