‘Guy on Rocks’ is a Stockhead series looking at the significant happenings of the resources market each week.
Former geologist and experienced stockbroker Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance, shares his high conviction views on the market and his “hot stocks to watch”.
Australian consumer sentiment has improved with all domestic indicators looking better and growth looking like it will rebound in the third quarter.
Employment is also improving, and while Victoria is in a bit of a dip, the broader Australian economy looks quite solid.
Meanwhile, Guy Le Page reckons that the US looks like it is heading to ‘WW2 levels’ on its deficit saying that it is “looking at somewhere between $US1.6 trillion to possibly $US2.4 trillion in fiscal stimulus”.
“Which would put the GDP deficit at about $US1.5 trillion, that’s about 27-28 per cent of GDP, so that puts it at WW2 levels,” he says.
“I think that is sort of breaking new ground, it underpins the investment case for gold.
“The US is taking the view that they can’t control the virus and that the real virus is unemployment and recession.”
He added that gold-backed exchange traded funds (ETFs) are still buying gold at a pretty aggressive rate, which accounts for its price above the $US1,800 ($2,577.68) an ounce mark.
“At the moment, that doesn’t seem to be abating at all.”
Le Page added that, as previously mentioned, it is getting harder to find undervalued gold plays and that the upside for gold players is in exploration that is leveraged to the gold price.
“You will probably see some of that investment start to move to copper-nickel-zinc as the boom unfolds,” he says.
“You are starting to see a bit of a rally unfold in copper, which we thought would happen.
“We are getting a lot of funds taking long positions in copper contracts, this is about as bullish as it has been in copper for about two years.”
News that China’s Yunnan province will help key companies stockpiles more than 100,000 tonnes of copper is also not insignificant while supply disruptions in Chile and Peru are continuing on top of union strike.
“I think the copper market is going to continue to be pretty tight,” he says.
Alaskan gold play takes the limelight
This week, Le Page turns his attention to Alaska-focused Resolution Minerals (ASX:RML), which has built a substantial landholding surrounding the 10 million ounce Pogo gold mine.
Pogo was acquired by Northern Star Resources (ASX:NST) a couple of years ago and is starting to show some good production metrics.
“They (Resolution) have acquired all the ground around Pogo in Alaska through a joint venture. They have assembled a pretty good team of people. Andrew Shearer, a former geologist, Justin Gum who I used to work with at North Flinders – very capable guy.
“They have acquired this ground in a period where there is very little interest in gold exploration in North America. I think their timing has been impeccable.”
RML share price
He noted that Resolution has about 30 prospects at its 64North project, of which Aurora, Echo, E1 and Boundary are high priority targets.
“They have similar mineralisation to what you are seeing at Pogo and they are going to have a fairly aggressive diamond drill program this year.”
Resolutions’ current work program involves just under 2,500m of diamond drilling.
“They have a lot of anomalies to follow-up, soils, streams, rock chips. They have got some CASMT conductors, they have some mag that is showing demagnetised zones that are pretty interesting.”
Le Page added there while there is a lot of data there from a lot of different explorers, none of it is conclusive as these programs have been fairly stop-start.
“A lot of the drilling is down to 150m to 200m, I think they will look to do a lot of deeper drilling. There have the Pogo and Fort Know-style mineralisation.”
At the current placement price, Resolution has a market cap of more than $18m and an enterprise value of about $14m.
“I wouldn’t say it is necessarily cheap, but it is certainly one to watch,” Le page says.
“And given the proximity to Pogo, any exploration success will see them as a potential takeover target.”
He added that once the Canadian market comes around to gold, there would be money coming out of cannabis and crypto currency.
“I would like to see them list in Canada, I think that will be beneficial because i think there will be a lot of interest in it.”
Hitting it out of the park
Some of Le Page’s previous hot stocks to watch have been right on the money.
Since then, the company has finished that first phase of its resource definition drilling at East Sampson Dam with its shares now trading at 13c.
“They finished about 1,400m of drilling, so that will be interesting to see that come out. They are obviously trying to get this into production soon using a couple of milling options.”
MOH share price
“Challenger just raised $20m at 20c. That puts them in a fantastic position on all their Ecuadorian, Argentine projects. That’s a multi-million ounce story.”
CEL share price
“They are currently waiting on that environmental approval for their iron ore play in WA.
“Their margins are eye-watering at the moment – well in excess of $50 a tonne. That has significant upside from the current share price 7.5c.”
FEX share price
“The other one that we mentioned, Blackstone Minerals (ASX:BSX), got some high-grade nickel-copper-PGE targets at Ta Cuong. That’s 6km away from Ban Chang.
“We will await the drilling, they had some pretty good assays to follow up, 15.6m at 0.7-0.6% copper, 0.8% nickel. I’m pretty optimistic that they are going to find more nickel mineralisation there.”
Le Page noted that Blackstone’s shares have moved from sub 10c to over 20c.
“I think that some of the money coming out of gold will be looking for those nickel-copper explorers that are generating good results.”
BSX share price
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Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.