Ground Breakers: Gold still shines in trying times as Northern Star finds a buyer for foundation asset
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Gold is good in trying days like these, and massive consumer price index increases in the US have pushed the flight-to-safe-haven asset even further overnight.
CPI hit 8.5% yesterday, the fastest 12-month pace since 1981 amid rising fuel prices, pandemic-related supply chain issues and Russia’s Ukraine invasion.
That’s all bullish for gold, which holds its value obstinately in what are, as Baby Huey would say, hard times.
Gold rose to around US$1970/oz, breakthrough levels the newly christened gold bulls at ANZ say would be a *ahem* bullish signal.
“Heightened uncertainty stemming from geopolitical tension has raised concerns over higher energy and food prices. Although history suggests that the impact on the market of geopolitical tension is usually transitory, this time looks different. Stagflation risks are rising, encouraging investors to divert funds to safe havens such as gold,” commodity strategists Daniel Hynes and Soni Kumari said in a note yesterday.
“Central banks are tightening monetary policy as part of efforts to contain inflation. Supply chain disruptions and elevated commodity prices may prompt the US Fed to make more aggressive rate hikes through the year, dampening investor appetite for gold. The downside looks limited, with gold well supported at USD1,900/oz over the next six months, in our view.”
They say investor demand in gold futures and ETF flows are positive signs as well.
“Central bank gold buying is likely to continue this year, despite January’s net fall. The Central Bank of Russia (CBR) has resumed gold purchases after a two-year break, but it may have to buy from domestic miners because of war-related sanctions,” Hynes and Kumari reckon.
“We expect gold to remain well bid in the short term. Further upside looks possible after closing above US$1,950/oz last week. The price of silver will largely follow gold, given the geopolitical backdrop.”
Gold miners were largely in the green today, with Northern Star (ASX:NST) the standout large cap.
But broader positivity rolled through the miners today with coal stocks, lithium firms and iron ore miners all well supported.
Higher iron ore prices came through with bullish futures activity after the Chinese government lifted a lockdown in Tangshan, the country’s largest steelmaking hub.
Rio Tinto (ASX:RIO) shares climbed 2.01%, MinRes (ASX:MIN) was up 3.28% and South32 (ASX:S32) also rose, while Lake Resources (ASX:LKE), Core Lithium (ASX:CXO), Yancoal (ASX:YAL), Paladin (ASX:PDN) and Sayona Mining (ASX:SYA) all climbed more than 5% among the mid-caps.
There’s little room for sentiment in sport and business and sometimes you need to make hard decisions.
1.6Mozpa gold minerNorthern Star Resources (ASX:NST) is the super club with a couple of under the radar contributors on its bench that can still offer a bit to a club in the lower divisions.
While its time has been taken up managing major mining operations like Kalgoorlie’s Super Pit, Kanowna Belle, Pogo in Alaska, the Jundee gold mine and the Thunderbox and Carosue Dam mines picked up in its takeover of Saracen, NST has had little time to give TLC to some of its smaller names.
One, the Paulsens mine, has been on the market – it is understood – for a couple of years.
Some within the sector felt the sentimental favour the company felt towards the mine may have become a stumbling block to its sale.
It was, after all, the mine NST’s former boss Bill Beament picked up back in 2010 that turned it from piddling junior explorer to one of gold’s rising stars.
The $40 million purchase provided a launchpad for NST’s growth into Australia’s second biggest gold miner behind Newcrest (ASX:NCM), via a series of increasingly ambitious acquisitions topped off by its $16 billion merger with Saracen which consolidated Kalgoorlie’s Golden Mile under one owner for the first time in its near 130-year history.
Now a buyer has been found, with Bulong gold mine owner Black Cat Syndicate (ASX:BC8) looking to repeat NST’s success.
The company, which includes former Silver Lake Resources (ASX:SLR) bigwigs Paul Chapman and Les Davis on its board, will stump up $44.5 million in cash and shares for both Paulsens and NST’s mothballed Western Tanami gold project near Newmont’s multi-million ounce Callie gold mine.
The deal will include some $14.5m in cash to be paid on the completion of the sale, $15m in deferred cash to be paid on June 30 next year, $10m in contingent payments on a series of production milestones occurring at Paulsens and Western Tanami, and the issue of 8.34 million Black Cat shares to Northern Star at an issue price of 60c a pop.
“The sale of Paulsens, our foundation asset, and the Western Tanami Gold Project align with Northern Star’s five year strategic plan to generate superior shareholder returns through active and disciplined portfolio management,” NST managing director Stuart Tonkin.
“We are delighted that Black Cat, which has a proven track record as a responsible operator and successful explorer, intends to undertake extensive exploration at each operation to provide a potential future redevelopment path for the benefit of all stakeholders.”