Monsters of Rock: Gold producers make the starting line-up as big miners prop up ASX
The materials sector dominated the top spots among the large caps today, with gold miners propping up a struggling ASX 200.
Oceanagold (ASX:OGC), Regis Resources (ASX:RRL), Northern Star Resources (ASX:NST), West African Resources (ASX:WAF), Newcrest Mining (ASX:NCM) and Kirkland Lake (ASX:KLA) were all among the stronger performers as gold continues to defy hawkish signals from the Fed reserve and maintain its ~US$1800/oz level.
CME Group analyst Todd Colvin said investors in the safe haven commodity are waiting on real action despite the expectation supercharged inflation in the USA could lead to “3-4” rate hikes this year.
“The market (is) clearly in a wait and see kind of mode,” he said.
“We know that’s going to be active this year, the market’s priced it in, more rate hikes, 3-4 rate hikes in 2022.
“But it seems gold wants more action and not just talk and up until this point it has been only talk.”
Fundamental Research Corp analysts say gold is likely to remain strong in 2022, with real rates to remain negative. They expect gold to average US$1825/oz this year.
“As central banks across the globe are preparing for rate hikes, we continue to expect a correction in equity valuations,” they wrote.
“That said, we remain positive on gold/silver prices as inflation is likely to be persistent, and real rates are likely to be negative through the year.”
Capricorn Metals (ASX:CMM) has been a good bet over the past year, rising to prominence as it has completed the development of its Karlawinda gold mine in WA under the watchful eye of industry legend Mark Clark.
One of its big moves last year was the $40 million purchase (in cash and shares) of the Mt Gibson gold mine, a low grade and long dormant asset hiding a couple million ounces of gold.
The company said today it plans to make a decision on its development in the December quarter, just one year after hitting full pace production at Karlawinda.
Capricorn has kicked off an 81,000m drill program tracking the 8km strike length of Mt Gibson’s 2.08Moz resource.
The $10 million program will take 4-6 months, infill drilling the known resource to a density of 25x25m, testing for extensions and gaps across the strike to deliver a maiden ore reserve in September this year.
The argument for Mt Gibson is the lack of work that has been completed there over the past 25 years since it shut in the midst of a major drop in gold prices.
When the mine closed its doors in 1999 the price of the precious metal was just $450/oz (against ~$2500/oz today), only 5% of drilling extended below 150m under the surface and the deepest open pit stopped at just 100m deep.
“The commencement of the major drill programme in and around the current 2 million ounce Mt Gibson gold resource is the first step towards Capricorn’s goal of developing a gold mining operation at the project,” Clark said.
“We look forward to estimating a maiden Ore Reserve and completing a feasibility study to underpin a development decision in the second half of 2022.
“With Karlawinda now fully operational, we have a clear focus on expediting development of Capricorn’s second Western Australian mining operation.”