Investors should fill their boots as Russian Gold rides IPO boom
Luke Cornforth | Mar 26, 2021 12:03
2021’s incredible market growth and IPO boom look set to continue as gold producers across the globe follow the tech industry’s lead to tap financial markets while they’re still hot. The rush to go public is seen from New York to Moscow, providing investors with an array of opportunities. With such a high quantity of listings, the ball is firmly in the investors’ courts to choose only the most promising sectors and companies to fund, and Russian gold presents a solid investment case.h2 Gold Star Credentials/h2
Gold prices are riding a long term wave, up 57% since the summer of 2018, despite small fluctuations which are to be expected in the market. This comes on the back of minuscule interest rates and unprecedentedly high quantitative easing and stimulus packages from central banks and treasuries. Gold is becoming increasingly seen as a safe haven for investor’s money offering greater returns than traditional yield-baring bonds. It could also act as a shrewd hedge should the cash swashing around the economy drive up inflation.
Industry giants have decided to seize the moment to take advantage of rising prices and increased market liquidity to either cash out shareholder stakes or raise money for expansion and further development.
The flurry of activity has centred around the London Stock Exchange, which has the most developed mining sector out of all global markets, with Canada’s Endeavour Mining Corporation seeking a secondary listing following the success of its compatriots at Yamana Gold Inc. in 2020.
Two of the most exciting 2021 offerings, however, come from Russia, with both expected to fetch valuations comfortably in the billions.
Both backed by prominent western private equity firms, Nordgold and GV Gold have significant assets across the country, with plans to scale up to access more of Russia’s vast reserves, which are the world’s largest deposits of premium grade gold, in the future.
Nordgold is looking to fill the gap left by Randgold Resources (LON:RRS) departure from the London Stock Exchange, while GV Gold is staying closer to home trying to raise money on Russia’s revitalised Moscow Exchange.
There is certainly room for an oil major in Moscow, with heavyweight Highland Gold recently going private and rumours that Trans-Siberian Gold Plc (LON:TSG) is likely to follow.
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Investors may be particularly interested in the Russian market right now, as Moscow’s IPO frenzy is drawing in international investors at a time when political relations between East and West are at a new low.
Despite the tension, markets have held up very well as investors are increasingly looking at the ins and outs of each specific company, judging them on their merit rather than current geopolitical trends.
As two well-run corporate entities with soon to be diversified shareholder structures, investors might want to cash in on the still visible ‘Russian discount’ in equity prices, before it disappears in the near future as investors cotton on to the real value in this market.
h2 Caution needed?/h2
Any investment should be approached with caution, and this is especially true in this unpredictable pandemic era. While markets have, so far, thrived under the spectre of coronavirus, no one truly knows what’s round the corner and whispers of a ‘bubble’ should have investors rightly worried and thinking twice about each investment.
For gold, the major risk comes from other financial instruments. Should yields rise, people may pull their money and reinvest in traditional bond offerings, likely leading to a plummeting price for the commodity. This, however, seems highly unlikely, with the US Federal Reserve expected to keep interest rates near zero until at least 2023 .
As a result, the commodity price underpinning these IPOs is likely to hold up for the foreseeable future, making investment in these companies seem a solid proposition. While they might not have the sex appeal or quite the rapid growth potential of everyone’s favourite new tech listings, prospects for solid returns seem encouraging.
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