• Gold miners post outsized gains as bank run at SVB sparks investor run on bullion
  • A major gold bull run came after the Global Financial Crisis and the collapse of Lehman Brothers
  • Capricorn Metals up nearly 15%, Evolution weak as rain halts Ernest Henry

The last time we saw a financial crisis hit it was, in the long run, good for gold miners.

While gold fell along with other commodities in the early days of the GFC as panicked investors liquidated their holdings, between 2007 and 2012 average gold prices rose almost US$1000/oz to US$1668.86/oz, with gold bulls buying into its safe-haven status.

The far smaller collapse of Silicon Valley Bank on Friday sent shivers through financial markets, which is just the sort of news those Machiavellian trolls in the gold market need to hear.

Prices rose 2.1% to US$1868/oz after weeks of malaise as fears of continued interest-rate hikes sent gold miners back under the covers.

“Gold is surging as Fed rate-hike bets get scaled down and as SVB contagion risks trigger some safe-haven buying,” OANDA senior market analyst Ed Moya said.

“The bond market is now starting to price in rate cuts by the end of the year and that is triggering a major collapse with yields. The two-year yield posted its biggest two-day decline since 2008.

“Gold is becoming everyone’s favourite trade again and that could continue as liquidity risk concerns won’t be quickly answered for that corner on Wall Street.”

The gold sub-index in the All Ords was up a massive 4.37%, with major gold recording gains not seen in weeks.

Northern Star (ASX:NST) rose 5.78%, with underperformer St Barbara (ASX:SBM) rebounding 11.22%, Regis Resources (ASX:RRL) up 8.18% and market leader Newcrest Mining (ASX:NCM) running 3.43%.

Westgold Resources (ASX:WGX) gained 10.16% on the back of an operational update at its Big Bell mine, where it operated above its 800-900,000 tpa design levels in January and February.

Another recent laggard in Ramelius Resources (ASX:RMS), which will drop out of the ASX 200 for the first time in almost three years this month, was up 9.09%.


There can only be one winner, though …

And that is Capricorn Metals (ASX:CMM).

The emerging mid-tier gold miner was up almost 15%, rising on the double whammy of the SVB collapse and some flow-on effects of its half-year report on Friday.

The owner of the Karlawinda gold mine is one of the few operators to be performing to expectations in the space in recent years, up 1,100% on a five-year basis.

It delivered a $58.3m before tax profit for the first half of FY23 – $40.16m after tax – with $91.7m in the bank and $41.7m in net cash as of December 31, up from $65.9m on June 30 last year.

At 60,315oz of gold produced and all in sustaining costs of $1105/oz for the first half, Mark Clark chaired Capricorn is on track to achieve guidance of 115,000-125,000oz at AISC of $1160-1250/oz in FY23.

On the other hand, Evolution Mining (ASX:EVN) posted only muted gains after revealing its Ernest Henry copper mine near Mt Isa in North Queensland would be out of action for around six weeks after heavy rain caused water to enter underground workings at the mine.

“Whilst this significant weather event that occurred at Ernest Henry last week has suspended operations, our
priority has been to ensure all personnel are safe, including as we move to the recovery phase,” managing director Lawrie Conway said.

“The team on site has handled the situation in accordance with our incident management protocols. We expect the recovery phase to take approximately six weeks before ramping up to normal production. The business performance in the March quarter has been solid with our cash position better than planned. This provides adequate coverage to handle the impact of this incident at Ernest Henry.”

Ernest Henry is an important mine for Evolution since its copper credits help keep all in sustaining costs down across the business, with the mine regularly running at a “negative” AISC.

RBC analyst Alex Barkley says Ernest Henry accounts for around 44% of EVN’s forecast 2023 EBITDA.

“A six-week shut is roughly A$60m reduction in EBITDA, for a 6% drop at the group level in FY23e (RBCe A$1020m),” he estimated.

“The mine generates around A$70m of post-tax cash per quarter. A six-week break could reduce FCF by roughly A$35m before any potential recovery expense.

“At FY23-end we forecast a net debt position of A$1705m with gearing at 33%, which would be negatively impacted by the shut at Ernest Henry.”

Queensland copper miner 29Metals (ASX:29M) revealed wet weather had prompted a suspension at its Capricorn copper mine last week.



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