Gold Mining Journal, Issue 157
Regular readers will know I’ve been anticipating this revival for some time and like any broken clock, I will eventually end up correct, even if just for a minute.
But several movements of the last few months point to a genuine changing of the mood.
It may only be a trickle, but money is starting to flow into gold developers and explorers again. Since the last GMJ, there have been larger capital raisings, including Brightstar Resources Ltd ($24 million in August), Magnetic Resources NL ($XX million in September) and Astral Resources NL ($25 million in September).
That Astral – a solid but hardly standout proposition (1.27 moz @ 1.1 g/t gold) – is proof investors are starting to loosen the purse strings for gold developers and explorers.
Elsewhere, the volume of gold exploration announcements has picked up markedly in the last three months. There have been few exceptional stories so far and even fewer share price breakouts but the anecdotal evidence I am receiving on the streets of West Perth is that these results are starting to garner interest among investors.
Spartan Resources Ltd has led the way, with its Never Never discovery catapulting it to a $1.5 billion market cap, further proof that markets are increasingly warming to gold discoveries.
Behind Spartan is a slew of explorers showing signs of building momentum. The true strength of the trend will emerge over the next six months as many of these explorers head back to market seeking funds to take promising discoveries into resource definition and beyond. With lithium, rare earth and other explorers in desultory mood, the gold companies should have a free run on the market.
The revival is even more welcomed as it was only a few weeks ago it felt as if the entire junior exploration industry model was broken after three years in which the gold price climbed inexorably to new highs, but investors continued to shun gold explorers.
Morgans Financial analyst Ross Bennett highlighted this “decoupling” from the gold price in a recent research report, noting that “since 2022 mid-cap gold equities have decoupled from the price of gold, whilst large caps have mirrored commodity price”. While Bennett was referring to mid-cap producers, his analysis held for developers and advanced explorers, where the delta between the gold price and historical valuations is even stronger.
“Capital is set to flow to mid-cap producers, development and advanced exploration
projects as the current gold price prevails,” he said. “We see value in quality assets
regardless of jurisdiction as gold remains near all-time highs.”
The change in investor sentiment was even more pronounced for those Australian companies who travelled to Colorado for the Denver Gold and Beaver Creek forums in September, where they were largely in the ascendancy in comparison to their TSX-listed peers.
Canaccord Genuity senior mining analyst Paul Howard told me the “Aussies that made the trip had good reason to as their projects are favourable”.
“I felt the mood among the Aussie attendees was very buoyant,” Howard said.
“Generally, lesser quality Aussies weren’t there but as for the Canadians, it was a bit more hit-and-miss. It’s far easier and cheaper to get to Denver from Canada, so far more make the trip. It seems like their equivalent of Diggers or Noosa. The downside is that lots of juniors attend; warts and all!
“Almost every conversation with a TSX-V listed company touched on whether they could list on the ASX, as if there’s a secret sauce down here. I’m still formulating a view, but I don’t think the ASX is particularly special – perhaps we appreciate jurisdictional risk a bit more – it’s more that the TSX-V has so many lifestyle companies listed that the gems get tarnished with the same brush as the lumps of coal.”
So, just as the sector was facing what felt like an existential crisis, the clouds apparently lifting and a new era of gold exploration could be emerging.