Monsters of Rock: As it ramps up production can Calidus break out of gold sector funk?
While gold prices are tasty and geopolitical dramas are leading pro investors to tell you to bet on bullion, gold miners are in the proverbial toilet right about now.
After a 2021 many felt couldn’t have gotten much worse, 2022 very much has, despite the commodity selling within the same sort of range it has for the past 12 to 18 months.
At $2660/oz Aussie, most gold miners should be raking in healthy profits, but plenty of headwinds have shaken confidence in the sector.
Most notable is the swag of gold miners announcing production downgrades and putting back major projects on account of Covid, weak supply chains and inflationary pressures.
But each year there seem to be some gold stocks who do it right, emerging from the mire while others crash and burn.
Last year a swag of gold stocks including West African Resources (ASX:WAF), Capricorn Metals (ASX:CMM) and Aeris Resources (ASX:AIS) were among a small cohort to record major gains in 2021.
Could there be some diamonds in the rough as we move into a new financial year?
Attention is turning back to the sector as Andrew Forrest, multi-billionaire of Fortescue Metals Group (ASX:FMG) appeared to pick a bottom for mid-tier gold miners with a large (and ultimately unsuccessful bid) to up its stake in Regis Resources (ASX:RRL) on Friday.
That will have investors sniffing their noses around looking for the company that could break the mould and defy what has so far been a pitiful -22.6% year to date return for the All Ordinaries Gold index.
The best bets are often early stage miners who drum up excitement with the growth story that comes with any new mining operation.
Those stocks, like Capricorn and WAF last year, often catch a wave from investors as their mines ramp up and before they have a chance to disappoint you.
One of the miners in this mode is $250 million capped Calidus Resources (ASX:CAI), which is down 4.62% YTD but caught a 6.9% bump today after announcing the start of steady state production at its Warrawoona mine in the Pilbara.
It expects to hit nameplate capacity of 2.4Mtpa in July at its processing plant, which has been tested at up to 2.8Mtpa.
Since first pouring gold in May, Calidus has delivered 8916oz of gold for $22 million of sales, helping make $3m of repayments on its debt to Macquarie Bank.
Calidus had $19.8m in the bank as of June 30.
“We are rapidly closing in on steady state operations at Warrawoona which is a fantastic achievement after pouring first gold from the commissioned CIL circuit only 6 weeks ago,” Calidus MD Dave Reeves said.
“This is a credit to the Calidus operations team and we look forward to the project become a strong cash flow generator for the Company in the coming years.”
The $120 million Warrawoona mine is expected to produce 90,000ozpa over its first 7 years, with a peak production rate of 105,000oz in its fifth year of operations.