Guy on Rocks: Diggers and Dealers optimism sets the stage for a bullish 2021
Guy on Rocks is a Stockhead series looking at the significant happenings of the resources market each week.
Former geologist and experienced stockbroker Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance, shares his high conviction views on the market and his “hot stocks to watch”.
At this year’s slightly later (thanks COVID) than usual Diggers and Dealers Mining Forum in WA’s gold-rich outback town of Kalgoorlie the sentiment was very bullish.
In his opening presentation on day one, Premier Mark McGowan emphasised the mining sector’s contribution to the Australian economy, which has been significant to say the least.
This was followed by some pretty impressive presentations. Of course, there was a lot of discussion around the Saracen/Northern Star merger.
Combined, that group now controls just under 20 million tonnes of production in Kalgoorlie. So that’s created a real powerhouse, and a top 10 gold producer in the world.
What was interesting was the upside at Fimiston and in particular the Mt Charlotte underground. It looks like the production coming out of the Golden Mile pit will be significantly extended.
So it’s gone from an unconsolidated underground operation back in the 1900s to being consolidated back to open pit and now it looks like the underground at Mt Charlotte will kick off again, which is very, very encouraging.
On the commodity front, it’s more of the same. Exchange traded fund flows have been strong and are picking up again, particularly back into precious metals.
But putting a slight dampener on the resources enthusiasm this week was China’s ban on coking coal, which has come out of nowhere. So that’s caused a bit of mayhem.
Obviously, that’s a big part of the Queensland and NSW economy and hasn’t been particularly well received. A lot of steel mills are diverting Australian coking coal that was halfway to China.
But that was the only sort of blight on what was a pretty solid week.
There were plenty of press releases during the week, as you’d expect from a Diggers conference.
Traka Resources (ASX:TKL) identified some new geophysical targets at the Mount Cattlin gold project that look pretty interesting.
Notably, a lot of new targets were located under areas where there’s only been shallow drilling.
Traka pinpointed four resistivity anomalies along an 800m north-easterly trend that extends from the Lone Hand to the Maori Queen mines.
I think on the back of the Medallion Metals (the old ACH) float — they’re floating the Ravensthorpe gold project in the next month — that’ll fire up Traka, and around 2c they’re pretty good buying.
Meanwhile, Tempest Minerals (ASX:TEM) is starting to drill at the Warriedar West project. That’s another intrusion-related gold system up near Mt Magnet that’s got a bit of interest.
There’s also been a lot of discussion around Estrella Resources (ASX:ESR), which we mentioned a few weeks ago.
Last week the company announced it had intersected 2.9m of massive nickel-copper sulphide, but the big interest is around that 15m wide vein, stringer, matrix and disseminated material which finished in mineralisation.
We’re either looking at a potentially massive sulphide operation or massive sulphide with a large lower grade halo that hasn’t been identified before.
So on the back of Estrella’s site visit there’s been a lot of interest in and obviously huge volume in the company.
And lastly, Fenix Resources (ASX:FEX) is buying the existing port facilities that Sinosteel owns at Geraldton Port for about $1m.
So the company is consolidating its position at the port, which is pretty encouraging.
A company that’s yet to really run, Eastern Iron (ASX:EFE), has picked up the Three Mile prospect in the Gippsland area following up some high-grade copper.
The company, which has a market cap of just over $5m, has some electromagnetic (EM) conductors it’s going to be targeting.
The only thing is Eastern Iron will need to raise money soon.
They’ve also picked up the Nowa Nowa iron ore project, which is not particularly high grade or large but with current iron ore prices and good logistics not far from a port.
A feasibility study was completed on the project in March 2014 and while it’s in a national forest area, it only takes up a fairly small footprint.
But I think the short-term interest is drilling those EM targets on that Nowa Nowa project. A bit of interest is starting to come into the stock.
All up it was a pretty exciting week at Diggers, and although it was a WA-only attended event there was plenty of enthusiasm and the activity levels from juniors right through to the majors has been pretty solid.
The biggest risk I think from here is running out of drill rigs and geologists. If you look at the figures, over $680m was spent in the June quarter on mineral exploration, an 11 per cent rise year on year. The numbers are really starting to build up.
Two years ago, you had maybe three or four geologists working on the Julimar and Pilbara projects across Chalice (ASX:CHN) and De Grey (ASX:DEG). Now you’ve got about 50 geologists working across these two projects.
From an employment and capital raising point of view, the trickle-down effect is going to be fantastic. They’re set up pretty well for next year, I think.
At RM Corporate Finance, Guy Le Page is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles.
He was head of research at Morgan Stockbroking Limited (Perth) prior to joining Tolhurst Noall as a Corporate Advisor in July 1998. Prior to entering the stockbroking industry, he spent 10 years as an exploration and mining geologist in Australia, Canada and the United States.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
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