Monsters of Rock: Gold miners have a slam dunk of a day

Fun fact: If you bought an ounce of gold when Michael Jordan’s Space Jam was released on December 12, 1996, that same ounce of gold would be worth roughly five times as much today.

Get 200 of those and you could pay the new lead of Space Jam, Lebron James, to play basketball and star in your movie for one day.

Even so, gold could be the “ultimate contrarian investment” right now and Credit Suisse is buying the dip.

According to Kitco News, Credit Suisse is tipping a return to prices of around US$1900/oz ($2546/oz), up from about US$1820/oz today.

Analyst Fahid Tariq, focused on North American equities, is the latest to view major gold stocks as underpriced.

“We think even if gold stays flat or declines slightly from current levels, gold equities still look attractive on valuation,” he said.

“With still strong margins and higher production in H2, we expect more announcements of higher dividends and increased pace of buybacks.”

Investors were feeling the same sort of way down under, where gold stocks led the large cap gains on Wednesday.

The All Ordinaries Gold Index broke through the 7000 point barrier today, up 2.8% to ~7050. That’s around 2000 points below a record high of 9118 on July 31, 2020.

That compared to a 0.67% gain for the materials sector and 0.31% for the ASX200.

Here are the large and mid cap miners who made a move today.

EVOLUTION MINING (ASX: EVN)

Evolution led the gold miners on a good day for investors in the precious metal.

EVN was up 4.1% (19c) to $4.82 on no news, with Northern Star Resources (ASX: NST), up 3.91%, and Newcrest Mining (ASX: NCM), up 2.58%, also well in the green.

The gold miner owns a host of high performing gold operations around Queensland, New South Wales and WA, but has spent the past couple of years building a major footprint in Canada around its Red Lake complex.

It also paid C$343 million to buy out neighbour Battle North Gold Corporation in March.

Evolution’s most interesting asset in Australia may be its stake in the gold rights at Glencore’s Ernest Henry copper mine.

Co-credits mean Evolution produced from Ernest Henry at a physics defying cost of -$1027/oz in the March Quarter, something that could go even lower in June after record copper prices during the period.

SANDFIRE RESOURCES (ASX: SFR)

Sandfire exceeded annual copper production guidance at its Degrussa mine in WA, producing 70,845 tonnes of copper and 39,459 ounces of gold for FY21.

Its revenue rose by 24 per cent to a record $813m thanks to surging copper prices.

DeGrussa’s reserves are set to run out in the third quarter of 2022, with Sandfire facing a brief period without production before it opens its Motheo copper mine in Botswana in early 2023.

VULCAN ENERGY RESOURCES (ASX: VUL)

The geothermal lithium play is up ~1900% over the past year and was trading at a market cap of more than $1.1 billion after gaining 10.87%, adding $1 to its share price to $10.20.

The company is progressing studies on its “Zero Carbon Lithium Project” in Germany’s Upper Rhine Valley.

OCEANAGOLD CORPORATION (ASX: OGC)

Oceanagold owns gold mines in New Zealand and the USA, but the Didipio gold-copper mine has the potential be its best asset.

It has been shut for a while now on the back of regulatory struggles in the Philippines, where the mine is based.

Oceanagold entered a trading halt this afternoon to make an announcement in relation to Didipio. It expects the halt to end on Friday.

The operation would be ready to go 12 months from a restart, producing around 120,000oz of gold and 12,000t of copper a year.

RAMELIUS RESOURCES (ASX: RMS)

Ramelius was up ~5% today on a great day for gold miners.

The company reported annual production of 272,109oz from its Mount Magnet and Edna May operations in WA for FY21 last week.

That missed its updated guidance of 275,000-280,000oz on the back of wet weather and labour shortages particularly related to Covid lockdowns.

It was, however, a record, and Ramelius expects to improve at Edna May as its new Tampia deposit ramps up.