These 3 S&P/ASX 200 Index (ASX: XJO) gold mining companies had over 20 million daily transactions each yesterday. This is more than every other large cap gold miner. As an indication of investor sentiment, yesterday they all traded more than ASX 200 giants Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP).
Why gold?
The gold price has fallen 11% in US dollars since 10 March, but is still at higher levels than it has been since April 2013. At the same time, through the magic of a weak Australian dollar, the gold price in Australia is at an all-time high. This is the secret weapon of gold miners and all companies earning revenues in US dollars.
Gold is the antidote to chaos. It will always be the haven that capital flows to when uncertainty abounds. This capital isn't only from institutional and retail investors. National governments also purchase and hoard gold.
I firmly believe that the bull market in gold still has a long way to run. Even before the coronavirus pandemic things were anything but certain.
The small one
Gold Road Resources (ASX: GOR) saw a volume of 23,353,554 on Tuesday and its share price rose a whopping 21.12%.
At a current market cap of $856 million, Gold Road is one of the 20 smallest companies on the ASX 200. At yesterday's close, its share price had shed 28.8% since 2 January. However, before the sell off it was one of the shooting stars on the ASX 200.
The Gold Road share price has grown at a compound annual growth rate (CAGR) of 31% over the past 5 years. At this rate, $10,000 invested on 1 January 2015 would have been worth $38,500 on 1 January 2020.
Gold Road was a speculative share until 2019, when its 50% owned Gruyere gold mine came into production. It has proven to be a low cost mining operation that generates a lot of free cash.
The challenger
Saracen Mineral Holdings Limited (ASX: SAR) saw 25,366,029 trades on Tuesday and its share price rose by 17.53%.
With its foundation operations in the Leonora-based Thunderbox and Carosue Dam operations, Saracen is the challenger for the dominant Northern Star Resources Ltd (ASX: NST) in West Australia's goldfields region. This was entrenched when it surprised the market by purchasing 50% of Kalgoorlie Consolidated Gold Mines.
Saracen has enjoyed a share price CAGR of 26.2% over a 10-year period and has a track record of solid, year on year performance. It has a reasonably low price-to-earnings ratio of 14.65 on Tuesday's closing price, just under its 10-year average of 15.
The work horse
Evolution Mining Limited (ASX: EVN) saw 40,863,991 trades on Tuesday and its share price rose by 8.04%. It is the largest of these 3 gold miners on the ASX 200.
This is a very solid company with a fiscally disciplined management. It is ramping up production on its acquisition of Red Lake in Ontario Canada, a high grade long life orebody. It is also drilling at the Crush Creek project, located 30km south of Mt Carlton.
H1 of FY20 saw the company achieve record profit, record cashflow, become debt free and continue healthy margins with an all in sustaining cost of $940–$990.
