Guy on Rocks: Uranium makes a surprise move, but gold is still very much the favourite
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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 stock to watch”.
Gold continues to be in strong favour, particularly following news of a 6.8 per cent contraction in China’s GDP in the first quarter because of COVID-19.
“There’s a very large move in Swiss gold exports to the US, which were up by 43 tonnes in March, which is another record,” Le Page explained.
And then there was Bank of America’s significantly increased forecast for the gold price.
The influx of stimulus from governments and central banks along with continued fears over the economic impact of the coronavirus pandemic have inspired the bank to raise its forecast.
Bank of America now reckons the precious metal could hit $US3000/oz by October 2021.
“That’s another $US1000 an ounce increase on their previous estimate, Le Page pointed out.
Meanwhile, other metals are off 20 to 30 per cent – a trend Le Page sees continuing in the short term.
However, uranium proved an outlier this week, with a 35 per cent increase in the spot price.
“That is probably going to help the likes of Greenland Minerals (ASX:GGG),” Le Page noted.
“While uranium is only 10 to 15 per cent of the production profile, it will still give that project a bit of a boost.”
Le Page has a few stocks on his watchlist this week.
First up is Moho Resources (ASX:MOH), which on Friday announced it had closed a fully subscribed placement.
RM Capital was the lead manager to the placement.
Moho has an enterprise value of just under $2m with around about $2m in cash.
“The interest there is their exploration program on Silver Swan at their East Samson Dam prospect that covers about 80sqkm about 50km north of Kalgoorlie,” Le Page said
“That’s shaping up to be a 300-400m long anomaly with high-grade hits.”
Top results from the company’s second drilling program at the prospect were 2m at 24.61 grams per tonne (g/t) gold from a depth of 56m, within a broader intersection of 5m at 10.36g/t gold from 54m, and 3m at 15.18g/t gold from 100m within 15m at 4.71g/t gold from 88m.
Results above 5g/t are generally considered to be high grade.
East Samson Dam is also covered by a mining lease already, which Le Page says is “pretty significant”.
“So they’re moving to metallurgical testing, resource, second quarter/early third quarter scoping study. I think there’s still a lot of upside.
“It’s not going to be a million ounces, but we could be looking at a resource in the 70,000-80,000oz range, potentially with a pretty high conversion to reserves.
“So that’s something you may see in production late this year, early next year. Certainly Moho Resources at an EV of under $2m I think that’s got three to four times upside there at least.”
Perhaps not surprising given Le Page’s earlier comments, but he also thinks investors should keep an eye on Greenland Minerals.
Greenland Minerals is developing the Kvanefjeld rare earths project in southern Greenland.
The company is in the process of trying to secure an environmental permit for the project, but the process has been delayed slightly due to COVID-19.
However, Kvanefjeld is “one of the larger new rare earths developments in the world with a 10 per cent partner who built all the downstream infrastructure”, Le Page noted.
“I would’ve thought they would have had their environmental permit through by now but we’re hopeful sort of mid-year that will come through and they’ll get a mining licence.”
Not so much a short-term play, but one with longer term potential that is on Le Page’s radar is Caeneus Minerals (ASX:CAD).
“Obviously the De Grey discovery is one of the biggest stories in gold this year,” Le Page said.
“That entire trend that De Grey are drilling strikes northeast and its within 10km of Caeneus’ ground. They’ve got similar rocks, they’ve got structures coming through their tenements in the same orientation.”
Caeneus recently undertook a soil sampling survey at the Yule project, with results expected in around six to eight weeks
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.