Apex Mining Company, Inc. (APX) \u2013 Buy, Target Price: P4.10
Philex Mining Corporation (PX) \u2013 Buy, Target Price: P3.50<\/p>\n\n\n\n
With the market anticipating that the US Fed’s rates may have finally peaked this time around, the USD has simultaneously seen its strength wane. The Bloomberg Dollar Spot Index, which measures the USD\u2019s performance relative to a basket of other major currencies, is down slightly on a year-to-date (YTD) basis at -0.5%, and has notably slid by -2.5% since its highwater mark for the year last Oct. 03. <\/p>\n\n\n\n
While nothing is set in stone, we note that the latest round of inflation data, and the less hawkish tone of the Fed are setting the stage for a gradual normalization in the greenback. Sustained reversal in the dollar\u2019s course should likewise be a boon for gold prices given that historically, the metal\u2019s performance tends to run opposite to that of the dollar. <\/p>\n\n\n\n
Data from 2006 to present day shows that year-on-year (YoY) performance of gold prices has an inverse relationship with the dollar. The reasoning for this is that gold prices are denominated in USD and weakness in the currency relative to other currencies tends to make gold more affordable for them, thereby increasing demand. For the year, gold has been performing strongly with YoY gains of 13.39%. With the favorable macro conditions abounding, we believe that gold has further legs to reach steeper heights.<\/p>\n\n\n\n
With prices of the commodity looking robust, the prospects for listed gold miners APX and PX are looking more appealing. <\/p>\n\n\n\n
On price growth alone, both companies may already be able to realize high single digit growth in full year revenues. Following its acquisition of Asia Alliance Mining Resources Corp. (AAMRC) earlier in the year and the consolidation of AAMRC facilities in Maco, Davao into its own preexisting mine, APX continues to work on fast tracking its goal of reaching 3,000 tpd capacity by the end of the decade. If APX were to simply maintain the same level of volume growth as it did in 2021 (18%), current average price levels of gold (USD1,933) would already be enough to raise revenues by a hefty 30.2%. However, seeing as capacity should further expand, then
revenues could increase all the way to 41.3% if last year\u2019s volume growth is sustained, assuming an average USDPHP rate of P55.65.<\/p>\n\n\n\n
As for PX, while upside from volume growth this year may not be as high given that capacity in its Padcal mine is already maxed out, healthy price levels should still ensure healthy cash flow generation which the company can then reinvest towards its upcoming Silangan mining project. The long-term performance of gold keeps us optimistic regarding the Silangan mine\u2019s future prospects, especially as its ore reserves have a higher grade (0.62g\/t) when compared to the Padcal mine (0.29 g\/t).<\/p>\n\n\n\n