Gold Digger: A weekly recap of the news driving ASX small cap gold stocks
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Gold just had its worst week in three months, believe it or not.
This ‘worst week’ — an un-cataclysmic 1.2 per cent fall from ~$US1589/oz ($2371/0z) to ~$US1569/oz ($2342/oz) – just demonstrates how strongly gold has performed in recent times.
Cashed up producers continue to look to mergers and acquisitions (M&A) for growth opportunities after a record-breaking 2019, which saw M&A activity total $US30.5bn – a decade high.
Some of those 2019 deals were huge, like Newmont’s $US10 billion acquisition of fellow miner Goldcorp.
>>>Scroll down for this week’s top 3 small cap movers
But the large and mid-tiers also have their collective eye on value at the small end of town.
The ~$208m cash and scrip offer equates to about 15c per Spectrum share — a 52 per cent premium to Spectrum’s last closing price of 9.9c on Friday.
It also represents a mind-blowing 2900 per cent return for Spectrum shareholders over the past 12 months.
In late 2018, the ~$5m market cap minnow paid $1m in cash and shares (mostly shares) for the historic Penny West gold project.
If the original vendors held onto every one of those 172.7m shares, that initial $1m payday just became ~$26m. Dreams do come true.
It might be the first, but Spectrum certainly won’t be the last promising small cap to be swallowed up by a miner in 2020.
Here’s how ASX gold stocks performed for the period Feb 3 — Feb 10 [intraday]:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop:
DE GREY MINING (ASX:DEG) +181%
Market Cap: ~$98m
Explorer De Grey confirmed a “major new gold discovery” at the Hemi prospect, part of its +1.7moz Mallina gold project in the Pilbara.
The explorer, which hit thick, high-grade intersections like 24m at 7.5 grams per tonne (g/t), is currently bringing in a couple of bigger rigs to drill deeper into this thing.
The stock went mental – up 98 per cent on Thursday, 42 per cent on Friday, and another 15 per cent on Monday.
SKY METALS (ASX:SKY) +138%
Market Cap: ~$63m
On Monday it was Sky’s turn to rip higher on some thick, high-grade gold hits.
Sky – which changed its name from Planet Gas in early 2019 – was initially focused on tin until making the strategic shift into gold exploration. Great move.
Maiden drilling at the Hume prospect – part of the Cullarin project in NSW – has just returned a 93m intersection grading 4.24g/t gold, 56m from surface.
Planning for a follow-up drill program is already “well advanced”, the explorer says.
DGO GOLD (ASX:DGO) +44%
Market Cap: ~$40m
DGO, a gold explorer which invests in other gold explorers, had a big win last week as De Grey’s biggest shareholder (10.7 per cent).
But DGO also has 100 per cent owned tenements adjoining De Grey’s ground in the Pilbara.
This includes over 30km of strike length of a major east-northeast-trending structure that parallels the Mallina Shear Zone (MSZ) and is associated with a 20km long gold anomaly that defines DGO’s ‘Scotties Well’ target.
DGO is preparing to commence a drilling program over this target in March 2020.