Plenty to drive fear and greed as yellow gold jumps and black gold tanks in the topsy-turvy world of coronavirus

Gold and oil were the big movers on the market this week, albeit in different directions, with gold up, and said to be heading for $US3000 an ounce, and oil so far down that it went below zero in some futures contracts
24th April 2020
Tim Treadgold

Gold and oil were the big movers on the market this week, albeit in different directions, with gold up, and said to be heading for $US3000 an ounce, and oil so far down that it went below zero in some futures contracts.

That gold-price tip wasn’t from a fly-by-night investment adviser. It came from the normally cautious Bank of America, which jacked-up its gold forecast by 50% from a long-standing forecast of $US2000/oz.

If the BofA is right, and the exchange rate stays where it is at US66 cents, the Australian gold price is heading into the stratosphere, with $A4500/oz the next stop.

For investors, gold at prices that high is very much a doubled-edged sword. It might be welcomed but it might also be a signal that everything else is heading in the same direction as oil – and interest rates – into unchartered negative waters.

On the Australian market, gold stocks had a reasonable week with leaders such as Northern Star and Saracen reclaiming more of the ground lost in last month’s rush by investors to sell everything as the coronavirus triggered waves of fear which, from an Australian perspective at least, have proved to be exaggerated.

And what a difference a month makes with cries to shut the economy being replaced by please to open the economy, and it’s those pleas which are likely to produce a positive reaction from Australian Governments with inevitable flow-on benefits to financial markets.

 

As ever, gold is good place to start looking at market events with strong news flow this week in quarterly reports and some reasonable price moves.

Northern Star, always a favourite, added $1 to $13.27. Saracen rose by 25c to $4.25, and Evolution moved back over $5 for the first time since last September, gaining 40c to $5.05 after releasing a slightly softer March-quarter production report which was boosted by the stronger gold price.

Other gold news included:

  • Bardoc reporting high-grade assays from in-fill drilling at its Zoroastrian project in WA, including 7.3 metres at 21.21 grams of gold a tonne, helping lift the stock by 1c to 7.1c.

 

  • Tempus Resources got a 6c (50%) share-price boost to 18c after releasing historic assays from drilling 15 years ago at its Mineral Creek project in Canada, including 7.2m at 159g/t from a depth of 63.8m.

 

  • Tietto Minerals adding 3c to 27c after announcing fresh drill results from drilling at its Abujar project in Ivory Coast with a best hit of 5m at 4.69g/t, with a 1m in that section assaying 21.24g/t

 

  • Gold Road said production in the March quarter at its half-owned Gruyere mine in WA totalled 59,595oz at an all-in cost of $1135/oz which helped lift the stock by 7c to $1.63 but also earned an investment downgrade to neutral from Macquarie Bank which expected better.

 

  • Talk of a major fund-raising saw De Grey Mining’s run come to end despite the release of fresh assays from its Brolga and Aquila projects in WA. The stock slipped 3c lower to 32c even with grades as good as 3.3g/t over 16.2m from a depth of 249m at Aquila, and 15m at 2.4g/t from 40m at Brolga, and

 

  • Alkane Resources was also marked down after investors took a surprising dislike to the latest assays from its Boda copper-and-gold project in NSW. The 18c share-price fall to 69.5c came despite one drill hole returning 965.7m of mineralised core assaying what looks to be a lowly 0.21g/t of gold and 0.11% copper, but the thickness is the key to what’s been discovered, and the location, 110 kilometres north of Newcrest’s giant Cadia mine.

Gold was not the only newsmaker this week with one of the less-loved metals, zinc, putting on a star turn through a company many investors had written off.

New Century Resources has been struggling to generate profits from reprocessing tailings left at the once world-class Century mine in Queensland but its other asset, a large tenement package attracted the interest of the gold and nickel producer, Independence Group.

In a unique twist to a fund-raising exercise New Century, at the urging of Independence, increased the price of its offer by 50% from 10c to 15c, and boosted the capital target from $20 million to $51 million.

Independence will emerge with an 18.4% stake in New Century and lead the hunt for zinc deposits close to the historic mine while pursuing a new theory about how the zinc orebody was created.

Zinc has also caught the eye of analysts at Citi, an investment bank, who reckon the metal is on a rising trend because of extensive coronavirus-related mine closures and a lack of new projects to meet future demand.

Chalice Gold got a big boost early in the week after reporting more encouraging drill results from its Julimar palladium discovery near Toodyay in WA with a second diamond drill hole intersecting the same massive sulphide mineralisation reported earlier. Assays are pending but, on the market, Chalice rose to an all-time high of $1.38 before easing to $1.06.

Strandline moved closer to developing its Coburn titanium minerals project in WA with the signing of three sales agreements which cover two-thirds of future revenue. The stock was steady during the week at 12c, but attracted the attention of analysts at Shaw stockbrokers who tipped a price target of 32c, describing the sales agreements as a major step forward.

Legend Mining reported the intersection of two zones of “significant” nickel-copper mineralisation from drilling at its Mawson project in the Fraser Range of WA. Assays are pending. On the market, the stock was steady at 18c.

Other news events and market moves this week included:

  • Sandfire Resources reported solid March quarter copper and gold production from its DeGrussa mine in WA and encouraging exploration and project developments news at its Black Butter copper project in the U.S. and at the Tshukudu copper project in Botswana. On the market, the stock added 7c to $4.18, and is now up $1.38 on its low in the current cycle of $2.80 reached a month ago.

 

  • Atrum Coal attracted heavyweight investor support for a $22 million capital raising at 23c a share with Multiplex Construction heir Tim Roberts tipping in $7 million. The funds will be used to advance the Elan hard-coking coal project in Canada. On the market, Atrum slipped 2c lower to 25.5c.

 

  • Orion Minerals enjoyed a modest share-price boost of 0.3c to 1.5c after Independence Group said it was preparing to drill the jointly owned Pike Eye prospect in WA’s Fraser Range, just 16km north-east of Legend Mining’s Mawson copper and nickel discovery, and

 

  • Lynas Corporation added 9c to $1.59 after reporting progress on its plans to produce heavy rare earths in the U.S.

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