The coronavirus is having a widespread impact on mining companies around the world, and many investors have been left wondering where to put their money during this uncertain time.
To answer that question, analysts at Canaccord Genuity’s Australian division recently released a report that identifies ASX-listed gold companies that may be positioned to withstand the current environment.
The firm focused on companies that check a number of boxes, such as asset diversity, higher ore stockpile levels, balance sheet strength and hedge exposure. It also favours companies with low exposure to fly in/fly out operations, as travel restrictions have made it harder for them to operate.
It’s worth noting that Canaccord is bullish on gold and emphasizes in its report that it sees operational disruptions as a short-term, surmountable issue for companies, not a long-term problem.
“We take the view that the inherent value of the assets are not greatly impaired from any short-term production cuts, and as such suggest that equities are potentially already pricing in the possibility of operational disruptions,” states the firm.
Read on to learn about Canaccord’s five ASX-listed gold picks for the coronavirus outbreak.
Canaccord breaks its recommendations into three groups, with the first being mid-cap producers.
1. Evolution Mining (ASX:EVN,OTC Pink:CAHPF)
Evolution Mining describes itself as the third largest ASX-listed gold miner. It has five gold mines, all in Australia — three in Queensland, one in New South Wales and one in Western Australia.
During its last fiscal year, the company produced 753,001 ounces of gold, and for 2020 its guidance is set at around 725,000 ounces. The company said on April 1 that it is taking precautions regarding the coronavirus, and so far its operations have not been materially impacted.
Canaccord describes Evolution as “perhaps the most resilient” to possible COVID-19 impacts for a variety of reasons, including its low fly in/fly out exposure, diverse asset base and safe balance sheet.
2. Saracen Mineral Holdings (ASX:SAR,OTC Pink:SCEXF)
Gold-focused Saracen Mineral Holdings has two wholly owned operations in Western Australia, plus 50 percent ownership of the Super Pit, which is situated in the same state. Its stake in the Super Pit comes through its recently purchased 50 percent interest in the Kalgoorlie Consolidated Gold Mines joint venture. Northern Star Resources (ASX:NST,OTC Pink:NESRF) holds the other half.
Saracen’s gold production during the 2019 fiscal year was 355,000 ounces; guidance for 2020 is set at over 500,000 ounces. COVID-19 has so far not impacted its output, although the company said on March 27 that this could change as the situation develops.
For Canaccord, Saracen’s appeal stems from a number of factors, including its 100 percent exposure to the gold price in Australian dollars and its potential for organic production growth at the Super Pit.
Canaccord also provided two options in the small-cap producers category.
3. Resolute Mining (ASX:RSG,LSE:RSG,OTC Pink:RMGGF)
Resolute Mining has three gold mines in Africa. Syama, located in Mali, is its flagship asset, and its other operations are in Senegal and Ghana.
In its 2019 fiscal year, Resolute poured 384,731 ounces of gold, and its guidance for this year is set at 430,000 ounces. In an April 6 release, the company said it continues to monitor how COVID-19 may impact the company. Like Saracen, it said any disruptions could have a negative impact.
Among other things, Canaccord points in its note to the company’s strong stockpile levels across all its assets, as well as Resolute’s ramp-up at Syama, which could potentially be a stock catalyst.
4. Silver Lake Resources (ASX:SLR,OTC Pink:SVLKF)
Gold producer Silver Lake Resources’ main property is the Mount Monger Gold Camp in Western Australia, and it also operates the Deflector gold-copper mine in the state.
The company’s gold production for its 2019 fiscal year clocked in at 166,695 gold equivalent ounces, and in 2020 it expects sales to come to 240,000 to 250,000 gold equivalent ounces. It does not appear to have issued any updates on COVID-19.
According to Canaccord, Silver Lake has “(o)ne of the safest balance sheets among Australian gold producers,” plus production growth potential.
Development and exploration
Finally, the firm shared one pick in the development and exploration stage.
5. Bellevue Gold (ASX:BGL)
Bellevue Gold is moving forward at the past-producing Bellevue gold mine in Western Australia. According to the company, it was previously one of the country’s highest-grade gold operations.
The company’s latest update came on March 12, when it shared its half-year financial report. It said at the time that it was anticipating a resource upgrade at Bellevue in the second quarter; there has been no indication on whether the coronavirus is affecting Bellevue’s work.
Canaccord desbribes Bellevue as as being among the highest-grade development opportunities, with resource growth potential and strong newsflow.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.