08 March 2024
Resources Rising Stars - Barry FitzGerald on the WA Gold Sector (including Antipa)
Gold’s move in to record territory has even got the gold bugs perplexed.
If there is such a thing as conventional wisdom on the subject, it is that gold has shot higher because US interest rates are headed lower in the second half of the year, taking the US dollar down as well.
There was a confirmation of sorts of that during the week, with comments by US Fed chair Jerome Powell saying that interest rates had likely peaked but there would be no rush to cut them.
The gold bugs reckon that was not transformational enough to explain gold’s spike to record levels.
One explanation is that the fear factor is on the rise, both in the US and China.
In the US, it is not because of recession fears. It’s fears that the great divide in the country could spill over in to civil war – you can’t make this stuff up – depending on the outcome of the next election, with Trump now shaping up as the likely winner.
In China, it is a distrust of Beijing messing with people’s savings. It is why social media is full of Chinese grandmothers lining up to buy physical gold, at a premium what’s more.
Having taken a walk on the sild side with all that, there is a more sombre assessment needed to be done on what record gold prices means for the ASX gold sector.
Not a lot so far, with leading gold stocks perhaps 30-40% below where they should be on what has become a fantastical Aussie gold price of more than $3,250 an ounce.
Consolidation of gold at these record revels will change the implied discount in gold stocks in time.
But for the more impatient, a combination of newsflow and gold in a record territory is a better bet.
Simon Lawson at Spartan (ASX:SPR) knows how these things work.
On Monday, before heading off on an Eastern states roadshow with the Resources Rising Stars Lunch Series, which finishes up at Melbourne’s Sofitel today, he announced more impressive drill results from the Never Never discovery at at Spartan’s Dalgaranga project in the Murchison.
As Euroz put it in a research note, the latest results went a long way to confirming its belief that Dalgaranga could become a generational asset.
The drill results confirmed high-grade depth extensions to the near 1 million ounce Never Never discovery.
“It may be a geologist’s dream to find a deposit like this, but it is a mining engineer’s dream to mine it,” Euroz said.
“Spartan continues to find high-grade gold within 600m of the (mothballed) 3Mtpa Dalgaranga mill. With minimal capital required to get the operation back into production($70-$100m), high grade feed (+2.2g/t) and visibility, this could be an asset capable of supporting a 10+ year mine life.
“We believe Spartan is a compelling opportunity for gold investors. This is the highest grade gold story since Bellevue Gold for a fraction of the price.”
High praise indeed and accompanied by an increase in the broker’s target price on the stock from 70c to 90c a share. It was a 60.5c stock at Thursday’s close, up by 4.3% on the day.
Tantalisingly, the deeper drilling at Never Never suggests a broadening of the shoot at depth and a possibility of a link up with a shoot being defined below the existing Gilbeys open-cut.
If that were to prove up, the current estimates of Never Never potentially being a 1.5 million ounce find could change to discussion around the potential for 3-6 million ounces. Still early days but one to keep to an eye on.
Paterson:
Psst…want to get a foot on more than 15 million ounces of gold and 3 million tonnes of copper in the ready-to-develop category via a potential once in a lifetime province play?
That’s what is unfolding in the remote Paterson province in Western Australia, about 400km inland from Port Hedland.
The potential play is a result of Newmont putting its Telfer gold-copper mine and its 70% owned Havieron gold-copper discovery 45km to the east up for sale following its takeover of Newcrest, and Rio Tinto seemingly losing interest in its
Winu gold-copper discovery,
The combined resource at Telfer/Havieron stands at 9.3 million ounces of gold and 700,000t of copper, with exploration upside, most notably at depth at the ageing Telfer, and in an around Havieron.
At Winu, the buzz discovery of 2017 which was originally funded by the credit cards of Rio geologists because the London head office was too slow in dispatching funding, the resource stands at 5.87 million ounces of gold and 2.43 tonnes of copper.
Rio hasn’t said it is looking to sell Winu but it did say in its December quarterly report that it was now looking for ‘’alternative development models and partnerships” to carry the project forward.
That is being taken in mining circles as code for “we will entertain offers”. No surprise in that as Winu’s copper component is not up to scratch for a company of its size. And like all of the majors, it struggles to understand how the market values gold assets, so it is better for others to own.
There is nothing to suggest that Telfer/Havieron and Winu will get sold off to the one buyer. But the potential is there, all of which might be of interest to Andrew Forrest through his privately held Wyloo, or Fortescue for that matter.
Wyloo is an 8.5% per cent shareholder in the London-listed Greatland Gold (AIM:GGP), the company that discovered Havieron which it now rates at 8.4 million ounces of gold equivalent. It is a 30% partner in the discovery with Newmont which owns 70% and is the operator (Newmont owns 100% of Telfer).
The idea all along has been for Havieron to feed its higher grade ore in to the hungry Telfer treatment plant to extend its life as a 400,000 gold producer well in to the next decade.
Neatly, Greatland is looking to list on the ASX in the second half of the year. Its current market cap is around the $A660 mark. Given the independent expert in the Newcrest takeover valued Telfer and its 70% Havieron stake at $US500-$US600m, Greatland would need to gear up in a big way to make Telfer/Havieron its own.
Having a shareholder like Wyloo on board would make the task all that much earlier. And in big picture stuff, why not go the whole hog and make a pitch to become the King of the Paterson by bidding Rio for Winu.
Notably, Fortescue is an active explorer in the Paterson in its own right, having taken up a big ground position following the discovery of Winu. So it is not adverse to gold-copper deposits of scale.
Having said that, there will be strong competition for Telfer/Winu and Winu as separate assets, or as a combination, because as is becoming increasingly apparent, opportunities of this sort of scale don’t come along often.
Antipa (ASX:AZY):
Assuming the corporate action in the Paterson heats up before long as suggested, one of the hardiest explorers that can be found on the ASX – Antipa (ASX:AZY) – could well benefit.
It has one of the biggest and best ground positions in the Paterson, some of which is covered by farm-in exploration joint ventures with the likes of Newmont, Rio and IGO.
But it has also been kicking goals on its 100% owned account, with some 2.6 million ounces of gold under its belt across the Paterson which alone should be of interest in a record gold market and Antipa’s modest $58 million market cap at 1.4c a share.
The bulk of that resource is at the company’s flagship and 100% owned Minyari Dome project (1.8 million ounces at a handy 1.6g/t plus copper, cobalt and silver, with 1 million ounces in the indicated category at 1.4g/t).
Significantly in terms of what is going down in the Paterson, Minyari is all of 35km from the Telfer mine with its far from full 22Mtpa processing capacity, even with Havieron to come on.
A 2022 scoping study when gold prices were some 30% lower than they are today envisaged an initial 7-year mine at Minyari from open cut and underground operations producing an average of 168,000 ounces of gold annually in the first five years of operation.
Using a gold price of “only’’ $A2,430 an ounce, the pre-tax NPV was put at $329 million and the IRR at 34%. Capital cost was estimated at $275 million .
There is on-going g exploration upside at the project and what else Antipa has on the go in the broader region. So as a stand-alone project, it looks technically and financially robust, not that Antipa’s market cap reflects that at these gold prices of $A3,273 an ounce.
But then there is potential for Minyari to be wrapped in to the Telfer complex. Telfer alone is currently good to continue to continue to FY2025 without further capital investment. But falling grades and future mine development costs means it needs Havieron to come in around FY2027 to reestablish it as a premier operation.
Nothing to say any of that is about to happen. But the potential is there for Minyari to feature in the plans of which ever group picks up Telfer/Havieron, and maybe Winu to boot.
Golds:
Gold’s move in to record territory has even got the gold bugs perplexed.
If there is such a thing as conventional wisdom on the subject it is that gold has shot higher because US interest rates are headed lower in the second half of the year, taking the US dollar down as well.
There was a confirmation of sorts of that during the week, with comments by US Fed chair Jerome Powell saying that interests rates had likely peaked but there would be no rush to cut them.
The gold bugs reckon that was not transformational enough to explain gold’s spike to record levels.
One explanation is that the fear factor is on the rise, both in the US and China.
In the US, it is not because of recession fears. Its fears that the great divide in the country could spill over in to civil war – you can’t make this stuff up – depending on the outcome of the next election, with Trump now shaping up as the likely winner.
In China it is a distrust of Beijing messing with people’s savings. It is why social media is full of Chine grandmothers lining up to buy physical gold, at a premium what’s more.
Having taken a walk on the sild side with all that, there is a more sombre assessment needed to be done on what record gold prices means for the ASX gold sector.
Not a lot so far, with leading gold stocks perhaps 30-40% below where they should be on what has become a fantastical Aussie gold price of more than $3,250 an ounce.
Consolidation of gold at these record revels will change the implied discount in gold stocks in time.
But for the more impatient, a combination of newsflow and gold in a record territory is a better bet.
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