PETER STRACHAN: Gold’s stage is set, and these ASX developers have been warming up in the wings

Why have we seen a major decoupling between the gold price and the ASX Gold Index since February 2021?

From February 2021 until September 2022, the gold price initially rose from ~A$2,200/oz to A$2,700/oz, before settling at A$2,500/oz, while the Gold Index moved from ~6,000 to a high of 7,500, before falling to ~4,550 points!

Since that time, the Gold Index has recovered some ground, possibly on the back of some merger and acquisition activity in the sector, but the gold price leads the Index over the past three years as it shoots up towards A$3,100/oz.

Maybe there has been just too much competition for the speculative investment dollar from the boiling-hot lithium exploration and takeover stocks like Azure Minerals (ASX:AZZ), Liontown Resources (ASX:LTR) and their neighbours over the past year?

Whatever the reason, as the market price of spodumene concentrate falls below US$1,900 per tonne and the prices of lithium battery chemicals teeter just above US$20/kg, surely there will be further cooling in the battery metals space, while the stage is set for a big turnaround for the gold sector.

When gold is worth around A$97 per gram, there is a lot of money to be made finding and producing the currency metal as interest rates appear to be topping out globally, while trade tensions and kinetic wars drive risk premiums higher.
 

ASX listed gold developers

The wunderkind of 2020, De Grey Mining (ASX:DEG) has now matured into a $2.2 billion adolescent.

The company is working towards developing its 6Moz Hemi’s gold Ore Reserve in the Pilbara, with plans to process 10Mt of ore pa to produce 553 Koz pa of gold at an AISC of $1,229/oz. That will deliver a total EBITDA of $7.9 billion over 10 years, with an estimated NPV of $2.9 billion after an estimated CAPEX of $1.3bn.

De Grey has demonstrated massive exploration appeal along more than 60km of mineralised trend at multiple targets along its Pilbara tenements where estimated Resources stand at over 11Moz of gold.

The project offers excellent access to infrastructure on the Pilbara coast and targets first gold by H2 ’26.

After a $300m placement in September ’23, the company’s estimated cash position of around $360 million should support early capital works before a final debt and possibly additional equity raising is put in place late in 2024.

The company now faces a 30-month build period ahead of first gold production, but ongoing exploration is likely to support the establishment of regional, satellite mines and concentrators over the longer term, that could feed gold concentrate into a pressure oxidation plant at Hemi.

Challenger Gold (ASX:CEL) has completed a detailed Scoping Study on a high-grade core at its Hualilan gold project in Argentina. The work encompasses mining an initial high-grade core of 8.1Mt grading 5g/t Au, 17g/t Ag and 1.8% Zn, leaving a residual Resource of 53.4 Mt grading 1g/t AuEq, with options for further development.

The study estimates capital costs totalling A$234 million and an AISC of A$1,277/oz over an initial mine life of seven years.

The project involves low-cost open pit mining, followed by sub-level, open stope underground mining to produce a sulphide concentrate and bullion containing 116,000 oz pa of gold, to deliver a post-tax, NPV5 of A$454 million at a gold and silver price of US$1,750/oz and US$20/oz respectively.

Regional surface and stream sampling has delivered assays grading 10g/t to 27g/t Au plus 1-6 oz per tonne Ag on the Hualilan permits, demonstrating exploration appeal.

In Ecuador, the company’s El Guayabo Gold-Copper Project contains a high-grade core of 1.5 Moz at 1.0g/t AuEq within a lower grade Resource containing 4.5 Moz AuEq. Surface channel sampling has demonstrated high grades of gold with associated silver and copper at its El Oro project in Ecuador, where exploration continues.

The company finished September ’23 with $7 million of cash and debt of $21.8 million.

Peregrine Gold (ASX:PGD) has been busy drilling at its Newman gold permits, located 25km to the west of Newman. Soil sampling at Pilgangoora North permit, which abuts Pilbara Minerals’ (ASX:PLS) mining operations, has outlined lithium bearing pegmatites that are crying out to be drilled, while at Mallina on the Pilbara coast, Peregrine has acquiring geophysical surveys.

Shallow drill intercepts above 16m from Newman’s Tin Can Prospect show gold grades of 1 to 11.5g/t over widths of 2-10m, typified by 6m grading 11.54g/t Au from 9m, that support potential for open pit mining.

Meanwhile, the Peninsula Prospect has delivered some eye-watering intercepts from surface, such as 3.6m grading 62.8 ounces per tonne (that’s $190,000 worth of gold per tonne!) and 1.78m grading 28.8 ounces per tonne.

Even if these assays represent limited diagenetic upgrading, there is little doubt that the company will be busy determining just how much of this mineralisation it has!

On the coast at the Mallina permits, Peregrine has identified strong magnetic anomalies that are coincident with gravity and anomalous PGE-Cu geochemistry.

With further exciting exploration results from several projects over the coming six months, adding to its $2.2 million of cash held at 30 September should not be an issue.

Spartan Resources (ASX:SPR) is a $386 million gold and base metals exploration company that morphed out of Gascoyne Resources in August 2023. The company has a 2.5 Mt pa processing plant that is presently on care and maintenance status.

However, SPR recently outlined the spectacular Never-Never gold deposit, just 2km from its plant and adjacent to its Gilbey’s open pit, where a Resource of 3.8 Mt grading 5.85g/t Au for 721,200 ounces has been estimated, lifting group Resources to 1.96 Moz of gold in 38.5 Mt of mineralisation.

Furthermore, SPR recently outlined high grade gold mineralisation at its Glenburgh and Egerton Gold Projects which it disparagingly describes as a non-core part of a regional Resource of 16.6 Mt grading 1.01g/t Au!

Maybe intercepts like 13m grading 5.44g/t Au from 137m or 4m grading 91.9g/t Au will change this status!

The company is busy planning its rebirth as a high-grade gold miner, leveraging off its Resource base, ~$28m of cash and ongoing high grade gold discoveries at depth on its Dalgaranga permits.
 
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At Stockhead, we tell it like it is. Spartan, De Grey, Challenger and Peregrine are Stockhead advertisers.

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