Monsters of Rock: Gold miners keep materials sector afloat on inflation fears

Gold miners were the strongest performers in the ASX 200 and 300 today
All Ordinaries Gold index up 0.56%, taking its year to date gains to 12.57%
Firefinch maps clear path to 100,000oz at its Morila gold mine in Mali this year

Gold producers salvaged the major miners helping the ASX materials index to finish the day’s trade near parity despite a 0.42% drop across the ASX 200 as gold prices rose above US$1950/oz.

$13 billion capped Northern Star (ASX:NST) climbed 1.41%.

Down the boards Oceanagold (ASX:OGC), Regis Resources (ASX:RRL), Capricorn Metals (ASX:CMM), St Barbara (ASX:SBM), Ramelius Resources (ASX:RMS) and Evolution Mining (ASX:EVN) were all up between 2.5 and 5.6% as goldies dominated the gains in the mid-tier.

The S&P ASX All Ordinaries Gold index rose 0.56%, and is now up 12.57% for the year with geopolitical uncertainty around the war between Russia and Ukraine dominating the investment landscape.

The sharp rise in gold prices came amid inflationary concerns out of the US that could see the value of cash materially drop, a positive sign for gold which investors view as a store of wealth in times when a safe haven is needed.

Has gold hit its highs?

“Unless the war escalates, I think gold has hit its highs for the year,” DailyFX.com senior market analyst Chris Vecchio told Kitco News.

“Despite the disruption created by the Russian invasion of Ukraine, the same obstacles remain for gold prices henceforth. With central banks acting to tamp down persistently higher realised inflation in the short-term, longer-term inflation expectations should begin to ease back, pushing down real yields and thus preventing gold prices from holding onto recent gains.”

On the other hand, Wood Mackenzie analysts think global economic growth could slow significantly if the war between Russia and Ukraine persists.

“Energy and commodity prices could fall as the global economic downturn takes hold and the EU and US recessions bottom out after four to six quarters when consumption hits its nadir,” WoodMac research director Peter Martin said.

“The lag in reaching the bottom of the economic cycle sees the global economy take a bigger hit, relative to the base case, in 2023 compared to 2022. This means global economic growth could slow to 2.5% this year and 0.7% next year.”

Gold’s rise today came against the backdrop of falls elsewhere in the commodities sector that weighed on the big miners.

Iron ore is still under pressure from Covid cases in China and is locked in at a relatively healthy US$150/t.

Key base metals including nickel, copper and aluminium fell of a high base with aluminium off 3.7% to US$3248/t, copper down 1.2% to US$10,201/t and nickel sliding 4.1% to US$32,483/t.

Gold miners share price today:

Firefinch charters path to 100,000oz

Malian gold miner Firefinch (ASX:FFX) has set out its path to hit the company’s long-stated goal of eeking 100,000oz out of its Morila gold mine this year.

FFX pumped out 10,874oz in the March quarter, well within its guidance of 10,000 to 11,500oz.

But a step change is coming as the mining of the N’Tolia satellite pit began six weeks ahead of schedule and the first contributions come this quarter from the Morila super pit.

FFX has been shifting from the low grade tailings primarily mined by the gold project’s previous owners AngloGold and Barrick to satellite deposits and now the higher grade, baseload feed from the main Morila ore body.

It plans to ramp up to 17,000-20,000oz over the next three months before hitting 30,000-35,000oz in the September quarter and eventually 36,000-40,000oz in the December term.

Longer term the aim for Firefinch is to hit a 200,000ozpa run rate by 2024.

“After a year in the role as Managing Director, I am very pleased to report we have delivered on our plan of transitioning from tailings reprocessing to hard rock mining,” FFX MD Mike Anderson said.

“Our Q1 2022 gold production of 10,874oz comfortably met guidance and pleasingly was delivered injury free. We are on the brink of benefitting from the mining of the Morila Super Pit and N’Tiola, both of which have commenced ahead of schedule.

“We are confident to maintain our 2022 production guidance for Morila at 100,000 ounces of gold and it is exciting to look forward to annualised production rates in H2 2022 in excess of
140,000 ounces. We are also refreshing the Life of Mine Plan and intensifying drilling as we seek to fully test the potential of Morila and its satellite ore bodies.”