https://www.livewiremarkets.com/wires/gold-juniors-beginning-to-bask-in-bullion-s-brighter-glow19 Nov 2021
BARRY
FITZGERALDCalidus tipped for re-rate as production looms, Kingston set for cashflow via acquisition, shareholders scramble for Bellevue SPP and Sunstone's discovery drill hole does it again. Left behind for much of the year while lithium and the other battery metals did their thing, the gold juniors are back in town thanks to gold punching back through $US1,800/oz in convincing fashion on inflation fears.
Last quoted at $US1,860/oz ($A2,574), the yellow metal has put on more than $US100/oz since the start of the month. And Macquarie’s commodities desk strategy team reckon there is more to come.
Macquarie sees the potential for gold to move in to the low $US1,900s, a level which would comfortably deliver the gold producers margins of more $A1,000/oz.
“Until the Fed pivots to a more clearly hawkish position, we expect prices to chop higher on the back of still-building inflationary concerns and increasing signs that the labour market is already in ‘late cycle’ territory,’’ Macquarie reasoned.
Gold’s price strength in the face of US dollar strength means that there is not exactly “let’s pile in’’ mentality just yet.
But a move in to the low $US1,900s would certainly help, firing up interest in the junior gold explorers, developers, and producers in the process.
The junior space offers the greatest leverage to a rising gold price. That has come through in the billion dollar-type deals and expansion plans announced recently by the gold majors having barely moved the dial.
Having said that, leverage works both ways, with many of the juniors still trading as if gold was still at its sub $US1,730/oz levels of late September. But they are on the march.
CALIDUS:
Gold developer Calidus (CAI) demonstrates the point. Its 53c share price at gold’s low point in September has since improved to 65c.
The company is well on its way to becoming a gold producer of note from its Warrawoona gold project near Marble Bar in the Pilbara.
Construction is more than 70% complete at the project which, in its stage one development, is good for average annual production of 90,000oz at an AISC of $A1,290/oz over an initial 8-year mine life.
Then there is the planned stage two expansion to 130,000/oz
annually by including high-grade ore from the Blue Spec satellite deposit, carrying life-of-mine annual production to about 100,000ozs.
As production draws closer, and assuming any cost inflation continues to be kept in check, Calidus is in line for a re-rating as Australia’s next gold producer of scale.
Canaccord had an 80c price target on the stock in early September, and the gold price has improved nicely since then.
So how meaningful will the re-rate be as production draws ever closer? Judging by the market performance of Capricorn Metals (CMM), the re-rate could be very meaningful.
Capricorn became a gold producer from its Karlawinda gold
project in the Pilbara in June. It is now ramping up to 110,000-125,000 ozs annually. No AISC costs reported just yet but the market is happy to value the company at $1 billion ($2.84c a share).
Karlawinda is lower grade than Calidus but has a bigger resource/reserve position. Still, the $750m valuation gap between the $250m Calidus and Capricorn does point to the potential scale of a re-rating for Calidus.
Clearly the market has been impressed to date with Capricorn’s ramping up of Karlawinda.
Calidus is not at the stage yet but the ramp up phase is not far off now. In addition, the company has been earning brownie points around the market for its derisking exercises at
Warrawoona ahead of first production.....
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