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Mining
Gold prices have surged into very profitable territory for most miners since the start of Russia’s invasion of Ukraine, holding above the key US$1900/oz mark as investors have flocked to the safety of bullion.
They took a dip overnight as word of more hawkish rate rises from the US Fed reared its head.
But overall the recent run in the precious metal has prompted analysts to lift their forecasts over the long term as a more supportive environment for gold bars sets in.
RBC has joined that cabal, increasing its forecasts for 2022 and 2023 by 9% to US$1889/oz and US$1795/oz respectively, and amping up its long term forecast by 7% to US$1600/oz.
While RBC expects gold to head lower from its current spot price of US$1940/oz, the environment remains bullish for gold stocks, with analysts Kaan Peker, Alex Barkley and Paul Wiggers de Vries increasing their price targets on Aussie gold stocks by an average of 21%.
The biggest upside on RBC’s previous targets has been found in Oceanagold (ASX:OGC) (+45% to $4), St Barbara (ASX:SBM) (+33% to $2) and Silver Lake Resources (ASX:SLR) (+22% to $2.75).
Earnings per share is also expected to lift in FY23 by an average of 34% across the sector with St Barbara modelled 59% higher, Regis Resources (ASX:RRL) up 44% and Silver Lake up 43%.
RBC says there are downside risks in the upcoming March quarter results from cost inflation and labour pressures as well as travel restrictions in WA.
Interesting the analysts say factors normally correlated with falling gold prices have emerged this year only for prices to rise almost 10% year to date.
“Expectations for nominal yields have outpaced inflation expectations; resulting in higher real yields,” they said.
“Further, the US dollar has strengthened and negative yielding debt has fallen sharply.
“All these factors have historically been strongly correlated with falling gold prices, yet gold is up ~9% YTD. RBC forecasts suggest gold will move lower in 2022/23.”
Dacian Gold’s (ASX:DCN) Mount Morgans has not been a happy hunting ground since it opened in 2017 and the mid-tier gold miner copped a more than 6% hit to its share price after reducing its production and lifting cost guidance for FY22.
The company produced 23,608oz in the March quarter in line with forecasts and up 37% compared to the December quarter.
But it has also flagged issues with an industry wide labour shortage the company said will force it to revise its guidance after identifying risks to the bottom end with stoping due for the June quarter pushed back to September.
“As a result, production for the June Quarter is now expected to be 37,000-40,000oz, with full year guidance adjusted to 94,000-97,000oz at an AISC of $1,850-$1,950/oz, slightly below previous guidance of 100,000-110,000oz at AISC of $1,750-$1,850/oz,” the company said in an ASX statement today.
“Like our industry peers, we are not immune to the COVID-19 challenges faced in maintaining full production manning levels across our operations and rising cost pressures,” Dacian managing director Leigh Junk said.
“While our March quarter has delivered to plan, we foresee these challenges persisting and, in particular, impacting our underground operations in the June quarter. Therefore, we have adjusted our guidance accordingly.
“Pleasingly, the step-change in production we have forecasted throughout FY2022, driven by the expected increase in delivery of Doublejay ore from March, is going to plan.”
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