The brains trust at asset manager Coronation has bemoaned capital allocation decisions by gold majors at a time of high gold prices, saying not enough cash was returned to shareholders.
This is as the asset manager, which recently reported nearly R800bn in assets, continues to be underweight on gold and has moved underweight on platinum group metals (PGMs).
Portfolio managers at Coronation, in a note reviewing its Top 20 Fund for the last quarter of last year, said that after many decades of investing in commodity-driven markets, they are very certain of the cyclicality of all commodity industries and are wary of investing heavily at the top of the cycle.
“To invest over a quarter of the portfolio today into speculative, commodity-driven companies we deem to be a significant risk. We are particularly concerned by the fact that gold mining companies have typically returned very little of the super profit years to shareholders, instead using the windfall to develop further mine expansions or buy up other assets and companies,” they said.
“Despite all the excess profits that the major precious metal companies have been generating and the optically low multiples that they are trading on, we have seen no share buybacks, which speaks volumes as to what the management of these companies think of the current market valuations.”
The record-breaking gold price, which has burst through the $5,000 milestone, has seen gold mining shares shoot through the roof.
Despite all the excess profits that the major precious metal companies have been generating and the optically low multiples that they are trading on, we have seen no share buybacks, which speaks volumes as to what the management of these companies think of the current market valuations.
— Coronation
Sibanye-Stillwater’s market value has surged 400% over the past 12 months, with AngloGold Ashanti up 310%, Gold Fields 197%, Harmony 97% and DRDGold 281%.
The surge in gold mining and PGM stocks has played a key part in the JSE all share index’ record-breaching run, creating R5-trillion in value last year.
Coronation’s Top 20 Fund returned 28% “being a fantastic absolute return number; it was unfortunately well behind the benchmark, given that the key driver of the South African market returns for this period was precious metals,” with the decision to be underweight on gold and PGMs having an impact.
The asset manager has exposure to Glencore, whose share price had underperformed the sector in 2025.
Coronation said Glencore’s market value was not reflected in its share price performance.
“Glencore presented a very compelling capital markets day at the beginning of December, showcasing the growth potential of its copper assets, one of the industrial commodities where we know there is significant demand in the years ahead. Coronation said.
“We think its asset base is attractive and undervalued, something which the market is now appreciating with the announced Rio merger talks.”
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