Gold prices are looking for direction, Cardinal recommends $300m takeover offer

Gold remains in a holding pattern with spot prices dipping slightly from last week’s close of $US1,730.80 an ounce to the current price of $US1,723.95 an ounce.

Currency exchange rates mean that Australian gold producers continue to enjoy an Australian dollar price of about $2,510 an ounce.

The precious metal barely reacted to better-than-expected sentiment in the US manufacturing sector as well as a report showing that another 1.5 million people sought unemployment benefits in the US.

However, MarketWatch quoted RBC Wealth Management managing director George Gero as saying that investors faced numerous worries next week including the potential for China-US tariffs, geopolitical tensions between India and China, and US election concerns.

“All this may add buyers next week to gold,” he said.

Takeover target

Gold’s continued strength undoubtably played a part in Cardinal Resources (ASX:CDV) receiving a recommended takeover offer from China’s Shandong Gold Mining that values it at about $300m.

The 60c all-cash offer represents a 39.9 per cent premium to the company’s 20-day volume weighted average price and a 31.1 per cent premium to Nord Gold SE’s indicative proposal in March.

Nord Gold had snapped up a 19.9 per cent stake in Cardinal and flagged its interest in acquiring the rest of the company in a non-binding preliminary proposal.

Shangdong has also agreed to provide Cardinal with interim funding of $11.96m by subscribing for 26 million CDV shares at 46c each.

Proceeds from this placement will be used to advance the company’s Namdini project in Ghana towards development.

Meanwhile, Anglo Australian Resources (ASX:AAR) has more than doubled the potential scale of its Mandilla project near Kalgoorlie after extensive drilling extended to mineralisation.

Drilling identified strike extensions of over 300m to the south of the main Mandilla East zone with intercepts of 26m grading 8.29 grams per tonne (g/t) gold from 76m, 21m at 3.7g/t gold from 35m and 17m at 3.71g/t gold from 59m.

Strike extensions of over 250m were also drilled to the north of Mandilla East with best results of 9m at 5.89g/t gold from 76m, 38m at 1.34g/t gold from 38m and 14m at 2.19g/t gold from 34m.

Additionally, drilling at the Mandilla South target returned 10m at 1.76g/t gold from 123m and 27m at 1.79g/t gold from 168m within the same hole.

Managing director Marc Ducler says that with over 9,000m of drilling targeting mineralisation within the Mandilla Syenite already completed and another 13,000m to come, the mineralised footprint of the discovery had more than doubled in size while remaining open to the north and south.

“The strong results support our view that there is a significant low strip ratio open pit opportunity. The recently completed DroneMag survey is also providing excitement with a number of anomalies yet to be followed up,” he added.

Navigating some hurdles

It is not all good news for Australian gold companies though.

Mid-cap miner Evolution Mining (ASX:EVN) has dropped about 75,000oz of gold from the life of mine plan for its Mr Carlton project after completing a grade control drill program.

Production for the current financial year is now estimated to be about 60,000oz, down from previous guidance of between 70,000 and 75,000oz, while production in the 2021 financial year is expected to be about 50,000oz of gold.

This will drop the company’s overall FY2020 production – excluding its Red Lake operations – by 1.4 per cent to about 715,000oz of gold.

Orminex (ASX:ONX) will consider the ongoing viability of mining at its 51 per cent-owned Comet Vale project in Western Australia’s Goldfields region after it completed the last processing campaign in June.

The company noted that due to the mine’s performance and uncertainty regarding its future viability, it had decided to obtain an independent valuation to assess the reasonableness of the Comet Vale’s carrying value, which could result in a write-down.

Shares in Orminex have plummeted over the past year, falling from a high of 17c in June last year to the current price of 4c.