Avocet Mining Plc and Adamus Resources Ltd. are among the “top picks” from junior gold miners as shares of producers lag behind gains in bullion prices, Ambrian Capital Plc said.
“Now is the time to buy gold equities,” Ambrian said in its Gold Sector Review released in London today. “We see a short-term arbitrage opportunity between undervalued equities and the current spot price. A sensible investment in quality gold equities will offer investors greater returns than an investment in gold alone.”
The benchmark Philadelphia Gold & Silver Index of companies including Barrick Gold Corp., Newmont Mining Corp. and AngloGold Ashanti Ltd. has slipped 2.1 percent this year compared with a 13 percent gain in the gold spot price. Gold reached a record $1,610.10 an ounce on July 19.
Avocet “has demonstrated its exceptional potential for organic growth,” Ambrian said. “We firmly believe management can make this a 500,000 ounce-per-annum gold company within five years.”
Avocet, which operates the Inata mine in Burkina Faso, targets output of 165,000 ounces of gold this year. Ambrian set a 277 pence target price for Avocet. The company closed 0.9 percent lower at 218 pence in London.
Adamus, which produced its first gold from the Nzema mine in Ghana this year, may be involved in consolidation in the West African gold industry, Ambrian said.
“Adamus will play a pivotal role as it is now a producer with a substantial and prospective gold package,” analysts Duncan Hughes, Adam Kiley and Nick Mellor wrote in the report.
Ambrian also recommended buying Ampella Mining Ltd. Ampella is one of the “most exciting” West African exploration companies and expects that it will increase the resource of its Konkera project by the end of the year, Ambrian said.