Gold stocks dancing in the streets as yellow metal struts its stuff

Gold’s surge to all-time highs of more than $US4,000/oz is amazing stuff. So too is the impact it is having on the ASX gold sector.

Fair enough. At current prices gold is more than double its average for CY2023 of $US1,943/oz and it seems to have the momentum to possibly double the CY2024 average of $US2,390/oz before long.

That would be something. Although, if you think of gold being an alarm bell on the state of the world, it becomes a bit of a worry.

Still, that shouldn’t stop the gold stocks from dancing in the streets. And they are, with some marvellous outcomes for ASX gold stocks as the yellow metal struts its stuff.

Today’s example is Minerals 260 (ASX:MI6).

Under the leadership of industry legend and 7.3% shareholder Tim Goyder as chairman, and former business development guy from OZ Minerals Luke McFayden as managing director, MI6 stepped up in January to acquire the Bullabulling project near Coolgardie from China’s Zijin.

It was a competitive process and it required the then $30 million MI6 to bed down a $220m capital raise to cover the $156.5m cash/$10m in shares acquisition cost and to fund a monster drill program to confirm and grow the 2.3Moz Bullabulling resource.

It was, as they say, transformational stuff. MI6’s market cap has since grown to $698m (32.5c a share). The gold price surge has been a big factor – it is up an amazing by 53% or $US1,400 an ounce since MI6 signed on the dotted line with Zijin.

Talk about getting the timing right. But as Goyder will tell you, it is just as important to have bought a project that will be able to ride out a downturn in gold prices. And he reckons he has got that with the 1.2g/t Bullabulling.

Apart for the gold price giving MI6 a big value uplift on the Bullabulling project, McFayden and his geology team have been busy adding value with the drill bit with the funds left over from the $220m capital raise.

This week, McFayden was able to say that the thick, high-grade intersections (including 10m at 7g/t from 204m) returned from the latest batch of assays supports the expectation that the 2.3Moz mineral resource at Bullabulling will be increased.

A resource update is slated for December, with Argonaut’s Hayden Bairstow not alone in expecting the December update to come in at something “well beyond’’ 3Moz, underpinning an increase in his target production rate from 140,000oz/pa to more than 150,000oz/pa.

Bairstow noted that the drilling results have confirmed depth extensions below the current resource pit shells at the key Bacchus and Phoenix deposits, which together account for 80% of the current 2.3moz resource.

He added that drilling at the Dicksons deposit had also delivered some impressive results and that it was now included in Argonaut’s development scenario for Bullabulling, now based on a mining inventory of 1.5Moz.

“The larger mining inventory, combined with the ongoing strength in the spot gold price and reduced equity dilution in our funding scenario due to the strong share price drives a 20% upgrade in our price target to 60c a share,’’ Bairstow said.

So, by Bairstow’s assessment, MI6 is headed to $1.35 billion market cap territory. Not bad after starting out the year as a $30m company.

DEVELOP:

The copper price is on the march due to both production outages and production shortcomings at big name overseas mines.

The pressure on supplies – more than 7% of global production ain’t there at the moment – has pushed copper prices on the LME to $US4.85/lb which compares with the not-too-bad-anyway June half average of $US4.27/lb

The concerns around current supplies have brought forward the longer-term concerns that there simply isn’t enough copper in the pipeline to meet a wave of increased demand coming from developing countries, digitalisation and the electrification of everything.

BHP puts the demand for new supply at 10Mtpa over the next 10 years. It is a seemingly impossible task.

But the scale of the looming structural deficit can be reined-in if a true incentive price emerges for the red metal. The current price is getting there, but the industry will tell you in a bar that at least $US6-$US6.50/lb is the requirement.

South32, which is spending billions developing a big zinc mine in Arizona, will tell you that zinc faces a similar supply deficit outlook. It’s forecasting that primary demand growth will exceed production by 4Mt to 2034.

As it is, the LME zinc price has edged up from its CY2024 average of $US2,779/t to $US3,027/t. And, as is the case for copper, industry players will tell you it has to go higher still to incentivise the required new production.

All that is by way of background to Thursday’s warm reception to the updated definitive feasibility study released by Bill Beament’s Develop (DVP) on its Sulphur Springs zinc-copper project in the Pilbara. The stock put on 9% to $4.57.

Develop raised $180m back in June to accelerate getting Sulphur Springs into production and to grow its Woodlawn zinc-copper project near Goulburn in NSW which is ramping up to initial full-scale production in the new year.

On capital expanded by the June issue, Develop has grown to a $1.47 billion market cap. It is only four years ago that Beament arrived on the scene with a recapitalisation plan and an ambition to achieve the same sort of high growth in base metals that he achieved in gold during his time at Northern Star.

Getting Sulphur Springs into production and growing Woodlawn will set Develop up to have a crack at a $2 billion-plus market cap, such is the investor interest in the base metals thematic at a time when investment options in the space on the ASX are limited.

Develop also has its underground mining services business and a ready-to-go lithium project on the books.

The updated DFS demonstrated that Sulphur Springs has the potential to produce a (pre-tax) cashflow of $1.5 billion – up 96% from previous study work. The internal rate of return was pegged at 59% (pre-tax) on a project costing $329m on a pre-production capital basis.

STRICKLAND:

Strickland Metals’ (ASX:STK) market cap has long looked under-done given the scale of its 7.4Moz gold-equivalent Rogozna gold and base metals project in Serbia.

That continued to be case when the market pretty much ignored latest drilling results on Wednesday from drilling at Copper Canyon, one of a cluster of deposits included in the resource estimate.

Strickland reported a 191.2m hit grading 0.5g/t gold and 0.5% copper from a depth of just 4.8m. It was the sort of stuff that would normally be expected to fire up investors, particularly in a hot gold and copper market. But it wasn’t to be.

However, Strickland followed up with news on Thursday that it had worked up a “compelling structural architecture’’ at Rogozna, which supports the identification of potential large-scale porphyry-style deposits in addition to the project’s existing skarn-hosted story.

There is nothing like the potential for a big copper-gold/gold-copper-gold discovery to capture the attention of investors and the big end of the mining industry looking for multi-decade projects to fill out their development pipeline.

Strickland shares popped 4.5c or 29% higher to 20c in response. Canaccord has a 50c price target on the stock.

MARMOTA:

It was mentioned here back on September 11 that far away from WA’s crowded goldfields, the over-looked west Gawler gold province in South Australia was coming into its own thanks to gold’s run up to all-time highs.

It’s where the 2021 $15 million IPO Barton Gold (ASX:BGD) has become a $300m company on the strength of its moves towards becoming a 150,000oz a year producer, starting from the end of next year at 30,000oz a year at the historical Challenger operation, and later at 120,000oz a year from Tunkillia.

It’s also where a bunch of junior explorers are doing their bit to re-establish the west Gawler’s gold province credentials at a time when investor interest in the push is riding high thanks to record gold prices.

One of those mentioned back on September 11 was the energetic Marmota (ASX:MEU) and its maiden drilling program at the Greenewood project, 35km from the company’s Aurora Tank heap-leach development opportunity.

It was a 4.9c stock on September 11 but in Thursday’s market it took off to 7.2c for a 41% gain and a $75m market cap on the day in response to a new batch of thick and high-grade results from Greenewood, 30km from Barton’s Challenger mine and mill.

Best results included 4m at 43g/t from 64m from a suite of high-grade composite assay results and, in the “show us how thick it is” category, 28m at 6.4g/t from 44m. The company said it had now clearly delineated a nearly continuous high-grade zone extending over more than 900m.

Marmota chairman Colin Rose said Greenewood is yielding some of the best gold results seen in the Gawler Craton since the (1995) discovery of the Challenger deposit. “The results feature high grades, close to surface, with excellent continuity along strike, and including exceptional thick high-grade intersections.’’