Singapore’s trio of gold plays have averaged an 3% return in the 2017 year to date. The three miners, CNMC Goldmine Holdings, Wilton Resources Corporation and Anchor Resources are in different stages of the gold exploration, development and production.

CNMC Goldmine Holdings recently completed a subscription of 51% of the shares in the enlarged share capital of Pulai Mining Sdn.Bhd. Pulai Mining’s brownfield project is nearly four times the size of CNMC Goldmine Holdings’ Sokor Gold Field Project. The stock was the biggest gainer amongst the trio in the past year with a one-year total return of +84.8%.

Wilton Resources Corporation is the biggest of the trio and has also been the strongest performer in the YTD at +12.1%. The company announced completion of a placement of 150 million new ordinary shares in capital in January, followed by announcing maiden mineral resource estimates for two of its prospects at Cibak and Cipancar in February. 

In October 2012, the Singapore Government lifted the Goods and Services Tax on Investment-Grade Precious Metals. Since then, IE Singapore have cited a Singapore Bullion Market Association (SBMA) survey that the amount of annual gold volume traded in Singapore has grown rapidly from 911 tonnes in 2012 to 2,624 in 2015.

While there are no upstream gold mining activities conducted in Singapore, the city-state is home to downstream international gold refineries and bullion product manufacturing plants, with significant storage capacity through Singapore Freeport.

Gold Mining Stocks

Of the 16 mining stocks listed on SGX, three stocks, all listed on Catalist are focused on Gold Mining. Singapore’s trio of gold plays have averaged an 3% return in the 2017 year to date. Wilton Resources Corporation is the biggest of the trio and has also been the strongest performer in the YTD with a 12.1% gain.

Name Last Price SGX Code Market Cap S$M Total Return YTD % Total Return 1 Yr % Total Return 3 Yr % Dvd Ind Yld %
Wilton Resources Corp 0.074 5F7 183 12.1 32.1 -43.1 N/A
CNMC Goldmine Holdings 0.395 5TP 161 -9.2 84.8 70.5 1.5
Anchor Resources 0.097 43E 30 6.6 N/A N/A N/A
Average       3.2 58.5 13.7 1.5

Source: SGX StockFacts, Bloomberg (Data as of 15 March 2017)

CNMC Goldmine

chart 1

Source: SGX StockFacts, Bloomberg (Data as of 15 March 2017)

*Correlation based on daily data between Jan 2015 to Mar 2017

CNMC Goldmine is the second largest capitalised of the trio and achieved its first gold pour in 2010. It saw an exponential increase in trading volume leading up to Brexit, with a threefold month-on-month increase from May to Jul 2016.

The company is headquartered in Singapore and started operations in 2006. It is principally involved in the exploration and mining of gold and the processing of mined ore into Gold Dores. It is currently focused on developing the Sokor Gold Field Project located in the State of Kelantan, Malaysia. Spanning an area of 10km2, Sokor had 618,000 ounces of JORC-compliant gold resources (including ore reserves) as at 31 Dec 2015.

CNMC Goldmine has also completed a proposed subscription to acquire a 51% stake in Pulai Mining Sdn Bhd, which is a brownfield project with 11 licenses spanning about 38 km2 to explore and mine for gold, iron ore and feldspar. A brownfield project is a mining area where previous mineral deposits have been discovered, whereas a greenfield project a mining area that has yet to have seen a discovery. Upon Pulai Mining becoming a subsidiary, CNMC Goldmine will commence geological exploration to find mineral resources that comply with the internationally accepted JORC Code.

CNMC Goldmine reported FY2016 profit attributable to owners of the company at US$9.1 million against US$10.6 million a year ago. In its 2017 outlook (click here), the company plans to:

  • Expand production by increasing leaching capacity and enhance gold recovery process with the aim of increasing gold production;
  • Minimise cost by further streamlining production processes to reduce wastage of raw material and leverage economies of scale from increased production capacity to lower material costs;
  • Accelerate exploration by increasing gold resources and reserves (as well as silver, lead and zinc resources and reserves) at Sokor; and
  • Expand portfolio by exploring opportunities to acquire and develop other mines in Malaysia, other parts of Southeast Asia and Australasia.

For kopi-C: the Company brew profile of CNMC Goldmine, click here.

Wilton Resources

chart 2

Source: SGX StockFacts, Bloomberg (Data as of 15 March 2017)

*Correlation based on daily data between Jan 2015 to Mar 2017

Wilton Resources is engaged in the business of exploration and mining of gold, and production of gold dore. The Group’s concession blocks, collectively termed the “Ciemas Gold Project”, are located in West Java province of Indonesia, and cover a total area of 3,078.5 hectares. For the six months ending 31 Dec 2016, Wilton Resources reported a loss after tax of IDR 22,422 million against IDR 24,180 million a year ago.

In its half year financial report, Wilton Resources noted:

  • The Ciemas Gold Project boasts high grades, large and open resources, and low projected costs which help to de-risk the opportunity.
  • The Board remains focused on the commencement of gold production at the Ciemas Gold Project, with mining of ore to be processed in a pilot plant expected to commence in 3QFY17 (1 Jan 2017 to 31 Mar 2017) from which first production is expected in 4QFY17 (1 Apr 2017 to 30 Jun 2017) – for more details see section page 15 – Section 14c here.
  • The volatility of the foreign exchange for the US dollar against Wilton Resources’ functional currency (IDR) will continue to have a significant impact on the Group’s financial results.

On 9 Jan, Wilton Resources announced that it completed a placement of an aggregate of 150 million new ordinary shares in capital in the company at S$0.0571 per share which amounts to S$8.6 million.

Wilton announced on 2 Feb that maiden mineral resource estimates for two of its prospects at Cibak and Cipancar, adding 6,160 kg of gold Inferred resources. On 9 Feb, it was reported that the total Ciemas gold Project hosts 26,740 kg of gold Measured + Indicated resources, and 18,390 kg of gold Inferred Resources.

Anchor Resources

chart 3

Source: SGX StockFacts, Bloomberg (Data as of 15 March 2017)

*Correlation based on daily data between Mar 2016 to Mar 2017

Anchor Resources is in the business of exploring, mining and producing gold for sale primarily in Malaysia. Its headquarters are in Kuala Lumpur and with group concession rights to the Lubuk Mandi Mine and the Bukit Panji Mine. Both properties are located in the state of Terengganu, Malaysia.

Anchor Resources’ current focus for mining and production of gold is at the Lubuk Mandi Mine where its project partners and appointed main contractors continue with exploration, gold mining, processing and smelting, as well as constructing and developing required equipment for the operations at the mine. Anchor Resources reported that the FY2016 loss attributable to owners of the parent was MYR 28.5 million against MYR 44.2 million a year ago.

Anchor Resources noted in its financial report (click here) :

  • The Group expects gold prices to fluctuate depending on the global economy and US interest rates.
  • The Group will continue with its hard rock mining activities at the Lubuk Mandi Mine including the dewatering of the main pit and the stripping of the overburden in order to reach the resources at deeper areas.
  • Reiterated that on 27 Jun 2016, the Group announced the Very Substantial Acquisition (VSA) to diversify into the new business of mining and quarry extraction of dimension stone granite as well as architectural stone and interior fit-out (“Proposed Diversification”). The VSA and Proposed Diversification are inter alia, subject to approvals from independent shareholders and the SGX-ST.
  • In addition, the Group is contemplating further fund raising for the development of Lubuk Mandi Mine.

Anchor Resources also provides mining consultancy services. As of 30 Sep 2015, JORC-compliant estimated total Mineral Resources for the Lubuk Mandi mine amounted to contained gold of approximately 115,000 ounces.

Process of Exploring, Extraction & Production 

The aim of gold exploration is to discover a new gold deposit and quantify the amount and quality of the mineral in order to assess if it can be profitably extracted. The majority of gold mines are open-pit mines (also referred to as open cut or open cast mining). This method is used to mine minerals where the deposit is located near to the surface.

The process of exploration, and extraction to production is outlined by CNMC Goldmine (click here):

  • Mining engineers will determine, using exploration data, if there is sufficient gold deposits under the surface to make the mining economically feasible; the type of mine needed; the physical obstacles to getting to the gold; and the potential impact of a mine on the area’s wildlife and environment.
  • Before the gold can be mined, supportive infrastructure must be created. Since mines are often in remote locations, an entire infrastructure – roads, administrative offices, equipment storage areas – must be built. The plans for each mine require the green light by a number of authorities at each relevant level of the government.
  • The mine site infrastructure includes a processing area where the ore is crushed and undergoes various processes depending on the nature of the associated minerals and then the loose rock is sent to the appropriate processing location.
  • The gold is extracted from extraction solution and deposited onto activated carbon, from which the gold is then chemically stripped – also referred to as leaching. The impure gold is then melted into dore bars, which contains about 90% pure gold. These bars are usually shipped to a refinery where they undergo further processing.
  • The refining process strips out the remaining impurities from the gold and convent the end product to 99.99% pure gold.

As noted in the Investor’s Guide to the Minerals Industry (click here), the key sources of risk and reward are exploration, technical, financial, environmental, social, political, and sovereign issues.

Portfolio Diversification with Gold

As Brexit vote took place on 24 June last year, the World Gold Council reiterated the diversifier role of gold, noting that gold was fulfilling its classic role as a haven asset. In previous publications, the World Gold Council’s research had suggested that when investors have added risky assets to their portfolios, gold should have made up 2% to 10% of the portfolio.

More specifically, for portfolios made up of 60% equities and 40% debt, the research suggested a 5% to 6% allocation to gold to effectively manage portfolio risk. The World Gold Council maintains that a key motivation for including gold in a portfolio has been gold’s history of maintaining low correlations to most other asset classes.

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