ASX gold floats are struggling but there’s cause to be confident says veteran player
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ASX gold players might be hurting right now after a recent slump in the price of the precious metal, but they are doing better than their Canadian counterparts, according to the head of recently listed Mako Gold.
“I’m really glad I’m not on the TSX [Toronto exchange] because over there if you have a marijuana stock or cryptocurrency you’re off, but if you’re a junior explorer you get very little attention,” Mako boss and veteran gold explorer Peter Ledwidge told Stockhead at this week’s Africa Down Under conference in Perth.
“So here we’re a little bit better off on the ASX.”
The seasoned exploration team of Mr Ledwidge and wife Ann have notched up considerable success in West African gold over the years.
Despite that, Mako’s shares (ASX:MKG) are almost half its 20c issue price since listing on the ASX in April.
Coolgardie Minerals (ASX:CM1) and Black Dragon Gold (ASX:BDG) made their debut on ASX this week, but traded below their 20c issue prices on the first day.
Black Dragon, however, added 10 per cent on its second day to trade at 22c and Coolgardie in its first session climbed up from its open of 16.5c to close at 18.5c.
Short sellers impacting gold
Some observers say gold is getting hammered because short sellers are out in force.
Short selling is the sale of gold, or another security, that the seller does not own — in the hope the price will fall and it can be bought back cheaper to make a profit.
Hebba Investments said on Seeking Alpha this week that a “short assault” on gold appeared to be slowing down.
However, the net speculative short position is still at a record high based on the figures from the latest “Commitment of Traders” (COT) report that shows an increase in shorts to 90,028 futures contracts from 83,324 a week earlier.
The COT report shows what positions major traders are taking in a number of financial and commodity markets.
Gold slump to be ‘short lived’
While gold players are feeling the pain now, it isn’t expected to last long given the resources sector has not long emerged from one of the worst downturns in history.
“I’ve been in this business over 30 years and I’ve gone through I think five or six ups and downs and the last down was the longest that I’ve experienced in my career,” Mr Ledwidge said.
“We were starting to climb out of the hole and then we dipped down again.
“I’m certainly no analyst, but just from what I’ve seen in my career and talking to some brokers, they’re saying that so many people are shorting gold right now and all of a sudden there’s going to be a panic that sets in.
“I’m of the inclination that’s it going to be short lived.”
Here’s a graph showing the gold price over the past year:
The good news for investors though is they can pick up gold stocks at bargain prices.
Expert resources analyst Gavin Wendt told Stockhead earlier in August there was a “tremendous buying opportunity now”.
Mako’s cornerstone backer Resolute Mining (ASX:RSG) – a large gold producer – used the falling share price as an opportunity to pick up more shares in the junior.
Resolute now owns a 19 per cent stake in the company.
“Right now [Mako’s] shares are trading below our IPO price and I think it’s a perfect opportunity for people to pick some up, because the prospectivity of our project hasn’t changed at all,” Mr Ledwidge said.
“As a matter of fact we’ve just increased [the prospectivity] … we had some pretty good results.”
Mako is developing three West African gold projects on the Ivory Coast and Burkina Faso.
The projects lie within the so-called Birimian greenstone belt — a 350,000 sq km region stretching across West Africa that has given up some 80 million ounces of gold in recent decades.
Maiden drilling at the flagship Napie project on the Ivory Coast has returned drill hits of up to 51 grams per tonne (g/t) of gold.
Anything above 5g/t is considered high-grade.