Rising gold price helps burnish mining stocks

The price of gold has jumped almost 20 per cent since the end of last year to trade above US$1,250 per ounce in recent weeks.
The price of gold has jumped almost 20 per cent since the end of last year to trade above US$1,250 per ounce in recent weeks.PHOTO: REUTERS

Two SGX-listed gold miners post double-digit gains this year while another had dull debut on Catalist

The surging gold price has lifted gold mining stocks in Singapore.

The precious metal has jumped almost 20 per cent in price since the end of last year to trade above US$1,250 per ounce in recent weeks.

Of the three gold miners listed on the Singapore Exchange, two have bucked the bearish tide across the wider market to notch up double- digit gains so far this year, according to an SGX My Gateway report.

CNMC Goldmine Holdings has shot up 21.7 per cent this year. The Singapore-headquartered miner started operations in 2006 and had produced more than one tonne of gold bullion as of July 2014. It is focused on developing a gold field in Kelantan, Malaysia.

The other counter - Wilton Resources Corp - has gained 13.8 per cent in the same period. The firm is involved in exploration in West Java, Indonesia, and has yet to start any gold production.

But the third gold miner, Anchor Resources, failed to impress on its debut on the Catalist board yesterday. The counter closed at 14.6 cents, 42 per cent below its initial public offering price of 25 cents. It has mining and production facilities in Terengganu, Malaysia.

Analysts told The Straits Times that while mining stocks tend to rise and fall in tandem with the price of the precious metals or commodities that they extract, it is also important to look closely at the operations and structure of each firm.

"Anchor Resources' IPO value of $69.9 million seems steep compared to CNMC's $89.6 million market capitalisation," said NRA Capital research director Liu Jinshu. He said Anchor Resources has reported resources of only 114,000 ounces of gold valued at US$19.2 million (S$26 million), while CNMC has 0.5 million ounces.

"Hence, investors may have been spooked."

The combined market capitalisation of the three miners is about $290 million, which is within the top two-fifths of the largest listed gold miners in the Asia-Pacific.

There are about 110 gold miners listed in the Asia-Pacific region, with Australia accounting for the bulk at 86 listings. Mainland China comes in a distant second with nine listings. Hong Kong has four while the Philippines and Singapore have three each.

But the nine mainland listings account for more than half of the total market capitalisation in the Asia-Pacific, at $40 billion, while the value of the 86 Australia listings is about $23 billion.

Gold miners in Australia have performed the best in the year so far within the region, with returns averaging 33.4 per cent.

Miners in the Philippines are in second spot, with 30 per cent returns, while the two Singapore players' 17.7 per cent gains put them in third place regionally.

According to the World Gold Council, the supply of the precious metal has become less geographically concentrated as more countries emerge as substantial gold producers in recent decades.

Mining companies may often take up to 10 years or longer to develop their gold mining projects and bring them to production. This means they cannot easily respond to immediate market conditions.

As the process of gold exploration could be expensive, some smaller companies may also need to do additional fundraising to finance this stage of development.

A version of this article appeared in the print edition of The Straits Times on March 19, 2016, with the headline 'Rising gold price helps burnish mining stocks'. Print Edition | Subscribe