Gold selloff gives more time for eagerly-awaited consolidation

There was lots of excitement in the ASX gold space a month ago on the basis that interest rates had turned.

Gold was meant to be charging off to more than $US2,000/oz and gold equities would respond accordingly.

It hasn’t happened, not yet anyway. Gold was friendless during the week and was last quoted at $US1,893/oz, down about $US70/oz on its level a month ago.

Although the fall is relatively modest, and the Aussie price is a fantastic $2,957/oz thanks to the lower Aussie dollar, gold equities have been smashed.

On the basis gold will bounce higher once there is a pivot to interest rate cuts, and the Aussie dollar remains weak, it stands to reason Aussie gold stocks are better buying than they were a month ago.

But it is not a buy-the-sector thing until interest rates turn and the US dollar comes off. It is more of a stock picker’s market.

Gascoyne (ASX: GCY) reflects what is going on. It has been swimming against the tide in the past month, rising from 18.5c to Thursday’s close of 28c.

Volumes in the stock have been particularly strong this week.

Gascoyne has brought itself back from the brink by making the high-grade Never Never discovery (720,000oz at 5.85g/t) in the shadows of its currently mothballed Dalgaranga mill, which used to just get by on less than 1g/t dirt.

So Dalgaranga is on its way to coming back as a high grade producer without the cost or risk of having to build a mill. That in itself explains the buying by high net worth types attracted by the renaissance story.

But the action this week in the stock suggests there could be corporate activity afoot. Regionally close mill owners Ramelius (ASX: RMS) and Westgold (ASX: WGX) are being mentioned as possible players, as are Gold Road and Regis.

As mentioned here previously, Bridge Street Capital’s Chris Baker reckons Gascoyne has a potential M & A target price of 65-70c.

Bellevue (ASX: BGL) is another one the stock pickers are likely to move into on the basis that it has been oversold. The stock was $1.61 a week ago and by Thursday’s close it was off by 9.6% to $1.49 due to the general gold market malaise.

The company is pulling in $20 million or so from the toll treatment of ore ahead of the December quarter start of the main event at its high-grade namesake project, the commissioning of its 1mtpa treatment plant.

The project is fully funded but as a derisking exercise in the extreme, the company has obtained an additional $25m debt facility it says it won’t need. Canaccord estimates Bellevue will have a cash buffer of about $50m when commercial production is declared early in in 2024.

It has a $1.80 share price target on the stock.

Uranium:

The shakedown in commodity prices brought on by Chinese economy fears has not been extended to the uranium market.

As highlighted by Sprott Physical Uranium Trust (SPUT) during the week, uranium has continued to shine.

According to SPUT – a declared uranium bull which now holds 62mlbs of physical material – the uranium price was up by 16.35% year-to-date as of July 31, while uranium equities were up by 9.11%.

“The growing embrace of nuclear energy is driving demand and sparking a resurgence in uranium mine operations,” SPUT said.

“The US opened its first new nuclear power facility in 30 years (Georgia Power's Plant Vogtle) and is actively legislating to reduce dependency on Russia's nuclear supply chain.”

Supply concerns have grown in recent times with the coup in Niger. The West African nation accounts for about 5% of world supply, most of which has been soaked up by France, its former colonial master.

As mentioned here last week, Boss Energy (BOE) reckons the uranium price is poised to take-off in a major way inside the next 1-3 years in response to the growing supply concerns.

The supply concerns have an added piquancy because of the growing acceptance of nuclear power’s key role in global decarbonisation.

Having said all that, it could well be time to be taking a look at the uranium explorers which, unlike Boss and other near-term producers, have been left behind somewhat in the uranium rally.

There is nothing quite like high-grade uranium exploration results to fire up interest.

Tim Goyder’s 16.9% owned DevEx (DEV) has put its hand up for attention on that score thanks to first results from its 2023 exploration program around the historic Nabarlek mine in the Alligator Rivers Uranium Province (ARUP) in the NT.

Nabarlek was small (24mlb) but very high grade operation (1.8% uranium oxide). It triggered a Poseidon nickel-type uranium boom after its discovery in the 1970s, with the ARUP also becoming known for the ERA/Rio Tinto Ranger uranium mine.

Recent exploration results by DeVex were from Nabarlek South (including 2m at 0.77% uranium), and at the U40 prospect (4.9m at 0.38%) on a different uranium-berating fault 20km or so to the north-east.

The drilling has added to the scale potential of the U40 fault system which was exciting enough in itself.

But uranium spooks reckon there is some real interest in the bedrock alteration encountered at the so-called unconformity between a sandstone unit and the regionally significant Cahill formation at Nabarlek South.

The unconformity is the classic geological host for the biggest uranium deposits in the ARUP, including Ranger (300Mlbs at 0.23% uranium over 40 years).

No wonder that DevEx has decided to expand and extend the current drilling program.

As part of the increased focus on the Nabarlek opportunity – and what will come from its recent Kennedy rare earths project in Queensland - the company has sold its NSW copper/gold exploration interests to ASX-listed Lachlan Star (LSA).

The shares and royalty deal gives DeVex a 36.4% stake in Lachlan so it has ongoing exposure to the hunt for a big copper/gold porphyry across the tenement packages.

Quebec:

The ASX-listed Quebec lithium explorers – and there are lots of them – should get a boost with the expected announcement in Quebec on Thursday morning (Friday in Australia) by Ford, the government, and Korean interests of the go-ahead for a big battery plant.

It means a domestic market for lithium with entry into the US market with its Inflation Reduction Act incentives.

Try as Australia might, it is downstream value-adding outcome that is unlikely to be matched by the WA lithium industry, although there are mid-stream opportunities that are being pursued.

Whether the go-ahead for the Quebec plant gives the ASX-listed players in the Canadian province a lift in coming days in what has been a tough market of late remains to be seem.

It can’t hurt though.