Gold Stocks, News & Tips on the ASX
Gold stocks have always been a popular investment choice, and it’s no different here in Australia to elsewhere. The Australian Stock Exchange has over 180 gold stocks listed, with a combined market capitalisation over 25 billion dollars.
But it’s worth being savvy if you want to trade in gold stocks: they’ve been punished by the market over the last few years on the back of the precious metals decline.
Gold stocks on the ASX are dominated by the top 10 players, who make up over 85% of the gold stocks market capitalisation. Newcrest Mining (NCM) is the only really blue chip in the group, with one of the longest track records of consistent production.
If you’re looking for more information, insider tips, professional analyses and news on gold stocks, Australian Stock Report has it covered. Browse below for our full selection of gold stocks resources.
Share to Buy: Alacer Gold Corp (AQG)
Alacer Gold (AQG) is a gold producer with operations in Turkey and Australia, and was formed through a merger between Anatolia Minerals and Avoca Resources in February 2011. AQG’s sole asset is its 80%-owned stake in the Turkish-based Coplar project. The group sold its Australian-based Higginsville operation last year. Gold price Gold has enjoyed a positive start to 2014, with futures prices up approximately 10% in the year to date. Below we graph the trend in the price of gold (green line), along with the total bullion holdings in global exchange traded funds (white shaded line). Source: Bloomberg As we can see, ETF bullion holdings have stabilised around 56 million ounces and in a bullish sign, gold recently broke through a downtrend resistance line (red line). The market has already priced in stimulus tapering from the US Federal Reserve (Fed). However the recent weak trend in US economic data and Chinese manufacturing activity has stoked concerns over slowing global growth, boosting the safe-haven appeal of gold. Quarterly production Copler output is growing strongly, with production totalling a record 216,850 ounces (oz) in 2013 – up 44% on 2012. The positive trend in cash costs also strengthens the earnings outlook. AQG’s December 2013 quarter cash costs were $865/oz, with the group forecasting 2014 cash costs of $730/oz - $780/oz. The compares favourably to bigger miners Newcrest Mining ($1003/oz) and PanAust (US$964/oz) and is only marginally higher than Regis Resources ($744/oz) With gold prices having steadied and appearing to head higher in 2014, growth in AQG’s cash margin bodes well for profitability even after accounting for the forecasted lower production.
Shares To Sell Newcrest Mining Limited (NCM)
Newcrest Mining Limited – Sell Stock
Newcrest Mining (NCM) is an Australian gold producer, with operations in Australia, Indonesia, Papua New Guinea, Fiji and West Africa. The group’s flagship mine is PNG-based, Lihir, with the other offshore operations being Gosowong in Indonesia, Hidden Valley (50%-owned) in PNG and Bonriko in Ivory Coast. NSW-based Cadia Valley and WA-based Telfer make up the company’s domestic operations. Gold weakness Although gold prices have stabilised in recent months, gold exchange traded funds (ETFs) have continued to shed their bullion holdings, highlighting weak investment demand for the yellow metal. Last Friday night’s better-than-expected US jobs report has increased the likelihood of the US Federal Reserve bringing the forward the date it begins tapering stimulus to December. The market response will likely be a rise in US bond yields and the US dollar, both of which are negative for gold. This reduces the incentive for ETFs to hold bullion and if they continue to sell their holdings – which we expect they will - gold prices are likely to head south. Outlook NCM’s cash costs for the September quarter were $1093 an ounce (oz), whilst the average realised gold price was $1442/oz. With gold prices recently trading around $1285/oz that implies NCM’s cash margin has shrunk by approximately 44% since the end of the quarter, to $192. It also means that Lihir, with a cash cost of $1152/oz, Telfer, with a cash cost of $1296/oz and Bonriko, with a cash cost of $1889/oz, have either become uneconomical or are very close to it. The balance sheet worsened considerably in FY13, with the net debt to equity ratio soaring from 14% to 41%. High costs and falling gold prices are hammering the group’s cash flows, limiting its options to arrest the balance sheet deterioration. This increases the odds of a capital raising. NCM stuck to its FY14 production guidance of 2.0 – 2.3 million ounces. Unfortunately, it is mining lower grade ore from its gold mines, as evidenced by the September quarter production report. A repeat performance in subsequent quarters increases the risk of missing production guidance. Amidst all these concerns, we think there is enough bad news to send NCM shares even lower from current levels. For all of our latest australian sell shares and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Newcrest Mining Limited Nosedives (NCM)
Newcrest Mining (NCM) is Australia's largest gold producer and one of the world's top five gold mining companies by production, reserves, and market cap. NCM’s main operations are in Australia, Indonesia, Papua New Guinea, Fiji and West Africa. The group’s flagship mine is PNG-based, Lihir, with the other offshore operations being Gosowong in Indonesia, Hidden Valley (50%-owned) in PNG and Bonriko in Ivory Coast. NSW-based Cadia Valley and WA-based Telfer make up the company’s domestic operations. Gold price plunge Gold holdings at exchange traded funds (ETFs) have fallen significantly in 2013, with the drop in bullion holdings reflecting a dramatic fall in investment demand. The plunge in gold prices has encouraged China and India, as well as the US and Perth Mints, to ramp up their physical purchases of bullion. However we believe the surge in ETF-related supply is overwhelming any physical demand for the precious metal. The spot gold price has plunged 16% in the year to date amid a sharp deterioration in sentiment towards the precious metal. Global inflation remains low whilst the US central bank has flagged an end to its monetary stimulus measures sometime this year in response to a strengthening US economy. We expect these headwinds to persist for a while yet, resulting in an environment where any short-term gain in gold prices is met by even stronger selling. Higher cost mines threatened by gold NCM is one of the higher cost gold producers in Australia. Cash costs were $1086 an ounce (oz) for the March 2013 quarter, with a number of its mines plagued by operational issues. Telfer, which accounts for a quarter of overall production, had cash costs of $1162 an ounce. This was 27% higher than the previous quarter due to weaker copper output, planned mill shutdowns and the sourcing of ore from higher cost open pit sources. The group’s offshore mines, Gosowong, Hidden Valley and Bonriko, contribute around 20% of overall production. Cash costs at these mines were $806/oz, $1790/oz and $930, respectively. With gold prices currently trading around $1400/oz, Hidden Valley has become uneconomical and Telfer’s cash margins are very tight, magnifying the threat of impairment charges at these mines. Outlook A major problem for NCM and other higher cost gold producers is the impact plunging gold prices are having on mine profitability. Mine shutdowns and weaker output contributed to a big rise in quarterly cash costs at Telfer, whilst Hidden Valley has become uneconomical given how much cash costs exceed current gold prices. We believe there is more weakness in store for gold prices, raising the threat of write-downs at NCM’s high-cost mines. Newcrest was listed as a sell share for our members on June 5th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Monadelphous Group Mauled (MND)
Monadelphous Group (MND) is a leading engineering group providing extensive engineering construction, maintenance and industrial services to the mining, energy and infrastructure sectors. The group comprises of the following three business groups: >> Engineering Construction, which includes Electrical and Instrumentation Services >> Maintenance and Industrial Services >> Infrastructure, which includes Aviation Support Services 1H13 results MND’s positive first half results have been largely overshadowed by a severe slowdown in tendering activity among the major contractors. The group’s 1H13 revenue was up 46.6% on-year to $1.3 billion, coming on the back of a surge in construction activity. However, EBITDA margin declined 60 basis points from 1H12 as the bidding war between mining services companies lowered contract tender rates (similar to how retailers reduce prices to win sales). Worsening industry conditions have seen Boart Longyear (BLY), Transfield Services (TSE) and UGL Ltd (UGL) all issue profit warnings in recent weeks. In addition to revenue, the sharp decline in industry activity is likely to pressure MND’s operating cash flow (OCF). MND’s OCF slid 37% from the prior corresponding half, and we expect another decline in the current half as weaker revenue squeezes the company’s cash intake. Chinese growth concerns dims outlook Unfortunately, we see MND coming under increased pressures in near term as industry activity slows in the face of a weakening Chinese economy. Chinese GDP rose just 7.7% in the year to March – weaker than economist estimates. Furthermore, the Chinese manufacturing sector entered contraction territory in May for the first time in seven months, according to the HSBC Flash Manufacturing PMI. There appears to be an emerging consensus that the resources boom has peaked, putting mining services contractor in an uncomfortable situation where they face lower profit margins. We expect MND’s own margins to come under further pressure as revenue growth slows and cost-cutting initiatives take time to play out. We don’t think it can repeat 1H13’s solid result, with revenue likely to suffer amid reduced tendering activity. Monadelphous Group was listed as a sell share for our members on June 3rd. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Perseus Mining Limited (PRU) Going Short
Perseus Mining (PRU) is a gold explorer and producer, focused on under-explored gold belts in West Africa. The group’s main assets are located in Ghana and the Ivory Coast, consisting of the Edikan Gold Mine (EGM), the Tengrela Gold project (TGP) and the Grumesa Gold Project (GGP). The Edikan Gold Mine in Ghana has 5.6Moz of Measured and Indicated gold resources, including reserves of 3.4 million ounces of gold, and 1.7Moz Inferred gold resources. Production began at the mine in the 3rd Quarter of 2011. The Sissingue Gold Project which is part of the Tengrela Gold Project. It is the group’s most advanced non-producing project. Bearish outlook for gold Gold holdings at exchange traded funds (ETFs) have fallen significantly in 2013. The drop in ETF holdings highlights the extent to which investment demand is weakening. Inflation expectations have eased considerably in recent months as the world economy fails to gain traction despite coordinated central bank quantitative easing programs. Below we graph the trend in ETF bullion holdings since the beginning of the year:As we can see there have been major outflows in recent months, with the surge in supply overwhelming what demand remains for the precious metal. Whilst physical demand from China and India is expected to continue and may even strengthen to take advantage of collapsing prices, we fear it won’t be enough to ignite a meaningful rally in gold prices. Weak March quarter PRU revealed a 12% increase in 3Q13 gold output (from 2Q13) to 57,169 ounces. This helped drive a 7% lift in revenue from the previous quarter to $77.2 million Worryingly, quarterly cash costs were US$1132 an ounce (oz), up 7% from the previous quarter. PRU guided for cash costs of US$1,100/oz for the six months ending June 30, 2013. At a time of falling gold prices, PRU’s elevated cash costs are translating into smaller cash margins, negatively impacting overall profitability. This was evident in the March quarter, where PRU reported a net loss of $892,000. This was in stark contrast to the $15.1 million profit recorded for the December 2012 quarter. PRU cannot afford more quarters like the previous one, but given how sharply gold prices have fallen since then we expect to see another weak result for the current quarter. Outlook Gold prices have suffered a dramatic decline of almost 18% since the beginning of the year. Higher cost producers are expected to be hit hard by the slump in prices. PRU swung to a net loss in the March quarter amid a spike in operating costs. With cash costs to remain elevated through to the end of FY13, we fear the company is tracking for an even bigger loss in the current quarter. This is likely to translate into continued share price weakness for the group. Perseus Mining was listed in the traders report as a sell share for our members on May 22nd. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Gold Stock To Sell – Newcrest Mining
Newcrest Mining (NCM) is Australia's largest gold producer and one of the world's top five gold mining companies by production, reserves, and market cap. NCM’s main operations are in Australia, Indonesia, Papua New Guinea, Fiji and West Africa, and has a global workforce exceeding 19,000. The company has a portfolio of predominantly low-cost, long-life operating mines, although it also has a history of operations troubles at its key projects (both operational and developmental). 1H13 Results NCM’s 1H13 results were disappointing on several fronts. Gold production for the half was 953,000 ounces, down 18% on prior corresponding half. Cash costs increased 8% on same period in FY12. The poor production results led to revenue falling 28% and underlying profit plummeted 48%. Guidance downgrade Late last month, the group downgraded its full year production – its fifth downgrade in the last two years. Gold production was lowered from 2.3 to 2.5 million ounces of gold to 2.0 to 2.15 million ounces. The company cited operational issues at Lihir and Gosowong as the reason for the downgrade. While the downgrade was not a massive shock given the poor 1H results, it is yet more evidence of management inability to forecasts its own production. Gold Prices While the groups poor results have contributed to recent share price weakness, it correlation to the gold price has also contributed.The above shows the gold price (white line) and NCM share price (yellow line) over the last nine month. As is shown, the fall in the gold price has dragged on NCM’s share price. With fears of monetary easing-induced hyperinflation are abating, other asset classes such as equities are offering relatively stronger returns. Outlook NCM’s 1H13 results showed the effects of both poor production and a falling gold price. Disappointingly, the group last month downgraded its full year guidance. This downgrade was already from what we would consider low-end guidance and while not a complete surprise it does not leave us with much faith its management’s ability to forecast its own production. With the flight to stronger returning asset classes likely to continue in the near-term, we see continued weakness for the gold price and as a by-product NCM’s share price. Newcrest was issued as a share to sell to our members on April 11th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only NCM but all our current trading ideas. Simply click here and starting trading today, free for 7 days.
Gold Stocks News: St. Barbara Ltd (SBM)
St. Barbara Ltd (ASX:SBM) is a gold exploration and production company. The Company's exploration projects include its Southern Cross and Leonora Operations which are located in Western Australia. ASX Small Cap stock, St Barbara today released production figures for the fourth quarter revealing a production increase of 18% compared to the previous quarter. The company said in a statement that the increase was due primarily to stronger milled volumes and the higher grade of ore mined. SBM said exploration drilling will increase in the second half with the exploration budget set to increase by $6 million for the year to $22 million. Click to Receive FREE Daily Trading Recommendations!
Gold Shares Buy-Back News: St Barbara (SBM)
St Barbara (ASX:SBM) is an Australian Small Cap gold producer and explorer. SBM’s primary assets are its Southern Cross and Leonora operations, both of which are located in Western Australia. The company purchased the Gwalia (WA) mine in 2005, which has now become its main focus. St Barbara today announced it has established an on-market share buy-back facility to repurchase up to a maximum of 15 million of its ordinary shares. The buy-back will be conducted over a six month period. The company stated the buy-back facility will enable it to apply its strong balance sheet and cash position to consolidate the company’s capital base for the benefit of shareholders. Click to Receive FREE Trading Recommendations!
Australian Gold Shares to Buy: Saracen Mineral Holdings Ltd (SAR)
Saracen Mineral Holdings Ltd (ASX:SAR) is an Australian mid-tier gold producer based in WA. The company bought its major assets off Sons of Gwalia back in 2006 - when the latter went bankrupt – and has done well to develop the assets and move from an explorer to a producer. SAR’s key assets are located in the South Laverton mining district, 120km North-East of famed gold mining town Kalgoorlie, in Western Australia. This includes around 200 granted tenements and applications pending spread over 2,500 square kilometres. Since purchasing these assets, SAR has spent money exploring the tenements and developing the projects to production. The company completed a Definitive Feasibility Study on the South Laverton gold project in December 2008 and started producing gold in early 2010. Ramping up Having started production in April last year, SAR has achieved strong production quite quickly and established itself as an enticing small producer. The company produced 111,163 ounces of gold in FY11, its first full year of production, at an average cash cost of $738 an ounce. SAR has forecast production of around 125,000 ounces in FY12 at costs of around $700-$750 an ounce. So far FY12 is off to a solid start, with the company recently releasing its September quarter Activities Statement. Production of 31,790 ounces at cash cost of $730 was right in light with guidance. By de-watering some of its flooded pits, SAR hopes to ramp up production to over 160,000 ounces a year by 2015. Management has proven to be conservative and reliable so far, offering some reassurance in what is a speculative sector. Saracen Mineral Holdings has managed significant upgrades to its gold resources and reserves, presently standing at around 3,300,000oz and 880,000oz respectively. Most of the reserves are open-pit, which allows for easier and cheaper mining. The sizeable resources and potential underground mining pave the way for a long mine life, while the company has extensive exploration potential to upgrade this further. The hunt for Red October SAR’s has planned to spend $35 million on exploration activities in FY12, a sizeable budget given the size of the company. The company recently completed a placement, raising $50.2 million and helping the company to end the September quarter with $60.3 million in net cash and no debt. A share purchase plan and subsequent placement have raised a further $15 million since. Together with cash generated from production (almost $10 million last quarter), SAR will not need to raise significant fresh capital to fund this. Much of SAR’s exploration efforts will be in exploring its Red October project. The company expects to have completed dewatering the pits shortly, to be followed by underground development work. Previous drilling results have confirmed the continuity of ore body at Red October and further exploration efforts could lead to significant resource upgrades relatively quickly. Production from Red October is expected to commence in FY12, but potential major exploration success could provide a major share catalyst before then. Outlook SAR only started gold production just over 18 months ago but is already generating output of around 125,000 ounces a year. Incremental production upgrades could come in the next few years, but the significant upside potential comes from the development of its Red October operation. While SAR offers significant exploration upside, its existing production provides extra protection, and suggests that the market could re-rate the stock and push SAR shares much higher than current levels. SAR is a defiantly a stock to watch. For further FREE Trading Recommendations, Click Now!
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Our short-term focused Trading Report returned 30.03%, outperforming the ASX/200 Accumulation Index by 6.45%*
DISCLAIMER: *Performance is derived from recommendations provided by Australian Stock Report’s Trading Report, opened on or after date of acquisition in Nov 2014 *Return figures are gross returns and do not take into account fees or brokerage costs. *Returns are calculated based on a $50,000 hypothetical portfolio, risking 2% of the overall portfolio balance ($1,000) as a starting point for each trade. *Due to slippage and gapping, losses can sometimes exceed $1,000 on an individual trade. *Opening and closing prices for trades (and therefore the prices used for determining aggregate profit/loss) will be those published on the Australian Stock Report website and will be determined by the price at which they could realistically be executed in the market at the time the recommendation is published. *ASX 200 Accumulation Index Return is calculated based upon the price of the index at the start of the session on the day the first ASX 200 trade was placed, i.e. 24.11.2015
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