Gold Producer Stocks Rise, Check the Outlook According to Analysts

Although gold prices are still generally trending downward amid ongoing geopolitical conflicts in the Middle East, the stock prices of those commodity producers have started to rebound.
Most gold producer stocks have shown recovery at least over the past week. For example, PT Amman Mineral Internasional’s stock price has surged sharply 15.43% in the past week to the level of Rp 5,425 per share as of Friday (10/4).
At the same time, the shares of PT Bumi Resources Minerals Tbk (BRMS) jumped 14.97% to the level of Rp 845 per share. The shares of PT Archi Indonesia Tbk (ARCI) also leaped 10.25% to the level of Rp 1,560 per share.
In addition, PT Aneka Tambang Tbk (ANTM) rose 1.92% over the past week to the level of Rp 3,710 per share. Conversely, the shares of PT J Resources Asia Pasifik Tbk (PSAB) held at Rp 510 per share even though they moved in a volatile manner over the past week.
A different fate was experienced by the shares of PT Merdeka Copper Gold Tbk (MDKA), which were corrected by 1.23% over the past week to the level of Rp 3,220 per share. Likewise, the shares of PT Merdeka Gold Resources Tbk (EMAS) weakened by 0.91% to the level of Rp 8,125 per share.
Arinda Izzaty, an analyst at Pilarmas Investindo Sekuritas, said the recent strengthening of gold producer stocks has been driven more by a combination of forward-looking factors (forward looking) rather than simply by the current spot gold price positioning in the market.
In this case, although gold prices are relatively stagnant around US$ 4,700 per troy ounce, the market has begun pricing in the potential decline in global benchmark interest rates, the weakening of the United States dollar (AS), as well as increasing geopolitical risk that could bring back gold’s role as a safe haven asset.
Besides that, company-specific factors are also quite dominant. For example, optimism about expansion and increased production volume at AMMN and BRMS, improvements in the cost structure, and expectations of margin improvement if energy prices stabilize.
“This rise in stocks doesn’t necessarily reflect a short-term rebound in gold prices, but more the expectation of a gold cycle that can turn bullish again in the medium term,” he said on Friday (10/4).
From a valuation perspective, Arinda said some gold stocks such as ANTM and MDKA are already at relatively fair levels up to a premium thanks to the price to book value (PBV) or enterprise value (EV)-EBITDA ratio above the historical average. Meanwhile, second-layer stocks such as BRMS and ARCI are still considered undervalued because they are in the early growth phase and optimizing gold reserves.
Meanwhile, capital market observer and Founder of Republik Investor Hendra Wardana assessed that some gold stocks have valuations that are relatively attractive, especially for those that have not fully reflected the potential of future production.
Even so, investors need to be more selective about gold issuers whose stocks have already rallied significantly, considering that their valuations are starting to approach fair value.
Overall, the outlook for gold issuers is still quite attractive, especially when looking at the direction of global monetary policy, which tends to be looser, as well as the potential for the weakening of the US dollar currency.
Under these conditions, gold prices historically tend to strengthen because the opportunity cost (opportunity cost) of holding gold becomes lower. Not only that, geopolitical tensions that are still fluctuating will continue to support gold prices in the medium to long term.
However, the growth room for the performance of gold issuers is not without limits. Challenges such as rising production costs, fluctuations in energy prices, and operational and regulatory risks remain factors that every issuer needs to consider.
“Issuers that have large reserves, efficient production costs, and clear expansion will perform better than those that only rely on commodity prices,” he said on Friday (10/4).
To be able to deliver optimal performance, the strategy that gold issuers need to strengthen is maintaining production cost efficiency so it remains competitive amid commodity price fluctuations.
Issuers in that sector also need to accelerate the development of new projects to increase production volume and keep their financial structure healthy amid the need for large capex. On top of that, diversifying the business into other minerals such as copper is also a strategic move, because it can provide a buffer when gold prices experience a correction.
In line with that, Arinda believes that gold producer issuers must be disciplined in controlling costs in order to remain competitive amid volatility in commodity prices. Next, issuers need to accelerate the exploration and development of new reserves to maintain the sustainability of production.
Furthermore, gold issuers need to optimize their core asset portfolios, including the divestment of non-core assets or high-cost mines. Downstream integration or diversification into other strategic minerals can also be an option for issuers as a hedge against the gold commodities cycle.
“Conservative financial management with low leverage and strong liquidity is important to maintain flexibility when the commodity cycle turns,” Arinda added.
Then, Arinda suggested that investors consider the stocks of ANTM and MDKA, with target prices of Rp 4,800 per share and Rp 3,700 per share, respectively.
On the other hand, Hendra considers gold sector stocks still relatively attractive as part of defensive play as well as tactical trading amid global market volatility.
ANTM stock is recommended as a speculative buy with a target in the area of Rp 4,000 per share. The same recommendation is given for BRMS stock with a target price of Rp 965 per share.
ARCI, EMAS, and AMMN are also worth watching, with target prices of Rp 1,770 per share, Rp 9,000 per share, and Rp 6,075 per share, respectively. Meanwhile, MDKA stock is also recommended as a speculative buy with a target price of Rp 3,540 per share.
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