Gold prices closed at their highest ever mark last night at USD2,278.1\/oz on the back of geopolitical fears following an Israeli airstrike on an Iranian embassy in Syria. Despite rising US treasury yields, we note that global uncertainty amidst overseas conflict and the looming US elections have continued to make gold an attractive safe-haven asset. <\/p>\n\n\n\n
In the same vein, copper prices also briefly touched USD9,000.0\/ton before closing at USD8,991.0\/ton (+5.0% YTD) as the recent slew of strong economic data coupled
with the tight supply backdrop fueled positive price momentum.<\/p>\n\n\n\n
Last week, thirteen major smelters in China met to discuss a potential 5 to 10% reduction in this year\u2019s output. Given that the country accounts for 45.7% of the global supply for refined copper, a cut of that size would be immediately felt by the market. <\/p>\n\n\n\n
Likewise, surprisingly strong manufacturing activity in the US and China further increases the likelihood of a tightening in supply and demand dynamics. The former saw manufacturing activity expand for the first time since Oct 2022, while the latter saw its longest streak of factory activity expansion in more than two years.<\/p>\n\n\n\n
The rosy outlook on these precious metals bodes well for our mining picks APX and PX given their significant exposures to these commodities. <\/p>\n\n\n\n
APX is notably the largest listed producer of gold with output as of 9M 2023 standing at 77,700oz. Meanwhile, although PX is currently in transition mode as it moves away from its depleted Padcal mine in order to focus on the construction of the new Silangan mine, the rosy outlook for gold and copper prices nevertheless boosts the stock\u2019s longterm appeal.<\/p>\n\n\n\n
Given the higher grade of Silangan mine\u2019s resources, the mine is expected to produce USD41-Million worth of copper\/yr and USD45-Million of gold\/yr for the first 5 years before eventually ramping up to USD246-Million\/yr for copper and USD270-Million\/yr for gold. <\/p>\n\n\n\n
Valuations-wise, PX is trading at 17.8x P\/E, a 10.0% discount versus its pre-pandemic mean, while APX\u2019s P\/E on the other hand lies at a cheap 4.1x which is far below the 22.5x of its regional peers. <\/p>\n\n\n\n
Given the combination of all of these factors, we think that there is potential for some strong trading action in these stocks and we would therefore recommend a BUY.<\/p>\n\n\n\n