Resources Rising Stars: Institutions target gold juniors as value emerges

Gold juniors are seeing increased interest from institutions after prices rose to record highs last month
Astral Resources MD Marc Ducler says instos having been buying stock on market and taking meetings, with focus shifting from fully priced producers to lagging explorers and developers
Solstice Minerals and Javelin Minerals chasing gold in elephant country around Kalgoorlie

As prices ride to record highs, junior gold companies forgotten in the post-Covid mining boom are floating onto the radar of institutional investors in a vote of confidence for the re-emerging sector.

Gold hit an all time high on August 20 of almost US$2530/oz, fuelled by central bank buying, decoupling of China and Russia from the US dollar trade, geopolitical uncertainty and war in both Ukraine and the Middle East.

The inverse relationship between gold and real rates means experts think gold could have another leg up once an expected rate cutting cycle is kicked off this month by the US Fed.

While gold producers, now largely unhedged, have borne the fruit fertilised by the recent gold run – pulling over $2 billion in collective profits in FY24 – small caps have trailed as liquidity from investors dries up in a tepid equity market.

That could be changing, with valuations surging at the upper echelons of the market and even in the mid-tier. $90 million-capped Astral Resources (ASX:AAR), which boasts over 1.2Moz at its Mandilla project near Kambalda in WA’s Goldfields, has seen the institutional composition of its register lift from 5% to 8.4% over the past 12 months.

“We’re certainly seeing a real increase in the interest from institutional funds. 12 months ago, you wouldn’t be able to get a meeting with those big US funds, and now we’re getting meetings with those US funds, and we’ve even got two of Sprott’s funds now buying on market,” Astral MD Marc Ducler said on the sidelines of the Resources Rising Stars conference in the Gold Coast yesterday.

“I think they’re also seeing that massive discrepancy between the producers and the juniors.”

Take out companies mining less than 50,000ozpa, and of the 18 ASX-listed gold miners above that mark just three are valued at under $1.5bn, Ducler said.

“75,000ozpa producers are up over a billion dollars. I think those funds are seeing that opportunity now in the juniors and are starting to come down the curve somewhat.”

Gold revival

While capital flew from the junior gold sector into lithium, rare earths and other new energy metals as EV penetration surged from 2021 to 2023, the worm has turned in market sentiment.

Solstice Minerals (ASX:SLS), a spinoff of the WA assets held by former Tanzanian gold developer OreCorp, already has big investment names on board as it looks to repeat the success its board and MD Nick Castleden had near Kalgoorlie with the $181 million sale of Apollo Consolidated and its 1.3Moz Rebecca gold project in 2021 to Ramelius Resources (ASX:RMS).

Liontown Resources (ASX:LTR) and Chalice Mining (ASX:CHN) founder Tim Goyder and his associates control 2.4% of the explorer, with Rusty Delroy’s Nero Resource Fund holding 7.5% and Perth insto Precision Funds Management’s Precision Opportunities Fund recently topping up to 8.5%.

“I think it’s a backing of the team and the geology, because Solstice is operating in very much the same neighbourhood as we found the Apollo discovery,” Castleden said.”The benefit of having two decent sized funds in this space is that they are focused in gold and copper and not distracted by the spodumenes and stuff like that these days.

“So there’s a lot more focus and and because they’ve got decent stakes in the company, we’re seeing a lot of potential for deal flow and ideas being percolated through from those funds.”

Solstice has $17.5 million in cash and a market cap not much different, the result of a well-timed $12.5 million cash sale of a small gold deposit neighbouring Northern Star Resources’ (ASX:NST) Carosue Dam gold mine, 120km north-east of Kalgoorlie, to the ore hungry $17 billion gold giant.

The sale of that one tenement shows what sort of premium is on offer for a gold discovery, even a modest one, in the current high gold price environment.

Castleden says the explorer is planning to use that cash to acquire other assets while it spends $1-1.5m on drilling at its Yarri and Kalgoorlie assets.

“Between us, we’ve got a reasonable eye for finding projects and putting money to use. We will make mistakes, but the board’s done five corporate transactions in the last 20 years, so hopefully we know what we’re doing,” he said.

“Of that money that we’ll apply in the next 12 months, hopefully (the big discovery) is at the end of one of these aircore holes that we’re drilling at the minute.

“A new discovery in this part of the world, so close to Kalgoorlie, there is essentially nowhere better to find a new gold deposit.”

A throw of the Javelin

In the same part of the world, Javelin Minerals (ASX:JAV) is emblematic of the shift from battery metals back into gold and copper.

It has held the Coogee gold project 55km south-east of Kalgoorlie for a number of years, which produced over 20,000oz at more than 4.5g/t for Ramelius in 2013 before wrapping at at time when depressed gold prices were around $1000/oz, more than three times lower than current levels.

But under previous management the focus shifted to lithium, with data bearing hints of deeper mineral potential left to gather dust.

Javelin has cobbled together historic data to post a mineral resource estimate of 126,685oz including 3.65Mt at 1.08g/t, 158% higher than previously interpreted. A small copper bounty of 1.01Mt at 0.41% Cu for 4133t is a kicker.

JAV executive director Brett Mitchell says drilling will begin in the fourth quarter, with investors backing the switch back to the precious metal.

The $10m market capper is hoping to follow in the footsteps of explorers like Spartan Resources (ASX:SPR), which found its company making Never Never a stone’s throw from historic low grade pits at its previously misfiring Dalgaranga gold project.

“We’re a micro cap company at the moment, and we’re just getting it started, we’ve just restructured and relaunched Javelin on the back of Coogee,” Mitchell said.

“But I’m already encouraged by some inbound interest we’re getting even at our size of market cap, and we’ve only started this journey over the last few weeks.

“Even at the conference here we’ve got a couple of interested parties who want to talk to us, which I find a bit surprising, but that gives you a good feel for the sentiment out there.”

While the mood has been subdued in the general resources market, Mitchell said gold was “the place to be”.

“We’re very fortunate to have found this asset sitting inside the company … because the company had been off chasing lithium and base metal projects for the last three or four years,” Mitchell said.

“There’s been no systematic exploration around the Coogee pit itself, and there’s structures that remain untested, both on the mining licence and the adjacent exploration licences that we’re very fortunate to have, which gives us immediate walk up exploration opportunities.”

At Stockhead we tell it like it is. While Astral Resources and Javelin Minerals were Stockhead advertisers at the time of writing, they did not sponsor this article.