TOL - 30th Sep, 2024
Buy Hold Sell: Gold soars to new highs - but fundies are selling these 2 stocks
Money of Mine has taken over Buy Hold Sell for the next two weeks - and this week, they're focusing in on gold.
Gold prices are trading at all-time highs, with the yellow metal soaring more than 38% over the last 12 months alone. The "safe haven" commodity's price has been driven by continued economic uncertainty, rising geopolitical tensions, a weakening US dollar, and net purchases of gold by global central banks - particularly emerging market central banks in Asia.
But can gold prices continue even higher from here? And if so, which ASX-listed players are likely to benefit?
To find out, Livewire has handed over the reins to our friends in Perth, Money of Mine, for their specialist knowledge of the resources sector.
Host Matt Michael sits down with two Perth-based fund managers with their ears to the ground on all things resources stocks - Perennial's Sam Berridge and Argonaut's David Franklyn.
In this episode, they analyse the lay of the land when it comes to gold, their preferred exposures in terms of established players versus juniors for greater gold price leverage, and share the stocks they would be selling despite the stellar run in prices.
Note: This episode was recorded on Thursday 19 September 2024. You can watch the video, listen to the podcast or read an edited transcript below.
Other ways to listen:
Edited Transcript
Matt Michael: Welcome to Buy Hold Sell, brought to you by Livewire Markets. My name's Matt Michael and Money of Mine is doing a bit of a hostile takeover today of Livewire to bring you everything that's going on in the gold sector in WA. And I've got a couple of fund managers in the weeds in this with me today - Sam Berridge from Perennial and David Franklin from Argonaut. Lads, gold is at all-time highs, both in US and Aussie dollar terms at the moment. It is flying. Can it continue? Sammy, we will start with you.
Gold prices to continue even higher
Sam Berridge: I think it can. I mean we've just seen the Fed cut rates by 50 points. They're talking about another 50 between now and the end of the calendar year. So, falling rates are usually a positive for the gold price. And then beyond that, we've got a US election and no one's suggesting there's going to be any belt-tightening. So in a nutshell, I think the path is up.
Matt Michael: What about you, Dave? Commodity prices go up or down usually. Could it keep going up?
David Franklyn: I think it can. If you look at what's happening globally, the world is a dangerous place. There are conflicts everywhere. You've got a lot of countries now that don't want to hold US assets or US dollars, a global financial system loaded up on debt and concerns over whether we're in for a soft landing or a hard landing, and then a US election, as Sam was saying, later in this year. So, there are a lot of issues conspiring to support gold in the medium term.
Matt Michael: We're going to talk about some Australian-based stocks today, but how are you looking at the gold space in terms of international gold, Aussie gold, diversified players, small cap, large cap? Where's the value at?How to get exposure to rising gold prices
Sam Berridge: We certainly prefer to stay on the ASX. I mean we can drift off globally if we'd like, but I just like to be there in front of the screens when the news comes out. And the Australian gold universe is quite broad, so there's something for everyone, appropriate to your level of risk tolerance.
Matt Michael: How about you, Dave?
David Franklyn: I tend to agree with Sam. There's a big universe in Australia. We can go offshore and we do do that sometimes, but there's enough here. I think what's really interesting in the gold space is just you've seen the money flowing to the producers and the bigger companies. The juniors have been pretty forgotten about. I think what that really highlights is that if you're a junior and you want to get noticed, you need the ability to scale and have production growth. And the ones that have done that, like Spartan (ASX: SPR), Ora Banda (ASX: OBM) or Catalyst Metals (ASX: CYL) have re-rated, but there's a lot out there that are a bit lost.Matt Michael: Righto. Let's get into Buy Hold Sell. The first stock is De Grey Mining, the aspiring, possibly producer, located in the hot part of Western Australia up north. Are we a buy, hold or sell?
De Grey Mining (ASX: DEG)
Sam Berridge (SELL): It's a sell for me. You hit the nail on the head. It is an almost producer. The record of these companies or gold stocks going into production is littered with poor returns. Precious few companies have managed this transition quite well and I think that if you want exposure to the gold price, you are probably better off placing it elsewhere until these guys get up and running.Matt Michael: Dave - big CapEx job, refractory deposit, but it has scale. Buy, hold, or sell for you for De Grey?
David Franklyn (BUY): I've got it as a buy. So, taking a different tack, I get the points that Sam's made. It's got to execute on the development and there's risk associated with that. CapEx is probably going to be higher than what they would like and there's obviously going to be issues being a refractory-type project. But, having said that, it has a market cap of $3 billion, $900 million cash, 85kms from Port Headland, 550,000 ounces a year for a very long time - it's a rare asset, should be owned by a global major and I think it's a buy.Genesis Minerals (ASX: GMD)
Matt Michael: Beautiful. If you agree the whole time, that's just going to be boring. I like that. Right. Next talk, the Raleigh Finlayson vehicle, Genesis Minerals. Currently producing out of Leonora with the historical Gwalia, but a lot of growth in the pipeline, A lot of piecing together with a Leonora and Laverton district. Rated very highly for the management premium and it does have a high short interest as well, but Genesis, buy, hold or sell?
Sam Berridge (BUY): I'll stick a buy on this one, Matty. I mean it has run quite hard, but it does have something which is reasonably rare and more important in this day and age, which is permitted growth. I mean they still need to tick a few boxes for Tower Hill, but their Leonora and Laverton operations can grow organically without having to run foul of any permitting requirements, as we see tripped up Regis Resources (ASX: RRL) recently. So I think that, along with no hedging, and good exposure to the gold price, should continue to see it keep going.Matt Michael: What about you Dave? There's growth, there's a pipeline with the base case without any sort of future M&A to get to that 400,000 ounce produce. For Genesis, buy, hold or sell for you, mate?
David Franklyn (HOLD): I've got it as a hold. The management team is one of the best in the business. It's roughly going from 150,000 ounces now to say 300,000 by 2028. And then as you're saying, up to 400,000. So that looks good. Costs are a bit high. A bit of work to be done to bring the operating costs down. Tower Hill's a great asset, but I just think it's priced in, so we've got it as a hold.Westgold Resources (ASX: WGX)
Matt Michael: Very good. Now, the final one, the new and improved, you'd say Westgold Resources just completed the merger with Karora. Recently put out guidance for 400,000 to 420,000 ounces for FY25 for the proforma. How are we looking? Buy, hold or sell?
Sam Berridge (HOLD): My last card is a hold for Westgold. I'm a big fan of Wayne Bramwell and Leigh Junk, who's joined the board from the Karora side. So they're great. Beta Hunt's a great asset, they've got a great growth profile there. But it's in the price.Matt Michael: Dave, is it a buy, west-hold or sell?
David Franklyn (BUY): We've got it as a buy. I think Wayne has done an incredible job since he stepped in the door in the MD position at Westgold. It's really about execution now. So 400,000 ounces, all in sustaining costs, falling over time. Bit of growth in CapEx in the short term, but they deliver that guidance. The stock is cheap.Matt Michael: Very good. Right. Now, even though you both appear to be still semi-bullish on the gold price going forward, even though it has run to where it is, what two stocks, one from you each, would you be looking to sell despite this run?
Bellevue Gold (ASX: BGL)
Sam Berridge (SELL): I think at the moment Bellevue still looks tough. It has come back a long way since their guidance update, but I'm just little bit mindful about how that September quarter is going to look versus what the expectations in the market are. So yeah, if I had a gun into my head, it would probably be that one.Matt Michael: Very good. Dave, what are you dumping at the moment?
Emerald Resources (ASX: EMR)
David Franklyn (SELL): I've got a sell on Emerald Resources, which I think is a big call because again, the management team is exceptional, they've done a great job with their Cambodian asset and Dingo Range is a work in progress. But I just think valuation wise, it's a bit stretched. I think there's better value elsewhere. So it's a sell.Matt Michael: Thank you gentlemen. Well that's all we have time for the gold spectacular. There's a couple more to come for this resources special for Livewire Markets. Appreciate Livewire for letting Money of Mine take it over for the moment and don't forget to subscribe to the YouTube and podcast channels for all your Livewire content. And it is flying in every week. Hooroo!
What gold stock are you backing?
Let us know in the comments section below.
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
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Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
Expertise
Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
Expertise
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