FTSE 350: London gold offerings dwindle but quality remains

But there is a bright spark in Endeavour Mining (EDV), which has worked hard to depict itself as the heir to Randgold following the latter's post-merger subsumation into Barrick Gold (CA:ABX), given its West Africa focus and dividend. The comparison is helped by its production of over 1mn ounces of gold a year and expansion options that should quickly pay for themselves. Handily for Endeavour, it was boosted into the FTSE 100 at the same time Polymetal was kicked out last month.

More broadly, appetite for gold exposure is clearly healthy: March saw the highest level of gold-linked ETF buying in six years, according to the World Gold Council, at $11.8bn (£9bn). This is a marked departure from 2021’s low level of interest and goes some way to confirm that punters still want gold in a crisis. 

Compared to bullion, mining companies can offer both growth beyond the price of the precious metal and a dividend, but risks include operational issues and rising costs eating into profits. Balance sheets are in good shape, given two years of high gold prices, but the need to keep replacing mined ounces and build-out expansion options mean debt could be piled back on quickly. 

Cost rises are no trifle: Endeavour has added $29mn to the forecast capex for its new Sabodala-Massawa expansion, on top of Liberum’s $260mn estimate. Centamin (CEY) has pushed its high-end 2022 all-in sustaining cost guidance – which includes both operational and capitalised costs – from less than $1,000 an ounce in 2019 to over $1,400 an ounce this year.

Outside Africa and Russia, Americas-based gold and silver plays have become more prominent. Fresnillo (FRES), the Mexican miner, was a favourite of investors in 2020, reaching more than 1,350p a share. It has struggled in the past 18 months, however, and its operational outlook is reliant on government approval for the new Juanicipio mine’s final permits and power hook-up, now expected by mid-year.