Gold prices could hit $US1400 by year’s end 

US gold prices are up 17 per cent since the start of the year and if the pundits are right, prices could be knocking on the door of $US1400 ($1917) an ounce come the end of the year.

Canada’s BMO Capital is among those that reckon the charge from the current spot price of $US1272 an ounce to the $US1400 an ounce level is on the cards, saying it is predicated on uncertainty in the global economy persisting through the remainder of the year.

That will drive incremental “safe haven’’ demand. Negative interest rates in Germany and Japan, the expectation that the US Federal Reserve will go slow on rate hikes, and the prospect of a Donald Trump presidency are all working in gold’s favour. Should the $US1400 expectation come to pass, Australia’s gold producers will be enjoying highest (non-inflation adjusted) record prices.

Average all-in sustaining costs of $US833 an ounce — on analysis by UBS of March quarterly reports — puts the Australians as best in class. Those in production are generating free cash flows beyond their dreams of a couple of years ago. So it is indeed a good time to be gold producer, or near-term producer. And it looks like staying that way for the foreseeable future.

Orinoco Gold (OGX)

ASX-listed Brazilian gold developer Orinoco Gold is one of the near-term developers which stand to benefit. And it really is near-term, with a little bit of Victoria in the form of a Gekko gravity gold processing plant now on site at Orinoco’s Cascavel project in Goias state.

The first gold pour from Cascavel is expected in July, which is behind schedule because of the delays in getting all of the kit through customs. But it is now on site and is being bolted together for commissioning to start next month.

There has been no harm from the delay to first production, with Orinoco closing on Friday at 18c a share compared with the 6.8 cents a share it was trading at the last time it was mentioned in this space back in March last year.

Cascavel does not fit the modern day model of a gold mine in that there is no ASX-compliant resource/reserve. Because of its nuggety nature, the only sensible thing to do was to take a suck-and-see approach, just like the old-timers did in places like Bendigo and Ballarat.

That the quartz structures can’t be reliably drilled was highlighted by an underground panel sample returning 39oz a tonne yet a drill hole all of 1.5 metres away reporting back with one-third of an ounce. But even the panel sampling can’t be taken as a reliable guide to what the grade will be once mining hits its straps.

Having said that, the expectation is that Cascavel will be a seriously high-grade show which may or may not translate into low cost of production. The proof will be in mining, and we will all now know soon enough.

Breakaway Research had a stab at what it might all mean a year ago. It suggested initial annual production of 22,000oz at a projected average grade of 20 grams a tonne gold (about two thirds of an ounce), at cash cost about $A460 an ounce.

That makes for an interesting comparison with Orinoco’s $46 million market capitalisation.

Tyranna Resources (TYX)

Should Orinoco put in a gold medal performance in Brazil, Gawler Craton gold explorer Tyranna Resources will be among those cheering the loudest.

It has 6.1 per cent stake in ­Orinoco worth about $7.2m. That’s kind of interesting given that at its Friday close of 3.4c a share, Tyranna was valued at $9.6m. It gets more interesting when Tyranna’s 7 per cent stake in Pilgangoora lithium explorer Kairos Minerals (KAI), worth about $1.6m, is added in.

All up, that means precious little value is being attributed to Tyranna’s Gawler Craton gold exploration push — the Jumbuck project which covers seven advanced prospects, all of which are within 50km of the now being restarted Challenger gold mine.

Challenger was responsible for a mini-boom in Gawler Carton explorers back in the 1990s because it was found by sampling the region’s extensive calcrete blanket. For a host of reasons, not the least of which was need to duck every now and then during missile testing on the Woomera rocket range, there hasn’t been another ­Challenger uncovered. Tyranna is out to change that, helped along by the tailwind that has arrived for gold explorers from the rise of interest in gold. It is betting that the northern Gawler will increasingly be seen as an unfolding gold province.

Drilling campaigns have been generating decent hits, increasing confidence that the aspirational target of putting together a resource across the prospects of more than 500,000oz of gold to act as springboard for something bigger in the region is in sight, remembering that the Challenger treatment plant is now a hungry beast.

Azure Minerals (AZS)

Tony Rovira’s Azure Minerals has confirmed its status as the go-to ­silver stock in this market after having put out a maiden resource estimate of 26 million ounces for its Mesa de Plata deposit in northern Mexico, hard up against that wall Donald Trump says he will build.

There is a high-grade core to it and its very much just the start, with more drilling underway to determine the full extent of the mineralisation.

It is worth noting that BMO Capital referred to earlier is also tipping silver prices will take off, tipping $US22.50 an ounce from the current $US17 an ounce in the first quarter of 2017.

Azure was 3.9c a share when this space pointed to the unfolding silver story in November last year. It is now 4.2c for a market capitalisation of more than $50m.

Azure has just added a gold leg to its story, with the Loma Bonita prospect some 200ms from Mesa de Plata returning some impressive gold hits, including a 27m intersection grading 4.1 grams of gold a tonne.

Rovira reckons the company is on to a gold project with excellent silver credits which could sweeten up project economics for Mesa de Plata when it gets around to some serious mine planning. And who knows, Loma Bonita could in fact become the main game.

Source: The Australian – Gold prices could hit $US1400 by year’s end

 

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