Gold sector is reaching a frenzy state as juniors ramp up acquisitions and drilling

Gold sector frenzy juniors ramp up acquisitions drilling ASX Australia
Activity in Australia's gold exploration space is heating up.

In the past few days we have an advanced materials company reveal its properties have several gold targets and a junior engaged in phosphate exploration has diversified into gold.

And we seem to be going through yet another attempt to revive the Victoria gold story.

The gold enthusiasm is starting to take the form of the uranium frenzy of 2007 when more than 200 junior explorers that (variously) revived projects, pegged ground which contained a sniff of uranium, suddenly discovered that their nickel-copper-gold or whatever properties miraculously also had indicators of uranium, or they went on the hunt for something that might have uranium.

Fortunately, this gold frenzy has legs and, barring unforeseen events, will not end as badly as did the uranium bubble.

Had even a quarter of the 2007-08 uranium hopefuls actually got to the stage of mining, their output would have overwhelmed demand. A considerable drop in the uranium price, however, stopped most of them in their tracks.

In stark contrast, the gold price is not likely to collapse; nor is demand. Unlike uranium, gold has a few thousand years of street cred as a store of value (especially in bad times) to its name.

Even the gold bears and detractors seem to have been silenced.

Gold exchange-traded funds set new records

In the aftermath of the global financial crisis during 2009, gold exchange-traded funds added 591 tonnes of the metal to their total holdings. That was an annual record.

Yet, in just five months this year (to 31 May), the gold ETFs had added 623t of the metal — in five months, that inflow has managed to exceed to the best entire year on record.

The World Gold Council (WGC) reported this week that global gold ETFs during April and May had inflows on all but two days.

“The only other historical period with similarly consistent inflows occurred in May and June of 2016, when funds experienced inflows in all but four days,” the WGC added.

That is two gold records in a period of a few months.

Gold global trading volumes were US$140 billion in April. In May they went to an even more bullish US$164 billion.

Bank: investor with precious metals ‘sitting on a gold mine’

While plenty of pundits are now starting to talk about the prospects for a US$2,000/oz gold price, ANZ analysts Daniel Hynes and Soni Kumari — while still expecting the metal to reach a record high in the second half of this year — note that the market’s risk appetite for other assets has improved, with investors believing stimulus measures will bring us back to more normal growth.

“A kick-start to another rally in the gold price remains elusive,” they said. The increase in risk appetite has become a strengthening headwind for gold.

But ANZ is remaining bullish: the macro-economic background is still challenging; the expansion of central bank balance sheets shows no sign of abating, while geopolitical tensions escalate.

“We think those investors who continue to raise their allocation to precious metals are sitting on a gold mine,” the analysts added.

But gold levels portfolios remain low

ANZ noted the US Federal Reserve statement that the current downturn is much worse than any recession since the Second World War.

“In this climate, we expect investor [gold] demand to remain strong,” the ANZ report continued.

A recent survey of US investors showed only 2% of them own investment grade gold.

Yet the WGC says an average US portfolio would have had risk-adjusted returns of between 3% and 7% if it included allocations of gold over the past decade.

Gold exploration, raisings continue at a high pace

The hills are alive, not with music (apologies to Julie Andrews), but with gold sampling and drilling.

As previously mentioned, the past week has seen a flood of announcements.

Here, therefore, is a sample of developments”

In terms of raising money, Xantippe Resources (ASX: XTC) — formerly graphite hopeful Peninsula Mines — brought in $1.25 million for its recently acquired Southern Cross gold project in the “gold rich” Yilgarn region of Western Australia. Directors tipped in an additional $100,000.

Advanced materials player Strategic Energy Resources (ASX: SER) raised $805,700 for drilling its Saxby gold project in Queensland and other ground.

Now that COVID-19 restrictions are easing, Gladiator Resources (ASX: GLA) will next month resume drilling at its West Australian Marymia gold project, and has added $150,000 to its bank account for the work.

Argonaut Resources (ASX: ARE) will begin drilling at a new prospect, Birties, at its Higginsville project in Western Australia. The company said the ground had been drilled in the 1990s, but it was believed that work had missed the mineralisation.

Dampier Gold (ASX: DAU) reported a maiden resource at that Credo Well gold project 40m north of Kalgoorlie where it has a joint venture with Torian Resources (ASX: TNR). The JORC resources totals 86,519t at 4.41 grams per tonne gold, for a contained 12,259oz. More ground is to be drill tested along a known gold corridor. The area was mined in the late 1800s.

Archer Materials (ASX: AXE) began life 13 years ago as a graphite play on South Australia’s Eyre Peninsula — back then optimistically dubbed as “the Pilbara of graphite” — and is now involved with advanced materials and quantum computing. However, it now reports several gold prospects on its ground in South Australia and NSW that it plans to explore.

Avenira (ASX: AEV) has been toiling away on a phosphate project but recently acquired the South Jundee gold project in Western Australia. The ground has been subject of several exploration programs over the years, most of those in the mid-1990s when gold was worth between US$300/oz and US$400/oz. Avenira said a new exploration strategy is needed: most of the historical work involved surface sampling and shallow drilling but the target lies under a considerable level of cover.

New concept to be used on Victorian historic field

Meanwhile, another player has joined the effort to revive Victoria’s long gold story. First Au (ASX: FAU) has acquired ground centred on the historical gold workings at Haunted Stream in East Gippsland.

Various mines were worked there back to the 1880s along an 8km strike, with production records indicating head grades of more than 28g/t.

But little or no modern drilling has been done to test at depth.

A new conceptual model of the ground will be evaluated. Several targets have been identified near and under old mine workings and are almost ready to be drill-tested.

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