Money Talks: Are we heading to $US2000/oz gold prices?
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Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for.
Today, we hear from Stuart Roberts, co-founder of Sydney-based Pitt Street Research.
Roberts has his eye on two commodities on contrasting ends of their respective price cycles – gold and lithium.
Gold is hot, but Roberts believes the price still has room to run.
“The gold price is running hard as a result of the world uncertainty, and particularly the troubles in Hong Kong at the moment,” Roberts says.
“When did we ever see Hong Kong in the kind of trouble that it is in right now?”
Current prices above $US1500/oz ($2,230/oz) make a whole bunch of gold projects potentially a lot more economic than they were a few months ago, Roberts says.
“Suddenly, those advanced projects are a lot more valuable at a $US1500/oz gold price,” he says.
“My favourite stocks are developers. They have completed studies on their first mine and are working on financing.
“It’s not hard to find smaller gold companies reaching the point where they are talking about definitive feasibility studies, for example.
“You can often find these gold companies trading at a fraction of what they are worth.”
If gold really gets a head of steam on, it will suddenly be the time for those emerging companies to come into their own, he says.
“This is just a gut feel, but I wouldn’t be surprised to see $US2000/oz in the not too distant future.”
Lithium prices are dropping across the board and investors remain bearish on the short-term outlook. Some are saying that the bottom may come in 2021, Roberts says, so we may be up for about 18 months of relatively bearish lithium sentiment.
And yet he still sees value in the sector – particularly in the brine space.
“Keep in mind that a lot of the lithium brine plays have very low production costs compared to where lithium [chemical] is trading at right now,” he says.
“Lithium Power International (ASX:LPI), for example, published a DFS on the Maricunga project at the start of the year where they talk about production costs of less than $US4000/t of lithium carbonate. The spot price right now is about $11,000/t.”
That’s the reason he’s bullish, Roberts says.
“But that margin is being chipped away, so that bullishness that we saw in 2017/2018 will continue to wash out,” he says.
“It will only be the true believers like me that stick around and keep following the sector. But I think, in time, these people will be rewarded.”
Because every serious assessment suggests that the world won’t be able to get enough lithium in the medium term.
“I predict that the uptake of EVs in most markets will move faster than a lot of people are expecting,” he says.
“With that will come voracious demand for lithium-ion batteries.
“There are technical breakthroughs happening all the time in terms of making those batteries more efficient, and EV price points are coming down in a lot of jurisdictions as well.
“EVs aren’t just for the ‘limousine liberals’ anymore.”
Stuart Roberts is the founder of and senior analyst at NDF Research, an independent equities research firm that specialises in ASX-listed life science companies. He is also a co-founder of Pitt Street Research, another equities research firm whose area of focus is the entire spectrum of ASX-listed companies.