Guy on Rocks: Gold volatility ahead as US election looms
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‘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”.
Guy Le Page’s prediction is for market volatility ahead in the lead up to the US election, which Donald Trump is perhaps a little too confident he is going to win.
“I think we’re coming into an extremely volatile period in the market generally, and it will probably reflect in metals I suspect,” Le Page told Stockhead.
That saw the US dollar strengthen and gold slip back below $US1900 an oz. It also resulted in a drop in exchange-traded-fund buying, Le Page said.
But, thankfully for the gold bulls, the price is back up over $US1900/oz again.
“I think that will recover as we move in towards the election and probably see even more volatility in gold,” Le Page said.
Copper is capturing headlines a bit this week, and also demonstrating the large disconnect between China and other major economies that don’t yet have a handle on COVID-19.
“Part of the challenge has been working out for example with copper where the growth is, with the data coming out now showing just how divided the world is, with China recording a 6.6 per cent increase in copper consumption and ex-China is down 8.4 per cent,” Le Page explained.
“It’s just an enormous gap between internal consumption and other copper consumption around the world, and we can’t really see that trend changing in the near term because the virus doesn’t really appear to be under control in some of the major economies.”
Meanwhile, although the rhetoric in iron ore circles is that the price of the steelmaking commodity has peaked, Le Page is reasonably confident it will remain above $US100 a tonne in the medium term.
Estrella Resources (ASX:ESR) wowed the market this week, with shares rocketing over 460 per cent to just under 8c on news of a significant massive nickel sulphide discovery at its flagship Carr Boyd project.
Exactly what you want after Telsa boss Elon Musk comes out and says he is definitely going to need more nickel and market commentators give us the numbers on just how much nickel Tesla is going to be demanding by 2030 if all goes to plan.
Estrella picked up the previously unloved Carr Boyd project, north of Kalgoorlie, back in 2017. It was a past producing mine that was discovered in the late 1960s and mined by Great Boulder Mines and WMC from the early to late 70s.
The project has similar geology to Nova-Bollinger in the Fraser Range, the famous discovery that rocketed explorer Sirius Resources from penny stock to $1.8bn takeover target in just three years.
“Estrella looks like it’s hit a bit of a basal contact, which is good, and they’ve got some more step out drilling going on,” Le Page explained.
“This is all part of their three diamond hole program. They’re yet to get the assays back. We’ll probably have a good look at them in the next 10 days.
“Encouragingly it’s open in all directions. The geology is a bit unique there — there’s multiple pipes. While it has been mined and there’s been a lot of ore taken out, there’s still a lot of exploration upside.”
Tribune Resources (ASX:TBR), another Le Page favourite, also made advances on Thursday, edging up 3 per cent to $7.20, after telling shareholders it would be rewarding them with a 20c-per-share dividend in November.
Back in mid-August, the company delivered its maiden resource for the Adiembra prospect in Ghana, which Le Page said at the time was a lot higher grade than he was expecting.
“Very cheap buying at current levels given we believe Ghana should be worth $6 to $7 a share just on its own in the next 12 to 18 months,” Le Page said.
Le Page has this week turned his attention to WA-focused gold explorer Dreadnought Resources (ASX:DRE).
Dreadnought has a market cap of around $73m at a share price of 2.8c.
The explorer on Thursday reported high-grade hits from a 17-hole, 1800m drilling program at its Metzke’s Find prospect, part of its Illaara gold-VMS-iron ore project northwest of Menzies in WA.
Top hits included 2m at 10.8 grams per tonne (g/t) gold from 102m and 1m at 10.9g/t gold from 89m.
These results followed earlier hits of 2m at 39.2g/t gold from 45m, 3m at 21g/t gold from 85m and 1m at 24.8g/t gold from 51m.
“These are really some of the better results we’ve seen in the last few months of this style of mineralisation,” Le Page said.
“High-grade, narrow vein but very impressive widths and even more encouragingly they’re starting to see these intersections in fresher rock, so it’s not just a sort of a supergene blanket we’re looking at.
“We’re actually looking at a genuinely high-grade plunging shoot. So that’s been really encouraging.”
Another new company on Le Page’s radar is Peak Minerals (ASX:PUA), which has a market cap of $16m at a share price of 3.4c.
This is Peak’s second swing at gold exploration after initially shifting its focus from gold to high purity alumina with its rebranding from Hill End Gold to Pure Alumina.
After a deal to acquire a Canadian HPA producer came up against some roadblocks, Peak decided to put its HPA ambitions on ice and return its focus to gold.
But what caught Le Page’s eye was Peak’s recent news it was acquiring a “highly prospective copper portfolio” in WA.
The company has picked up an option to buy four copper projects that span 1289sqkm.
“Peak Minerals have just raised a couple of million, brought Wayne Loxton on as a promoter,” he said.
One of the projects, Cork Tree, sits 28km southeast of Sandfire Resources (ASX:SFR) producing DeGrussa copper-gold mine.
Le Page, however, is interested in the Carson project in the Kimberley region, which was drilled by Planet Gold in 1968 and by Anglo American in 1971 after it became a partner in the project.
“They had results of 33m at 0.9 per cent copper from near surface,” Le Page said.
“Pegasus did some more work later on, got some 12 per cent assays. So that looks pretty interesting.
“Early days yet but plenty of high-grade targets there.”
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.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.