ACA, Share Of The Week.......27 Jun 2016 13:27
ACA Acacia Mining......
Share of the week: Love this gold digger
By Harriet Mann | Fri, 24th June 2016 - 17:39
After an extremely tight European referendum campaign, Britain's decision to leave Europe came as a major shock. Sterling crashed, the Prime Minister resigned and investors dumped risk assets. In typical fashion, the unease sent investors rushing for safe-havens like gold and miners to the top of the FTSE 350.
A plunge in the pound to its lowest level since 1985 and a quick-fire 550-point dive in the FTSE 100 also had investors hunting international earnings exposure, which included pharmaceutical groups NMC Health (NMC) and Mediclinic International (MDC). ARM Holdings (ARM), which makes the chips for iPhones, was also in demand. Miners were the other winners - and not just gold diggers!
"Mining, by its nature, is extremely international in terms of operational location and the markets for its products. Therefore, unless Brexit translates into a more general economic malaise, the sector is likely to be relatively insulated from any near-term impacts," reckons finnCap analyst Martin Potts. "Dollar revenues and to a large extent costs and earnings are normal for the sector."
In addition to US Treasuries & gilts and the Japanese yen, the surge in demand for gold left London bullion dealers short of retail-sized gold bars for immediate sale. As the markets recovered some of their losses during the day, gold eased off its intra-day high. This trend was matched by gold miners Randgold Resources (RRS), Acacia (ACA), Fresnillo (FRES) and Centamin (CEY).
Up 19% this week alone, Acacia Mining led the FTSE 350, followed by Evraz (EVR) and Fresnillo, which jumped 14% and 13% respectively. Randgold also made the top eight performers, with growth of 11%.
"[Gold] is seen as a safe haven and its liquidity means that it is straightforward to trade in large volumes," says Potts. "The new gold price appears to be well reflected in the price performance of the larger gold miners such as Randgold."
This isn't the first time the gold miners have bucked wider market trends this year, with investors flocking to "safe-haven" equities during market volatility sparked by China's economic health and during turbulent times ahead of the referendum.
Last month, Randgold reported a production miss in its opening quarter, although lower depreciation and taxes brought its earnings in line with expectations. Hard work strengthening its balance sheet has paid off too, with $253.8 million in the bank at the end of the three months. Although Numis analyst Jonathan Guy maintained his 'hold' recommendation, he increased its target price to £65. After this week's surge to £73.70 this represents 11% downside.
Acacia Mining reported its first quarter results back in April, when it showed improvements to both its production and cost-cutting. Unfortunately, an additional $70 million t
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