Polyus Gold shares - a profitable investment

On December 11, the rebalancing of the world's largest ETF on shares of gold miners GDX. As a result, it could include shares of Polyus Gold with a weight of 7%. This could trigger a capital inflow of about $1.1 billion, which equals the average daily turnover of shares in Moscow and London of about 20 trading days.

Is it worth taking advantage of this moment to buy Polyus shares? Alexei Kalachev, an analyst at FINAM, answered Fortrader magazine's question.

- The inclusion of Polyus shares in the largest ETF of gold mining companies should certainly support their price on the exchange at least for the period when rebalancing will take place. And in anticipation of this event, exchange players will be betting in advance.

Without the factor of inflows or outflows into ETFs or index funds, the value of gold-linked securities follows the price of the metal by vector, but with a stronger leverage. Graphs of gold itselfThe price of gold, GDX and Polyus shares looks almost identical. However, if we compare the magnitude of change, since the beginning of the year gold has become more expensive by 23.2%, GDX quotations have risen respectively by 22.8% and Polyus shares have added 112.5% in value. Such leverage creates the risk that in case of a reversal in the gold market, they will also become cheaper. However, the company is not equal to the metal, it generates cash flows, receives profit and pays dividends.

"Polyus is not just Russia's largest gold mining company and one of the world's top 10 gold producers. It is the company with the lowest cost per ounce of gold in the industry. And most importantly, it remains a fast-growing company and, unlike its competitors, has the capacity to grow its production. The Company has achieved a considerable growth after the development of the Natalka deposit and the commencement of the planned capacity of the Natalka mill. In the years to come Polyus will start developing the big Sukhoi Log deposit, which will enable it to double its gold output and rank among the top 3 gold producers of the world by 2025. In other words, Polyus shares remain an attractive asset for long-term investments, even if they are falling behind gold.