Gold prices may have been up and down in the last fortnight, but the precious metal looks strong compared to other investments.
The ‘safe haven’ commodity is especially shining for Australian producers – with falling oil prices and a weak Australian dollar against the US increasing their margins, according to resource sector analyst Gavin Wendt.
While gold prices have fallen to about $US1450 an ounce compared to highs around $US1700 just weeks ago, the MineLife founding director said they were still 15-20 per cent up on the same time last year.
“Over that same period most equity markets have fallen by about 20-30 per cent,” he said.
“So if you contrast the performance of gold, even with its recent price fallback, I think you can confidently argue it has maintained its safe haven status.”
As significant stock market falls had continued day after day, Mr Wendt said it had created a situation where those investors who were borrowing money to invest in stocks had been forced to stump up with margin calls on their equities. In order to do that, some had been calling on selling their gold, he said.
With low interest rates, high global debt levels and continued uncertainty in the wake of the COVID-19 pandemic, he believed gold prices were likely to again hit $US1700 to $US1800 an ounce in the next 12 months.
Australian miners were positioning themselves to capitalise on current prices of about $A2600 an ounce, he said.
“Our currency has dropped so the Australian gold price is very high indeed, generating high margins for Australian gold miners,” he said.
“The other key thing for our gold miners – our miners generally – is the falling oil price.”
This flowed on to diesel prices and was creating considerable savings in operating costs, Mr Wendt said.
The big question for emerging miners aiming to bring advanced gold projects into production was securing financing in what was a very tough market, he said.
“But I think that investors will see that the outlook for the gold sector in coming years is very good in terms of a very strong gold price and strong margins, so the economics of emerging projects I think are going to be very good,” Mr Wendt said.
“If we do see a situation in the near term where companies are going to struggle to raise money for new projects then there is every likelihood of corporate activity ….
“In an environment with very good emerging projects out there and funding conditions not optimal there’s every likelihood we’re going to see opportunistic takeover bids coming from cashed up existing producers.”
Who’s in the game?
These are some of the companies looking to bring gold mines into production in regional Queensland in the near future:
- Ausmex plans to develop a multi-pit mining hub across the Mount Freda and Golden Mile assets near Cloncurry, with production to start this year. More HERE
- Carnaby Resources is keen to push ahead with its Tick Hill project, targeting first gold towards the end of 2020, after positive scoping study results amid record gold prices. More HERE
- Outstanding drill results have fueled plans to bring the gold-rich Liontown project online as part of Red River Resources’ Thalanga operations, with mine development flagged as early as 2021. More HERE
- Great Northern Minerals is moving to raise about $2.25 million to advance its North Queensland gold projects – Camel Creek, Golden Cup and Big Rush. More HERE
- Laneway Resources is looking to launch a further mining campaign at Agate Creek as it looks for quick options to cash in on high gold prices. More HERE