Barry FitzGerald: This $12m gold play is in the same region as the big boys but is undervalued
Gold’s safe haven status was challenged last week.
Prices for the yellow metal sank 3.6 per cent to $US1,585/oz ($2,432/oz) on Friday as long positions were liquidated to cover equity margin losses, and as growing uncertainty around the coronavirus drove money into the safety of US bonds and cash.
All up, the gold price was off by 4.5 per cent for the week.
That was nowhere as bad as the 10 per cent-plus drubbing equity markets took, so it could be suggested gold passed its safe haven challenge, particularly as it is still 4.4 per cent above its starting point for the year, and more than 20 per cent above its level a year ago.
But that did not stop leading gold equities from being smashed on Friday, bringing them into line with the pain that was dished out to the broader market during the week.
It did not matter that gold at $US1585/oz remained at elevated levels.
So it could well be Friday’s hit on the gold stocks will soon be seen as overdone, depending of course on the move in the gold price, and the spread of coronavirus, from here on in.
Today’s interest though is in the ability of a sub-sector of the ASX gold sector to enjoy a level of protection from the current gold and equity markets gyrations.
That sub-sector is the cashed-up junior explorers that are actively exploring a potential value-altering project where a discovery could make the weekly ups and downs of the gold price and equity markets somewhat irrelevant.
Today’s example is ASX-listed Resolution Minerals (ASX:RML) which is about to start drill testing its 64North project in Alaska’s Tintina gold province.
The project area lies next to Northern Star’s 300,000oz-a-year and high-grade Pogo gold mine, 120km from Fairbanks in prime aurora borealis viewing country.
Resolution’s Aurora Creek prospect within the 64North project area is the focus of the initial drill program, with the company’s managing director Duncan Chessell confirming that as announced on February 17, the program is now good to go.
Chessell will be heading to the drill site after first filling in Canadian investors on the company’s story at this week’s monster PDAC conference in Toronto where the “where to now” question on gold (and the coronavirus) will be front of mind.
Resolution has an easy and exciting story to tell. Aurora is immediately adjacent to the Goodpaster gold discovery made by Northern Star in the 2019 September quarter.
Northern Star considers Goodpaster is the “continuation of the main Pogo mineralisation.’’ Its discovery hole returned an impressive 4m grading 67.5 grams per tonne (g/t) gold. Follow-up results by Northern Star have included 1.4m at 19.3g/t, and 5.2m at 15.7g/t.
Chessell told Garimpeiro that Goodpaster was within 450m of Resolution’s tenement boundary.
“We are up next to a world-class operating gold mine and we are looking for a lookalike deposit,’’ Chessell said.
“We think we have got analogous geophysics, lithology and geochemistry. So we are looking for the next Pogo.’’
Resolution (formerly Northern Cobalt) recently raised $4.5m from a share placement at 5c each to fund its 2020 drilling program. In Friday’s gold equities rout, Resolution shares closed 7 per cent lower at 5.8c, valuing the company at $12m.
While the shares took a hit in line with the leading gold issues, the bigger point here is that the potential for Pogo/Goodpaster-type exploration results from the drilling program provide extreme leverage to the upside for its $12m market cap, regardless of what the gold price and equity markets are doing
“It is a bit of an understatement to say we would expect to see a fairly significant re-rate if we are able to hit Pogo-style of mineralisation on our claims,’’ Chessell said.
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