Gold’s Splendid Isolation – by David Fickling (Bloomberg News – August 9, 2017)

Ancient alchemists believed that gold was the noble metal: Incapable of reacting with other minerals, it could exist only in its unsullied elemental form. Investors believe something similar about gold mining companies.

Like the alchemists — who later discovered that the yellow metal could be turned into a variety of useful chemical compounds — they might be making a mistake. Of the top 20 producers globally, almost all are pure-play miners that are only really serious about producing gold itself.

The exceptions — Freeport-McMoRan Inc. and Glencore Plc — end up on the list simply because their copper mines also contain a few veins of the more valuable stuff, which they can sell to make a bit of cash on the side. The world’s biggest miners don’t produce much gold, and the biggest gold miners produce little else.

That’s an exception to the general rule, which sees mining companies produce a spread of minerals. Put together a portfolio of iron ore, aluminum, coal and copper ETFs and you have a decent proxy for Rio Tinto Group. Swap the aluminum for nickel, and you’re looking at Vale SA; exchange it for platinum and diamonds, and you can mimic Anglo American Plc. Switch it for a barrel of oil, and it’s BHP Billiton Ltd.

Why should gold be different? Though a barbarous relic, it’s clearly consumed in substantial volumes. In terms of the value of global production, only coal and iron ore bring in more money to mining companies. Its popularity among Indian and Chinese jewelry-buyers suggests it’s also highly leveraged to growth in emerging economies, in a way that’s been fashionable among major miners for well over a decade.

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