Has London lost its shine for African gold miners?

Thu Sep 21 2023

The London Stock Exchange has long been the home for mining companies digging up West Africa. But that position looks shakier after a new Africa-focused outfit run by former Yamana Gold boss Peter Marrone has picked the Toronto Stock Exchange and perhaps New York as its listing venues. 

Just three years ago, Marrone brought Yamana Gold back to London in order to take in more institutional buyers and offer investors a gold company without exposure to Russia or West Africa. Now Toronto has first dibs on Allied Gold (CN:AAUC). Allied will look at a New York listing as well. 

So where does that leave London? Once proudly the home of Randgold Resources, there are now only a few gold plays in the region. Endeavour Mining (EDV) is top of the pile, with around half its trading volumes here after taking a premium listing two years ago. Others focused on West Africa include Hummingbird Resources (HUM), Thor Explorations (THX) and Resolute Mining (RSG). Centamin (CEY) also has some exposure, but only through its Doropo project in Cote d’Ivoire, one of the area’s best-regarded jurisdictions. 

A spokesperson for Allied said London investors were still keen on Africa but added that “interest [in the region] is now also developing within North American investors”. They added: “Investors are looking for returns, and returns on many African opportunities are often better than those in other areas, including developed markets."

Coup coast

But the region has certainly not made itself a beacon for investor cash. A string of coups and the presence of terror groups have brought on a rethink from even major players with assets in Burkina Faso, Niger and Mali. 

Endeavour sold its Boungou and Wahgnion mines to a local Burkina Faso consortium earlier this year. Chief executive Sebastien de Montessus said last month the sale allowed the company to “refocus all the management, but also our security efforts into one single area, which is obviously one of the safest parts of the country”. That means the Mana and Houndé mines. Boungou is in the far east of the country, near the border with Niger. 

Endeavour’s share price shows little impact from operating in these areas. Liberum analyst Yuen Low said it was the “go-to” stock for London funds looking for gold exposure.

“Endeavour’s periods of outperformance would tend to suggest that investors are not too concerned about West Africa risk," he added. 

The company has largely kept up with the performance of the VanEck Gold Miners ETF (US:GDX), used as an industry average. Endeavour was well ahead of the ETF at the end of May when the gold price surged, although it has underperformed it in the past month. 

Source: https://www.investorschronicle.co.uk/