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Precious metals in tough times

14 Jul 2021 4 month(s) ago

Australian precious metals producers are looking strong, but there may be labour shortages.

Precious metals producers can do well in uncertain times, and these are surely uncertain times, despite the seeming economic recovery from the pandemic. That suggests investors may wnat to look at not just the physical metals, but the producers of the metals. 

Cannacord Genuity has had a look at the Australian precious metals sector ahead of the reporting season. It is mildly bullish, but sounds a note of caution.

“Across the board we are forecasting production to decrease by 1% quarter on quarter with AISC (all in sustaining costs) also modestly increasing by on average +7%.”

Here comes the caution, due to labour shortages. “Notwithstanding our current forecasts, we are increasingly becoming wary of WA producers with rhetoric from multiple companies outlining a skills shortage in the state. It does not appear to be limited to either white or blue collared workers, and we believe this will be an ongoing issue until boarders reopen. We have not increased our unit costs for WA assets at this juncture, but highlight the risk to elevated costs versus our forecasts as a result of this factor.”

The broker is upgrading its gold forecasts. “The 2025 US$ gold forward curve has increased by 2.9% to US$1,848/oz with nearer-term assumptions increasing on average by 3.1% over 2022-23.’ The broker has increased in its A$ gold price assumption by 3.1% to A$2,465/oz.

Here are the assessment/predictions. The plethora of buy recommendations either implies considerable optimism or a reluctance to offend:


   Name                                               Recommendation                    Target


Evolution Mining (ASX.EVN)                      Hold                                      $4.55  

Northern Star Resources (ASX.NST):        Buy                                        $13.40

Regis Resources (ASX.RRL):                    Buy                                        $3.40

Barbara (ASX.SBM):                                  Buy                                        $2.80

Perseus Mining (ASX.PRU)                       Buy                                        $1.85

Resolute Mining (ASX.RSG)                      Buy                                        $1.10

Gold Road Resources (ASX.GOR)            Buy                                        $2.05

Silver Lake Resources (ASX.SLR)            Buy                                         $2.40

Ramelius Resources (ASX.RMS)              Buy                                         $2.10

Red 5 (ASX.RED)                                      Spec Buy                                $.035

Westgold Resources (ASX.WGX)              Buy                                         $2.50

Gascoyne Resources (ASX.GCY):             Buy                                        $0.80


Reader note: This is general reporting only and should not be considered in any way to be investment or tax advice. It does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. For more information please read our disclosure statement.


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