While 2022 has been a hot year for battery metals but one to forget for gold, the yellow metal has seen something of a revival as investors weigh the prospect of interest rates plateauing — or at least not going as high as thought.
Will Bullion Regain Serious Glory In 2023?
In US dollar terms, gold has recovered about 10 percent from its low for the year of US$1,629 an ounce ($2,445/ounce) in early November, but is also 10 percent off its (record) high of US$2,040. Dollar/ounce lagged in early March .
ANZ’s commodity research team reckons gold is headed for $1,900 an ounce in a “recession scenario,” while the crazy-brave folks at Saxo are nominating $3,000 an ounce (though we think they’re half-joking ).
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The gold bugs argue that interest rates could even fall if major economies slow faster than expected. But falling inflation means higher “real” interest rates, which is good for savers like gold, but not as good for non-income generating gold.
At the same time, interest in cryptocurrencies – boldly viewed by many as an alternative store of value to gold – has waned.
The obvious course of action for passionate gold buggers is to take direct exposure such as a gold ETF, physical bars, or leading miners such as Gold Newcrest Mining (ASX:NCM) Spirit Northern Star(ASX:NST).
For those with a long-term horizon, the two explorers have eschewed battery metals in favor of gold — a switcheroo that could prove exquisitely timed.
Battery Minerals (ASX:BAT)now inappropriately nicknamed having sold its graphite assets in Mozambique to focus on gold exploration in western Victoria.
The sale to London-listed Tirupati Graphite included $1.5 million in cash and $11 million in Tirupati shares (later adjusted to $10 million).
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Operationally, Battery is now focused on its Stavely-Stawell project, located just 10 km from the operating 5 million ounce Stawell gold mine. Its property is also adjacent to Staveley Minerals’ Thursday Gossan copper-gold project.
So, join the points! A drilling campaign will test historic workings on the prospect that have produced rock chips grading up to 430 grams per tonne. Battery has $1.7 million in cash and an additional $1.5 million from the Tirupati sale. Add in the Tirupati stake and an expected $1.5 million UK sales tax refund, and the company is worth well in excess of its $11 million market cap — and that’s assuming the Victorian gold background has no value Has.
Battery, meanwhile, remains the largest holder of London-listed Tirupati and as such remains engaged in Tirupati’s two active mines in Madagascar, which produced 32,000 tonnes of the coveted flake graphite in calendar year 2022 (with plans to increase production to 80,000 tonnes by 2024) .
In a similar way, Breaker Resources (ASX:BRB) was all about lithium, but sold its interest in its property in WA, Manna, to joint venture partner Global Lithium Resources for a whopping $88 million. This has focused Breaker on its Lake Roe gold project near Kalgoorlie.
The project has an indicated mineral resource of 1.7 million ounces averaging 1.6 grams per tonne. A scoping study for an initial underground phase estimates production at 88,000 ounces at a total cost of $1,390/ounce compared to the current spot price of approximately $2,700/ounce. The key Bombora project is a resource of 1.5 million ounces – 778,000 ounces are indicated.
Neighbors include Northern Star Resources’ more than four million ounce Carosue Dam project and Ramelius Resources (ASX:RMS) Rebecca Gold Project with over 1 million ounces. After the Manna sale, Breaker has $80 million in cash, compared to a market cap of around $100 million. The Company also has a 1.5 percent net smelter royalty on each Future Manna production. “Put us on your watch list,” urges Sam Smith, Breaker’s Chief Operating Officer.
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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Originally published as Tim Boreham: Golden Slumbers may be ending