Pan African Resources Share Discussion Threads

[stonedyou] 13/9/2024 13:23

Pan African Resources PLC (OTCQX:PAFRF) Q4 2024 Results Conference Call September 11, 2024 5:00 AM ET

Company Participants

Cobus Loots - Chief Executive Officer
Deon Louw - Financial Director
Hethen Hira - Investor Relations

Conference Call Participants

Cody Hayden - Berenberg

Cobus Loots

Good morning to all of you, and a warm welcome to our 2024 Final Results Presentation. Thank you very much for taking time of your schedules to join us today. We will keep the presentation fairly brief with an opportunity for questions afterwards.

Joining me and presenting today will be Deon Louw, our Financial Director. You're welcome to refer to our SENS or in Ace announcement and to the supplementary information available on the Pan African website, should you require detail not dealt with in today's presentation. Please note the disclaimers and information on forward-looking statements on Slide 2 and Slide 3. Pan Africanstrategy is to position ourselves as a safe and sustainable, high-margin and long-life gold producer. I believe the last year, again, demonstrated Pan African's resilience our ability to generate attractive returns on our assets to grow in a responsible and value-accretive manner and to continue to pay a sector-leading dividend to our shareholders.

In terms of dividends, we have paid almost $200 million to shareholders in the last 10 years. Today also marks the 10th instance that I am presenting the year-end results as Pan African CEO. Reflecting on the last decade, it wouldbe fair to say, the group, on occasion experienced tumultuous times. We don't get everything right all of the time. I think that is not possible in business, and certainly not in mining.

What is, however critical, is to demonstrate tangible value creation for all stakeholders over the long term. And I believe Pan African can be proud of our record in this regard. Today, we have the added tailwind of a gold price pretty much at record highs in U.S. dollar and rand terms and also a generally bullish view in the market on the metal short- and medium-term prospects. Let me assureyou that the gold price windfall will not be wasted on Pan African.

We are using the opportunity to invest into our assets for the long term to deliver on production growth that will benefit the group for many years to come and to continue to provide excellent returns for our shareholders. We are incredibly excited about our prospects for the next years, and I look forward to sharing some thoughts and further detail on many of our initiatives and plans in the following slides.
On slide number 4, an overview of the presentation. We'll start with Pan-African Health and Safety performance, which is obviously critical in our business, and then provide an overview of the group and our operating environment, some key features from the past year, including our new exciting operation at MTR and detail on asset performance as well as our cost and capital outlook. We will then spend a couple of minutes on ESG before allowing Dion the opportunity to highlight elements of the group's financial performance for the 2024 financial year.

The presentation will then conclude by outlining focus areas for the year ahead. If we then proceed to Slide number 6, our safety performance and our journey to Zero Harm. We continue to focus on safety initiatives and interventions and on maintaining an industry-leading record. We can also celebrate a number of safety milestones achieved during the last year. During our interim results, we report on the tragic fatal accident at Elikhulu earlier in the year. We are doing our utmost to ensure that the group has a safe year ahead.

Slide number 8, a high-level representation of our unique portfolio of surface re-mining and underground assets. The addition of MTR or Elikhulu Mintails means that we now have three large mining complexes in South Africa, surface operations, reduce unit costs and turn legacy liabilities into profits, whilst the underground provides long life of mines, solid returns on investment as a result of a large sunk capital base and also attractive optionality, which we are bringing to account in a circumspect and considered manner, as demonstrated by our progress on the Evander underground.

If there is one takeaway from this slide, is that we are growing profitable production very materially in the years ahead. We expect to be well north of 200,000 ounces of annual production in 2025 with MTR coming online. Pan African might not be the biggest gold miner, but -- and that is also opportunity. None of the majors can grow their production by 25% or more in a short space of time. This is what we will do in the next year.

Slide 9, the coming year will also see us moving towards an even more balanced portfolio of low-cost and stable surface re-mining and high-grade, long-life underground assets. This asset mix should also reduce our group all-in sustaining cost profile, with both Elikhulu and Mintails, producing at an all-in sustaining cost of approximately $1,000 per ounce and the BTRP even lower.

Slide 10, a bit more detail on our current asset mix. I think what is very helpful is that all of our assets now have extended lives, with the shortest life being a BTRP at 7 years, which is still quite a while. If we compare ourselves with the rest of the sector, many producers are running out of life on their assets or have to spend massive capital for future production, not the case for Pan African. We do not have to go and acquire more assets to maintain and grow production.

Slide 12, our operating environment. We continuously seek ways of making our business less susceptible to adverse external impacts in South Africa. Some matters to highlight in terms of our operating environment over the year include the following: I think before the fact, there was significant concern around the South African general elections, which were held in May this year. Following the free and fair elections and the successful formation of a government of National Unity, we are definitely seeing some green shoots, so to speak, and quite a bit of optimism in terms of the South African economy. South Africa enjoyed strong foreign investment inflows over the last months. The Johannesburg Stock Exchange saw an over 5% uptick over the last 2 months,and SO bonds have also surged.

The rand has been the best performer amongst the group of leading emerging market currencies against the U.S. dollar over the last month. And this trend can improve further, should we see positive reforms coming from government. Pan African is reducing our reliance on Eskom, South African electricity utility. So, more information on this in the ESG section of this presentation. Also, positively, South Africa has now experienced more than 100 days without any load shedding. In terms of title, Pan African assets have long lives with extended mining rights. The Evander's complex rights are valid until 2038 and those at Barberton until 2051. MTR's new auto-mining right is currently valid until 2029, we will obviously seek extension in due course.

As far as stakeholder interaction is concerned, we invest heavily in our social license to operate. Pan African mines make a meaningful positive impact in the areas where we operate. We also announced a 5-year wage deal at Barberton this year, which will provide stability and the ability to further optimize this operation whilst limiting cost increases.

Finally, from a security perspective, our efforts to safeguard our people and operations and minimize the impact of illegal mining and criminality are ongoing. I'm pleased to report that the people of [indiscernible] and Krugersdorp can already see a marked improvement in their area since we started our work at MTR. To conclude on this slide, Pan African's track record demonstrates that we can operate and grow in South Africa and do so very successfully.

If we then proceed to key production costs and financial features from the year past on Slide 14, some of the highlights from 2024 include the following: we reported an improvement in overall safety rates. We produced just over 186,000 ounces of gold, an increase of more than 6% when compared with the previous year. Our team did well in terms of managing costs with a globally competitive all-in sustaining cost for the group.

We are reporting an increase in profits of more than 30% with very manageable net debt levels and healthy liquidity. It is worth our noting that the U.S. dollar gold price only really started surging late in the financial year, and therefore, the full impact of the higher price should only come through in the year ahead. Gold in U.S. dollar terms is currently at approximately $2,500 per ounce versus the circa $2,080 we received in the financial year. And despite all the growth and capital reinvestment, we are able to maintain our sector-leading dividend to shareholders.

Slide 15 should be an interesting one for our investors, demonstrating how nicely we have expanded margins in recent years, and this excludes any contribution from MTR. We believe that if we deliver our share price should take care of itself, and the recent while has reaffirmed this view. That being said, I think we are still in a strong position to benefit from the current gold price environment and from our own growth plans in the time ahead.

If we then move on to more detail on the performance per operation, starting with Elikhulu on Slide 17. This really is a flagship asset for the group, 9 years of production remaining, producing at just over $1,000 per ounce. Our team managed to increase both production tonnes and recoveries through the mining of the Lazy Bracken tailings facility, with gold production increasing by some 9%. We look forward to another year of more than 50,000 ounces of production and clearly excellent cash flow generation and the current gold price environment. The asset generated $57 million of EBITDA in the last year. We are currently completing Phase 3 and Phase 4 of the Kinross tailings facility, the final expansion. These will be delivered on budget and on schedule in the next months.
As we've said before, we are also carrying all of the learnings on building and operating Elikhulu over to MTR as we ramp up operations there.

Slide number 18, BTRP, another sterling performance from our first gold tailings retreatment plant commissioned in 2013 and the lowest cost producer in the group. The BTRP management team also again deserves special mention, managing to reduce unit costs of production. I think very exciting news for the BTRP is that we have now managed to extend the life of this operation from surface re-mining only to 7 years. We will be reprocessing the Bramber tailings storage facility and other sources, again.

The capital requirements for this new initiative is also relatively modest, around ZAR100 million or some $5 million for a new pump station and then a new tailing storage facility for all of the Barberton complex in due course. So, the bottom line, BTRP will continue to form an integral part of Pan African tailings retreatment story for many more years, and also allow us to develop Royal Sheba at a much slower pace.

NTR on Slide number 19. Large-scale construction on site is now nearing completion, and we will be pouring first gold at this operation on the 3rd of October. Yes, the 3rd of October of this year, the project will be delivered under budget and ahead of schedule, which you will appreciate is not a common in the mining industry. We have built all of the plant and infrastructure in a little over 14 months, a testament to Pan African's ability to secure, conceptualize, fund and then execute world-class mining projects. In the current gold price environment, the payback on this $135 million initial investment should be under 3 years with a project life of more than 20 years, when we include the Soweto reserves.

In terms of the Mogale cluster metals, the life is 13 years with total gold recovered more than 600,000 ounces. Additionally, the Soweto cluster consists of more than 130 million tonnes of tailings currently containing a mineral reserve of more than 0.5 million ounces of recoverable gold. This mineral reserve will extend MTR's life from 13 years to 21 years. Total gold recovered will increase to 1.1 million ounces. It's also important to note that we believe that we have enough gold reserves at the Soweto cluster to sustain a stand-alone operation, treating 1 million tonnes per month over an approximate 10-year life of mine.

On Slide number 20, a picture of construction progress on site. And you can see that we are currently firmly on track in terms of the project execution time lines. Slide 21. We cannot say enough about the socioeconomic and environmental benefits of this project. Concurrent rehabilitation is in progress. We are uplifting local communities, providing much-needed economic and employment opportunities, and working with law enforcement to eradicate illegal mining. There were some skeptics on Mintails' MTR when we announced our intention to proceed with the project. I'm so pleased and we are about to prove them wrong.

Slide 22. I think it's fair to say that Pan African has a record second to none, in terms of construction and operation of tailings retreatment projects. These long-life assets now form the cornerstone of our business. And I believe we have further room to grow in this space, which should be very attractive for our investors. Slide 23, the Evander underground team delivered in line with expectations, producing some 38,000 ounces for the year at an all-in sustaining cost of just over $1,300 per ounce. Now the delay in commissioning of the sub-vertical shaft for wasting has impacted us somewhat. This project will now be completed by the end of this month.

We are pretty much been doubling our wasting capacity, which should allow us to play a bit of catch-up in the months ahead. I really believe this shaft with a western capacity of 40,000 tonnes per month will be a game changer for Evander. No more cumbersome conveyors, lower costs with a higher mine core factor. If we then proceed to Slide 24, dealing with Fairview, our flagship underground operation at the Barberton Mines complex. At Fairview mine, the Rossiter ore body enhanced production during the reporting period. Exploration drilling has identified a second high-grade structure, which intersects the Rossiter ore body and doubled the mineralized with, thereby increasing the volumes that can be extracted.

This ore body average over 30 grams per tonne throughout the year. Additionally, downdip development at the MRC ore body on a deeper level at Fairview progressed according to plan, with top access to the high-grade 261 platform completed during May 2024. This platform grade averages 27 grams per tonne. The downdip development is being extended deeper towards a lower access of 261 as well as to the 262 platform, where exploration drilling successfully intersected the down-drop extension of the MRC. Rehabilitation of the existing ramp infrastructure from 38 level downwards is progressing according to schedule.

This decline will be used to transport personnel and material to the working phases on the 3-shaft section and will further alleviate logistic pressures on 3-shaft, which will then mainly be used for rock wasting and improving logistics. Continuous operations at Fairview implemented in February 2023 resulted in a significant improvement in terms of tonnage output of tonnes increasing by 11% year-on-year from underground. Additionally, the processed grade improved from 11.7 grams to over 12 grams per tonne, a circa 4% increase year-on-year.

The all-in sustaining costs for Fairview also improved from $1,546 in FY '23 to $1,434 mainly as a result of the 14% increase in gold production. The smaller underground operation at Barberton on Slide 25. At Sheba, development towards additional mineral reserve blocks on both the high-grade MRC and ZK ore bodies are progressing according to plan, with production improvements noted during the year. Development in the Sheba Fault project, Western Cross ore body is ongoing with initial mineralized intersection being exposed on a crosscut. This project is planned to eventually supplement feed sources to the BTRP plant, as well as to offsetting the treatment of low-grade surface sources at the Consort and Sheba plants.

The continuous operating cycle at an even greater impact at Sheba Mine was tuned increasing by 18% year-on-year. The processed grade also improved from 4.9 grams per tonne to over 5 grams per tonne. A circa 6% increase year-over-year. In terms of Consort, following some due technical and mining difficulties, the group replaced the contract miner in order to improve production at the mine. The rehabilitation of the PC Shaft has been completed and now enables the contractor to recommence mining on the high-grade 41 to 45 level mining sections. Additional development is ongoing on the MMR shaft and the PC shaft to access reserve blocks, which will give us access to more ground to mine.

On Slide number 27, section dealing with all-in sustaining cost. Almost 85% of our portfolio produced an all-in sustaining cost of $1,170 per ounce. Now Slide 28 illustrates that our cost performance continues to be very much in line and better than the average for a global sector, with most producers having experienced significant cost pressures in the last couple of years. Despite inflation, we should be able to maintain an all-in sustaining cost at between $1,350 and $1,400 per ounce in the coming financial year in U.S. dollar terms.

On Slide number 30, group capital projects. We continue to invest into our assets and into growth with most of MTR's comfort capital now spent. For Evander, we expect CapEx to reduce in the next year as most of the large capital for '24 to '26 levels would have been spent. The accrued CapEx will also be fair addition in the year ahead of profiting spend fairly stable. ESG, Slide 32. I'm very proud of our achievements on this front, particularly on progress with renewable energy, water treatment and social projects. We really do make a positive difference where we operate.

To elaborate further on our renewable energy road map on Slide number 33. We've completed construction of our Barberton solar facility, and we are currently ramping up generation from this plant, which should be fully ramped up in the next month. We further anticipate first power from our 40-megawatt 30-ag power purchase agreement during 2026. You can also expect other announcements on renewables from Pan African in the months ahead. Hopefully, we can add even more capacity. In terms of our student needs exploration venture, we are continuing activities on a scale-back basis. We are hoping that the wording parties can come to a resolution soon.

I will now hand over to Deon, who will provide an overview of the financial results for the year.

Deon Louw

Thank you, Cobus. From Slide 36, you will notice the positive impact of the increased gold production and gold price of a full financial year's revenue, which increased by 17% to $374 million relative to the prior financial year. Production costs were well contained with all-in sustaining cost increases by only 3.4% in dollar terms, assisted by the average random exchange rate depreciation of 5.3% year-on-year. The tailwinds of an increasing U.S. dollar gold price and depreciating rand during the year delivered EBITDA by 23% to $141 million relative to the prior year.

Attributable earnings increased by 30% to $79 million and earnings per share commensurately as no new shares were issued in the year. The 9% decline in operating cash flow to $91 million is due to an increase in income tax and royalties paid of $8 million and finance costs of $5 million. It also needs to be born in mind that the prior U.S. cash flows were also boosted by the upfront receipt of ZAR400 million, approximately $22 million from the sophistic gold forward sale transaction. We spent ZAR166 million in capital during the year, the bulk of it on the MTR project, and grew $71 million on our debt facilities, resulting in a predictable increase in net debt by $84 million to $106 million.

Slide 37 demonstrates the extent to the group's available single debt facilities and funding of the MTR project. As mentioned in the past, our funding approach to projects of Elikhulu and MTR [indiscernible] in nature, is to fully fund the projects upfront capital with the debt redemption profile opted to its cash flow profile, leaving the rest of the group's cash flows largely unencumbered for other capital expenditure programs and returning cash to shareholders. Our core facilities comprised the RCF of $54 million and GBF of $8 million. The bar chart on the right of this slide shows the composition of the two senior debt facilities of $113 million dedicated to MTR's construction, which together with the $22 million received from the simplistic gold forward sale transaction fully funded the project's development costs without having to raise equity.

Dividend also is a growing loan of $90 million dedicated to the funding of our renewable energy plants. This facility, which we can effectively June also provides for an embedded equipment option of $40 million for future funding requirements of this nature. On 15th June 2024, the senior facilities were fully drawn as expenditure of MTR peaks and to reduce the risk of a severe dip line in the rand gold price, will edit into a number of gold price hedges that will lock in the rand proceeds on 49% of the lower end of the group's 2025 financial year's guided ounces. The effect of these edges is that 18% of the 2025 financial year's production is locked in at a fixed price of $1,942 an ounce in terms of the Synthetic gold forward
sale transaction and 31% locked in at a floor price of $2,147 an ounce and a cap price of $2,995 an ounce assuming an exchange rate of ZAR18.19 to the dollar.

The synthetic gold forward sale transaction expires in February 2025 and a zero cost collars by 15th June 2025 were after the group is unhedged. It is however, likely that we'll continue to make use of short-term ranges on this nature, especially zero-cost collars to lock in cash margins and reduce short-term financial risk while participating in the upside to the level of the capital price. Slide 38 illustrates the magnitude of the quarterly principal and interest redemptions of the group's similar debt to June 2029, when all existing senior debt is extinguished.

Until June 2025, [indiscernible] with only quarterly principal storms of a renewable energy facility being payable. But from September 2025, the early facilities redemptions commenced. And in December 2025, the 3-year bond with a nominal value of ZAR585 million, approximately $32 million which is the large spike in debt reductions in June 2026 comprises the $54 million bullet reduction on the RCF. Mintail's updated cash flow projections markup lets a buyback period of approximately 2 years post commissioning of the original electronic at [indiscernible]. What's astounding, it is likely that the RCF will again be extended as has been the case in the past as it constitutes a key component of our core financing facilities.

We also have numerous approaches from financial institutions to anticipate to refinance of the in term of bond issue should further capital expenditure funding required in due course. Signal debt is expected to pick at approximately ZAR3.5 billion approximately $190 million towards the end of this calendar year, resulting in a debt-to-equity ratio of approximately 52%, still well within the senior debt covenant of one to one.

Slide 39 tracks the group's historical dividend yields and yield of the proposed dividend of ZAR489 million or approximately $26.8 million for the 2024 financial year. The proposed 2024 financial year dividend is a payout ratio of approximately 53% of cash flow, as defined by the dividend policy and is an increase of 22% in rand terms and 26.5% in dollar terms relative to the prior year.

With the share price doubling year-on-year, the dividend yield has declined to 3.6% relative to the 5.9% of the prior year when the closing share price was ZAR3.3 or 12.5p per share. On the basis that the proposed 2024 financial year dividend is approved by shareholders and paid in December with total dividends paid to shareholders during the first decades is $193 million.

Finally, Slide 40 shows a return on the group's shareholder funds for the 2024 financial year, relative to a gold mining peer group. Return on equity and cash flow per share are two of the key parameters for measuring the success of our value grade and try and to inform our circumspect approach to capital allocation decisions and M&A. After a decline in the group's return on equity in the prior financial year, it has now increased to 25% for this financial year and post the imminent commissioning of MTR, we should again see it enter the aspirational range of 25% to 30% as MTR contributes higher margin answers to the group. Thank you.

Cobus Loots

Thank you very much, Deon. If we conclude on Slide 41, Pan African continues to be focused on delivery and execution. Key areas for us in the next year include the following: we will continue our proactive journey to zero-harm. We will successfully execute into our capital projects, including a very exciting MTR development, that will increase and sustain our future gold production profile at approximately 250,000 ounces per year. We will continue optimization and improvement initiatives to increase gold production as per our guidance and to further reduce costs.

We look forward to progressing our ESG initiatives and our focus on maintaining our social license to operate, while also expanding our renewable energy footprint and rehabilitating old areas for the benefit of our communities. We will maintain our focus on generating sustainable shareholder returns, creating value for all stakeholders. And finally, we will continue to explore value-accretive options for further growth in a very circumspect manner as always.

I would like to end my presentation by extending my thanks and appreciation to Deon Louw, who is retiring for some very well-deserved R&R. Deon will, however, remain available as a consultant to the group. Deon and I have known each other for more than 20 years and have worked together Pan African for more than a decade, is acumen, experience and advice greatly assisted and position Pan African where we find ourselves today. Deon, you are a fantastic colleague and a friend, and we wish you all the best for the future.

Question-and-Answer Session

[justiceforthemany] 13/9/2024 10:32

$2566 Gold
Mintails commissioning in 2 weeks.
50,000 @ <1,000 AISC
10p EPS for 2025?

[hjs] 13/9/2024 10:14

18BT what happened to the results? there is no RNS issued for the results.

[stonedyou] 12/9/2024 22:11

Saudi Central Bank Caught Secretly Buying 160 Tonnes of Gold in Switzerland

Jan NieuwenhuijsJan Nieuwenhuijs

Jan Nieuwenhuijs


The Saudis have joined other Asian countries in ditching their long-term sensitivity to the gold price. Evidence suggests the Saudi central bank has been covertly buying 160 tonnes of gold in Switzerland since early 2022, contributing to the current gold bull market.

Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, this time around they might even become a lynchpin for its dissolution.

Introduction
Until recently, Saudi Arabia’s gold demand would decline when the gold price went up and strengthen when the price went south. This dampened volatility in the gold market, which for many decades was ruled by the West.

Ever since the West immobilized Russia’s dollar assets in February 2022, those with diplomatic disagreements with the West are increasingly exchanging their dollars for physical gold. Saudi Arabia is the latest country—after China and Thailand—of which I have found cross-border trade statistics showing it has shifted from being price sensitive to a price driver.

During the entire rally from late 2022 until present, the Saudis have been a constant net importer which has boosted the gold price. The icing on the cake is that part of the flow into Saudi Arabia, the gold coming from Switzerland, actually goes to the Saudi central bank, aka the Saudi Arabian Monetary Authority (SAMA).

Exposing Saudi Central Bank’s Hidden Gold Buying
Formally, any country’s cross-border gold trade statistics refer to “non-monetary&rdquo; metal, meaning privately owned. Monetary gold—owned by central banks—is exempt from being disclosed in trade numbers. As I have demonstrated in a previous article, though, the non-monetary gold crossing the Chinese border is often a shipment heading for the vaults of the People’s Bank of China (PBoC) regardless.

Among industry insiders, SAMA is known for having accelerated secret gold purchases since 2022. By comparing the World Gold Council’s (WGC) estimates of total central bank buying (based on field research), to what central banks report to have bought to the International Monetary Fund (IMF), we can conclude “unreported&rdquo; purchases went through the roof starting in 2022. People familiar with the matter, but who prefer to stay anonymous, told me this is largely due to the PBoC, and to a lesser extent SAMA. That’s clue number one.

Because gold Exchange Traded Funds (ETFs) hardly exist in Saudi Arabia, we can estimate SAMA purchases by comparing net imports to local consumer demand. Not coincidentally, net imports began to consistently outpace consumer demand in the second quarter of 2022, right after the Ukraine war started. SAMA was (and is) in a hurry to get its hands on physical gold.

A source once told me that central banks often by gold in Switzerland and London and have bullion banks pack and ship the gold to wherever the central banks want. This way it shows up in cross-border trade data because the bullion banks have to deal with customs.

Switzerland Pinpointed as Ground Zero for Secret Purchases
To find out if SAMA shops for gold bars in the Swiss Alps, I have subtracted Saudi consumer demand from its net imports and compared the outcome (gold imported but not sold to consumers) to gross exports from Switzerland to Saudi Arabia. The result shows a strong match since Q2 2022, confirming SAMA has quietly been buying gold in Switzerland.

Saudi Arabia Owns Way More Gold Than It Wants Known
The data suggests SAMA bought approximately 160 tonnes of gold in recent years (and it was likely also buying in 2015 in Switzerland). How much it holds in total is unknown to me, partly because Saudi gold trade data only starts in 2015. What happened before that is up for grabs. Neither do I know how much additional gold SAMA might be buying elsewhere.

One thing is for certain: Saudi Arabia owns much more gold than it wants the world to believe.

The last time the Saudi central bank updated its official gold reserves was in February 2008, when it conveyed to hold 332 tonnes, which was 180 tonnes more than in January 2008. Obviously SAMA didn’t buy 180 tonnes in one month.

Just like the reported gold reserves by the PBoC, the number put out by SAMA is purely political. By hiding how much precious metal the nation truly owns, the House of Saud avoids openly upsetting the United States.

But the evolution of countries in Asia storing more and more of their trade surpluses in gold—a time-tested neutral and sanction proof reserve asset—is clear. Next to 160 tonnes by SAMA, I calculate the PBoC bought 1,600 tonnes since the war in Ukraine. Both central banks, the former of the most influential country in the oil market and the latter of the second largest economy globally, must be confident in what direction the gold market is headed.

How the above ties into other concerted initiatives by Asian nations to bypass the U.S. dollar, we will discuss in the next article.

[stonedyou] 11/9/2024 10:36

Pan African Resources PLC

AIM:PAF
OTCQX:PAFRY
JSE:PAN
OTCQX:PAFRF


Pan African confirms earnings soared in latest financial year

Published: 13:24 05 Sep 2024 BST

Pan African Resources PLC (AIM:PAF, OTCQX:PAFRY, JSE:PAN, OTCQX:PAFRF) said earnings for the twelve months to end June 2024 will be more than 25% higher than the year previously.

A trading statement is a requirement of the Johannesburg stock exchange if earnings change by 20% from the year before and the South African gold miner said headline earnings per share (HEPS) are expected to be between US3.99c per share and US4.31c per share.

That compares to US3.15c per share for the 202-23 or an increase of between 27% and 37%.

Basic earnings per share (EPS) for the current reporting period would be between US3.98c per share and US4.30c cents per share respectively, an increase of 25% - 35%.

Pan African added that revenue during the year increased by 16.8%, mainly due to an increase in gold sold of 4.9% combined with an increase in the average US$ gold price of 11.3%.

Results for the year ended 30 June 2024 will be released on 11 September 2024.

Shares rose 0.3% to 29.5p.

[af004] 11/9/2024 10:24

Article today in FT re gold co. takeovers likely and consolidation.

[stonedyou] 11/9/2024 08:15

Pan African Resources boosts annual profit 30% on strong gold price

Wednesday, September 11, 2024 - 08:45


Pan African Resources PLC on Wednesday reported robust profit for the 2024 financial year, crediting a ‘very favourable gold price’.

The Rosebank-headquartered gold producer said pretax profit was $109.4 million for the financial year that ended June 30, up 29% from $85.1 million the year before.

Revenue grew 17% to $373.8 million from $319.9 million, driven by a strong gold price. The price received for gold by Pan African was up 11% to $2,015 an ounce from a restated $1,811.

Gold prices have continued to climb since. Spot gold was quoted about $2,525 an ounce on Wednesday.

‘We find ourselves in a very favourable gold price environment, with the metal appreciating by more than 20% in dollar terms in the past year, and generally positive sentiment on its near-term prospects,’ Pan African said.

Gold production was 6.2% higher at 186,039 ounces from 175,209 ounces, in line with guidance.

Operational enhancements and optimisation efforts had resulted in ‘significant&rsquo; improvements at Barberton Mines’ underground and Elikhulu tailings retreatment plant’s surface operations. Gold output from Barberton’s Fairview and Sheba mines rose 14% to 65,580 ounces from 57,778. Elikhulu’s gold production was up 8.4% to 54,812 ounces from 50,573.

All-in sustaining costs increased by 3.4% to $1,354 an ounce from restated $1,309, marginally above guidance of between $1,325 and $1,350, with the delay in commissioning Evander Mines’ subvertical hoisting shaft.

Pan African declared a final dividend of 22.00 rand cents, up 22% from 18.00 cents a year before.

Earnings per share jumped 32% to $4.14 in the recent financial year from a restated 3.18 cents in financial 2023. Jeadline EPS grew by the same percentage to 4.15 cents from a restated 3.14 cents.

The gold junior said it is poised to deliver on its next phase of ‘value-accretive production growth’ at the Mogale tailings retreatment project. It said it had made ‘exceptional&rsquo; progress with this project’s construction, which is nearing its final stages.

Plant commissioning and first gold production are anticipated ahead of schedule next month.

Pan African guided for gold production of between 215,000 ounces and 225,000 ounces in financial 2025.

In Johannesburg, Pan African shares were up 0.1% at R 6.93 on Wednesday morning. They were down 1.9% at 29.10 pence each in London.

Copyright 2024 Alliance News Ltd. All Rights Reserved.

[stonedyou] 11/9/2024 07:28

11 Sept 2024 Annual Results Presentation for the year ended 30 June 2024 4.7 MB Download

[aim999] 11/9/2024 06:43

Should do just fine. And divi in the pipeline

[18bt] 11/9/2024 06:40

Happy with the results today - honest about the successes and odd failings in timing. With MTR it is incredibly well positioned to throw off cash and pay down the debt incurred in its development. Cobus' 10 year review shows it has become a strong business.

[stonedyou] 09/9/2024 10:05

Mike Maharrey: Greetings, I'm Mike Maharrey. I'm a reporter and analyst here at Money Metals and I'm here today with Chris Powell. He is a political columnist, a longtime newspaper editor, and the co-founder of the Gold Anti-Trust Action League, where he currently serves as the secretary and the treasurer. How are you doing today, Chris?

Chris Powell: Very good to be with you, Mike.

Mike Maharrey: Well, I really appreciate you taking a little bit of time to chat, and I thought we'd kind of start out and talk a little bit about GATA and the work that you guys are doing, and I want to start off this way. I think a lot of people, just your average guy on the street, if I go and say the gold market is rigged, that there's price manipulation going on in the gold market, I think a lot of people are skeptical of that and they're going to say, "Oh, conspiracy theory." And I'm curious from your perspective, if you're talking to somebody – you've got just a quick time, what is the most compelling evidence that you would present to somebody to show them the reality of what happens in these markets?

Chris Powell: Well, I would explain that our work for more than 20 years has been to collect the documentation of gold market manipulation and intervention. If I was going to refer to a single document, I mean, I have lots of favorites, but one that I think is probably as compelling as any other is the speech that was given by the head of the Monetary and Economic Department of the Bank for International Settlements, William White back in, oh, I don't know, 2010 or something, it's on our internet site, he was giving a speech to a BIS conference at the bank's headquarters in Basel Switzerland, and he was talking about the four or five major purposes of international central bank cooperation, and one of those purposes was to influence asset prices, especially gold and foreign exchange in circumstances where this might be felt useful. That's on the record. That's what central banks do. Central banks rig the gold price. Why do they rig the gold price? They rig the gold price to defend their own currencies because gold is the prospective alternative international reserve currency, and if gold ever gets out of the box, they're through.

Mike Maharrey: Yeah, and that was actually going to be my next question. What's the motivation? And I think you summed that up perfectly. Gold is real money and it's a challenge to the paper fiat that they can't seem to quit producing. I almost feel like I'm drowning in paper. In fact, I think Thomas Jefferson actually talked about being buried under a deluge of paper way back in the 17, 1800's. So yeah.

Chris Powell: Oh, it's money without counterparty risk and it's money that's very hard to devalue. Well, central banking is largely a matter of cheating the public through inflation, and if there's any escape valve from that, escape hatch from that, any fire escape, people will take it. And gold is the fire escape. That's why they've always tried to control the gold price. So it does not reflect the inflation that central banks are inflicting on the world.

Mike Maharrey: Do you think the kind of movement that we've seen, and it seems like to me that it's accelerated a little bit over the last year or so, this kind of movement of gold from the West to the West, where we're seeing a lot of demand for gold, not just from central banks, but also from individual investors, much more so in Asia, China, emerging market economies. Do you think that the central banking cartel in the west could be in danger of losing the control of what's going on, and do you see this as maybe a political move from some of these eastern countries…

Chris Powell: Oh, absolutely. I think the western central banks have already lost control of the gold price. Look, if they still had control of the gold price, it wouldn't be at $2,500 today. There would be … a Louis d'Or would be the prize in every Cracker Jack box if central banks in the West had their way. Look, since I got involved in this crazy business, gold has gone from $250 an ounce to $2,500 an ounce in really just 25 years of my paying attention to it. That's not something central banks are very happy about, though I think in the end they may revalue gold. We'll talk about that just when they think that's going to serve their own purposes.

But yeah, really the Western central banks here I think have kind of shot themselves in the foot. I mean, I would like to be able to take credit for raising the gold price from 10 times over the last 25 years, but I think it is, to a great extent, a matter of the stupidity of Western government policy and particularly US government policy, which has started to make other governments and central banks realize that, look, if the United States can confiscate Russia's dollar-based assets, it can confiscate anybody’s. So the security and safety of the dollar have been destroyed but have been destroyed by the US government.

Mike Maharrey: Yeah, I've written quite a bit over the last year or so about the weaponization of the dollar and they put that into hyperdrive when Russia invaded Ukraine. And I'm curious from your perspective, they have to know, right? Or is it just a matter of arrogance that, "Oh, we can do this and we can get away with it." What's the mindset that says we're going to keep weaponizing our currency to our own detriment, or do they really not see it as their detriment? What do you think?

Chris Powell: I think in the end, that as the US economists Paul Brodsky and Lee Quaintance wrote a decade ago, I think there is a general understanding among central banks coordinated through the BIS that the gold price is going to have to be revalued for a number of reasons. International politics is one of them. The debt burden on government and society is another one. But I think all central banks know this. They know it now, they might not have known it 10 or 20 years ago. I'm convinced that GATA was responsible for informing the Bank of Russia about Western gold price suppression policy. The deputy chairman of the Bank of Russia Oleg Mozeskov gave a speech to an LBMA conference in Moscow, oh, when was it? 15 years or so ago, in which the only words of English he spoke were Gold Antitrust Action Committee. To the best of my knowledge, up to that point, we had never had any contact with anybody in Russia.

Mozeskov's speech was an indication that quite to our surprise, the Bank of Russia was paying very close attention to our work. We know from the WikiLeaks cables of Bradley Manning and the guy who ran WikiLeaks and has just been given a plea bargain, that China long has known about Western gold price suppression policy. The WikiLeaks cables are full of Chinese news organization reports, reports from news organizations that are controlled by the Chinese government, which reported about gold market rigging by the West and particularly by the United States.

Those cables, which WikiLeaks disclosed were sent from the US Embassy in Beijing to the State Department of Washington, many cables talking about gold market manipulation by the west in order to support and sustain the dollar. Well, the WikiLeaks cables show that not only has China known all about Western gold price suppression policy for years, but the US government knows that China knows because the reports were cabled to the State Department. Now, I've had some face-to-face contact with some other central banks and some correspondence with them, and while most of them don't want to have anything to do with me, I did get a couple meetings with Central Banks who beautifully heard me out, and some Central bank people around the world are on GATA's mailing list.

And I think we have informed, I think, a few people who wouldn't necessarily have known about it otherwise. But as a general matter, Mike, insofar as most major central banks are members of the Bank for International Settlements and they have directors and meetings every month, to which you and I are not invited, I am very confident that most of the central banks around the world are fully aware of Western Central Bank price suppression policy and that they are coordinating their response to a change in this policy.

Mike Maharrey: Did you see the report? I think it came out of TASS out of Russia, that the Russians are apparently planning on ramping up gold purchases here.

Chris Powell: Yes starting tomorrow.

Mike Maharrey: Yeah. What do you of that?

Chris Powell: What do I make of it? What the hell took them so long!? Russia is a commodity producing country, has a lot of gold in the ground. I think this should have been apparent to them long before they learned about it from us. I mean, certainly their intelligence agencies are better than our work, but it makes perfect sense. Gold in hand can't be sanctioned. Gold is the only plausible alternative to the dollar as a reserve currency, as an alternate reserve currency. Yeah. The Russians have finally figured this out.

Look, not long after GATA had its conference up in Dawson City in the Yukon back in what, 2006, something like that. We had a very prominent Russian, supposedly a confidant of President Putin at that conference. He told us that it was the greatest conference he ever attended, and a few weeks later, president Putin was photographed at a gold conference in the Russian Far East holding a gold bar, and he was quoted as saying he had instructed the Bank of Russia to start buying gold on all markets. The world has figured this out. I mean, I despair of retail investors ever figuring this out in a big way, and certainly I despair of mainstream financial news of organizations ever telling the truth about gold and about market rigging. But all the major, and I think some of the minor central banks around the world know, and I think they are preparing a world in which gold is the reserve currency, the once and future money.

Mike Maharrey: Yeah, I was going to ask you about that if you thought that, because there's a lot of proposals that seem to be floating out there about competing currencies. You've got the cryptocurrencies, you've got the Zimbabwe, they've got their ZiG now, which is a gold backed currency. You've got BRICS talking about a currency. You think the gold is what's ultimately going to win the day?

Chris Powell: Well, what else are you going to use? I mean, if people want to believe in cryptocurrency, I welcome anybody who wants to get into the currency business, let currencies compete. That's really the fair and democratic thing to do. I do not have much faith in crypto. I mean, I have to rely on somebody to tell me that the crypto program really does what everybody says it does. How do I know that? I mean, crypto is a phantom to me. Maybe it'll work, maybe it won't work, but gold is tangible.

If you're holding it, you're holding it. You don't have to understand any computer programs or anything like that. It's been money for thousands of years because it met of all of Aristotle's prerequisites for money, it's money today because it has no counterparty risk when you're holding it yourself and it's accepted everywhere as even Alan Greenspan said, it's better than an American Express card. So what else are you going to go to? I can't see them resorting to anything else but gold. It has universal recognition as money. It's real. It's not going to disappear when the power goes out or the internet services is cut off. Now, if you have more faith in something else, good luck to you.

Mike Maharrey: Yeah, I agree with you completely. I'm a big fan of let the market sort it out, but I'm inclined to agree with you as well. Adam Glapinski, and I probably just butchered his name, but he's the governor of the Central Bank of Poland, had a great quote. This was a couple of years ago, and incidentally, Poland for folks who don't know, has been one of the biggest central bank gold buyers this year. And he said basically exactly what you said about the fact that it is the one thing that we can hold on to that nobody can turn it off, right? There's no switch that can be flipped. There's no electronic thing that can happen that can wipe it out. It is a tangible physical thing, and that's exactly why Poland is seeking to, at least according to their public plans, increase their reserves to at least 20% of gold.

Chris Powell: Yeah, well, JP Morgan said that gold was money and everything else is credit. And if he meant by that everything else is counterparty risk, I'd go along with him completely.

Mike Maharrey: Yeah, yeah, absolutely. And for folks who maybe don't know what counterparty risk is, it's basically just the fact that on most assets, somebody is standing on the other side that could conceivably default or make it go bad. And gold doesn't, it is what it is. So I wanted to talk a little bit about an article that you wrote that we published over at Moneymetals.com/News, and you talked about the, it was actually in context of this trillion dollar coin, which is an idea that seems to not ever want to go away, but you pointed out that it's feasible to do exactly the same thing by revaluating Gold, and it's something that you've already mentioned in the course of our conversation. And in that article you pointed out that there actually is already a kind of a process in place at the treasury to make this happen. Can you kind of explain to folks what, first off, what is gold revaluation and what would it do? And second off, how could it be done conceivably?

Chris Powell: One of my favorite documents, which I think was discovered, well, it was either by Ronan Manley or Jan Niemanhuis some years ago, is the transcript of a conversation in US Secretary of State Henry Kissinger's office in April 1974 with his deputy assistant secretary Thomas O. Enders, in which Enders is explaining to Kissinger why the US must keep its European allies from remonetizing gold or giving gold any more of a role in the world financial system. Enders is telling Kissinger that the Europeans now have more gold than the United States does. Collectively, they had more gold than the United States did, and that whoever has the most gold has the power to revalue it from time to time and thereby change all asset and currency valuations in the world. Enders told Kissinger that gold is what he called the reserve creating instrument. If you can assign gold's value, you can create more money reserves for yourself.

You can change the value of all currencies and assets and goods and services in the world if you control the gold price. Hence, Enders told Kissinger, we can't let the Europeans control the gold price. We have to control the gold price in order that we can control the value of the dollar and the value of everything else. That's the point. Gold is the great reserve creating instrument. You can assign values to it and thereby create money if you want. I mean, the United States could do this now, we technically, the Treasury technically values our gold at $42 and 22 cents per ounce for all those 8,133 tons. We supposedly still have possession of. If the United States wanted to change the valuation of that gold, it could just change the valuation of it and give orders to the Federal Reserve that the gold certificates you now hold are now worth trillions and trillions more than you're carrying them on the books.

Please credit the gain to our account and issue a lot of currency against that gold. It's the reserve creating instrument. It's an accounting mechanism by which you can create money. That was what was the behind the platinum coin idea, that they wanted to use the obscure law about the Treasury's authority to mint platinum coins in any denomination. Well, that was thought to be a thing for collectors, but they looked at the law carefully a few years ago and realized, wait a minute, you could make any denomination of a platinum coin? Well, you could tell the Treasury to have them make a trillion dollar coin, deposit that trillion dollar coin over at the Fed and tell them, we want to cash this coin.

And the Fed would create a trillion dollars or 10 trillion, however you wanted to denominate the coin. The benefit to the United States of using a platinum coin for reserve creation rather than gold is that the platinum coin with the high denomination deposited at the Fed would create reserves only for the United States. But if you revalue gold, every nation in the world that has a gold reserve, if the gold is to be revalued upward, is going to benefit from that revaluation and the revaluation of gold suddenly would be more democratic. That's why I think certain elements in the United States would much prefer the platinum coin denomination at a trillion dollars rather than gold revaluation, because then the United States would get all the reserve creation.

Mike Maharrey: Right, right, and that's effectively what Franklin D. Roosevelt did back in the 1930s, right? I mean, he tried to get more gold by taking it from the public, and then he simply valued it higher and in effect created a bunch of currency.

Chris Powell: You wrote the definitive essay on that the other day, didn't you? The reason Roosevelt did that was because the law at the time required a, what, 40% gold backing for the dollar, and Roosevelt was sitting in the middle of a catastrophic deflation. He wanted, I think rightly, he wanted more money circulating in the economy. Under the law, he couldn't create it unless the Treasury had more gold reserves. That's why Roosevelt wanted the gold. He wanted the gold to put it into the government so that the government could create more money against it. Again, gold in that circumstance was the reserve creating instrument.

Mike Maharrey: I think people don't understand, or most people out there don't understand the fact that central banking and their ability to create money, I call it the engine that drives the biggest government in history of the world. If it wasn't able to create money out of thin air, if it was really even restrained, much less actually having where gold actually is money, there's no way that they could borrow and spend to the extent that it does, and without the ability to borrow and spend that takes power away from politicians. And I think really, if you want to get into the psychology of the whole thing, that's it right there. It's a matter of power. I mean, you could literally say gold is power.

Chris Powell: Yes, infinite money is infinite power, and you don't want that floating around for God's sake. That's the end of humanity. It's the end of democracy. But I would never say that central banks are creating money out of nothing. Every currency is backed by something. It's backed first by the economic production of the country that's issuing the money, and secondly, it's backed by the tax power of the government issuing that money.

There's a great essay, I forget the guy's name right now, but I can look it up. Back in the forties. The essay was titled, I guess, Taxation for Revenue is Obsolete. It was written by the president of the New York Fed at the time, and he was explaining that modern governments, when you're relieved of a commodity standard for your money, if you're not on a gold standard anymore, if there's no fixed rate of convertibility from your currency into gold, they can create as much money as they want, and they don't tax because they need revenue, they can just print it up, they can type it in, they tax to give value to their currency, they tax to create demand for their currency. If you didn't have to pay your taxes in dollars, well, people might start using almost anything else for money, especially if the dollar was being inflated away.

Mike Maharrey: Right.

Chris Powell: So, fiat currencies do have some backing. They have the economic production of the country whose goods and services of purchasable in that currency, and they have the tax power which is backing, but they don't have enough goods and services and production of tax power to support all the money they've been issuing in the last few years, at least not without running the currency down to zero.

Mike Maharrey: Right, exactly. And I'll wrap up on this, and this is a little bit of speculation. Well, no, it's a lot of speculation, but obviously we've seen situations in history, Zimbabwe comes to mind, we've seen it in Venezuela where you have hyperinflation where the currency just completely collapses, and sometimes you'll hear people say, "Well, that could happen here in the United States." Do you think that the government or any major Western government is in danger of overplaying its hand and collapsing its currency, or is that kind of something that's maybe a scare tactic?

Chris Powell: I think we're on that very brink right now, Mike. I think, I did a little calculation the other day that United States is spending, I believe, 27% more money than it's taking in tax revenue. Now, you can get away with that for a while, but we are living off the rest of the world because we rely on the rest of the world to lend us money, and the rest of the world is beginning to wake up that that's not such a good bet, that the dollar is being devalued by inflation, so why are buying long-dated US government bonds? If the rest of the world ever decided, no, we don't want to buy your bonds anymore, and all of a sudden the US bond market crashed, well, the dollar would crash soon afterwards.

So I think we're at that point already. We have alienated much of the rest of the world and we're living off the rest of the world borrowing its money. That's one thing that Mozeskov in his speech 15, 20 years ago said, he noted the irony of the richest country in the world, the United States, living off borrowing from poorer countries. That was a moral wrong, and here's an Russian telling us about a moral wrong. And he was absolutely right. We think of ourselves as the good guys. We're exploiting the rest of the world, especially the poor countries.

Mike Maharrey: I saw today along those lines that the US trade deficit was, excuse me, at the highest level since May 2022. So we're giving them dollars and we're taking their stuff.

Chris Powell: We get oil and electronics and commodities from them, and we pay them in colored paper and electrons.

Mike Maharrey: Yeah.

Chris Powell: It's a nice racket while it lasts.

Mike Maharrey: I was going to say it's a good gig if you can get it. Unfortunately, we can't do that. We'll end up in prison. So before we wrap up, why don't you let people know how they can follow the work that you're doing over at GATA and get the information that you're handing out? And one thing I would highly recommend folks, just get on your email list and get your emails because you guys send out a lot of great information thats not necessarily out there on CNBC or Fox Business, but how can people follow what you're doing?

Chris Powell: Well, thank you, Mike. Yeah, our internet site is GATA.org. We have a daily newsletter. Sometimes I'll send out several dispatches a day, then some days we don't really have much to say, but getting on our dispatch list is free. You can sign up for our dispatches, put the mechanism in the top right column of our internet site. You can subscribe to the daily dispatches to get all of them at once. You can subscribe to a summary to dispatch so your email box doesn't get quite as cluttered. We're a non-profit educational and civil rights organization. We're recognized as tax-exempt by the US Internal Revenue Service or a 501c3 organization. We survive off contributions from anybody who cares to support us. We have a little support from the mining industry, though I think 99% of the mining industry is brain-dead, doesn't have any idea that it's in the money business.

Mike Maharrey: I know, they're digging money out of the ground and then they sell it for fiat.

Chris Powell: Yeah, well, I've lost that battle. They're never going to understand that. But we do see contributions from anybody who wants to help the struggle for transparency and limited government and sound money and all that. We welcome checks payable to GATA sent to our corporate address here in Manchester Connecticut. And if it really wasn't for people who, I guess they're dreamers like us, we wouldn't be here. But we survive on generous donations from the public, and I think we could use some more today.

Mike Maharrey: Yeah, absolutely. And I want to reiterate something that you just mentioned. If you are a person who cares about limited government, if that's a thing and that's important to you, I would argue that you're probably not going to get that by voting for the next great president or whatever. I think limited government is really going to come through reforming this monetary system because again, that's the rocket fuel that makes the whole thing go. So if you're a limited government person-

Chris Powell: You can't have limited government without limited money. Infinite money is infinite government.

Mike Maharrey: Perfect.

Chris Powell: And that's the road to hell.

Mike Maharrey: Yeah, absolutely. That's a great quote. I'm going to write that one down and keep it. Well, I appreciate you taking the time out of your day and appreciate your insights and we'll definitely have you back on again as we move on, and we'll try to keep people informed and make people more informed.

Chris Powell: Thanks for your work too, Mike.

Mike Maharrey: Thank you. Bye-bye.

"You can't have limited government without limited money. Infinite money is Infinite government and that's the road to hell." A profound quote by our good friend Chris Powell right there… and that’s a great way to put a bow on this week's podcast.

And I sure hope you will consider supporting GATA, as we do here at Money Metals. We think it’s important Chris and his team have the resources to continue their important work. If you can help, please go to their website by typing GATA.org.

Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Tune in as well to the Money Metals Midweek Memo, hosted by Mike Maharrey and airing each Wednesday. To listen to any of our audio programs just go to MoneyMetals.com/podcasts or find that on whatever podcast platform you prefer.

Until next time, this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a wonderful weekend everybody.

[justiceforthemany] 04/9/2024 12:03

11p EPS with Mogale and 250K annual production
Why are shares trading at just 2.5x earnings?
This is worth 100p.

[salisbury3] 04/9/2024 10:11

Hoping that the FY2024 annual results presentation on 11 September will give the share price a bit of a boost. The fact that production was at the lower end of expectations has dragged the share price back a bit this last week.

[stonedyou] 31/8/2024 15:36

Miners’ Margins Grow as Gold Soars to Fresh Highs


maru Casanova
Portfolio Manager

Gold reached new highs in July due to concerns over escalating global geopolitical risks, a shift towards safer and more defensive assets and speculation about an imminent Fed rate cut.
Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits.

Another month, another high!

Gold reached intra-day highs of $2,431 in April; $2,450 in May; and $2,483 per ounce in July. Gold’s rally this year has been impressive. The sideways price action that we were expecting, following such a strong start to the year, has occurred at a much higher level than we would have predicted.

Gold has averaged around $2,358 per ounce since its April peak.

Key drivers: heightened geopolitical risk and market rotation

In July, gold continued to be supported by heightened global geopolitical risk as the U.S. elections took an unexpected turn, and tensions worsened in the Middle East. Gold's strength in July coincided with a 1.60% decline in the Nasdaq 100 Index1, reflecting a broader pullback in equity markets driven by powerful technology stocks. “Rotation&rdquo; was a hot word in financial markets in July – one could fairly assume that gold would benefit from such a rotation into safer, cheaper, or more defensive assets. Investment demand, as gauged by the holdings of gold bullion backed ETFs, picked up in July, with net inflows resulting in a 1.8% increase in holdings during the month.

Also…rate cuts

Last, but not least, lower-than-expected June U.S. Consumer Price Index readings seem to have convinced markets that the U.S. Federal Reserve (Fed) will soon cut rates, supporting gold. At the end of July, three 25 basis point cuts were priced in for 2024, compared to two cuts priced in at the end of June. While past performance is not indicative of future results, lower real interest rates have historically been positive for gold. The performance of gold in the year or so following the start of the last three rate cutting cycles supports this view (chart below). Gold closed on 31 July at $2,447.60 per ounce, up $120.85 or 5.19% during the month.

Historically, gold has performed well following the Fed’s first rate cuts

Miners are starting to shine

Gold stocks showed their gold price leverage in July. The NYSE Arca Gold Miners Index (GDMNTR)3 and the MVIS Global Juniors Gold Miners Index (MVGDXJTR)4 were up 10.91% and 8.38%, respectively, amply outperforming bullion. For the gold miners, these record gold prices mean record margins. With costs contained, their free cash flow generation expanded significantly in Q2 (see table below).

Healthy margins for miners these days—despite higher costs

Gold companies have been reporting their financial and operating results for Q2 2024. We track a universe of companies during the earnings season to assess how they deliver against expectations, and thus far, the updates appear to be a net positive for the sector with about 80% of results beating or meeting consensus estimates. This is encouraging, and we continue to stress how critical it is that these companies consistently meet their targets. Achieving this should lead to higher valuations that are supported not only by high free cash flow yields during periods of record gold prices, but also by the markets’ conviction that these companies are solid, sustainable and profitable businesses, able to offer positive returns throughout the commodity cycles.

Demand could still be a major catalyst

As of end-July, gold and gold stocks were among the top performing assets so far this year. While gold has reached new highs, gold stocks remain well below their historic peaks. Even a slight increase in global capital allocations to gold and gold mining stocks could have a material impact on the price of gold and gold equities, given that the sector represents a very small percentage (approximately 1%*) of global financial assets. Similarly, despite very robust purchasing of gold in recent years, as a group, central banks of emerging economies remain relatively underinvested in gold, with indications that they could be looking to increase their percentage of total reserves held in gold. If both investors and central banks’ sentiment towards gold and gold equities continues to improve from here, the additional demand could have a significant positive impact on the gold price and the valuations of gold stocks.

China/EM central banks have been big buyers…but could be bigger…

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