Money Talks: The three unloved ASX gold gems investors are still missing

Money Talks is Stockhead’s regular drill down into the sectors and companies that investors have their eye on right now.

Today, we hear from Trent Primmer, head of trading at Barclay Pearce.

What’s hot right now?

Primmer reports it’s been a busy year for Barclay Pearce with such a big increase in the amount of capital raised in 2020. But there’s no question that gold is the sector clearly outperforming the rest.

“It’s probably the easiest pitch you could bring to market,” he told Stockhead.

In 2020, the average ASX gold stock is up 107 per cent. A handful have gained over 1,000 per cent.

Experts believe it is getting much harder to find bargain gold opportunities given stock valuations have risen just as massively as the price of the precious metal.

But there are still opportunities out there, Primmer says.

“People want businesses that are coming off a low base, that do have that sort of upside that could come through in the share price if they hit a high-grade gold deposit from their exploration programs,” he said.

“I think it’s a pretty easy pitch at the moment, everyone wants a piece of gold.

“With [interest] rates staying low for a long period of time, you could argue there’s more downside in the broader market than upside.

“We’re just getting propped up by fiscal stimulus, once that dries up its hard to see the market continuing to track higher. So I think there’s a lot of room to go [for gold].”

Top picks

KINGWEST RESOURCES (ASX:KWR)

Market Cap: ~$17m

Kingwest’s turf is in the Eastern Goldfields of WA. The company’s flagship Menzies project once hosted five underground gold mines which produced between 16 grams per tonne (g/t) and 32g/t gold over their operating lives for a total of 650,000oz at 22.5g/t.

No activity occurred at the project for over 20 years until Kingwest came along.

Early exploration results, including one ~25g/t gold hit earlier this year, has shown there could be even more gold to be found at Menzies.

Another of the company’s projects with plenty of upside is Goongarrie, 40km away.

“We’ve had a couple of chats with these guys and they’re confident they’re going to be continuing to return some pretty punchy sort of returns for clients and shareholders,” Primmer said.

“It will be interesting to see how they go over the next several months but around these levels they are a cheap buy for us so we’re comfortable accumulating at these levels.”

Kingwest (ASX:KWR) share price chart

AUSTAR GOLD (ASX:AUL)

Market Cap: ~$14m

Austar is another brownfields-focused stock but its projects are in Victoria.

The stock has nearly doubled in the last month and while Primmer admits profit taking may appear tempting, he thinks there’s still upside left.

“They’re a long-term business, we like how well its run, we like the assets and are pretty confident about them continuing to deliver for shareholders moving forward,” he said.

“[Chairman] Phil Amery in particular knows what he is talking about. You want management like that, that’s pretty straight forward and set on executing their strategy and doing well.”

Austar (ASX:AUL) share price chart

RESOURCES & ENERGY GROUP (ASX:REZ)

Market Cap: ~$9m

This explorer has projects in the Western Australian Goldfields at East Menzies as well as in Queensland at Mount Mackenzie.

The Mount Mackenzie project also has a modest silver resource in addition to gold which Primmer is bullish on, labelling it “the B-Class shares of gold”.

Few ASX stocks offer exposure to silver but those that do have rallied in recent weeks as investors sought exposure thanks to the rising price.

“REZ is well-positioned with its promising exploration being undertaken at East Menzies and is on track with Mount Mackenzie, progressing studies and assessments to capitalise on the opportunity to commence production,” Primmer said.

“We believe right now they are currently undervalued and are quickly making in-roads towards milestones that will result in significant upside for shareholders.”

Resources & Energy Group (ASX:REZ) share price chart

At Stockhead, we tell it like it is. While Kingwest Resources is a Stockhead advertiser, it did not sponsor this article.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.