Tim Boreham: Golden slumbers may be ending
Gold lost a little of its lustre in 2022, but has been fighting back, and could be gearing up to shine in the new year, says Tim Boreham
While 2022 was a hot year for battery metals but one to forget for gold, the yellow metal has had a revival of sorts as investors contemplate the prospect of interest rates plateauing – or at least not heading as high as thought.
Will bullion regain its lustre in earnest in 2023?
In $US terms, gold has recovered about 10 per cent from its year low of $US1629 an ounce ($A2445/oz) in early November but is also 10 per cent adrift of its (record) early March peak of $US2040/oz.
ANZ’s commodities research team reckons gold is headed to $US1900 an ounce on a “recession scenario”, while the crazy-brave folk at Saxo nominate $US3000/oz (though we think they are half joking).
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The gold bugs argue that if the major economies slow faster than expected, interest rates could even ease. But falling inflation means higher “real” interest rates, which is good as gold for savers but not so good for actual non-income producing gold.
Concurrently, interest in cryptocurrencies – bravely viewed by many as many as an alternative store of value to gold – has sagged.
The obvious action for ardent gold bugs is to buy a direct exposure such as a gold ETF, physical bullion or leading miners such as Newcrest Mining (ASX:NCM) and Northern Star(ASX:NST).
For those with a long-term horizon, the two explorers have both eschewed battery metals in favour of gold – a switcheroo that could prove exquisitely timed.
Battery Minerals (ASX:BAT), which is now inaptly monikered given it sold its graphite assets in Mozambique to focus on gold exploration in western Victoria.
The sale, to the London-listed Tirupati Graphite, consisted of $1.5m of cash and $11m of Tirupati shares (later adjusted to $10m).
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Operationally, Battery is now focused on its Stavely-Stawell project, a mere 10km from the operating, five-million-ounce Stawell Gold Mine. Its ground is also next to Staveley Minerals’ Thursday’s Gossan copper-gold project.
So, join the dots! A drilling campaign will test historic work at the prospect that produced rock chips grading up to 430 grams per tonne. Battery has $1.7m of cash and a further $1.5m from the Tirupati sale. Add the Tirupati stake and an expected $1.5m UK sales tax refunds and the company is worth well over its $11m market cap – and that assumes the Victorian gold ground has no worth.
Battery, meanwhile, remains the London-listed Tirupati’s biggest holder and thus has ongoing exposure to Tirupati’s two working mines in Madagascar that produced 32,000 tonnes of the coveted flake graphite in calendar 2022 (with plans to rev up output to 80,000 tonnes by 2024).
In a similar vein, Breaker Resources (ASX:BRB) was all about lithium but sold its stake in its WA prospect, Manna, to joint venture partner Global Lithium Resources for a cool $88m. That left Breaker to zero in on its Lake Roe Gold Project near Kalgoorlie.
The project has a stated mineral resource of 1.7 million ounces averaging 1.6 grams per tonne. A scoping study for an initial underground phase estimates output of 88,000 ounces at an all-in cost of $1390/oz compared with the current spot price of around $2700/oz. The key project, Bombora is a 1.5-million-ounce resource – 778,000 oz indicated.
Neighbours include Northern Star Resources’ four million ounce-plus Carosue Dam project and Ramelius Resources’ (ASX:RMS) 1 million ounce-plus Rebecca Gold Project. Post the Manna sale, Breaker has $80m of cash compared with a market cap of around $100m. The company also has a 1.5 per cent net smelter royalty on any Future Manna output. “Put us on your watch list,” urges Breaker chief operating officer Sam Smith.
OK – we will.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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