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ASX Gold Stocks Under Pressure Despite Progress Across Quality Assets- RSG, KLA, and SAR

  • November 26, 2019 03:25 PM AEDT
  • Team Kalkine
ASX Gold Stocks Under Pressure Despite Progress Across Quality Assets- RSG, KLA, and SAR

Australian gold stocks are somewhat supported by the swift progress across the gold prospects of the Australian gold mining companies. ASX gold Stocks and the ASX gold companies such as Kirkland Lake Gold Limited (ASX: KLA), Resolute Mining Limited (ASX: RSG), Saracen Mineral Holdings Limited (ASX: SAR), etc., are making progress.

However, the decline in gold prices in the global market is exerting pressure on the gold stocks on the ASX, with many trading in the red zone for quite some time, despite significant progress across the gold prospects.

To know how the Australian gold industry and how its players are performing and performance going forward, Do Read: ASX Gold Stocks At The Brim Of The Rejuvenating Gold Industry In Australia

Resolute Mining Limited (ASX: RSG)

The Australian gold miner announced that the company would partner with Aggreko plc- a global leading power generation provider for the development of a new hybrid modular power station at the Syama Gold Mine, Mali, which is currently undergoing through the repairing work of a sulphide roaster.

  • The new power plant, which would commence in the current quarter, will be combining thermal, solar, and storage technologies to ensure optimal efficiency, reduced energy costs, and positive environmental outcomes.
  • Once fully operational, the hybrid modular power plant would slash the power costs of the Syama gold mine by about 40 per cent, while reducing carbon emissions by approx. 20 per cent.
  • The Stage 1 of the new power plant, which would consist of the installation of three new thermal energy Modular Block generators and a battery storage system, is anticipated by the company to be completed in 2020.
    • The new thermal energy Modular would be installed near the existing Syama thermal power plant and would use refined heavy oil (IFO 180);
    • It would also replace the existing diesel thermal generation at Syama with modern intermediate fuel oil thermal generation, which would result in the anticipated increase in efficiency of about 30 per cent.
  • Stage 1 is anticipated by RSG to 30 megawatts of power with an additional 10 megawatts Y-cube battery storage system;
  • The Stage 2 would comprise of the installation of an additional 10 megawatts Modular Block in 2022 along with the construction of a 20 megawatts solar power system.

RSG last traded at $1.107 (as on 26 November 2019, AEST: 01:40 PM), up by 2.5 per cent against its previous close on ASX.

Kirkland Lake Gold Limited (ASX: KLA)

KLA has notified the shareholders that the company would acquire all the issued and outstanding common share of the Detour Gold Corp- a Toronto Stock Exchange-listed gold mining company. KLA inked a definitive agreement to exchange all the issued and ordinary share of Detour Gold Corp at a ratio of 0.4343 to 1.

Once the proposed transaction concludes, the shareholders of the company would hold about 73 per cent of the pro forma company, while the shareholders of Detour would hold about 27 per cent.

KLA recently announced the new drill results from the underground exploration conducted by the company at the Macassa Mine in Kirkland Lake, Ontario, Canada. The new results included 71 drill holes, which accounted for 29,207m of drilling from the exploration drifts on the 5300-foot level and 5600 Level Ramp Development along the east and west.

The company presented the results from the three key targets rigs, namely SMC East, SMC West and the Amalgamated Break, and would further continue the drilling from the 5300 Level and 5600 Ramp till the end of the year.

KLA intersected high-grade mineralisation about 200 m northeast to the existing Mineral Resource via 41 holes drilled to the east of the SMC from the 5300 Level. The company also completed a total of 16 drill holes from the 5300 Level west exploration drift to target the west and lower SMC, which resulted in high-grade intersections up to 275 m west of existing Mineral Resources.

An additional 14 drill holes from the 5300 Level west exploration drift and 5600 Level Ramp, targeted the Amalgamated Break and associated hanging wall mineralisation.

Key Intersections

The drill hole identified as Hole 53-3790 (SMC East) intersected 111.8 g/t of gold over 2.1 m true width.

The drill hole identified as Hole 53-3853 (SMC East) intersected 53.0 g/t of gold over 2.1 m true width.

The drill hole identified as Hole 53-3818 (SMC East) intersected 49.2 g/t over 2.0 m core length (true width unknown).

The drill hole identified as Hole 53-3784 (SMC West) intersected 46.5 g/t over 2.0 m core length (true width unknown).

The drill hole identified as Hole 53-3781 (SMC West) intersected 24.4 g/t over 2.0 m core length (true width unknown).

The drill hole identified as Hole 53-5732 (SMC West) intersected 17.7 g/t over 2.2 m core length (true width unknown).

The drill hole identified as Hole 56-735A (Amalgamated Break and Hanging Wall) intersected 17 108.2 g/t over 3.3 m core length (true width unknown).

The drill hole identified as Hole 56-749 (Amalgamated Break and Hanging Wall) intersected 51.3 g/t over 2.0 m core length (true width unknown).

The drill hole identified as Hole 53-3839 (Amalgamated Break and Hanging Wall) intersected 20.1 g/t over 5.4 m core length (true width unknown).

The stock of the company last traded at $59.200 (as on 26 November 2019 AEST: 01:40 PM), down by 15.416 per cent against its previous close.

Saracen Mineral Holdings Limited (ASX: SAR)

SAR announced that the company entered an additional hedge of 200,000 ounces of gold and received the ministerial consent for the proposed acquisition of Barrick Gold’s interest in the Newmont operated Superpit Gold Mine in Western Australia.

The company entered the hedge at an average price of $2,187 per ounce with scheduled deliveries out to the December quarter 2022, which would take advantage of a strong Australian-dollar gold price and would further boost the financial position of the company to repay the $400 million debt amidst the 50 per acquisition of the Superpit.

The additional hedge of 200,000 ounces of gold took the total hedge book to 541,500 ounces of gold at an average price of $1,990 per ounce.

SAR Hegde Book (Source: Company’s Report)

The share price of the company last traded at $3.030 (as on 26 November 2019 AEST: 01:40 PM), up by 1 per cent against its previous close on ASX.

While RSG, KLA, and SAR remain just an example, there are many more ASX gold miners who are developing their assets consistently; however, the slipping gold prices could be worrisome for them. The strong hedge book building process could support the falling share prices, but the longer-dated hedge could build some pressure on the futures curve of gold, which could be again a problem for gold prices.

However, the current valuations scenario, coupled with falling bond yields could provide some support to the gold prices, and it would be worth monitoring the gold prices ahead and its impact on the ASX gold stocks.

To know how could gold make its way to the investors’ portfolio in the international market, and to know about the right parameters to guide your judgement better, we would like to encourage you to read: Does Gold Investing Intimidate you? Discover the Right Parameters for Astute Judgement


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