ASX-Listed Gold Stocks- An Emerging Ray of Hope for Domestic Investors

  • Mar 19, 2020 AEDT
  • Team Kalkine
ASX-Listed Gold Stocks- An Emerging Ray of Hope for Domestic Investors

Gold prices are holding near the record levels of $2,693.49 (intraday high on 3 March 2020) amid the market plunge due to the outbreak of COVID-19. The coronavirus fear and uncertainty is firming its grip on global economic activities, which is pushing investors towards safe assets such as gold.

ASX-listed gold stocks have relatively performed better than the benchmark index S&P/ASX 200 in this current downfall.  S&P/ASX All Ordinaries Gold is down 24.3 per cent while S&P/ASX 200 is down 33% since 20 Feb 2020 (as on 19 March 2020).

To Know More, Do Read: 5 Gold Stocks Beating the S&P/ASX 200 Plummet

Amidst the global plunge, investment in gold is making more sense to investors to hedge against the economic slowdown led by the COVID-19 due to its impact on various businesses, which is further prompting several central banks to bring the interest rate lower, and in turn, fuelling the gold rally.

Also Read: Low GDP Growth, Coronavirus Pandemic – Push AUD to Decade Lows; What’s Next?

The plunge in business activities is pushing the domestic currency down, which, in turn, is supporting the higher gold prices in the domestic market. One prominent way of parking an investment in gold is through the stocks of companies that deal with the exploration and mining of gold, as they have direct exposure to the gold price.

Do Read: Market Seeks Safe Haven Shelter Once Again, Coronavirus or Overvaluation?

ASX-listed Gold Stocks

While the gold prices are taking a breather from its previous rally, which took the price to a new record high of $2,693.49, to trade in the range of $2,500.00 to $2,600.00 the high interest of investors around ASX gold stocks is clearly evident with many stocks such as St Barbara Limited (ASX:SBM), Evolution Mining Limited (ASX:EVN), and Northern Star Resources Limited (ASX:NST) bouncing in the past few trading sessions.     

  • The emerging figures from World Gold Council suggests that investments in gold and its allied products such as gold equities, ETFs are still prominent, and ASX gold mining companies are taking benefit of the available liquidity offered by the investors. While the gold investors remain bullish on gold for the years ahead, considering the current economic conditions and prevailing geopolitical circumstances; and,
  • Many ASX gold companies are on an exponential development phase to increase their production capacity and secure future sales in terms of higher realised price, which is further pushing the exploration expenditure for gold in Australia higher and higher on a yearly basis.

 

                            Australia Year-on-Year Gold Exploration Expenditure (Source: DIIS)

                            Australia Year-on-Year Gold Exploration Expenditure (Source: DIIS)

 

Gold Exploration Expenditure in Australia Continues to Surge

The gold exploration expenditure across the continent surged by ~ 20 per cent in 2019 to stand at $1.1 billion, reflecting ~ 40.0 per cent of total minerals exploration expenditure in 2019, amid high gold prices in the domestic market and depreciating home currency.  Western Australia once again remained the cornerstone for the spiked exploration and accounted for 68 per cent or $726 million of the overall gold exploration expenditure in 2019.

Domestic Production and Exports Forecast

The export value for gold is expected by the Department of Industry, Innovation and Science (or DIIS) to reach a record high of $26 billion in 2019-20, supported by the higher gold prices and export volumes, which are anticipated to surge by 19 per cent in 2019-20 to stand at 389 tonnes.

The rise in export volume would be largely supported by higher local mine production, which is projected to increase by 7.1 per cent on a yearly basis to stand at 344 tonnes. However, DIIS anticipate an annual fall of 4.4 per cent in export value post-2019-20 to stand at $21 billion in 2024-2025, as DIIS anticipates the gold price to slip in the U.S-dollar and home currency terms.

Mine Production Poised to Surge Again

DIIS estimated the domestic gold mine production to increase by 7.1 per cent in 2019–20 and 9.0 per cent in 2020–21 to reach at 378 tonnes by 2020-21, as both mine expansions and production from new mines come into play.

Across the continent, five new gold project landed on the final investment decision in 2019, which includes $685 million Cadia Stage 1 Expansion project in NSW- operated by Newcrest Mining Limited (ASX:NCM), $200 million McPhillamys gold project in NSW- operated by Regis Resources Limited (ASX:RRL), $134 million Ravenswood expansion project in Queensland- Operated by Resolute Mining Limited (ASX:RSG), $132 million Karlawinda gold project in Western Australia- operated by Capricorn Metals Limited (ASX:CMM), and $100 million Gwalia extension project in Western Australia- operated by St Barbara Limited (ASX:SBM), and cumulatively expected to add about 37 tonnes of new production a year.

Also Read: Resolute and Oceana Secure Future Sales, While Dacian Expects Steady 110,000 Ounces Per Annum

 

                           Australia Gold Production Forecast (Source: DIIS)

                         Australia Gold Production Forecast (Source: DIIS)

 

However, post peaking in 2021-22, the domestic gold production is expected by DIIS to decline annually at 0.8 per cent to stand at 370 tonnes by 2024-2025, as the quality of ore grades reduces, reserves deplete, and prices fall back.

The DIIS projects the Edna May- the gold prospect of Ramelius Resources Limited (ASX:RMS) to cease production in 2022, while production at Jundee- operated by NST to decline to stand at 9 tonnes from 12 tonnes by 2025.

Also Read: Gold Glitters Bright; ASX Gold Stocks Ramelius and Westgold Considers Moneyness

To summarise, the global investing community are now eyeing gold in the wake of the COVID-19 outbreak, which is providing cushion to the gold prices in the domestic market and gold is trading around the recent record value.

  • The rise in gold prices is further propelling the ASX-listed gold stocks, some of which are beating the market plunge with decent returns to investors. The fear and impact of COVID-19 are also aiding the gold prices.
  • The export value for gold is expected by the Department of Industry, Innovation and Science (or DIIS) to reach a record high of $26 billion in 2019-20, supported by the higher gold prices and export volumes, which are anticipated to surge by 19 per cent in 2019-20 to stand at 389 tonnes.
  • DIIS estimated the domestic gold mine production to increase by 7.1 per cent in 2019–20 and 9.0 per cent in 2020–21 to reach at 378 tonnes by 2020-21, as both mine expansions and production from new mines come into play.

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