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Gold stocks (contd)

The global economy is showing signs of an impending recession, or even worse still, a depression. A safe haven investment in these circumstances is gold. Below are a some gold stocks to keep an eye on.

From Stockhead:

Classic Minerals (ASX:CLZ)

Market Cap: $7m Production: N/A

Construction is ongoing at CLZ’s 92,800oz Kat Gap mine in WA, with first production pencilled in for the current quarter.

A bulk sample stockpile (6500 tonnes at 6g per tonne) is ready to be processed once the plant has been assembled.

It comes hot on the heels of a $20.1m institutional funding package to fast-track phase-1 development as well as extensional drilling across the wider project area, which is already coming up with the goods.

In January, the company announced a bunch of high-grade gold hits beneath the existing resource at Kat Gap, including 10m @ 9.26g/t Au from 57m.

Manuka Resources (ASX:MKR)

Market Cap: $45m

Production: 2.3Moz silver per annum (plus gold credits)

MKR owns the Mt Boppy gold and Wonawinta silver projects in NSW’s Cobar Basin.

Prior to production at Mt Boppy kicking off in April 2020, MKR had estimated Phase 1 production of 22-24koz gold, but ended up delivering >41,000koz.

Mt Boppy, which remains open, now has an updated resource of ~45,000oz at 4.95g/t gold. A Phase 2 mine plan is expected soon ahead of recommencement of operations.

MKR transitioned to silver production at the 51Moz silver, 207kt lead Wonawinta project in late March 2022.

First production comes from a 515,000t stockpile sitting alongside the pit, which was forecast to produce ~800,000oz silver through to February this year.

This is essentially a trial program ahead of mining the +50Moz silver resource, the company says.

In the September quarter, MKR reported sales revenue of A$6.015m from 183,630oz silver and 308oz gold for operating cash flow of $2.213m.

While production was up 20% on the June quarter, processing remained 30% below forecast throughput (due to weather, etc), while silver recoveries were 15% lower than the 75% target.

This impacted profitability, but MKR are optimistic that it is on the cusp of turning things around.

Following the 2020–2022 disruption from COVID and La Niña-induced wet weather, MKR is now poised to recommence open-pit silver mining in 2Q CY23 by re-entering existing open pits to produce at 2.3 Moz silver annum (plus potential for additional gold credits).

This will generate annualised revenues of more than A$75m, based on a silver price of US$22.4/oz.

Horizon Minerals (ASX:HRZ)

Market Cap: $40m

Production: N/A

In early 2022, a toll milling trial at HRZ’s 448,000oz Boorara gold project in the Goldfields was expected to de-risk larger scale mine development.

In total, 98,121 tonnes of ore was processed in the two campaigns at a grade of 0.93g/t Au and 90.2% recovery. The campaigns generated ~$1.35m cash to HRZ after all costs.

Plans change, however.

“Unfortunately, we’ve seen inflation and volatility in cost estimates increase materially since the second half of last year to a point where we now believe too much risk and potential for value destruction exists making it reckless to pursue a large-scale development in such an uncertain operating environment,” HRZ managing director Jon Price said late March.

“We are fortunate to have a [total +1.24] million-ounce resource within close proximity to the mining centre of Kalgoorlie-Boulder which provides significant opportunity and flexibility.

“Our location gives us the opportunity to monetise low tonnage high grade assets through a contract mining and toll milling model as we have done successfully in the past.”

The first of these assets is the 32,000oz Cannon pit, where a recent PFS envisaged solid cash flow of ~$10.1 million over five quarters “with a proven and relatively low risk operating strategy”.

This is based on a gold price of A$2600/oz (currently A$2770/oz).

Permitting is well advanced for a development decision in March quarter 2023, the company said in November.

Tombola Gold (ASX:TBA)

Market Cap: $33m

Production: N/A

TBA’s ~200,000oz Mt Freda Complex in Queensland consists of several open pit gold mines including Mt Freda (80% TBA) and Golden Mile (100% TBA).

The company is building/refurbing its own gold processing plants but plans to fast track cash flow via the short-term lease of the nearby Great Australian Mine (GAM) plant.

TBA was meant to start production via GAM in November, but a problem during ramp up has forced this emerging producer into a long suspension.

It now reckons it is close to a solution and plans to recommence trading on the ASX late January.

Production will be increased in 2023, with TBA’s VATS and the Lorena CIL plants both becoming operational in Q2 and Q3 respectively.

Lorena and VATS will operate concurrently, ramping up production “and providing Tombola the opportunity to process various ore bodies at the best possible AISC” the company says.

“With exploration to be funded from cashflow, we also aim to unlock further value from our projects and extend the life of mine.”

Kaiser Reef (ASX:KAU)

Market Cap: $27m

Production: 3,512oz (September quarter)

In the September quarter KAU delivered record gold production of 3,512oz at an average grade of 12.1g/t from its A1 Mine in Victoria.

At an operational cash cost of A$1,333/oz and received gold price of A$2,516/oz the company made a tidy $8.83m in revenue for the quarter.

It finished the quarter with $7.4m in the bank; an increase of $860,000 on the prior quarter.

KAU says access to deeper lodes at A1 is delivering exceptional results such as rising grades and increasing numbers of production opportunities.

“These discoveries are also providing increased confidence in the long-term future of the A1 Mine,” it said October 19.

“The A1 Mine is increasingly looking like a jewel in our future business plans as a long-term consistent producer.”

Kaiser is unhedged and debt free and directly exposed to the gold price.

This graph shows Kaiser share price for the last 12 months.

Financial indicators

The VIX fear gauge down by 3.16 points since 31 December to 18.51.

The Dow Jones Industrial Average up 831 points or 2.51% since 31 December to 33,978, the STOXX 600 up 30.28 points or 7.13% to 455.17 and the Shanghai Composite index up 178 points or 5.70% to 3,265.

Gold up to 1,927.60. US 10-year Treasury Bonds down to 3.448 and oil down to 79.38. Cryptos Bitcoin up by 6,534 points or 40.06% to 23,193.

ASX 200 up 455.10 points or 6.47% since 31 December to 7,038.70. The Aussie dollar up to 71.52 US cents.

Carbon Market Spot Prices

LGC $51.00 STC $39.90

ESC $33.25 VEEC $69.50

ACCU $37.25 EU ETS €84.11

NZU $NZ72.30 UK ETS GBP69.51

Sources: RenewEconomy, demandmanager, Market Watch, CarbonView, Stockhead, Green Car Report, Driven

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