Analysts at Berenberg have pinpointed gold equities as the investment of choice amid a climate of economic fluctuations and geopolitical tensions, emphasising their strong performance and potential for growth.
According to a recent report by the investment bank, which cast a spotlight on the mining sector, particularly undervalued junior miners have emerged as notable standouts.
In the face of a 6% rally in gold equities since the beginning of the year, the anticipation of interest rate cuts by the US Federal Reserve —despite the uncertainty surrounding their timing — and the backdrop of global unrest paired with the prospect of Donald Trump's political comeback, the bank identifies a heightened risk environment. This scenario underscores the enduring value of gold as a safe investment haven, investors were told.
"Amidst the current uncertainties, gold equities represent the optimal investment locale, marked by attractive valuations and a clear pathway to share price appreciation," Berenberg analysts stated, solidifying the case for gold as a prudent investment choice in turbulent times.
Among the blue-chips, Wheaton Precious Metals (“quality, stable and high margin”) or Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) were picked, with the latter offering a “rerate trade” after a challenging Q1.
On Endeavour, Berenberg’s mining analysts said: “we believe that it is time to look through the noise after the previous CEO’s departure and look to 2024’s volume growth, rising FCF generation, falling leverage and increasing shareholder returns from 2025”.
In the mid-cap space, the preference is for Centamin, Hochschild Mining, Pan African Resources PLC (AIM:PAF, OTCQX:PAFRY, JSE:PAN, OTCQX:PAFRF) and Resolute Mining – all stocks have “near-term catalysts to drive the share prices higher, and we think that catalysts are key in this market”.
Looking elsewhere in the sector for “clearly mispriced equities”, the analysts flagged that Tharisa PLC (LSE:THS, JSE:THA, OTC:TIHRF) has “taken matters into its own hands” with the launch of share buyback, while Ecora Resources PLC (LSE:ECOR, TSX:ECOR, OTCQX:ECRAF), which has pivoted to battery metals, offers “compelling medium-term growth at a far too cheap valuation, in our view”.
As for Base Resources, “permitting risk is why” it trades at 0.19 times net assets; “if it sees progress here, we see material upside in the shares”.
Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF) was flagged as “a great project, with the shares not reflecting its value”, and rutile-graphite developer Sovereign Metals Ltd (ASX:SVM, OTC:SVMLF, AIM:SVML) “a clear takeout target for Rio Tinto given the relationship between the two companies”.