Barry FitzGerald: Two minnows that could be ready to join the ‘gold party’ on the ASX
Link copied to
Gold has been doing its thing in the last 30-days by proving to be resilient while global markets have been buffeted by the return of extreme volatility.
The steady price performance over the last 30-days in US dollar gold – the price that drives investor sentiment in the ASX gold space – has been a real tonic for the gold explorers.
Gold explorers are normally ditched during equity market volatility like that seen last week. But this time around they are benefiting from gold’s resilience.
The downside to that is that equity values for the better-known gold explorers have remained at elevated levels. There hasn’t been a major pullback to create some value opportunities.
There was a brief window of opportunity on that score when global equity markets were smashed in March. But gold’s resilience has seen the better-known explorers come storming back in price.
That was reflected in Friday’s performance check on the 141 gold stocks that Stockhead monitors by Reuben Adams — 38 have made gains of more than 100 per cent, with 98 all up sporting gains over the past year.
In a search for value in what is clearly a well-performed sector, Garimpeiro has gone off on a hunt for a couple of gold stocks that could be next in-line to join the gold party on the ASX.
He has settled on West African explorer Chesser Resources (ASX:CHZ), and the junior hoping to find the next multi-million-ounce gold deposit in ground adjacent to WA’s Albany-Fraser province, Nelson Resources (ASX:NES).
While their projects are on different continents, they share some common themes.
Both have been working up their projects to the point where the 2020 drilling programs offer the potential for high rewards, and they have the funds (or are about to have them in Nelson’s case) to push ahead with the programs.
Chesser last traded at 8c for a market cap of about $26m. It was an 11c stock before COVID-19 pulled the rug on equity markets in March when it got as low as 4.5c.
Last month it kicked off an eagerly awaited drilling program at its flagship Diamba Sud gold project in Senegal that is hard up against the Senegal-Mali shear zone, home to 45 million ounces of gold, mostly on the Mali side of the border.
The drilling program is following up results from a previous program which gave Chesser strong indications it is on to something significant at the Area A prospect.
Latest drilling will test for extensions of high-grade mineralisation (8m at 5.16 grams per tonne (g/t) from 10m and 3m at 4.93g/t gold from 101m).
Area A is close to an eastern tenement boundary with Barrick, the world’s biggest gold producer by market cap and a West African specialist. Barrick said recently that it would be drilling an anomaly at its adjacent Bambadji project area.
The discovery at Area A has also given Chesser a better understanding of the mineralisation controls on its ground. That knowledge is to be applied in the current drilling campaign at the Area D prospect, and the less advanced Western Splay target.
The wet season in Senegal runs from mid-July to the end of September so Chesser is not messing around with getting the exploration holes in at the prospects.
Results from the first holes could be expected soon, with additional results to flow to mid-August.
Nelson last traded at 4.6c for a market cap of all of $2.4m, but it is in the process of raising up to $2m from a one-for-one rights issue at 3.8c a share, with one free attaching two-year listed option (exercisable at 8c) for every two new shares.
Either way, it has to be one of the smallest market caps out there for an active gold explorer.
The fund raising is earmarked for the company’s Woodline project, a now consolidated land package on the boundary between the Albany-Fraser province and the Yilgarn Craton.
The project area has the benefit of having $14m spent on it by previous explorers and Nelson itself.
There are four sizeable identified targets with the potential to host Tropicana-scale deposits (7.7 million ounces and owned by AngloGold/Independence), as well as a lightly explored stretch of the prolific Norseman-Wiluna greenstone belt.