Gold’s record run to almost $2 000 an ounce has burnished cash flows and driven a surge in shares of bullion producers. The rally provides a renewed test of discipline for Barrick Gold and peers after a similar climb a decade ago prompted a spate of inflated deals and overly optimistic investments that wasted billions.
The 2020 redux isn’t being fuelled by traditional demand: The China Gold Association says consumption in the world’s biggest buyer plunged by more than a third in the first half. Instead, it’s a combination of low bond yields, pandemic worries and institutional investor appetite.
Silver has also rallied, breaking through $24 an ounce this week to its highest since 2013. Precious metals aren’t always predictable, but Covid’s stubborn resistance means the general picture is unlikely to change soon.
For gold-mining companies, this is becoming a test of memories. With costs contained even after pandemic-related closures, virtually all are churning out impressive cash: In the first three months, Toronto-based Barrick alone generated $438 million in free cash flow based on a realised price of not far off $1 600, compared to $146 million a year earlier. Valuations look better too, especially for the sector’s largest players.
For the rest of this article: https://www.moneyweb.co.za/news-fast-news/gold-miners-get-a-shot-at-redemption/