Monsters of Rock: Goldies prop up the mining space as bulks slip and slide through the afternoon

Gold miners rule after US Fed chair strikes less hawkish tone with smaller rate rise
Hot mining services stock SRG wins Northern Star contracts
Uranium play Deep Yellow releases Tumas DFS

Gold miners ruled the roost among the large caps, but a slippery afternoon session sent the big bad bulk miners tumbling as iron ore stocks copped a hit.

Bullion was in strong demand in 2022, but gold miners suffered a pretty difficult year weighed down by concerns about interest rate hikes.

But the US Fed’s offering overnight was a tame 25bps lift, taking the official cash rate in the States to between 4.5-4.75%.

While the war against inflation is hardly over, that has given hope to gold bulls that rate rises will be less painful and could reverse in 2023.

OANDA senior market analyst said gold prices, now over US$1950/oz and a little over US$100/oz shy of all time highs, would hinge on the next inflation numbers.

“Gold was volatile after the FOMC decision. Gold dropped initially after the Fed raised rates and signalled more hikes are coming,” he said.

“The weakness with gold was limited as we are clearly approaching the end of the Fed’s tightening cycle. Gold rallied after Fed Chair Powell decided to not go hawk on markets and said that the disinflation progress has begun.”

The All Ords gold sub-index rose over 4% with majors Evolution (ASX:EVN) and Northern Star (ASX:NST) leading the way.

Among the mid-caps Westgold Resources (ASX:WGX) led the way with an almost 7% gain, up 47% YTD.

On the other hand some poor real estate data in China for January had an impact on iron ore stocks Rio Tinto (ASX:RIO), Mineral Resources (ASX:MIN), Fortescue (ASX:FMG), BHP (ASX:BHP) and Grange Resources (ASX:GRR).

Monstars share price today:

SRG up on contract wins

Mining services stocks can be hit or miss, but with the recent boom in mining activity across Australia, those high performers in the contracting market have been in strong form.

SRG Global (ASX:SRG) is one of those. A long time supplier of services to the Kalgoorlie Super Pit, SRG is up almost 60% over the past year, to a market cap of almost $330 million.

It rose again today after familiar client Northern Star ponied up for a new five year contract for drill and blast, explosives management and grade control drilling at the Bronzewing gold mine, part of NST’s Yandal gold operations.

It also secured two year extensions on an initial five year deal for the same services at the Thunderbox and Carosue Dam mines, initially awarded in April 2020.

“SRG is extremely pleased to have secured both the new five-year contract at Bronzewing and the two-year contract extensions at Thunderbox and Carosue Dam,” MD David Macgeorge said.

“I am very proud of our Mining Services team for their hard work supporting Northern Star’s operations at the Kalgoorlie Super Pit, Thunderbox, Carosue Dam and now the Bronzewing gold operations in WA.”

The deals are valued at around $220m to the SRG order book.

SRG Global (ASX:SRG) share price today:

Deep Yellow lifts the lid on Tumas numbers

John Borshoff’s Deep Yellow (ASX:DYL) is one of the largest listed uranium names on the Aussie bourse following its merger with Vimy Resources last year.

The deal gave the company potential operations in preparation for a rebound in uranium prices at both Mulga Rock in Australia and Tumas in Namibia.

The hopeful yellowcake developer has put the hard numbers now around its Tumas deposit in the southern African nation, home to a number of uranium deposits including Paladin Energy’s (ASX:PDN) restarting Langer Heinrich mine.

DYL says it will treat 4.15Mt of uranium rich ore per annum, producing up to 3.6Mlb of U3O8 and 1.15Mlb of vanadium pentoxide over a 22.25 year reserve mine life.

Additional conversion of resources to reserves could take that mine life beyond 30 years, assuming a US$65/lb uranium price, US$7/lb vanadium price and 90% vanadium payability at a discount rate of 8%.

The project would cost an initial US$372m to build, with pre-production costs of US$48m and life of mine all in sustaining costs of US$38.72/lb.

Spot uranium prices are currently hovering around US$50/lb, but industry voices have suggested they need to rise higher to deal with a coming shortfall and bifurcation in the market between Russian and western supply.

DYL says it will now focus on front-end engineering and design, financing and offtake ahead of a final investment decision in the first half of calendar year 2024.

MD Borshoff said the study was based on recent quotes which provided a realistic outcome against a backdrop of inflation and supply headwinds.

“The development of Tumas is a cornerstone component of our long-held, dual-pillar growth strategy, which now also includes the Mulga Rock Project in WA, all to capitalise on the forecast improvement in uranium prices on the back of looming global uranium shortages from 2024,” he said.

“Our strategy encompasses organic growth of our own projects, and non-organic growth through consolidation in the sector.

“We remain strong believers in nuclear energy for electricity generation what with its growing role and importance both in combatting climate change by reducing global gas emissions and securing electricity supply for the future.”