Gold traders buzzing with talk of ‘whale’ soaking up bullion

3rd February 2022
Tim Treadgold

Rare earths and other critical metals moved back into focus this week thanks to Australian Government project funding offers but it was gold which really caught the eye of investors as reports surfaced of a “whale” soaking up bullion every time the price slipped far below US$1800 an ounce.

Said to be a sovereign wealth fund of the sort operated by oil-rich countries such as Qatar and Norway, the buyer’s identify has become a hot topic among gold traders because the gold being acquired is not being delivered to traditional bullion-vault operators.

Only a sovereign wealth or central bank would have the firepower to spend millions of dollars on a gold buying spree and then spirit the purchases away to a private and secure storage facility.

Whatever the explanation, the net result is that gold, rather than fall as the threat of higher interest rates bears down on the sector, is going up with buyers, including the whale, lifting it by US$23/oz over the week to US$1806/oz.

The effect on local gold leaders was significant with all reversing a recent weakening trend. Newcrest led the way up with a gain over the week of $1.36 (6.5%) to $22.49, followed by Evolution, up 20c (5.8%) to $3.61 and Northern Star, up 20c (2.5%) to $8.52.

Better gold moves came among the explorers and project developers, including:

  • Genesis Minerals, up 22c to $1.65 after reporting exceptional results from the latest round of drilling at its Ulysses project near Leonora in WA with a best hit of 34 metres at 13.36 grams a tonne from a depth of 42m, including a 1m core assaying 382.6m.
  • De Grey Mining, up 9c to $1.22 after reporting fresh high grade, near surface assays during resource definition drilling at its Falcon discovery in the north west of WA with a best hit of 28m at 8.8g/t from 39m, including 3m at 66.5g/t.
  • Red 5, up 3c to 28c after reporting the start of mining at its King of the Hills project near Leonora in WA, and
  • Los Cerros, up 1.5c to 13c after reporting a 100m intersection at 1.01g/t from the latest drilling at its Tesorito project in Colombia.

Other interesting gold exploration results reported this week came from Medallion Metals, a 16m intersection at 9g/t from its Harbour View project in WA (shares up 1.5c to 23c), and Musgrave Minerals, 9m at 110.5g/t from 42c at the new Mosaic Lode in its Cue project in WA (shares up 3c to 32c).

Hastings Technology Metals led the way up among rare earth and critical metal stocks with a rise of 5c (19.5%) to 31c after announcing receipt of a $140 million loan from the Northern Australia Infrastructure Facility (NAIF) which will form the backbone of a $400 million raising to fund the company’s Yangibana rare earth project in WA.

Two graphite stocks, Ecograf and Renascor, have also received loans from NAIF as part of the government’s drive to develop a critical metals sector capable of by-passing China, a process being watched closely in Europe.

Ecograf rose 7.5c to 64c over the week and Renascor was up 7.7c to 28c while a third graphite stock, Talga put on 11c to $1.53 after releasing more high-grade drill results from its Vittangi project in Sweden with a best hit of 52m at 29%Cg (total carbon in graphite form).

Rare earth leader Lynas continued its upward run with a gain of 16c to $8.95, but also earned a fresh buy tip from Macquarie Bank which sees $12.40 as the target price.

Overall, the week was notable for a fading level of investor anxiety over negative factors which have been obvious since Christmas, including rising interest rates and the threat of war in Ukraine.

Two leading investment banks added their weight to positive commodity price trends with UBS upgrading its price “deck” thanks to a more optimistic outlook for the first half of the year with the copper price lifted from $US3.63 a pound to $US4.06/lb and nickel up from $US8.38/lb to $US9.74/lb.

J.P. Morgan’s view is that commodities will continue to outperform even as interest rates rise, telling clients that: “Commodities have delivered higher returns over previous hiking cycles”.

Oil, the commodity which environmentally sensitive investors are avoiding performed strongly again this week with the price of Brent quality crude briefly moving about $US90 a barrel before settling around $US89/bbl, good enough to lift Woodside Energy by $1.16 to $25.94 and Santos by 33c to $7.33.

The impact of oil rising back to a level last seen in 2014 is best measured through the profits of the global majors with ExxonMobil and Chevron reporting a combined net profit for calendar 2021 of $US38.6 billion, a dramatic reversal of their collective loss of $27.6 billion in 2020, the first year of the pandemic.

Uranium, the other energy the world tried to forget, is also shifting up a gear with financial market activity, such as funds buying and storing the fuel, expected to be replaced this year by genuine demand from nuclear power plant operators.

Canaccord Genuity, an investment bank, sees number of local uranium stocks outperforming this year, including Boss Energy which is tipped to rise from its current $2 to $2.88. Macquarie Bank reckons Boss could reach $3 thanks to exploration upside.

Other U-stocks expected by Canaccord to do well this year include Paladin, tipped to rise from 70c to $1.05. Peninsula, up from 17c to 30c, Lotus, up from 24c to 30c.

Elsewhere on the market the battery metals family remained firmly in the sights of investors. Lithium leader Pilbara Minerals added 19c to $3.32 but chief executive Ken Brinsden warned that labour shortages in WA were hurting production, though any slip in output is being offset by high prices.

Macquarie Bank kept its buy tip on Pilbara and set a price target of $3.70. Canaccord sees $3.80 as the target, but that’s 10c down on its previous tip.

Copper and nickel had a mixed week with Sandfire leading the copper sector with a rise of 23c to $6.80 after completing the acquisition of the MATSA mining complex in Spain while 29 Metals slipped 3c to $2.57 after reporting an outbreak of Covid-19 at its Golden Grove mine in WA.

Revolver Resources was the best of the copper explorers with a rise of 6.5c to 48c after reporting 96m of visible copper mineralisation from drilling at its Dianne project in north Queensland. Assays are pending.

Other news and market moving events this week included:

  • Iron stocks rising as Chinese demand for the steel making material increases, boosting the iron ore price back to $US143.50 a tonne with Mineral Resources leading the way up by $4.72 to $58.84 thanks to a revised port access deal which could see it substantially boost exports.
  • Fortescue Metals also rode the iron ore price higher with a gain of $1.21 over the week to $21.06.
  • Nickel stocks were mixed as the price eased back from last week’s peak of $US24,200/t. Western Areas was 1c weaker at $3.43 despite speculation of a possible counter bid to its merger with IGO, while Mincor added 8.5c to $1.65.
  • Image Resources rode higher titanium mineral prices in the December quarter with investors returning to the stock which added 3.5c to 24c.
  • Rumble Resources added 3c to 48c after reporting promising zinc and lead assays from drilling at its Earaheedy project in WA with a best intersection of 51m at 4.76% zinc and lead combined from a depth of 82m, and
  • Firebird Metals reported encouraging assays from its Oakover manganese project in WA, including 5m at 24.9% manganese from 24c. On the market, the stock added 4c to 35c.

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