By Jonathan Boyd
Investment Europe
Speaking on the 25th anniversary of the launch of the BlackRock Gold & General fund, Evy Hambro, CIO of the Natural Resources Team at the manager, said that a new era beckons for equity investors in gold mining companies, which have started to focus on profitability rather than size.
Through the past decade of ever rising gold prices, gold mining companies thought that in order to benefit they needed scale of production. However, this came at a price for investors, because the focus on producing more ounces of gold resulted in many companies digging out ever increasing amounts of lower grade ore.
This resulted in costs rising faster than the price of gold and lower profitability. The effect was exacerbated by high levels of M&A activity and reinvestment in lower quality mines.