Tim Boreham: Golden dreams may be ending

While 2022 was a hot year for battery metals, but a year to forget for gold, the yellow metal has enjoyed a resurgence of sorts as investors contemplate the prospect of stabilizing interest rate, or at least not as high as thought.

Will bullion really shine again in 2023?

In US dollar terms, gold has recovered about 10 percent from its one-year low of $1,629 an ounce ($2,445 an oz) in early November, but it also is down 10 percent from its early March high (record) of $2,040 an oz. .

ANZ’s commodities research team reckons gold is headed for $1,900 an ounce in a “recession scenario”, while the crazy and brave folks at Saxo nominate $3,000 an ounce ( although we think they’re joking).

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Gold bullies argue that if major economies slow faster than expected, interest rates could even ease. But falling inflation means higher “real” interest rates, which is good as gold for savers, but not so good for non-income producing real gold.

At the same time, interest in cryptocurrencies, boldly viewed by many as an alternative store of value to gold, has waned.

The obvious course of action for burning gold bugs is to buy direct exposure such as a gold ETF, physical bullion or leading miners such as Newcrest Mining (ASX: NCM) i North Star(ASX: NST).

For those with a long-term horizon, both explorers have eschewed battery metals in favor of gold, a shift that could prove exquisite timekeeping.

Battery Minerals (ASX: BAT)which is now inappropriately named as it sold its graphite assets in Mozambique to focus on gold exploration in western Victoria.

The sale, to London-listed Tirupati Graphite, consisted of $1.5 million in cash and $11 million in Tirupati shares (later adjusted to $10 million).

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Operationally, Battery is now focusing on its Stavely-Stawell project, just 10km from the operating five million ounce Stawell gold mine. Its ground is also adjacent to Staveley Minerals’ Thursday Minerals’ Gossan copper-gold project.

So join the dots! A drilling campaign will test the historic work with the prospect producing rock chips of up to 430 grams per tonne. Battery has $1.7 million in cash and another $1.5 million from the Tirupati sale. Add in the Tirupati stake and expected UK sales tax refunds of $1.5 million and the company is worth well above its $11 million market cap, and that assumes the floor Victorian gold has no value.

Meanwhile, Battery remains the largest London-listed Tirupati holder and therefore has continued exposure to Tirupati’s two operating mines in Madagascar which produced 32,000 tonnes of the coveted flake graphite in calendar 2022 (with plans to increase production to 80,000 tons in 2024).

In a similar vein, Breaker Resources (ASX: BRB) it was lithium, but sold its stake in its WA prospect, Manna, to joint venture partner Global Lithium Resources for $88 million. This left Breaker at zero on its Lake Roe gold project near Kalgoorlie.

The project has a declared mineral resource of 1.7 million ounces averaging 1.6 grams per tonne. A scoping study for an initial underground phase estimates production of 88,000 ounces at a total cost of $1,390/oz compared to the current price of about $2,700/oz. The key project, Bombora, is a resource of 1.5 million ounces, 778,000 indicated oz.

Neighbors include Northern Star Resources’ more than four million ounce Carosue dam project and Ramelius Resources (ASX: RMS) Another 1 million ounce Rebecca gold project. After the Manna sale, Breaker has $80 million in cash compared to a market cap of about $100 million. The company also has a 1.5% net smelting royalty on any future Manna production. “Put us on your watch list,” urges Breaker COO Sam Smith.

OK, we will.

This story does not constitute advice on financial products. You should consider getting independent advice before making any financial decisions.

Get more wisdom from Tim Boreham at stockhead.com.au

Originally published as Tim Boreham: Golden slumbers may be reading

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