Money Talks: The future looks bright for these 3 stocks as gold runs hot
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Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for.
Today, we hear from Noel Ong, founder of Perth-based consultancy Samso.
The gold sector is an obvious answer, says Ong, who believes the already booming gold price will keep rising.
“I think it could do as much as another 30 per cent rise in the next 12-24 months,” he says.
“One cannot ignore the current geopolitical and financial issues around the world.”
It’s even better for local miners, who benefit from a weaker Australian dollar, Ong says.
“Currently, Australian miners are enjoying gold price at nearly $2,300/oz with a cost margin around the $1,500 mark or lower,” he says.
So which part of the gold sector should investors participate in – exploration plays, or the mid-tier and top-tier producers?
“The smart money, or the more conservative money, will be more inclined to stay within the safer mid-tier producer region or higher,” Ong says.
“Exploration funding for any sector is still hard, and in a commodity such as gold, it is still hard to find the money,” Ong says.
“However, with the recent rise in the gold price, one would think that funding for exploration will soon be more accessible.”
NORTHERN STAR (ASX:NST)
Market Cap: ~$8.81 billion
Up 22.5% over the past 12 months
Northern Star is an obvious choice, says Ong.
“They have a great balance sheet and the purchase of the Kalgoorlie Super Pit (50 per cent share) is a great money-spinner.
“I grant that there is a lot of conjecture about the future viability of the resources; but if you believe that gold is going north, this [operation] is going to make the company a lot of money.
“Northern Star also controls two major projects east and west of Kalgoorlie; Kundana and Kanowna Belle. It makes perfect sense to be in Kalgoorlie.
“My other reason for liking NST is that this [regional] consolidation will give them advantages in finding more gold in the region.
“Exploration is all about how much money you spend in the ground. Money is what NST has a lot of at the moment.”
DACIAN GOLD (ASX:DCN)
Market Cap: $385m
Down ~35% over the past 12 months
Dacian is one of those companies that is developing a good project, says Ong.
“I will say that I have not looked at the project in depth; however, from what I have read and heard this is a good project and it will give investors more uplift as they continue to release results,” he says.
“They have had a scare recently with the ‘tanking’ of the share price, but the subsequent resurgence is what I like to see from the market.
“The market has liked the way the company has come back from that setback and there is confidence in the stock.
“Is Dacian part of the ‘over-valued’ stable of companies? It may be, but this is a company that is just starting to come into production.
“There is a good line of projects that will supplement future production. Current [all-in sustaining cost] is good at sub $1500. There is a mineral resource of 3.5 million ounces.”
“What is there not to like?”
SILVER LAKE RESOURCES (ASX:SLR)
Market Cap: $1.22 billion
Up ~128% over the past 12 months
Ong says he has been associated with Silver Lake since the company’s IPO.
“Working with these ex-WMC [Western Mining Corporation] guys had given me a good insight into ‘who knows what’ and what kind of management is considered good management,” he says.
“The management and the culture is what I like the most about Silver Lake.
“I am not particularly excited with the projects that they have, especially Andy Well and Deflector. I don’t think those two assets were good acquisitions.
“However, Silver Lake is making money. Increasing cash generation every year is a sign of good management.
“This is a testament to what this company can do with a rising gold price and an increasing bank balance to buy other projects.”
Noel Ong is the founder of Samso, a consulting agency that writes organic content as insights into companies and new ideas. Ong has worked in the resources industry for nearly 30 years as an exploration geologist and as the founding director of Siburan Resources.