The future is bright for gold miners

The gold mining sector has had its share of problems. But the worst may now be over - and that makes gold miners great value.

I didn't get much support for my editor's letter in the magazine this week: Olympic delusions(subscribers can find out why here). But this column on gold shares appears to have gone down rather better. One of our favourite fund managers Sebastian Lyon at Troy has been in touch to tell me that he also thinks gold mining shares are about to see better times.

He notes that they are mostly cheap and has topped up holdings in Newcrest and Newmont. The former has had a nasty year thanks to production problems its production forecasts have been cut twice already this year - but Troy suspects they are now through the worst.

A note also arrived from Angelos Damaskos of the Junior Gold Fund yesterday. He expects the gold price to "resume its uptrend" (as do we not least because of China's passion for it) and reckons that when it does the "rerating of gold mining equities should be quick and substantial".

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As ever, the companies that will benefit the most are those with "solid balance sheets, growing production-manageable cost bases and development potential" are the ones that are likely to be the best. However Damaskos also expects "acquisition activity to intensify as medium sized, cash-rich companies take advantage of market anomalies and snap up distressed situations".

Given that two of the holdings in the Junior Gold Fund have recently had all-share offers made for them (Integra and Avion Gold), this doesn't seem an unreasonable expectation. After all, this M&A activity, if nothing else, tells us that, at these levels, the larger players in the market see value in the smaller, and Mike Feehan, a regional manager at Barrick Gold is quoted as saying that "there's more M&A opportunities today than there were a year ago, and as a company we're looking at those assets on a daily basis".

I mentioned a few stocks (tipped by Ambrian) inmy weekend column: Why youshould still hold gold.And my colleague Phil has a few more thoughts here: Is the gold mining sector about to take off?

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.