Ground Breakers: Emerald as good as gold as Cambodian miner marches into ASX 200

On a 120% gain this year to date, $1.6 billion Cambodian gold miner Emerald Resources walks into ASX 200
The miner is currently operating one of the world’s highest margin gold mines at Okvau in the South East Asian nation
Copper market continues to face headwinds from rising supply, Chinese intervention

One of the best performing gold miners in 2023 has crystallised an outsized gain this year to charge into the ASX 200, with Emerald Resources (ASX:EMR) taking the spot vacated by the go-private move of funeral group Invocare (ASX:IVC).

The performance of its Okvau gold mine has given Emerald a green tinge in 2023, printing plenty of cash as the first commercial gold operation in Cambodia, leading Emerald to a 120% gain year to date.

Now worth $1.6 billion, the Simon Lee-backed gold producer has inked a near 750% lift over the past five years.

It came after another solid quarter from Okvau, where Emerald produced 28,100oz at an all in sustaining cost of US$823/oz in the September quarter, selling 27,900oz at prices of US$1918/oz, making it one of the world’s highest margin gold mines.

Emerald had $109m on hand at September 30. MD Morgan Hart told shareholders yesterday that recent drilling had outlined opportunities to extend Okvau’s eight-year mine life.

“The operational performance at the Okvau Gold Mine has generated US$28.1m in operating cash flows which continues to underpin the company’s ability to advance its growth opportunities with the aim of becoming a multi mine, diversified gold mining company,” he said.

“This quarter also saw the completion of the Okvau Gold Mine mineral resource and reserve update which included a maiden underground resource. The update is expected to extend the mine life beyond eight years and supports the company’s view that resources will continue to be replenished on an ongoing basis with continued drilling to extend the current pit shell, below pit for underground potential and near mine prospects.

“Further, significant progress continued on the resource delineation at the Memot Gold Project (maiden resource current quarter) and North Laverton Gold Project (resource update early 2024).”

Emerald is looking to expand further into WA’s gold market via a takeover of its majority owned public unlisted explorer Bullseye Mining.

The offer has crossed 76.5% of acceptances, with the offer extended to November 24, though shareholders who have accepted the offer now have withdrawal rights after a declaration of unacceptable circumstances was made by the Takeovers Panel over agreements contained in a legal settlement between Emerald and major shareholder Au Xingao.

Emerald says 75.5% of the holding is not subject to withdrawal rights.

Emerald Resources (ASX:EMR) share price today

Copper continues to hit headwinds

Spurred by additional green energy demand, China has been expanding its copper smelting capacity at pace, at the same time as mined supply especially out of Chile has hit some roadblocks.

That fundamental support for copper has run up against some tough headwinds, including a high US dollar, rate rises and uncertainty over the strength of this year’s economic bounce back in China. It was fetching a little over US$8100/t overnight, with prices fluctuating below incentive prices for most new large scale operations for much of 2023.

“Base metals fell after weaker than expected manufacturing data in China raised concerns about the economic recovery,” ANZ economist Adelaide Timbrell said in a note this morning.

“The official manufacturing purchasing managers index came in below expectations at 49.5. Below 50 suggests activity is contracting. This suggests there is more work required to boost economic growth, despite recent support measures.

“These include raising the fiscal deficit ratio for 2023 to about 3.8% of GDP, as well as an additional CNY1tn of debt to support construction activity.”

There could be more fundamental challenges for copper in the short term.

Data from Chile, the world’s largest copper producer, overnight showed output in September rose 4.1% year on year, with Codelco’s output lifting last quarter as well.

Why has #copper remained in downtrend for pretty much all 2023 & recently tested lows for year? One factor has definitely been rising supply with no 2,3 & 4 global producers all well above seasonal average levels & Chile Sep prodn up 4.1%yy plus Codelco reporting Q3 prodn +2.1%yy pic.twitter.com/mpVqRDOZd1

— Robert Rennie (@Robert__Rennie) November 1, 2023

Meanwhile, Bloomberg says China could limit the output of its copper smelters in a bid to curb emissions and reduce competition that is putting pressure on processing rates.

The broader materials sector was up 0.95% as the big iron ore miners all lifted with Singapore futures up almost 2% to over US$121/t.

Citi, which issued caution on an iron ore rally earlier this year, took a bullish stance in a new note, saying iron ore could hit US$130/t in a bull case scenario this quarter.

It came as BHP (ASX:BHP) hosted its AGM in Adelaide this morning, where chairman Ken Mackenzie and CEO Mike Henry defended its decision to officially support and donate $2 million to the failed Indigenous Voice to Parliament Referendum Yes campaign, and took aim at proposed IR laws, saying it could take US$2 billion out of growth plans for a proposed 500,000tpa copper province in South Australia.

Uranium stocks were also on a tear, with Paladin Energy (ASX:PDN) up 6.88% on high volumes and Boss Energy (ASX:BOE) 4.23% higher.