Gold explorers have gone from zero to hero as investors look for value at depth

As gold producer valuations soar, junior explorers are increasingly confident investor interest will head down the value chain.

Gold looks set for a super few years yet. Pic via Getty Images

This time last year Gareth Solly's Black Cat Syndicate (ASX:BC8) was battling for relevance, trading at a little over $60 million even as it progressed the refurbishment of its Paulsens gold mine, the first leg of a three-step process to become a 150,000ozpa gold producer.

Now, 12 months down the line, the booming ASX junior is sitting on a near 300% 12-month share price gain, $460m market cap and owns the status of Australia's newest gold miner.

Even before forms have been returned, interest is already looking overwhelming for a run of minted 1oz coins to commemorate the Paulsens mine's reopening, cut from its first gold bar.

Each day those seem to become more valuable – the price of bullion has gone from US$2014/oz this time last year to US$2912/oz yesterday, around $4585/oz Australian.

"It's been a welcome relief from where we came from. Absolutely the gold price has helped, becoming a producer has helped and we're getting a lot of investor interest (from people) who want to get into gold now," Solly said on the sidelines of the RIU Explorers Conference in Fremantle yesterday, where gold miners have become the toast of the port city.

Black Cat engineered a transformative change in 2022 when it paid $40m for Northern Star's mothballed Paulsens and Coyote mines in WA.

"The market didn't give us any credit for the first couple years and now that the gold market has turned they are very valuable assets."

With miners like Black Cat sitting on enormous recent gains, investors are now looking further down the food chain to find the next worthwhile contender.

Undervalued

It's a common cliche for a junior explorer to call themselves 'undervalued' at a mining conference – it's on the bingo card of any cynical onlooker.

But junior golds have some right given where prices sit – and few investors are betting on a collapse as Trump's tariffs, war, global economic uncertainty and a growing chasm between trade in the east and west sends investors running for safe haven.

Odyssey Gold (ASX:ODY) executive director Matthew Syme, whose Mid-West explorer is chaired by Robert Champion de Crespigny's Normandy Mining lieutenant Ian Middlemas, says it's hard to be bearish.

"We've never really been gold bulls – we've always just dealt with the gold price that's in front of us," he told Stockhead.

"Even today I wouldn't say I was a gold bull, but it's very difficult to think of a set of circumstances that's more favourable to gold or anything that's going bring this gold bull run to an end for at least the next couple of years.

"Gold looks as good or better than it ever has in my long career, so while I say we're not gold bulls per se, it's incredibly hard to be a gold bear."

Odyssey has a familiar strategy when it comes to WA gold producers.

Located at Tuckanurra, it owns 80% of a resource containing 407,000oz at 2.5g/t, the other 20% held by Monument Minerals, a TSX-listed company that holds the nearby Burnakura processing plant.

It's also located well within trucking distance of mills owned by Westgold Resources (ASX:WGX), Ramelius Resources (ASX:RMS) and Catalyst Metals (ASX:CYL), all of which makes its gold highly marketable.

"We want to start to monetise those existing shallow resources while we explore for additional shallow resources and then also pursue the deeper leads, and most of the resources we already have, these open pits, they all sit on the on the crown of a deeper shoot that's come up from the fresh rock," Syme said.

While ODY has an EV of close to $20m, Syme says at current gold prices each 2.4c share is backed by close to $1.50 worth of gold in the ground.

Such valuations are always fragile.

Profit-taking has started to emerge in recent days, as investors take stock of a gold run that has accelerated in recent days amid fears from US traders that tariffs could be placed on imports of the precious metal.

But even at these levels, bearish bets are muted. Nicholas Frappell, global head institutional markets at Australia's largest private gold refiner ABC Refinery, said shorts were unusually small for a market running so hard.

"Very few people have been betting against the price of gold by being outright shortly exchanged ... gold shorts in that sector doubled in the last week, but they doubled from such a low base that does it really make a huge difference? Not really," he said.

"It's too early and too small to say, but it's worth looking at."

Gold analysts have tipped prices rising to US$3300/oz (Citi) and even as high as US$3600/oz (Victor Smorgon Group). Frappell says it's reasonable to think US$3000/oz will be cracked.

"I think that it would be really hard to bet against gold not getting to between $3000 and $3048 in US dollar terms," he told Stockhead.

"I think that's almost like its destiny.

"And anytime short of that, it's quite brave to sell it – not sell it to take profit, but if you're going to sell it to short it, bet against it if you like, that'd probably be a braver guy than me."

Security matters with gold at record prices. Pic: Josh Chiat

Not just a victory lap

While some investors are astonished to see gold prices double, longer standing industry figures have seen it run far lower levels.

Gold veteran Andrew Pumphrey, MD of ASX gold explorer OzAurum Resources (ASX:OZM) and long time resident of Australia's gold capital Kalgoorlie-Boulder, has seen bullion trading in the hundreds, let alone over $4000/oz.

"I remember going to Diggers and Dealers once, it was around $200/oz. Now it's around $4500 so for anyone getting into production, producing gold or has got gold projects it's really nice to see the whole sentiment change," he said.

"Especially for the junior explorers it's been really tough for us for a long time and I think it gives the investor community a lot of confidence, too," he said.

"I think while we've got Trump in, unfortunately with all the world uncertainty gold's going to be quite strong for three or four years.

"It's a great time to be in the gold business."

Explorers aren't just taking a victory lap. OZM is studying a heap leach with a JV partner on its 260,000oz at 0.7g/t Mulgabbie North gold project, while its share price has run 300% higher this month after striking 20m at 3.57g/t gold from surface at a high-grade discovery around 1.3km south of previous drilling.

"Being based in Kalgoorlie we're in a really good position to take advantage of this ... we're hoping we can get into production in the foreseeable future and scale that up to generate cashflow," he said.

"We've got a new exciting target that's come back with some fantastic results from surface, so that gives our shareholders a lot of exploration upside to find a significant discovery there."

Early stage explorer Arika Resources (ASX:ARI) is among those said to be receiving interest from institutional investors who normally steer clear of riskier, retail-backed stocks like micro-cap explorers.

It holds numerous targets near the historic Goldfields production centres of Menzies and Laverton, with 5000m of diamond drilling now under way at its Yundamindra project, where a previous drill program hit 14m at 15.48g/t from 46m alongside other shallow hits.

"We're in the fortunate position where we've got gold and we've got high-grade gold on mining leases, so it can be easily converted into cash," Arika MD Justin Barton said.

"Instos are really starting to pay attention to us now and there's obviously a lot of interest in the retail market, we're actually seeing huge volumes of stock going through daily now, which 12 months ago, 18 months ago, we just weren't getting the interest despite what we were doing."

Barton is confident the company's ground has 'multi-million ounce' potential, located in the vicinity of major operations like Sunrise Dam, Granny Smith, Wallaby and Mount Morgans.

Now, it's easier for companies like the $22m capped Arika to raise equity to prove those resources up.

Spending big

One of the gold explorers that has already raised that cash is Gorilla Gold Mines (ASX:GG8), formerly Labyrinth Resources, which owns the Vivien, Comet Vale and Mulwarrie projects in WA.

It raised $19.5m in a placement last year to test its theory that high-grade ounces had been left behind by distracted miners at a time of lower gold prices.

"It's not a small amount of money for an exploration company, but it's backed by three brilliant projects in WA," CEO Charles Hughes, a former Saracen, Northern Star and Delta Lithium geologist said.

"Definitely the gold price is helping and I think the smaller companies are starting to see the benefits of that now with smaller amounts of money coming in to fund some of the smaller juniors, which just hasn't been there for years.

"The gold price is definitely driving that and long may it last."

That means older operations, where exploration was undercapitalised still have plenty of potential for new drillers to tap.

"It's always surprising there are still projects there where you can add ounces from surface right next to a mine that was previously operating ... the opportunities are still out there."

One of those examples is Spartan Resources (ASX:SPR), which found the 1.5Moz at 8g/t Never Never gold discovery at Dalgaranga, in the shadow of a loss-making open pit. The bold step to shut down mining operations and focus on drilling turned the Simon Lawson led junior into a $1.7bn company.

It's now close to 20% owned by Ramelius Resources (ASX:RMS), with plenty of other WA juniors aiming to follow a similar path.

Caprice Resources (ASX:CRS) is the latest to throw its hat in the ring as a candidate to claim the next significant Mid West gold discovery, its shares lifting 185% in a month after hitting 28m at 6.4g/t from 114m at its Island gold project.

CEO Luke Cox, a former Evolution Mining mine manager who shifted from subdued lithium back to gold, said the junior gold space was "going gangbusters".

"Everyone's going, OK, well you've got all these gold producers, they're printing money, well let's have a look at who's going to be the ones that have multiples in front of them in terms of share price, and that's the juniors.

"That's the Caprices of the world."

Cox pointed out the competitive tension around CRS' ground. Just about everything to the north of its package is owned by Westgold, with cashed-up Ramelius dominant to the south.

"I used to work at a gold mine, and I was running 1g/t, but the gold price was $1500/oz, and we were printing money then," he quipped.

"Now the gold price is at $4500/oz and when you look at what Caprice's got – anywhere between ~3-6g/t, you've got multiples on the gold price and you've got multiples on the grade as well.

"It's a whole new ball game."

At Stockhead, we tell it like it is. While Caprice Resources, OzAurum Resources and Arika Resources are Stockhead advertisers, they did not sponsor this article.

Originally published as Gold explorers have gone from zero to hero as investors look for value at depth