Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
Shares in Mexico-focused precious metals miner Fresnillo (LON:FRES) got a boost on Wednesday after HSBC Securities upgraded the company’s rating to a “buy.”
The miner, which is the world’s largest primary silver producer and Mexico’s second-largest gold company, saw its stock jump 2.83% to close at 1,319.64 in London. Compared to its peer group, however, Fresnillo is currently trading at a 20% discount and around 17% behind its closest comparator, Agnico Eagle.
HSBC referred to the company as a ‘sector leader at a discount’.
That makes the miner’s valuation “very attractive” on a historical basis and relative to peers, the bank said.
In HSBC’s opinion, the miner’s shares — up 8.5% to date this year — have “overplayed” operational setbacks, while expected improvements haven’t been factored into the current valuation.
In their note to clients, HSBC’s analysts said that while Fresnillo seems to have stumbled somewhat and its operating costs are likely to rise in the second-half of the year and in 2018, the miner “is still a premier name with one of the best production growth profiles and very low operating costs.”
Fresnillo, which floated in London in 2008, is 75% owned by Mexican billionaire Alberto Bailleres. The company’s flagship mine is Saucito, at nearly 22 million ounces of silver produced in 2016, the world’s largest silver operation.
HSBC expects grades at the Saucito mine to increase, while Herradura — in the northern state of Sonora — is poised to deliver “another strong production quarter”.
