Gold Digger: The world’s top gold exec says bullion is enjoying ‘a new floor’ amidst inflation
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The US CPI print of 8.6% last week played havoc with global markets, but rising uncertainly and the inflationary environment is providing a platform for gold to retain its value.
Australian mining executive Tom Palmer, the boss of the world’s largest gold miner Newmont, says the events of the last few years mean the floor for gold prices has lifted.
Where they may have once fallen to US$1200/oz, Palmer think they will remain above US$1500-1600/oz, prices at which the major producers with the scale to keep costs low should be making bank despite rising supply chain and labour costs.
“I see no reason why you wouldn’t, over the next year or two, see it around current levels, but more importantly sitting on top of a floor that has fundamentally moved given the events of the last couple of years,” he said in an interview with Bloomberg after delivering a keynote speech at the PDAC Convention in Toronto.
Gold gets the bulk of its value as a safe haven from inflation and tends to increase in value at times of geopolitical uncertainty.
That has come into stark focus twice over the past couple of years, as prices hit a record of US$2067/oz in August 2020 in the wake of the initial panic of the Covid-19 pandemic and swung close to that mark in March this year shortly after Russia invaded Ukraine and sparked Europe’s largest conflict in decades.
We’re yet to see gold hit levels of up to US$2500/oz some analysts projected in the wake of the Russian invasion, but at US$1,843.91/oz gold has largely held its value while equity markets and crypto have faltered in 2022.
The impact of inflation on junior gold stocks has been felt clearly in recent weeks.
Advanced explorer Black Cat Syndicate (ASX:BC8) said last month it would withhold a decision on building a new gold mill near Kalgoorlie due to the current fiscal environment.
Troubled producer Dacian Gold (ASX:DCN) today lost almost 40% of its value after blaming the high inflationary environment for a decision to shelve the Jupiter open pit at its Mt Morgans gold mine in WA.
The company expects to have $17m in cash at June 30 and is largely debt free, but will stem losses and cut costs by trimming the fat, shifting its focus to exploration and generating income by processing stockpiles at the Laverton gold mine.
Palmer said in his keynote speech at PDAC this week that smaller players may need to consolidate and combine to thrive given current economic headwinds.
“There are only a few gold mining companies who have the capacity to deliver on all of these elements: size, scale, mine life and access to capital — clearly making the case for further partnerships and consolidation within the gold mining industry,” he told conference delegates.
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This hard drilling Cote d’Ivoire gold explorer is run by Justin Tremain, who led Exore Resources ahead of its ~$80m takeover by Perseus Mining (ASX:PRU).
He also headed Renaissance Minerals before its takeover by Asian gold producer Emerald Resources (ASX:EMR).
Today, new step out drilling results announced from ‘Nyangboue’ — part of the Boundiali project (89% owned) — included a highlight 4m @ 8.34g/t gold from 21m.
This thing is open all over the joint, TCG says, with aircore drilling also hitting a new subparallel, 400m long shallow zone of gold mineralisation immediately north of the prospect.
“These latest results demonstrate the potential to continue to extend mineralisation defined at the Nyangboue prospect, along strike, at depth and from new gold zones at surface,” Tremain says.
Assay results are pending for over 7,000 drill samples across the ‘Eburnea’ and ‘Tongon North’ projects, where drilling is ongoing.
The $30m market cap stock is down 37% in 2022. It remains well funded with ~$10m in the bank at the end of May.
ASX microcap Sihayo owns the Sihayo gold project in Indonesia, where it already has a feasibility study prepared despite its minnow status and a strategic review process in train with CLSA looking for a potential funding partner for the proposed mine.
At US$1700/oz gold prices, Sihayo would deliver 551,000oz over its 6.5 year life, but with a capital cost of US$173 million and IRR of just 10.1% some more exploration may be prudent.
Recent announcements have focused on drilling at the Sihorbo South project, where results this week caught the attention of investors.
The first phase of drilling has been completed at Sihorbo South, with a total of 5,215m in 30 diamond drill holes completed since September. Drilling results include: 3m @ 25.15 AuEq with 24.88g/t Au, and 20g/t Ag from 112m, and 7m @ 1.18g/t AuEq with 0.9g/t Au, and 21g/t Ag from 129m.
That has seen Sihayo rise 25% this week off a low base after a very ordinary start to 2022.