Ten Bagger: The tailwinds for gold miners keep gathering pace

Trump’s tariffs may have throttled the market, but gold miners are riding high with bullion prices at a record and oil crashing.

Is there a silver lining for gold miners as tariffs tank markets? Pic: Supplied/Stockhead

Welcome to Ten-Bagger, where Lowell Resources Fund chief investment officer John Forwood gives us his take on a sector of the ASX resources market full of value.

This month, John looks at the positive drivers for ASX gold miners after Trump's tariffs throttled oil prices.

Gold prices may have taken a dive as volatility on US treasury yields went sky high this week, one of the many offshoots of Donald Trump's tariff madness, reined in by an aboutface on all bar a 125% hit on Chinese imports on Wednesday.

But we remain in rarefied air, with gold in Aussie dollar terms collecting $5040/oz, which against all in sustaining costs reported in the fourth quarter of 2024, would suggest our locally based producers are pulling in margins of around $3000 an ounce.

Arguably, the situation has gotten even better thanks to the arbitrage between crude oil prices and gold. Recession fears sent crude tumbling below US$60/bbl on Tuesday, hitting levels not seen since the latter stages of the Covid pandemic.

With energy making up 30-40% of a miner's cost base, Lowell Resources Fund (ASX:LRT) chief investment officer John Forwood said the economic fears inspired by Trump's tariffs are delivered a margin boost for ASX gold miners.

"The fundamentals have actually got better," he said.

"The Tapis and Brent crude oil prices in Aussie dollar terms are actually at three year lows, and in real terms they are probably even lower

"That can be 30-40% of input operating costs for a mining project in terms of mining cost and processing cost."

Forwood says a slow down in other commodities like lithium, nickel, and even iron ore, which dropped as low as US$92/t midweek, would also create better labour availability for miners in Australia's resources hotspot of WA.

"So there's two massive input costs for gold producers or gold projects that are actually looking better than they were a week ago," he said.

Capital crunch

Capital could become cheaper if a slowdown in the economy leads to additional interest rate cuts, which would be a positive for potential developers.

At the same time, gold explorers and miners won't be saved from some of the broader impacts of market volatility.

One aspect of the market that could take a hit is IPOs, Forwood suggested.

"We spoke to a potential gold-silver IPO this morning and they're shelving their plans and looking more at a RTO," Forwood noted.

"It has been the big hurdle for junior companies up to now and I think the hurdle's just got a lot higher.

But Forwood said there were junior explorers whose share prices were swimming against the tide amid the market maelstrom.

Outperforming gold juniors

One of those is Leeuwin Metals (ASX:LM1), a stock held by Lowell both directly and through its stake in Ramelius Resources (ASX:RMS).

Leeuwin shares have surged 150% in the past six months after a well-timed deal to take the Marda gold project, once a satellite feeder to the mothballed Edna May gold mine near Westonia, off the mid-tier gold miner's hands.

Originally announced the week before Christmas last year, the transaction to acquire more than 500km2 of quality gold ground 120km north of Southern Cross came in at an initial costs of just $500,000 worth of Leeuwin shares.

Future cash payments of $500,000 and $1m will only be due if Leeuwin can delineate JORC resources of 500,000oz and 1Moz respectively.

"They just closed the deal last week or so and they announced a whole lot of drill results which have never been released to market by Ramelius – or I don't think they had been – and they were up 50% (Tuesday)," Forwood said.

"So there's still a bit of interest in the market for the good stories."

Those intercepts, which came from unmined areas outside the four open pits excavated by Ramelius, included highlight RC intersections of 62m at 1.94g/t from 102m, 48m at 1.95g/t from 94m and 36m at 1.83g/t from 92m.

Another on Lowell's radar, Ecuador-focused gold and copper explorer Sunstone Metals (ASX:STM), raised $4m at 0.5c in late March and has since seen its shares double in price.

"For special situations, there's still good interest in the market," Forwood said.

More special situations

Those can include companies with development milestones and catalysts on the way. One Forwood likes the look of from that perspective is Medallion Metals (ASX:MM8), which last year put out a scoping study which placed a $73m capex bill on the construction of its Ravensthorpe gold project on WA's south coast.

While some developers may be faced with the challenge of raising substantial chunks of equity in a weak capital market, Medallion has already lined up a potential line of $50m of finance, with strong demand to secure offtake of its future gold-copper concentrate.

"They have offtake finance for potentially $50-odd million, and they've got a market cap of around $100-odd million," Forwood said.

"So if they have to raise maybe 50% of their market cap that potentially is still doable, particularly for a substantial project that's going to be producing 60-70,000 ounces of gold equivalent per year."

Forwood also pointed to Carnavale Resources (ASX:CAV) as one to watch.

Its Kookynie project has an indicated and inferred resource of 85,000oz at a high grade of 5.8g/t, including an "ounce dirt" bonanza gold zone containing 53,000oz at 31.2g/t Au.

With mine dilution, its initial plan is to toll treat 421,000t of ore at 4.6g/t for 62,000oz, generating undiscounted cash flow of $105m after pre-production capital of just ~$3m, with a maximum cash drawdown of $12.9m.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

At Stockhead, we tell it like it is. While Leeuwin Metals and Medallion Metals are Stockhead advertisers, they did not sponsor this article.

Originally published as Ten Bagger: The tailwinds for gold miners keep gathering pace