Barry FitzGerald: Topflight gold stocks on sale now. Prices slashed!

The most successful explorers of recent times like De Grey (ASX:DEG), Chalice (ASX:CHN) and Bellevue (ASX:BGL) are on sale. Oh, the joy!

Their share prices have been under the pump since January 20 when the spectre of rising interest rates to rein in rampant inflation ignited Wall Street’s tech-wreck, and a general equities sell-off to boot.

Since January 20, De Grey has fallen by 18%, Chalice is off by 9.2%, and Bellevue has given back 9.8% of its value.

The falls are despite commodity markets pretty much holding the line in the face of the equity market rout, although it is clear that gold price expectations have been hurt by interest rate fears. But hey, there is nothing wrong with $US1,800/oz gold.

The three companies mentioned above have distinguished themselves in recent times by making world-class discoveries. Even at their marked down share prices, they have been well rewarded with massive share price growth since the discoveries were announced.

But now they are on “sale’’ Garimpeiro wonders whether there is an opportunity for investors prepared to look beyond the current equity noise to secure exposure to classy discoveries at what could well prove to be discounted prices in the long-term.

The thinking behind that is that as sizeable as they already are, discoveries like Hemi (De Grey/gold), Julimar (Chalice/PGE-nickel-copper), and Bellevue (Bellevue/gold), are still very much in their early exploration history.

They are going to grow in scale as time goes by, as will the market valuations of the owners. And because such finds are rare beasts, the companies are being eyed off by the big miners as potential acquisition targets.

Finally, the re-rating of explorers as they make the transition to producer status can be particularly rewarding for owners of significant discoveries. Re-rates of more than 100% during the development phase are common when commodity prices remain “supportive”.

The latest quarterly reports from the three named above demonstrated that the upside in the discoveries was continuing to evolve, and that as the companies advance their development plans, the current share price weakness is short-term stuff.

Ready to Rumble?

Garimpeiro also includes Rumble Resources (ASX:RTR) in the following summaries of the successful explorers.

Unlike the earlier three, Rumble’s share price is up by 37% since January 20 because latest exploration results at its recent zinc-lead discovery has added to its world-class credentials – going to the point that truly significant discoveries grow in scale (and value) over time.

De Grey (ASX:DEG): Trading at $1.18, down 18% since January 20. Macquarie has a $1.90 price target on the stock, saying De Grey’s Mallina gold project has clear tier-1 potential thanks to the game changing discovery of the 6.8 million ounce Hemi deposit.

The more it drills, the more it finds, so far at a phenomenal monthly rate, and at a cost of well below $20 an ounce. Recent infill and extensional drilling suggests that scoping work around annual production of 427,000oz for 10 years is very much the start of a bigger and longer-lived project.

Chalice (ASX:CHN): Trading at $7.98, down 9.2% since January 20. Its Julimar discovery on the doorstep of Perth is the biggest nickel sulphide nickel discovery in the world in 20 years, and the biggest ever PGE discovery in Australia. That says something.

The company recently gained drilling access to prospective ground to the north of Julimar to test lookalike targets. Given it has only tested 7% of the 26km long Julimar complex, there is a lot of faith in the company’s recent comment that investors should watch out for “material growth with ongoing drilling”.

Has to be considered a takeover target for one of the big miners looking to acquire a big deposit containing a full suite of “green’’ metals for the world’s decarbonisation efforts.

Bellevue (ASX:BGL): Trading at 77.5c, down 9.8% since January 20. Its namesake 3m ounce gold deposit is not the biggest around but ounces have been added at a super impressive compound growth rate of 81% since November 2017, and at a cost of just $18 an ounce.

Equally important, the resource grade shames nearly all others out there, weighing in at 9.9g/tonne. A dual-track approach of exploring/infill drilling while developing a fully funded mine means that Bellevue will be bigger and longer-lived than the current market valuation gives it credit for. Macquarie has a $1.50 price target on the stock.

Rumble (ASX:RTR): Trading at 55c, up 36% since January 20. Its Earaheddy lead-zinc discovery is the most recent of the discoveries with tier-1 credentials. Latest exploration has enhanced the story by adding silver and copper potential into the equation.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees 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.