Gold Digger: Australian gold price flirts with record high, M&A could return with a vengeance in 2023
Link copied to
Our Gold Digger column wraps all the news driving ASX stocks with exposure to precious metals.
Gold prices continued to rally this week, almost hitting the $US1,930/oz mark on Friday.
That’s close to a record high in Aussie dollar terms; great news for local miners who are looking to offset ballooning production costs.
Fabulous for our domestic producers (and aspiring producers) to see the Australian dollar gold price very close to record highs. pic.twitter.com/IUweJ06s9e
— Gavin Wendt (@MineLifeReport) January 20, 2023
“Gold prices are rallying as investors seek safety as recession and default risks won’t be going away anytime soon,” OANDA’s Ed Moya says.
“Mixed US data continues to support the idea that the Fed might need to do more tightening given how strong the labour market remains, but the rest of the economy is weakening.
“Gold will look even more attractive if the US is viewed as likely having a recession in the second half of the year, which could mean earnings will contract far worse than markets are pricing.
“If gold doesn’t make a quick run towards the $1935 level, it could consolidate around the $1900 region.”
After soaring to record levels in 2021, the global merger and acquisition (M&A) market slowed in 2022 against a challenging economic environment.
M&A is often good for investors.
Acquisitions enable producers to strengthen and sustain production growth, while the disposal of non-core assets allows producers to focus on mine expansions and development of other projects more aligned to their corporate strategy.
Junior companies struggling to raise capital funding can seize the opportunity to either sell assets or enter into joint-venture agreements with major producers.
In the gold sector, M&A worth +$US120bn have taken place over the past decade, according to Metals Focus.
However, deal activity slowed in 2022, with only 71 completed.
“The total value of the transactions completed declined significantly, by 86% y/y, to $2.5bn,” it says.
“Of those announced, 87%, valued at $8.9bn, are still pending, and are expected to be concluded within the next two years.”
In terms of value, China led the way with completed deals worth $US560m in 2022. Australia and Russia followed, totalling $US470m and $US340m, respectively.
For Australia, much of that came via one deal. In December, St Barbara announced a merger with Genesis Minerals in an all-share deal valued at $367m, resulting in the consolidation of Leonora assets in WA.
M&A is expected to rebound strongly more generally in 2023, says Goldman Sachs.
The same goes for the gold sector.
“Rising capital and operational costs, in addition to a lower gold price in the latter half of the year  will have lowered valuations making potential deals more attractive,” it says.
“We expect the squeeze on profit margins will continue to have an impact on valuations in 2023 and this, in addition to the need to add growth opportunities to depleting resource profiles, will lead to increased mergers and acquisition activity in 2023 and beyond.”
Here’s how ASX-listed precious metals stocks are performing:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.
Stocks missing from this list? Email [email protected]
ADG bolted by a full 142% Tuesday morn on massive vols after a follow-up drilling program at Gibraltar turned up a solid set of hits, like 3m at 12.57g/t gold from 20 metres, including 1m at 34.6g/t.
$8m capped Adelong may still be but a minnow on the market, but that’s a thumper of a daily gain and deserves a round of applause.
It is now in a trading halt pending a cap raise announcement.
(Up on no news)
The Chile-focused gold and copper explorer listed in 2021 with three projects including ‘Capote’, which had been untouched for almost 70 years.
It is home to the historical San Juan gold mine, where 500,000 ounces of gold was produced at an ore grade of 40 grams per tonne through to 1954.
Earlier this month BMO announced shallow, high grade gold drilling results from Capote, like 5m @ 2.06g/t gold from 42m (including 1.6m @ 5.6g/t).
The company says many veins remain open laterally and are yet to be evaluated at depth, including the San Juan Vein.
“Now that we have received all the results from our maiden drilling campaign, we will assess the future resource potential and sites for further drilling,” BMO exec chair Ross Landles says.
“This includes targeting future drilling on the high-grade San Juan vein system.”
In December, BMO also announced an option to acquire an extensive 2,250sqkm Canadian lithium royalty and projects portfolio.
Pending exploration success on optioned properties, potential sales of NSR royalties could be up to C$46,750,000. An additional 42 projects will be acquired within the portfolio to be owned 100% across commodities such as lithium, nickel, copper, gold, platinum and palladium.
The $7m capped stock is up 50% in 2023, on larger than normal volumes. It had $1.5m in the bank at the end of September and is currently undertaking a ~$1.6m cap raise.
The small explorer has picked up rocks containing up to 4.5% copper, 1785ppm cobalt and 796g/t silver from spoil dumps around the historical Svatnodusa mine workings, part of the recently acquired Kolba project in Slovakia.
Historical production at Kolba graded between 2% and 17% copper up until the 1850s, the company says.
Together with a soil sampling program, these new results have extended the target area – which has never been drilled — to 1.8km and counting.
A drilling program will kick off soon.
“Surface sampling is now complete prior to drill planning of this exciting high grade copper-cobalt-silver-nickel target,” PRS managing director Jason Beckton says.
“We have completed 3D collation of historic workings and preparing for drilling in early 2023.
“The Kolba prospect and related Svatodusna prospect present drill targets of historically mined, yet never drilled, critical raw material systems.”
The $3m market cap stock is up 65% over the past month, but down 85% on its December 2020 listing price of 20c per share. It had just $452,000 in the bank at the end of September.
(Up on no news)
In December, BTR and Kingwest Resources (ASX:KWR) agreed to merge via a Scheme of Arrangement, under which BTR will acquire 100% of the shares in KWR.
According to BTR managing director Bill Hobba, the merger will combine two complimentary WA gold companies, leveraging Brightstar’s infrastructure (currently on care and maintenance) to unlock the development potential of KWR’s Menzies gold project.
“This is a transformational transaction for Brightstar and marks a refreshed direction for the company,” he says.
“It creates a larger, diverse junior gold play and means Brightstar can now start to assess development options utilising a larger resource base and our significant existing infrastructure.”