Barry FitzGerald: With Torque’s market valuation, small cap punters may pull off their own Paris gold heist

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

There was much gnashing of teeth in the ASX gold sector during the week in response to the 6% retreat in the gold price from record levels.

Was the sell-off in gold equities over done? More than likely, assuming that the yellow metal now consolidates at around $US4000/oz, given the reasons it got to record levels in the first place have not gone away.

As it is, gold at $US4127/oz in Friday’s market was still up a bumper 57% on its starting price for the year and 34% up on its average price for the June half. So it remains a fantastic price, particularly in Aussie dollars ($A6334/oz).

Still, the $US254/oz price fall in Wednesday’s market was enough to rattle investor nerves, prompting a wave of profit-taking in gold equities. Producers took share price hits of around 10% and have yet to recoup the losses.

Fair enough, their revenues have been hit by the gold price fall. But as suggested, should gold now consolidate at around $US4000/oz the share price hits will be unwound as the impact on December half earnings of a gold price that remains 34% above the June half becomes apparent.

Chasing gains

Garimpeiro’s real interest today though is in the explorers. Even though they haven’t taken a revenue hit because they are not in production, their share prices have taken bigger hits than the producers. It is a sentiment thing.

To Garimpeiro’s way of thinking that has created opportunities that weren’t there before. Simply put, they are a lot cheaper than they were and the outsized upside they have with the drill bit remains.

Torque Metals (ASX:TOR) is today’s example. Its share price was down 20% for the week to 26.5c despite the company pumping out more impressive high-grade exploration results at its flagship Paris gold project in WA.

Garimpeiro mentioned this one a month ago on the basis of building investor interest. The company’s merger with Aston Minerals delivered a 1.5Moz gold project in Canada and, crucially, a cash kitty to maintain its exploration momentum at Paris.

The Canadian gold is very much of secondary interest. But the building excitement in Paris culminated during the week when two brokers initiated coverage of the stock: Morgans and Canaccord.

Morgans set a 12-month price target of 80c a share, saying it was being conservative as its valuation was based solely on a toll-treatment scenario at Paris underpinned by the existing resource (250,000oz at 3.1g/t gold).

“As exploration success and resource growth continue, we see potential for material valuation uplift beyond our current assumptions,” Morgans said.

Resource upside

Morgans said drilling outside of the resource delivered some of the most impressive gram-metre (grade x interval) gold intercepts seen in WA this year, with six holes exceeding 200-plus gram-metres.

“The Paris system remains open with simple and effective geophysical targeting delivering a high success rate in intercepting high-grade gold,” the broker said.

“This supports rapid resource growth – we see scope for 500,000oz in the near term (just at Paris main) and a broader 1-1.5Moz potential across the 57km mineralised corridor,” Morgans said.

“The combination of grade, scale potential, and proximity to established processing infrastructure makes it a logical bolt-on for mid-tier producers seeking high-margin feed or regional consolidation opportunities.”

Interestingly, Morgans’ valuation does not rely on a heroic gold price assumption. It is line with the big name brokers by having a gold price assumption of $US3600/oz in FY2026 and $US3325/oz in FY2027.

Canaccord also recently initiated coverage of the stock. Its target price of 45c a share is well below Morgans’ 80c a share but is nevertheless 73% more than Torque’s market price on Friday.

Canaccord sees the potential for Paris to host 1.6Moz across a number of deposits over time.

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