Ground Breakers: NASDAQ tanks but gold is good
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Ground Breakers is a Stockhead column looking at the morning movements of the big miners in the ASX 200, and beyond.
The NASDAQ took a dive overnight, falling by 2% and losses flowed on to the major iron ore miners this morning on the ASX.
Fortescue Metals Group (ASX:FMG) continued its fall from record highs as it released details about its plan to hit net zero on scope 3 emissions (those generated by its customers) by 2040.
It is now trading at $14, a far cry from the $26.30 share price it commanded as it announced record production results for the 2021 financial year on July 29.
As US markets tanked and the world awaits the outcome of the Evergrande suspension in China, gold miners drank from the glorious goblet of global uncertainty, with prices inching up by 0.5% to US$1,769.12/oz (AUD$2,428.11/oz).
Gold stocks have struggled in 2021, but always threaten a break out with some economists and analysts concerned global economic conditions could be worse than markets make them appear post-pandemic.
In those situations, gold threatens to steal back the crown from other investments.
It’s the gold mine study every small cap investor’s been waiting for, many of whom have been riding De Grey stock since it was a 5c tiddler early last year.
The company is now worth more than $1 billion off the back of its 6.8Moz Hemi gold discovery in the Pilbara, an area known more for its vast iron ore ranges than its precious metals wealth.
A scoping study this morning shows the mine has the potential to be one of Australia’s biggest and, at an initial production rate of 473,000ozpa, the world’s third largest new mine under development.
WA gold discoveries of the scale and size of Hemi are few and far between in this day and age. Tropicana, discovered by AngloGold Ashanti and Independence Group east of Kalgoorlie back in 2005 (opened 2013) was one.
300,000ozpa Gruyere, owned by Gold Fields and Gold Road Resources, was found in 2013 and opened a couple years ago was another. Hemi, which carries an early capex of almost $900m and which will produce 4.3Moz over a 10 year life, has the potential to eclipse both.
A PFS is due from De Grey in the second half of 2022.
Meanwhile in West Africa, Tietto Minerals (ASX:TIE) has put some tidy numbers around its Abujar mine in the Ivory Coast in a DFS.
Abujar would produce 260,000oz of gold in its first year at an AISC of US$651/oz, before turning out 1.2Moz over 6 years at 200,000ozpa and AISC of US$804/oz, about 20% higher in output terms than its PFS.
The mine would generate an IRR after tax of 95% with life of mine revenue of US$2.87 billion and EBITDA of US$1.52b at a capital cost of US$200 million.
With a dearth of quality sources of class 1 nickel like the kind mined here in Australia, Western Areas’ (ASX:WSA) Odysseus development will be closely watched.
Odysseus’ planned opening in late 2022 marks Western Areas as one of the few nickel companies with growth and mine life extensions on the horizon.
Probably why IGO (ASX:IGO) is eyeing it off as a takeover target and Twiggy Forrest and BHP could be circling.
Western Areas says the WA nickel mine, once part of the portfolio of Jubilee Mines before its takeover by X-Strata (now part of Glencore), could send ore for tolling while its concentrator remains under construction.
“It is an exciting milestone to reach first ore and we now look forward to continuing ore production and construction activities, while also advancing offtake tenders for new nickel sulphide supply into the class 1 nickel market,” WSA MD Dan Lougher said.
“The raise bore breakthrough is also a key achievement that further de-risks project delivery and allows completion of the shaft sub-brace concrete works, as well as remaining surface civil works, associated with the shaft.
“Importantly, the work was completed without a safety incident, for which credit must be given to the site management team and RUC, the raise bore contractor.”
Evolution Mining (ASX:EVN) has never been beholden to sentiment when it comes to gold mines that don’t fit in its portfolio.
Queensland’s Mt Carlton has long stood out as a divestment option for Evolution as it moves into expansion mode at its larger operations at Cowal in New South Wales, Red Lake in Canada and Mungari in WA.
The staged deal to vest the mine into Victorian gold explorer Navarre Minerals (ASX:NML) has the same hallmarks as Evolution’s previous transactions, particularly the Ramelius deal.
Navarre will pay $40 million in equity (giving EVN a 19.9% stake in the junior) and cash, with another $50 million due in milestone payments and royalties.
“Mt Carlton was Evolution’s first development project and has generated excellent returns for shareholders since it was commissioned in 2013,” EVN chairman Jake Klein said.
“With the Company focussed on delivery of growth projects at the cornerstone assets in the portfolio, we believe now is the time to hand Mt Carlton over to an emerging gold producer who can focus on extending the operation’s mine life.
“The exposure we have retained will enable Evolution shareholders to benefit from the future success of the operation.”