Tru Datt: Datt Capital's top picks as gold forecast to hit US$3000/oz

Datt forecasts gold prices will continue to rise in 2024 and may hit US$3000/oz in the coming weeks
US presidential election and geopolitical tensions pushing investors into safe haven assets
Datt said strong gold prices made higher cost producers and discovery plays attractive from a risk-reward basis

Welcome to Tru Datt, a Stockhead exclusive featuring the insights and opportunities of Emanuel Datt – founder and chief investment officer at Datt Capital, a Melbourne-based investment manager focused on identifying growth and special situation investments.

Emanuel Datt forecasts gold prices will continue to rise in 2024 and may hit US$3000/oz in the coming weeks after passing $US2700/oz in October.

As gold prices push to all-time highs there are several factors that would further propel its ascendancy, Datt says.

“Firstly, gold prices have rallied partly due to expectations that the US Federal Reserve would cut interest rates in 2024.

“Lower interest rates typically increase the appeal of non-yielding assets like gold.”

Datt said the US Fed’s 50 basis point cut in September buoyed the price of the precious metal.

“Additionally, gold is often seen as a hedge against inflation and currency depreciation,” he said.

“So as inflation concerns and persistent monetary stimulus continue globally, investors are turning to gold to protect their future purchasing power.”

Concerns about the US presidential election, combined with the escalating conflicts in the Middle East, were also major factors as they push investors into safe haven assets like gold.

“There has also been significant demand for gold from central banks, particularly from China, as countries seek to diversify their reserves away from the US dollar amid concern about the US election outcome,” he said.

“For investors, gold is a highly effective portfolio diversifier due to its low to negative correlation with all other major asset classes.”

Gold protects an investment portfolio from volatility because factors that impact the returns of most asset classes do not significantly influence the price of the precious metal.

“Local investors may benefit from strong gold prices by taking positions in unhedged gold producers across the risk spectrum,” Datt said.

In terms of which companies to invest in to take advantage of higher and rising gold prices, Datt suggested large cap producers like Newmont Corporation (ASX:NEM) , Northern Star Resources (ASX:NST) and Evolution Mining (ASX:EVN).

Strong gold prices boost appeal of high-cost miners in WA

Across Australian mid-cap producers, Datt favours Westgold Resources (ASX:WGX) , Vault Minerals (ASX:VAU) and Ramelius Resources (ASX:RMS).

He said strong gold prices made higher cost producers and discovery plays attractive from a risk-reward basis, especially in tier-1 jurisdictions such as Western Australia. His preferred gold exposures of this nature include:

Westgold

The mid-cap, multi-mine gold producer is producing ~400,000ozpa across five mines after taking over TSX-listed Karora Resources this year, owner of the Beta Hunt and Higginsville mines near Kambalda. The company holds significant land holdings providing substantial optionality and organic growth potential.

“The company is capped at $3bn and is unhedged thereby enjoying full exposure to the gold price,” Datt said.

Vault

VAU also produces ~400,000oz of gold per annum across three producing mines, though at relatively high cost.

“The company’s production is partially hedged so has lower exposure to gold spot prices and a shorter time horizon across the portfolio,” Datt said. But its smaller market cap means it has more exposure if operations come good and gold keeps rising.

“The company is capped at around $2.6bn and is a higher risk, high reward exposure,” Datt said.

Yandal Resources (ASX:YRL)

YRL is a junior gold explorer in the Yandal region of Western Australia, a well endowed gold belt where Northern Star Resources (ASX:NST) is the major producer.

The company recently disclosed a compelling gold strike from exploration drilling of 78 metres of 1.2g/t from 96 metres in depth to end of hole at its Siona discovery, part of the Ironstone Well-Barwidgee gold project.

Northern Star has been known to pick up small resources nearby to feed its Jundee gold mine, including the acquisition last year of Strickland Metal’s Millrose project for $61m in cash and shares.

“Whilst this is very early stage and requires follow up exploration; the location is very attractive from an infrastructure perspective and has a low bar for commercialisation,” Datt said.

“The company is currently capped at around $60 million and has an existing gold resource of almost half a million ounces across its various holdings.”

Three ASX gold small and mid caps to watch

Along with Yandal, Datt also likes two other explorers at the riskier end of the spectrum, both with deposits in West Africa.

Predictive Discovery (ASX:PDI)

With a market cap of ~$650m, PDI is a gold developer which holds a five million ounce gold deposit in Guinea, the Bankan project. Datt said the project had the potential to produce 270,000ozpa over a minimum 12 year mine life, at an all in cost of around US$1200/oz.

“In our opinion, it is the most attractive gold development project on the African continent,” he said.

“The company are in the late stages of project permitting and are at risk of being an M&A target with West African focused gold producer Perseus Mining (ASX:PRU) recently buying 19.9% of the company.”

Turaco Gold (ASX:TCG)

The gold explorer with a market cap of ~$250m is focused on Cote D’Ivoire in West Africa. Datt said TCG had built a resource of around 2.5 million ounces in a relatively short period of time, and continues to achieve promising results.

“TCG are an earlier stage company that will take some years to define their gold resources and go through the permitting process,” he said.

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