Gold shares can rise further, say sector’s bosses
Fresh from enjoying one of its best years, Australia’s gold sector is wasting no time talking shares higher.
Fresh from enjoying one of its best years in memory, Australia’s gold sector is wasting no time talking shares higher.
The record high Australian dollar gold price coupled with low fuel prices and falling labour costs has helped Australia’s mid-tier gold sector surge dramatically over the past 12 months, providing a buoyant backdrop to this year’s Diggers and Dealers mining forum in Kalgoorlie.
But the record high share prices enjoyed by most of Australia’s gold plays has raised the obvious question about whether there’s still any value to be squeezed from the sector.
It’s a question that the sector’s managing directors have been contemplating intently, with several companies willing to detail their plans to deliver more growth through exploration, consolidation, or a combination of both.
Dacian Gold, arguably the hottest gold stock of the moment given its climb from 42.5c a year ago to almost $4 a share due to the ongoing success of its Mount Morgans gold project, revealed some tantalising slides about its nearby Callisto target — a big magnetic anomaly not far from some of Western Australia’s biggest gold deposits.
The anomaly sits under a salt lake, which has inhibited drilling efforts in the past, but drilling is now under way and results should be known within weeks.
Doray Minerals, fresh from commissioning its new Deflector goldmine, is on the hunt for acquisitions. It is now prepared to look outside Australia and has also upped its exploration budget by 50 per cent.
Doray managing director Allan Kelly said the company’s decision to look overseas for acquisitions reflected the high asset values in Australia and the lack of quality assets on the market.
“Everyone is either pretty fully priced or the projects are pretty average, they’ve been around the block a few times,” Mr Kelly said. “It’s tough to find a lot of value.”
Saracen Mineral Holdings, which has climbed from 38c to almost $1.80 a share as it brought its Thunderbox goldmine into production, is trying to keep investors interested by pumping $42 million into exploration over the next year. Speaking to analysts on a site visit to Thunderbox on Sunday, Saracen managing director Raleigh Finlayson talked up the deeper underground potential of its Thunderbox and King of the Hills projects and their potential to drive an upgrade of the company’s profit guidance.
He also spelt out the potential benefits of any retreat in the gold price, noting that any correction could work in Saracen’s favour longer term given the robustness of its own mines and the impact a fall could have on the price of any gold assets on the market.
“If we have a scenario where gold tanks, it’s not a bad scenario for us as we will have one of the lowest cost goldminers in Australia and can go on the acquisition hunt again.”
At the bigger end of the industry, Northern Star Resources managing director Bill Beament suspects that the gold industry’s global majors will increasingly have to turn to mergers and acquisitions to replenish their reserves.
“It’s the elephant in the room — reserve depletion of the majors,” he said.
Mr Beament added that at current production rates, the majors will consume 50 per cent of their reserves within 10 years.
St Barbara chief Bob Vassie said the company was also looking at potential acquisitions after turning around the miner’s performance over the past 18 months.
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