Investors weigh local exploration news against global economic fears in a challenging week

Positive discovery news at a number of exploration projects partially offset the effects of a $US20 an ounce fall in the gold price yesterday
27th September 2019
Tim Treadgold

Positive discovery news at a number of exploration projects partially offset the effects of a $US20 an ounce fall in the gold price yesterday, and the negative influence of international political shenanigans, to leave financial markets in an eerie truce.

Stavely’s exceptional copper assays from its Thursday’s Gossan project in Victoria (the subject of Barry Fitzgerald’s column, above) lit up the market, along with Mincor’s high-grade nickel hit at the Cassini project in WA and Azure Minerals’ exceptional zinc recoveries at its Oposura mine in Mexico.

But weighing on investor confidence was the spectre of a global economic slowdown as the US plunged into what will be a debilitating (and doomed to fail) attempt to impeach  President Donald Trump, the spectre of either a hard-Brexit in Europe or a hard-left Labour Government and a whiff of panic in the all-important German car industry as sales crumble.

Essentially, the big picture being painted by international events threatens to overpower the encouraging domestic news which, in theory, means a good time for gold and a tougher time for industrial metals.

That wasn’t the case this week as news from copper, nickel and zinc exploration delivered healthy wins for investors in Staveley, Mincor and Azure.

In Victoria, a State which is rapidly reclaiming its reputation as the home of high-class mines (the Fosterville goldmine of Kirkland Lake springs to mind) it’s the work of Stavely which is starting to generate interest.

Yesterday’s news from Thursday’s Gossan (delivered, naturally, on a Thursday) included a stunning 2 metre section grading 40% copper, plus 3 grams of gold a tonne and 517g/t of silver from a depth of just 62m.

Investors loved it, boosting Stavely’s share price by 64c, or an astonishing 260% to 86c in a matter of minutes as the stock resumed trading after a three-day pause.

The company said the result came from the first shallow diamond-drill hole to hit a high-grade, structurally-controlled zone of copper, gold and silver mineralisation immediately south-east of recent deep drilling.

As well as the 40% copper hit, which has only been matched recently in Australia by the Doolgunna discovery in WA of Sandfire Resources, there were other zones, including: 32m at 5.88% copper plus 1g/t pf gold and 58g/t of silver from a depth of 62m, 12m at 14.3% copper plus 2.26g/t of gold and 145g/t of silver (for the detailed see Fitzgerald’s report).

Mincor’s news, which lifted the stock by 5c to 61c, featured a 15.4m drill hit assaying 4.7% nickel from work at the fast-developing Cassini project. The intersection included an 8.6m core assaying an outstanding 7% nickel.

The company described the latest drilling result as the highest-value result yet obtained at Cassini because the intersection has an exceptionally thick true width of 13.2m.

Azure’s news, which lifted the stock by 9c to a 12-month high of 28c, came from the starter pit at Oposura, which saw the removal of 6100 tonnes of ore grading 13.4% zinc and 10.8% lead, a result which was well above expectations.

Before getting to more exploration and discovery news, it is worth considering the latest international developments which could skew investment markets for the next six-to-12 months.

Industrial metals are most likely to feel the weight of the ongoing China v US trade war, though it is Europe which has started to look like the place where real trouble could start as the threat of an unruly Brexit weighs on the wider European economy.

In those circumstances it is gold which should fly and while some forecasters see gold moving up to the $US2000 an ounce level (and beyond), that’s not a view fully shared by leading members of two important groups; some gold company directors and some investment banks.

As mentioned here last week, some goldminers are still using remarkably low gold price forecasts, including Polyus at $US1050/oz and Barrick at $US1200/oz.

This week it was the banks turn to be cautious about gold with Morgan Stanley tipping a price next year of $US1511/oz, roughly where it is now, but sliding to $US1455 in 2021 and then down to $US1330/oz in 2022.

Macquarie reckons gold will average $US1459/oz next year, rising to $US1606/oz in 2021 before retreating in the outer years.

Perhaps the most sobering observation for gold investors is a comment from Morgan Stanley that most Australian goldminers are factoring in a gold price of $US2100/oz a calculation which, if right, indicates that investor enthusiasm is too far ahead of events – or investors are genuinely worried about the big picture and are moving into gold for safety.

Other news and market-moving events worth noting this week include:

  • Red 5 reported encouraging near-mine drill hits from exploration close to its King of the Hills project in WA with a best intersection of 34m at 1.87g/t from the Centauri prospect and 4m at 17.07g/t from the Cerebus-Eclipse prospect. On the market, the stock was up half-a-cent to 30.5c but Morgans, a stockbroking firm, said it was heading to 50c.
  • OceanaGold reported an expanded exploration target at its Waihi project in New Zealand which could lead to a material upgrade of the project, news which lifted the stock by 35c to $4.18.
  • Liontown went against the tide affecting other lithium stock with a rise of half-a-cent to 10c, but with good news for the sector possibly on its way after reports that the lithium sell-off in China appears to have ended with Tianqi Lithium rising by 6.6% and Ganfeng enjoying a 4% rise earlier this week.
  • Metals X added 2c to 19c despite muted criticism about its move to raise $32.7 million in fresh capital to improve the Nifty copper project in WA. Bell Potter, a stockbroking firm, said the new issue sent a “mixed message” but maintained a buy recommendation albeit with a cut to its price forecast from 45c to 40c.
  • Strandline Resources added half-a-cent to 10.5c, announcing a fresh titanium minerals discovery at the Sakura prospect along strike from its Tajiri project in northern Tanzania.
  • Exore Resources reported excellent assays from drilling at its Veronique gold project in the West African country of Ivory Coast, including 4m at 76.31g/t from a depth of 32m, news which moved the stock by a modest 1c to 10c.
  • Galileo Mining added 1c to 13c after reporting the start of a fresh round of drilling at its Fraser Range nickel project in WA, and
  • Korab Resources, which added 0.1c to 2.3c, is in the running for a “courageous exploration” award after reporting that it had earned a government an extension of title to the promising Bobrikovo gold and silver prospect in the Luhansk region of eastern Ukraine “until the end of hostilities”.

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