Guy on Rocks: $US20k gold is a little ambitious, but the flight to gold will see it run further
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‘Guy on Rocks’ is a new 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”.
Le Page says the volatility in the markets right now is not necessarily reflected in the metals’ prices.
That is unless it’s gold.
But while gold is going strongly thanks to its safe-haven status, suggestions it could reach $US20,000 ($31,151) an ounce in two to five years may be taking things a little too far, according to Le Page.
“I noticed on Kitco (see below), Pierre Lassonde, chairman of Franco Nevada, is projecting $US20,000 an ounce gold prices in two to five years, which I think is maybe a little bit optimistic,” he told Stockhead.
“I think $US2000 is probably not an unreasonable target, particularly in the light of depression talk and projections on domestic GDP of minus 5 per cent.
“The quantitative easing has been 2.6 per cent of global GDP versus 1.6 per cent. So, I think you might see that flight to gold in particular coming out sooner than later.”
Overall, Le Page thinks the resources sector “feels pretty good at the moment”.
“You’re seeing a sustained strong iron price, you’re seeing very high gold prices,” he says.
“Obviously combined with that, Australian dollar weakness has really put Australian mining companies in a very strong position, and particularly the domestic miners — the BHPs, the Rios, the gold miners — are making very strong cash flow at the moment.”
Even with the recent market ructions, Le Page is still bullish on iron ore, gold (obviously), nickel and copper.
“In my belief iron ore has held up particularly well, stocks are down in China, our export volumes out of Australia are still rising,” he explained.
“Nickel has been a hard one to predict, but I’m still bullish on nickel on the basis that 60 per cent of world production’s C3 costs are below the current spot price of nickel.
“It’s a hard one to project because a lot of the nickel trading occurs outside of the LME, but I think that and copper, which is going to go into deficit later this year, are probably some of my key focuses.”
“Chalice had a phenomenal discovery 70km north of the Julimar nickel-copper-PGE project,” Le Page recapped.
Just a couple of weeks ago, Chalice reported a hit of 19m at 2.59 per cent nickel, 1.04 per cent copper, 8.37 grams per tonne (g/t) palladium and 1.11g/t platinum from 48m in fresh rock at the so-called ‘Conductor E’ target.
“An incredible result, plenty of scope,” Le Page said. “They’ve got in excess of 20km strike on that structure.
“And I think this is shaping up to be a very significant discovery.”
Legend Mining, meanwhile, revealed back in December that it had made a new “Nova-style” discovery at its Mawson prospect in the Fraser Range.
Then in March the company hit three massive sulphide intercepts in a maiden diamond drill hole.
“I think the significance of the intersection that they reported in late March was the fact that they got several zones of massive nickel-copper sulphides, not dissimilar to the mineralisation style you’re seeing at Nova-Bollinger,” Le Page says.
“The Mawson prospect within the Rockford project is certainly a more impressive hole than the one that was released last month, which should have pointed to a lower grade, large tonnage system with some high-grade pasture, but this looks like more of a massive sulphide high-grade project.
“There’s over 300km of strike potential there at least. So this is a quantum leap from the previous discovery hole earlier this year.”
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.