AngloGold and Great Basin hot favourites in SA gold sector

Analysts agree that AngloGold Ashanti is quality, while Great Basin is deemed attractive among the ranks of many cheap juniors.

JOHANNESBURG - 

With signs that the gold price is strengthening, analysts covering the South African gold mining sector say AngloGold Ashanti (JSE:ANG, NYSE:AU) is their pick among majors, while Great Basin Gold (TSX:GBG, JSE:GBG) is an attractive choice among many cheap and interesting juniors.  

Resource analyst with Coronation fund managers Duane Cable said the firm preferred quality and liquidity over smaller players and continued to hold AngloGold Ashanti in the current environment.

Cable said AngloGold Ashanti was the lowest cost gold miner in the world and had "phenomenal assets".

Among the juniors, Coronation was closely watching Great Basin Gold, which starts mining at its Burnstone project in South Africa soon. Cable said Great Basin Gold had a good management team and two good assets in Burnstone and Hollister that were high grade and low cost.

While Great Basin Gold's share price dropped along with that of other junior resource companies, the company looked very attractive.

Cable elaborated that there were many cheap shares among the juniors, but they tended to pick shares with a cheap valuation and quality assets.

He indicated that he didn't see many investment opportunities among the junior gold companies that have acquired old, high cost assets from the gold majors, such as Pamodzi Gold and Aflease Gold.

Cable was also not too bullish on Pan African Resources' prospects as it was using cash from its producing Barberton Mines in South Africa to fund exploration projects in Africa.  

"There are lots of interesting, cheap juniors, but we prefer to stick to low cost producers with quality assets which stand a chance to become serious players in the medium term," he said.

Rand Merchant Bank investment professional Cor Booysen said if the bank did invest in gold its choice also fell on AngloGold Ashanti as the company had very good management, lower costs and various open cast mines, which meant their costs declined substantially when steel and oil prices fell.

Booysen said however, that the gold sector with its deeper mines and lower productivity was risky to start with, and gold juniors presented even more risk. 

He said it was always good to have gold in uncertain times as these, but he would not recommend holding more than 5% or 6% of one's total investments in gold.

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responses to this article

What about forward sales ? Anglogold Ashanti. No mention of forward sales. The Company was raped by Godsell & Kelvin Williams (the forward sales Guru). The takeover of Ashanti was a political move ...B***** the share- holders. Even Silver and Uranium sold . .more forward. The Article conveniently ignores the above big mistakes. Goldfields is a much better share. . .less by Realist on November 27 2008, 09:05 Find this comment inappropriate? Report it

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