Gold prices have surged to record levels rising 22% in the year to date. The recent weakness in global equity markets has impacted gold equities and we see significant value emerging across the sector. We retain a positive view on gold equities, with our preferences driven by companies with the ability to deliver strong organic growth that can be funded from internal cash flow generation. GMD, WGX and CMM are our key preferences of the mid-cap Australian producers, with GMD and CMM boasting a strong organic growth outlook while WGX provides a strong mix of growth balanced by cash flow generation. DEG is our key pick of the larger developers, combined with MAU, with both stocks likely to play a role in the sector consolidation thematic. RED and RRL offer the lowest EV/Ebitda multiples, while CYL has the highest valuation leverage to gold.
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