With gold providing strong performance in 2024, many investors are looking to gold miners. The AuAg ESG Gold Mining Ucits ETF (LSE: ESGO) is an exchange-traded fund (ETF) offering equal-weighted exposure to mining companies with high environmental, social and governance (ESG) standards.
This ETF therefore has two unique features. Firstly, it is equally weighted, so its holdings are not dominated by one single stock or a handful of them. Secondly, the ESGO ETF allows investors to gain exposure to the best-in-class gold miners from an ESG perspective. As well as allowing investors to align their investments with their values, the ESG screening approach helps to mitigate risk. Companies with poor ESG scores, which the ETF does not provide exposure to, may be more at risk of being involved in controversies that can affect their bottom line.
1. Wheaton Precious Metals (NYSE: WPM) is one of the largest players in the precious metals streaming business. Wheaton finances mining projects in exchange for a percentage of the production, allowing it to reduce operational and environmental risks.
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In the second quarter of 2024, Wheaton reported revenues of $299m, a 13% year-on-year increase. It achieved a return on equity of 8.54% and a net margin of 50%. Wheaton is focused on minimising its environmental impact. The group’s latest Climate Change Report noted that 87% of emissions from firms it finances are now covered by reduction goals, while 70% of Wheaton’s current revenue is sourced from mines that are producing metals required for the clean energy transition. The company also noted that it is one of the top-rated companies by Sustainalytics and holds an AA ESG rating from MSCI.
2. B2Gold (NYSE: BTG) is a Canadian gold producer with mines in Mali, Namibia, and the Philippines. The company also has a 25% interest in Calibre Mining and a 19% interest in BeMetals. In addition, it has a portfolio of other exploration assets in Mali, Uzbekistan and Finland. B2Gold’s current valuation is attractive.
The miner has a forward price/earnings (p/e) ratio of 12.84, which is below the industry average of around 15, using the NYSE Arca Gold Miners index. This suggests that the stock is trading at a discount to its peers in the gold mining sector. B2Gold has been integrating renewable energy into its mining operations: 22.9% of total electricity consumed was from renewable sources in 2023. Its Otjikoto mine in Namibia is now principally powered by clean-energy sources, with renewables accounting for 81.4% of the electricity used.
3. Pan American Silver (NYSE: PAAS) While primarily a silver producer, Pan American Silver also produces significant amounts of gold. Its operations are spread across Latin America. As of 30 June 2024, Pan American reported 6,893 kiloounces (one thousand ounces) of proven and probable gold reserves. To translate this into more familiar terms, it is approximately 194.8 metric tonnes of gold reserves.
Its latest earnings report for the second quarter showed revenue of $686.3m, representing growth of 7.3%. Pan American has an ambitious goal to achieve net-zero emissions by 2050 and has been investing in energy efficiency at its sites. The miner hopes to reduce emissions from its operations by 30% by 2030.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.