- Australia houses some of the largest gold mines on earth.
- Aussie gold production is estimated to cross 384 tonnes for the year 2020-21.
- The Department of Industry, Science, Energy and Resources report revealed that gold prices are expected to plummet and settle around US$1600-1700 per ounce in the coming year.
The bullion run of gold has been phenomenal in the year 2020. As the world panicked and pulled the plug on the equity market, most of the investors ran for a “safe haven” to inject their money. Their search ended in gold, and the yellow metal showed record-breaking investments and the prices soared to US$2,064/oz in early August 2020.
Gold Price Chart of 12 months (Source: Refinitiv Eikon)
Is gold expected to shine in 2021?
The success story of gold that was seen after August 2020, has started to fade. The demand for gold fell by 19% during September 2020. It was observed that the vaccine rollout news negated the hike in the gold prices. As soon as vaccine efficacies were announced, prices started to fall. Investors who were earlier putting their money in gold, started to delve into riskier assets with the world economy showing signs of rebound.
According to the Department of Industry, Science, Energy and Resources December quarterly report, the gold prices are forecasted to be around US$1700/oz in 2021. However, the strengthening of the Australian dollar with respect to the US dollar, along with the lower gold price in US dollar is expected to push the Australian dollar gold price in 2022 to an average value of A$2,076/ounce.
Image Source - ©Kalkine Group 2020
Let us discuss few large-cap gold mining stocks which have delivered excellent results in 2020 and is expected to perform well in 2021 too.
Newcrest Mining Limited
Newcrest Mining Limited (ASX:NCM) is a leading gold miner with gold assets in Australia, Papua New Guinea and Canada. The operational mines include Cadia, Telfer, Lihir and Red Chris while Wafi-Golpu in PNG is in the advance stage of development.
Newcrest had produced 843koz of gold, generating a cash flow of A$991 million in 2019-2020 from the Cadia mine. Production from other mines includes 776koz from Lihir mine generating a cash flow of A$233 million, 393koz from Telfer mine with a cash flow of A$51 million and 39koz from Red Chris mine.
NCM shares were trading at A$26.610 at 1:09 PM AEDT with a market cap of A$21.05 billion, as on 4 January 2020.
Northern Star Resources Limited
Northern Star Resources (ASX:NST) operates three gold projects- Jundee, Kalgoorlie and Pogo with a total reserve of 173.641 Mt @ 1.9 g/t with 10.849Moz of gold as on 30 June 2020.
Named among the top 15 global gold producers, Northern Star has given production guidance of 940-1060 koz of gold for the year 2021 with AISC of A$1440-1540/oz. The Company generated a total cash flow of A$423 million in FY20. Northern Star also announced a merger with Saracen Mineral Holdings under Merger of Equals announced in October 2020.
NST shares were trading at A$13.110 at 1:09 PM AEDT with a market cap of A$9.40 billion, as on 4 January 2020.
Evolution Mining Limited
Evolution Mining Limited (ASX:EVN) controls four gold mines in Australia. Those mines are Cowal, Mt Carlton, Mt Rawdon and Mungari. The Company operates Red Lake (100%) in Ontario, Canada and also has an interest in Ernest Henry copper-gold project.
Evolution Mining has a global mineral resource of 26.2Moz and ore reserve of 7.3Moz. Evolution mining generated a cash flow of A$542 million in FY20 @ A$726/oz.
The Company has given production guidance of 670-730koz for the FY21 at an AISC guidance of A$1,270/oz.
EVN shares were trading at A$5.215 at 1:09 PM AEDT with a market cap of A$8.52 billion, as on 4 January 2020.