Southern Cross, Northern Star in focus for gold investors

With gold going from strength to strength, companies exploring for the commodity are becoming popular among high net worth investors. Picture: David Gray/AFP

Gold continues to be a major point of focus for investors, with three stocks in the sector, Northern Star Resources, Bellevue Gold and Southern Cross in the spotlight on Tuesday.

The $1.2bn Australia- and Canada-listed gold explorer Southern Cross Gold Consolidated tapped the market on Tuesday for $134m ($C120m) by way of a placement to fund further exploration at its high grade Sunday Creek gold discovery in Victoria, 60km north of Melbourne.

It’s located in one of the richest gold mine regions in the world near where Agnico Eagle’s highly lucrative Fosterville gold mine is based and there’s said to be much hype about discoveries by explorers there.

Groups operating in the space were making big gold discoveries at a time the gold price trades at about $5160 per ounce amid global uncertainty.

The stock is mostly held by wealthy privates, with institutional investors sometimes shying away from gold exploration companies, being less familiar with the space compared to producers.

But, should its share price continue to climb, as it has done this year, increasing 47 per cent, institutional investors may then buy up, because it may enter the ASX 200 index.

Another explorer in the region, S2 Resources, has also experienced an uplift.

Working on the deal as joint lead managers were Aitken Mount Capital Partners and Canadian bank Stifel Nicolaus.

Among its backers are well-known Canadian mining investor Pierre Lassonde and Switzerland-based Australian mining investor Darren Morecombe.

The price of $5.10 per share is an 8.3 per cent discount to the last traded price of chess depository interests on Monday.

Meanwhile, Northern Star’s quarterly update on Tuesday allayed investors’ concerns it may need to cut dividend payments after lowering production guidance, with the company explaining it had inherited $900m of cash to fund payouts through its $5bn purchase of fellow gold producer De Grey Mining.

Also catching attention has been Bellevue Gold. A substantial shareholder notice ahead of the long weekend revealed the Dion Hershan-run active fund manager Yarra Capital Management increased its position in Bellevue Gold to almost 6.6 per cent from 5.25 per cent, following a deeply discounted equity raising.

Bellevue Gold’s share price was up more than 5 per cent, with its market value at $1.3bn after its share price crashed by at least 20 per cent following an announced $156.5m raise by way of a placement to bolster the balance sheet and carry out a revised mine plan.

Among other holdings of Melbourne-based Yarra Capital in the Australian-listed gold mining space are Gold Road Resources, recently subject to a takeover bid from its partner Gold Fields.

Bellevue Gold is in play after it also downgraded its production guidance, closed out part of its goldmining hedge book, flagged changes to the group’s board and executive team, and launched a UBS-run strategic view to consider placing itself up for sale after receiving informal “approaches”.

But, weighing in the miner’s favour is that investors are flocking to Australian gold stocks, as the price of the precious metal rises, with US tariffs creating more global economic uncertainty.

The gold price, at over $5000, is almost double what it was hedged at by Bellevue for its Bellevue Gold project in Western Australia’s Goldfields region.

Australian peers are interested in buying Bellevue to secure more production as gold’s price increases and shows no signs of abating, rather than for synergies, say sources.