Five ASX small cap gold plays stockbroker Argonaut likes this month
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Appetite in the gold space has definitely picked up and there are a few emerging producers that are looking good to stockbroker Argonaut.
“There’s a lot of good explorers out there, but there’s a lot of near-term guys that have the potential to make the jump into mining as well,” mining analyst James Wilson told Stockhead.
Here are Mr WIlson’s top five gold picks (in no particular order):
Gascoyne Resources (ASX:GCY) – this $243 million company is about to pour its first gold bar.
Earlier in May, the company revealed it was ahead of schedule and under budget with the start of commissioning at its Dalgaranga project.
Gascoyne – which will be a 120,000-ounce-per-annum gold producer – trades at two thirds of the value it should be, according to Mr Wilson.
The company’s share price is up 17.7 per cent over the past year, closing at 56.5c on Friday.
Next on the list is the $54 million Explaurum (ASX:EXU), which is expected to release a feasibility study for its Tampia project in the next week or so.
Tampia, a former BHP-owned project, is located near Ramelius Resources’ (ASX:RMS) already producing Edna May mine near Narembeen in Western Australia’s wheatbelt region.
“It’s the only other deposit around there that’s a near-term producer, so they should have some news in the near future,” Mr Wilson said.
Explaurum’s share price, however, has slipped 11.5 per cent to 11.5c over the past year.
Genesis Minerals (ASX:GMD), which has a market cap of $31 million, also makes the cut because of its ability to potentially more than double the resource at its Ulysses project to 700,000 ounces in the near-term.
The grades of the mine, which lies 30km to the south of St Barbara’s producing Gwalia mine, are also two to three times higher than other mines in the region.
Genesis’ share price has climbed 89 per cent to 3.4c in the past year.
NTM Gold (ASX:NTM), meanwhile, is located in a large mineralised belt in the Eastern Goldfields region of Western Australia.
A relatively unknown player, the $16 million explorer already has a resource of around 300,000 ounces and Mr Wilson thinks NTM could grow that to between 500,000 and 600,000 ounces.
NTM hasn’t witnessed massive share price growth, however, with shares only up 2.1 per cent over the past year at 4.8c.
Lastly is Catalyst Metals (ASX:CYL) – the biggest gainer of the list with a 125 per cent jump in its share price to $1.13.
Although the $77 million explorer is looking for gold in Bendigo, Victoria – historically a region that has been the downfall of past miners because of its nuggetty gold – Catalyst has a much better chance of success, according to Mr Wilson.
“Catalyst has new ideas. Fresh ideas in an old belt,” he explained. “Their exploration manager is the former Newmont head of worldwide exploration, so I think he knows what he is doing.”
Catalyst is also partners with Gina Rinehart’s Hancock Prospecting in the Four Eagles gold project north of Bendigo.
Hancock has spent $4.2 million in recent years earning a 50 per cent interest in the project.
Money flows to the small caps
Gold players who have undertaken recent capital raisings, like Genesis, have received oversubscriptions for double what they were targeting.
“People want that opportunity to get into small cap explorers at a discount because they are generally all trading reasonably well,” Mr Wilson said.
“It’s amazing how many people come in and the ferocity of the bidding.”
In some cases, investors are cashed up from big gains made from their investments in the mid-tier gold players.
Investors who had money in Northern Star Resources (ASX:NST), for example, over the past two years would have more than doubled their cash, according to Mr Wilson.
Evolution Mining (ASX:EVN), meanwhile, has provided investors with an 89 per cent return on their investment over the same period.
With the larger guys now trading sideways, investors are cashing in some of that profit and looking for a place to park their cash.
“What we’re finding is the funds and investors are now taking profits out of those and then going down the curve and having a look where else they can put their money,” Mr Wilson said.
“A lot of that money is then being redeployed down the curve into little guys.”
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