Exposure to exciting Victorian and Pilbara gold exploration
Kalamazoo (KZR) is a very interesting company with an impressive track record since listing less than four years ago. It has built an asset base and astutely secured funding that has placed the company in a strong position to confidently carry out its programmes over the next few years.
The company has its focus on two key areas, Victoria and the Pilbara, that are likely to be amongst the most important and exciting exploration centres in Australia for the next five years.
In Victoria, KZR has accumulated 100% ownership of three historic goldfields in the important 60moz Bendigo Zone that have a combined past production of over 8moz.
In the Pilbara, KZR’s projects include the recent Ashburton 1.6moz resource acquisition and those in the vicinity of DEG’s exciting Mallina Gold Project. KZR’s impressive growth has been through strategic asset accumulation and its future is developing them.
The potential of KZR’s tenements and its corporate character have been recognised by Quinton Hennigh, President of Novo Resources and adviser to Kirkland Lake on Fosterville and also KL.TSX Chairman Eric Sprott with respective shareholdings in KZR.
Call me to participate. Barry Dawes BSc F AusIMM MSAFAA Executive Chairman Martin Place Securities +61 2 9222 9111 bdawes@mpsecurities.com.au
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Torque Metals has two projects - One at Paris/HHH to the South of Kalgoorlie and the second at Bullfinch at Southern Cross to the West of Kalgoorlie.
Paris/HHH is near to production and surplus cash would provide additional funds for further exploration.
The Boulder-Lefroy Fault is the dominant structural feature in the Kalgoorlie region and this diagram clearly shows its NNW-SSE orientation
and the numerous subparallel structures either side.
All the largest gold mines in this region are on or very near this Boulder-Lefroy fault which is acting as the mineralised fluids plumbing system. Paris/HHH is within 50km of some very large gold deposits and the area has not had much modern exploration.
The Paris/HHH Gold Project deposit had 18koz recovered in 2017 in a small mining operation and currently has a JORC `Indicated’ resource of 32,000 ounces
on existing granted pre Native Title mining leases that should allow gold production within the next 18 months. The previous scoping study is still basically current.
Assuming a conservative 50% recovery and $1000/oz margin at A$2500/oz just this resource this would bring A$16m cash surplus to the project.
As with all mines, the increased A$ gold price will increase the total gold in a revised pit design so the resource number should be higher
Paris has good high grade zones and some old workings and good potential down plunge.
The HHH deposit has potential down dip and in the footwall.
Additional potential is noted in a sub parallel structure at Paris North where 5.2m @ 14.2g/t has been intersected.
The 68km2 contiguous granted mining lease tenements have additional potential along strike at in the sub parallel zones for Strauss and Marmaracs.
But much of this is underexplored.
Paris has also has a 10km northward extension in a 80% earn in JV with Jindalee Resources Ltd.
Some high grade intersections have been encountered including Maynard’s Dam with 3m @28g/t.
Gold is moving to challenge previous 2011 highs of US$1800-1923 and has a near term target of US$1800 where some consolidation `should’ take place.
But note that more consolidation around here could allow gold to exceed previous high at US$1923.
Shorter term suggests the current consolidation is nearly over and we should move higher.
Don’t you just love long term charts! From Jason Atkinson in Dallas @schism
Institutional investors have added to portfolios abut are still low compared to previous gold bull market leg.
The main driver is likely to be the short covering from Western gold market participants although it would be expected that Asian demand is likely to be soft for a while yet.
Physical gold is scarce and premiums are being paid for coins and bars.
Some US numbers on coin sales. (Can’t confirm source though)
US$ holding strong. The numbers might seem horrific but just think of the numbers everywhere else. Who would buy the Euro(57% of this index)?
Nth American Gold Stocks
And those liking the long term, the XAU should rise about 50x over the next decade. From Jason Atkinson in Dallas @schism
And here. Gold stocks vs S&P500. From Jason Atkinson in Dallas @schism
A$ has had a major reversal.
A$ will follow gold and goldstocks
A$ gold to consolidate with rising currency.
The Australian gold industry is doing very well at present with record production and record exploration at a time of record gold prices.
Gold sector shares should rise much higher and action should just get better as market breadth expands and more investors participate.
Aren’t you glad you bought NST for dividends a few years ago and not NAB or the other banks!
NAB
When I think of Silver I think of Palladium. When I think of Palladium I think of Silver. For Silver Bulls - From Jason Atkinson in Dallas @schism
The low for oil is in. The recovery will be rapid. Graphics from @Gradhhy
This has certainly been uncharted territory for us all so we can only react to what major markets are doing and saying. The very long term price histories remain positive and suggest the past few months have seen declines to major long term support.
We now need to ponder what this all means in the longer term.
And price history suggests you can forget the doomsday scenarios.
Extremes in sentiment show many signs of very important lows and provide the basis for continuation of the DawesPoints Global Boom.
The rally in global equities has begun and it could be driven more by the assumption that the worst for Covid-19 may be over rather than just the US bailout. The markets are anticipating a peaking in new Covid-19 reportings and/or that a cure/cures has/have been found.
Let’s look at what the markets are saying and have been showing these signs for the past month as reported in my desk notes.
Key Points
Dow Jones Industrial Index at important MAJOR long term uptrend support
Four year cycle low is probably in place
Sentiment indicators show high pessimism levels
Long term indicators suggest low is in place
US$ still strong – Euro made new 3year low
Bond markets well over extended
Commodities driven lower by oil price rout
Shanghai market still holding well
Iron ore steady
Long term ASX Metals and Mining index back to downtrend line
I still am of the view that this weakness will be over very quickly and the fiscal and monetary easing across the world will cause strongly inflationary pressures.
I am seeing numerous efforts to bring some vaccines and drugs to combat the virus and am particularly impressed with the results from the anti-malarial Hydroxy Chloroquine. Markets might be recognizing this.
These figures are very interesting for the understanding of this Covid-19 virus and who it hits.
A 2 April 2020 report from Reuters on Louisiana showed an astounding 97% of COVID 19 hospital admissions had pre-existing conditions:-
Diabetes 40%
Obesity 25%
Chronic Kidney 23%
Cardiac Problems 21%
(these are not meant to add to 100)
And this:-
I have not been able to independently confirm this data but it seems whatever data we are seeing it is more a matter of comparing apples with bananas, cheese and zucchini.
Age, gender, race, comorbidities, mortality/admission ratios and so much needs to be tabulated and analysed.
Control might prove to be far simpler than currently perceived.
This crisis is enforcing curtailment of civil liberties and changing expectations from citizens so we might see some most unexpected outcomes when this is all over. Will it bring better people into politics and will the media be reformed after so much partisan commentary from commentators who are instant experts on everything?
Good people need to, and are, standing up.
The opportunity for restructuring the global economy and supply chains is now massive. This should result in more manufacturing in the US and hopefully in Australia and may be a sea change here in attitudes and actions. New incentives for start ups, fewer regulations, revival of onshore oil and gas exploration, consideration of new onshore refining capacity and changes in labour laws.
The crisis has created problems in Europe and the pressures will surely lead to the eventual break up of the EU. That union has no leadership and its many members will be wondering why they are there at all. Euro to zero?
Also the problems in Iran could lead to a better outcome for its citizens and a regime change would curtail much of the insurgency in the Middle East.
And the impact on China may also lead to more liberalisation once the crisis there has truly passed.
The collapse in the oil price will cause restructuring in US shale production and in Russia. Saudi Arabia will be having budget issues as will all the high taxing oil producing countries.
Expect to see the permanent loss of at least 1mmbbl/day production from marginal fields in the US and Russia in 2020. Oil prices (West Texas Intermediate -WTI) in Midland Texas have been in the US$6-7/bbl range as demand drops storage is taken up. Expect a 25% decline in US oil production rate from ~13mmbbl/day to <10.
This crisis has also shown up problems in so much infrastructure so renewal capex should accelerate across the board with physical assets and also in IT and bureaucracies. Interesting times.
The economic impact of the shutdowns will be great on employment levels but many sectors will be completely unaffected in the short term.
The equity markets will discount the future and give a better idea of the outlook so it will again be a time to `Heed the Markets, not the Commentators’.
This is indeed a critical moment in the markets but could be the MAJOR low here as the bottom picked up the 1982 uptrend. Maybe some churning is required but the worst is probably over.
This graphic shows the extreme low channel and a jump back into the next channel.
The shorter term looks even better for a market bottom to be in place. Bounced off a lower channel and back into a mid-range channel.
It is worth looking at some of the sentiment graphics available.
Martin Pring with Stockcharts showed the NYSE Bullish % Index hit a level almost as low as 2008.
The US Put/Call ratio was at extremes with all Puts and no Calls.
Martin Pring’s momentum indicators provided a major BUY signal with many stocks making extreme lows then rebounding to show leadership in the S&P500 Index.
Ciovacco Capital has this interesting chart for the S&P 500 250 week moving average with probably fastest-ever test.
Source: Ciovacco Capital
The short term has seen a close above the 200 week moving average but with confirmation needed with this week’s close.
Source: Ciovacco Capital
Stocks are outperforming bonds and have just pulled back to the break out line. Very positive.
And this from Graddhy – Commodities TA and Cycles (@graddhybpc) suggesting the 4 year cycle low is coming in right now. This is impressive. Major sell off, massive volume right on time with this 4 year cycle.
f you have a Twitter account I suggest you follow him at @graddhybpc
Comparisons with 1929.
The 1929 fall was very dramatic and the recovery quite spectacular.
This graphic is not logarithmic so is not so useful. (Apologies that it is cut off, unlabelled and unsourced.)
However, this is Martin Pring’s view of 1926-1941 highlighting major selloffs.
The world worked on the Gold Standard then so prices had a true yardstick (even if it did change in 1934 from US$20.67 to US$34.00).
Today, with no Gold Standard, all prices are measured against a floating currency which means nothing can be measured against a fixed yardstick.
It is also worth noting that in the 1920-30s about 40% of Western World workforce was employed in primary industries:- agriculture, mining, fishing, forestry, energy etc.
Today it is 3-4% so low commodity prices benefit most of the other 96%.
But today, services are far more than 40% and here it is where most job losses appear to be.
Importantly, many of these services have low barriers to entry as far as working capital so we should see a strong pick up once the turn comes through.
Barriers to employment in many services might just be a desk, phone or a vehicle.
I have shown this long term graphic of the Dow Industrial Average from 1923 to present from Schism @jatkinson33 previously.
A break of the uptrend curve from the low in 1932 would be very negative indeed but it would seem that government fiscal and monetary policies are and will be very accommodative such that a decline would be unlikely.
Also, bull markets, and this has been a major bull market, generally end with a bang. This hasn’t!
Note that the Dow 30 was not even at the midpoint curve when it had its pull back to the bottom uptrend curve.
The longer term in this 60 year price history of the CRB Index shows today is certainly at an extreme level but it is at a stage of close to the end of a 12 year decline from 2008.
This index is back at 1973 levels in nominal terms but it is heavily weighted to oil and petroleum sector products.
It seems to be coming into a major low.
Clearly precious metals and copper are well above 1973 levels and certainly iron ore so do not fit into this group.
ASX Metals and Mining
This is one of the best and most positive charts I can find. Pull back to 2008 downtrend and some long term support.
This graphic tells me a lot and is very positive. Ignore the current `fundamentals’ and consider that a retest of the 2008 downtrend line has taken place at a level that is horizontally important. The bounce should be robust from here.
BHP is well placed to continue its longer term outperformance of the S&P500.
Shanghai - Long term still heading up
It is surprising that Shanghai is holding up well and in 2019 finally broke out from its 2015 downtrend.
This market may be manipulated but it is still at the level of a decade ago despite rising GDP figures.
Shanghai – Short term still solid
And what might this mean? Shanghai vs S&P 500.
Iron ore is holding OK.
Gold – looking very strong - Much higher prices coming -probably quite soon
Gold – still in uptrend here and making new rally highs.
And here
This model puts gold into the US$10,000/oz class in the next few years and almost US$9,000 now.
Source: Lighthouse
Another view on gold from Northstar @Northst18363337 suggests we are only just starting this bull market. Northstar is an excellent analyst on Twitter.
Gold stocks in North America have done some constructive (if highly unusual) technical action and this is very positive.
The sell-offs were related to highly leveraged ETF and hedge funds getting margin calls. The worst of this should now be over and will allow gold stocks to move higher again.
Market leaders Barrick and Newmont are very constructive.
The bigger picture is provided by this Dawes Point Elliott Wave interpretation where it would appear we have just completed a wave 2 in a WAVE 3.
Gold stocks are poised to strongly outperform the general market.
A$ gold is still strong and made a new high above A$2800 and is now about A$2730.
The ASX Gold Index has provided a good test and a bounce.
All this looks very encouraging to me. Best big buys BHP RIO FMG MIN WPL OSHBest Golds NCM NST EVN WGX RRL SAR WGXBest emerging golds DEG BGL CYL RED KZR CDV NTM CHN MGV
Call me to participate. Barry Dawes BSc F AusIMM(CP) MSAFAA Executive Chairman Martin Place Securities +61 2 9222 9111 bdawes@mpsecurities.com.au
LKE has a lithium development strategy with projects in the prime Argentinian brine producing regions and utilising innovative technologies to minimise operating costs and to maximise earnings and sustainability benefits.
LKE’s 4.4mt LCE Kachi resource will utilise Lilac Solutions ion exchange technology in its project with a PFS due shortly for 2023 production startup.
Lithium sector undergoing improved conditions as supply and demand match.
The rise and rise of the lithium-ion battery is changing the world.
The versatility of this technology for application from smartphones, domestic appliances, power storage to Electric Vehicles (hereon EVs) implies universal acceptance and dependence. The advent of the high tech chemical refiner and processor for battery plants is changing the lithium industry.
It becomes critical to understand that whilst lithium prices are soft it does appear that they are bottoming and as the near term market balance is being sorted out. Underlying battery demand is inexorably rising between 15-18% per year together with EV and energy storage demand and will eventually impact the lithium price.
LKE has globally significant resources and has Lilac Solutions’ innovative approach to lithium recovery from brines.
Ion exchange technology cuts out the time and capital intensive evaporative process from the flow sheet.
Developing Quality Gold Exploration Portfolio in WA
Torian has quality exploration tenements in two prolific gold production regions in Western Australia and is ready to resume activity after a period of tenement rationalisation and management changes.
Kalgoorlie Region tenements have six projects including the Zuleika Shear, Credo Well, Mt Monger and Gibraltar. This Kalgoorlie region has a widespread blanket of transported cover and little outcrop and is undergoing a major re-evaluation and re-interpretation from basic principles as new gold hosting environments in the Black Flag Group (including sediments) are recognised. Over 127 targets have been identified by TNR on its tenements using geological and geophysical tools.
Leonora Region tenements have three projects Mt Stirling, Mt Stirling Well and Diorite. Mt Stirling is adjacent to RED.ASX’s very encouraging King of the Hills development and likely to provide near term cashflow from small scale mining.
Torian has accelerated the activity over its portfolio by farm-outs and is seeking to achieve gold production and build cash by end 2020.
Gold is a many splendoured thing and means different things to different people.
Concerns over debt, the Coronavirus or an overvalued stock market could be reasons for higher gold prices but I still consider gold now to be the Metal of Prosperity.
Asian demand is from rising prosperity and sales to Asia from the West represents a short position for many banks. The probe into JPMorgan gold price rigging may force cover of these short positions, especially in silver.
ETF and Central Bank purchases of gold in the Dec Half of 2019 offset declines in Asian demand but rising prosperity in the US pushed gold jewellery demand to the ten-year highs.
The US is experiencing a momentous acceleration in its Trump Blue Collar Boom. Just watch employment, housing and autos (the coming EV boom).
Economic Confidence Index is at the highest level in almost 20 years.
This long term demographic/technical graphic shows the US market is in the early days of a major bull market. Demographic changes are driving it.
Capital flows are showing bonds have peaked and are flowing into equities. And Property and commodities and gold.
Gold has continued to move higher in all currencies and achieved Friday monthly close on 31 January at US$1588.
The technical setup is for gold to now move higher in the near future.
US$1600 is an important level so a break above this should see gold rise almost US$200 to around US$1775 in a reasonably short time frame.
Moves to US$1800 are likely in 2020 and the previous high of US$1923 might be met or exceeded this year.
The longer-term picture is for a much higher gold price than this.
Gold in A$ is moving higher and the technical are suggesting a coming move into the next channel.
Gold can be traded using the ASX-listed ETF GOLD.ASX.
Silver is also setting up for continuation higher after its strong move in Sept last year.
As with gold, the long term pattern is suggesting a move that will take silver above its 1980 and 2011 high of US$50/oz.
Silver can be traded using the ASX-listed ETF ETPMAG.AXW
World Gold Council Data
The recently published 2019 data from the World Gold Council provided some interesting market trends.
Gold-backed ETF holdings reached an all-time high in Dec Qtr 2019 at 2885 tonnes, up 325 tonnes.
Europe now has almost as much in gold ETFs as the US.
Gold in Euros seems to be ready for a strong move as well.
The Euro still looks very weak to me and so the US$ will remain strong.
The US$ Index seems to be now ready to move higher.
Central banks were net buyers for 10th consecutive year with 650t to 34,500t and this gain, similar to
that in 2018, was the most in 50 years.
World Gold Mine production was 1% lower at 3463 tonnes and the first mine output decline in ten years.
Interestingly, this data shows the rate of change of gold production has a declining trend.
China has been declining from a record 453 tonnes (453,00kgs here) to 420 t but these figures may be optimistic. Peru gold output fell 9% in 2019.
Gold production in China has been from numerous small mines so the longer-term production is not assured despite official forecasts.
Other major gold producers Australia, USA and Russia were marginally higher.
Production costs as measured by AISC figures are rising again but this is more likely to be a function of declining cutoff grades rather than input factor costs.
On this graphic, ~6% of global gold production is still loss-making basis AISC data.
Recycling rose 11% to reflect the higher prices bringing out scrap.
The data showed gold in Indian Rupees drew out some selling.
Gold stocks
Gold stocks in North America continue to consolidate and after breaking through some technical resistance should move sharply higher again.
The unhedged HUI index is constructive.
The Philadelphia Gold Index has major long term resistance at 110 so a breakthrough this soon into 2020 will provide an acceleration to 150-170.
The GDX ETF seems to be tracking the XAU but may be stronger.
This GDX is tradable on ASX under code GDX.AXW.
Also, a North American Goldstock portfolio BetaShares ETF MNRS.AXW (non ASX companies) is available on ASX.
Individual stocks like Newmont
And leading royalty company Franco Nevada, are doing well.
Overall, Nth American Gold stocks are now breaking upwards against the S&P 500.
And looking very positive against gold itself.
Here in Australia the ASX S&P Gold Index looks very constructive. New highs above 2011 were seen in 2019 but the Index (~39% NCM) has pulled back to good support where the 2 December Dawes Points BUY NOW was issued. Once XGD breaks out to new highs a strongly accelerative action is likely to take place.
NST is well on its way to A$20 and beyond.
And NCM is far too cheap. Haveiron will be a real winner for NCM by converting Telfer from a marginal operation to a long life very profitable mine. Recent rains should also remove any concern for water for Cadia.
ASX gold stocks are very cheap now.
All these constructive technicals for gold and silver ( and platinum ) are telling me the artificial down pressures on gold are being removed and a significant revaluation is coming.
But this and so much else is also telling me that US equities and hence global equities are looking very strong for at least a decade.
The massive over-commitment to bonds to ~US$110tn will provide capital flows to equities and commodities for the next decade.
The A$ gold
price is higher and is cementing its position above A$2100.
Exploration
expenditure for gold is at a new record high.
Many small
gold stocks are starting to perform.
Australian
gold production is strong but off slightly in Sept Qtr 2019.
Although Iran is in the news today and gold went through US$1600 I am not convinced it is rising due to safe-haven demand and a general need to protect against market failure.
No doubt
Iran has helped gold rise recently but I see a bigger picture.
Global
equity markets are still strong and are anticipating an expanding global
economy.
Reviews of
so many US subsectors and global markets show some important and very positive
changes are underway in the world.
The Dow 30
is strong and is indicating a boom to last for years.
Calls for a
weaker US$ don’t make sense to me.
The strength in gold to me is confirming the strong underlying demand from Asia that has been fed by banks in the West that have gone short to deliver.
With US
prosperity increasing, the demand for gold is rising so the banks are left with
a major short position they need to cover.
This will
be the driver in gold prices to much higher levels.
Gold is
becoming not the crisis metal but rather the prosperity metal!
Call me to participate (and don't forget to subscribe to Dawes Points).
Nova Minerals (NVA) has the Estelle Gold Camp in the premier Tintina Gold Belt that hosts >220Moz in mostly bulk tonnage but high margin deposits.
Estelle has established a 2.5Moz JORC resource on Korbel Blocks A&B and the 2020 program is targeting a further 2-5Moz from here and in Targets C&D.
Officer Hill Gold Project with Newmont showing encouraging results chasing Callie-style mineralisation in the Tanami Region gold system.
NVA is fortunate in having a number of existing new or project mines in the Tintina Gold Belt for comparison so indications on capital and operating costs are current or recent.
Disclaimer: This commissioned report has been written by Martin Place Securities Pty Ltd. Data has been sourced from available public information and reflects the author’s own assessments.
