Gold Digger: One Rick to Rule them all
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A weekly recap of the news driving ASX small cap gold stocks.
As a trusted safe haven in times of economic crisis, gold usually rallies amid nasty stock selloffs like this one. It seems like a strange time for gold and gold-facing equities to be dropping.
Gold producers have been hit hard, led by Alkane Resources (ASX:ALK),Perseus Mining (ASX:PRU) and St Barbara (ASX:SBM) down 25 per cent, 19 per cent, and 18 per cent respectively week-on-week. The junior end didn’t fare any better.
Or maybe it’s not so strange. Speaking on the sidelines of the Prospectors and Developers conference (PADC) in Toronto, Canada, renowned investor Rick Rule says all asset classes get sold off during a liquidity squeeze.
“What you see in circumstances like last week — or in 2008, or before that in 2000, or before that in 1987 — is that all assets sell off in a crisis,” he told Kitco.
But for the last 20 years the official sector response to a liquidity squeeze is more liquidity. Easy money and lower interest rates tend to be good for gold, Rule says.
“If you look back to 2008 yes, gold sold off immediately [which] scared many of the faithful – but then it came back very, very, very strongly,” he says.
“What happens Monday? What happens Tuesday? The most honest answer is don’t know.
“What I can tell you is this — in circumstances where fear begins to prevail over greed … the risk of not owning gold is much higher than the risk of owning gold.”
Here’s how ASX gold stocks performed for the period Feb 24 — March 2 [intraday]:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop:
Market Cap ~$17.6m
Alto is popular, fielding takeover offers from fellow top five mover Middle Island Resources last year (which failed) and Chinese-owned company Goldsea (which is ongoing).
The WA explorer is still considering its response to the February 21 Goldsea offer, which values it at about ~$20m.
On February 27 drilling at the historic 800sqkm Sandstone gold project intersected a new shallow gold lode, about 200m south of — and identical to — the old Lord Nelson open pit.
Which is great, but that’s not even taking into account the lack of deeper drilling by previous owners.
“[This was] primarily due to the inability of the former Sandstone process plant to treat large volumes of the harder, fresh ore found at depth,” Alto says.
“Given many other orogenic Yilgarn gold deposits, such as Jundee (+5.5moz production), Kanowna Belle (+4.9moz production), Gwalia (+5.5moz production) are known to extend to great depth, Alto firmly believes the significant potential of Sandstone has not yet been tested.”
Market Cap: ~$8m
Minnow Krakatoa is chasing porphyry whales at the recently acquired Belgravia project in NSW’s East Lachlan.
Drilling kicked off last week at the Bell Valley target which Krakatoa says “lies in the same rocks” that host the giant Cadia-Ridgeway mine (35km south) and Alkane Resources’ Boda discovery (65km north).
Market Cap: ~$19.5m
Middle Island’s 180sqkm Sandstone project is surrounded by perpetual takeover target Alto Resources, which also has a project called Sandstone (confusing, we know).
But the explorer has also completed a capital raising which saw notable mining investor Stephen Copulos top up his holdings.
Market Cap: ~$51m
Anglo’s main game is the Mandilla gold project, 60km from Kalgoorlie.
In February, new managing director Marc Ducler said that drilling “continues to validate what appears to be a significant, large-scale gold system”.
Ducler was most recently the guiding force behind high-grade success story Egan Street Resources, a stock which went from 19.5c to ~55c in 12 months.