The gold producers have a lost a bit of their shine in recent weeks as a result of the gold price sinking below $US1,300/oz for the first time this year because of US dollar strength and an easing of geo-political tensions.
The price fall in local dollar terms is close enough to $50/oz. On an annual basis, that amounts to a revenue hit of some $450 million, something which might or might not prove to be the case, depending on where gold prices go from here.
At the current local price of a touch more $1,710/oz, much of the local industry is still enjoying margins of $500-$700/oz. So the industry is not exactly doing it tough.
But it’s a good thing for the producers to encourage some stickiness in its investor base should gold prices remain under pressure. One of the best ways of ensuring some stickiness is to have some near-term re-rating events up the sleeve.
That’s just what founder and executive chairman of Dacian Gold (DCN), Rohan Williams, has got at the newbie gold producer.
The first of the re-rating events is Dacian’s up-coming June quarter production report. It will cover the first full quarter since Dacian poured its first gold bar at its $197 million Mount Morgans gold project near Laverton in WA on March 29.
Dacian forecast gold output for the 2018 FY (essentially the June quarter) of 30,000-40,000oz and 180,000- 210,000oz for the 2019 FY. The market always gets twitchy when any new project starts up.
So on the assumption that Mount Morgans comes in comfortably with 30,000-40,000oz in the June quarter (and the 2019 FY target gets refined somewhat), then a re-rating event will be upon the stock, currently trading at $2.86.
It sets up a situation in which barring dramatic moves in the gold price, Dacian could well start to work towards the much greater share price targets on the stock out there, ranging as they do from $3.25 a share (RBC) up to $3.70 a share (Macquarie).
There is little if anything in those price targets for the second near-term re-rating event Williams has up his sleeve – the likelihood that Dacian’s Cameron Well discovery will soon become a third ore source for the 2.5mtpa Mount Morgans treatment plant.
Cameron Well sits between the Westralia underground and the Jupiter open-cut mines. Following a pattern- bomb-style drilling campaign that’s been going on there since 2016, Dacian is not far off declaring a maiden oxide resource estimate, followed by a maiden reserve before year-end.
Plus, rising prices for battery metals boost Panoramic’s campaign to re-start mothballed Savannah. Read more +
