3 Aug 2011

Gold keeps motoring with a 'long way to go'

Fears that the gold price would tank by as much as $US100 an ounce in response to the US debt ceiling deal have proved groundless, giving delegates at the Diggers & Dealers bash another excuse for some late night revelry.
Gold did drop about $US20 an ounce on news of Monday’s agreement but has since motored right back to where it was. And if the bar talk in Kalgoorlie is on the market, it will be going higher still.
Alacer Gold’s straight-talking chief executive Ed Dowling Gold is one of those tipping gold has got a long way to go.
He told Garimpeiro that all that has been achieved with the debt ceiling deal is a slowing down in the trajectory of America’s debt. ''I mean, we still borrow 40 cents of every buck that we spend in the US.''
''So the debt is not coming down. It’s getting bigger. It’s just getting less big. So $US1800 gold by year-end for sure. Probably $US2000 next year. But I hope it’s not Pierre Lassonde’s prediction that the gold price and the Dow Jones (circa 12,000 points) will be the same.''
Dowling, who hails from Denver, said while thumping gold prices are obviously good for the gold industry, his personal hope is that it does not go to $US5000 an ounce because my friends, we’re all in trouble if it does.

N.B The below stocks refer to the Australia Stock Exchange.

Royalco Resources
The boys from the Sydney-based Kingsgate are pleased as punch with the group’s acquisition of the Bowdens silver project near Mudgee.
It comes with a silver resource of about 100 million ounces, or a 127 million ounces if you give the by-product metals in the deposit a silver value.
Kingsgate is as keen as mustard to get Bowdens – originally a Rio Tinto find but being acquired from Canada’s Silver Standard Resources for $75 million - into production by early 2014.
Melbourne-based royalty holder and gold/copper explorer Royalco Resources is cheering Kingsgate on.
About 10 years ago it picked up a swag of royalties from Rio Tinto, one of them being a sliding royalty on Bowdens.
Nothing happened at Bowdens for so long that Royalco kind of forgot that it held the royalty. It sure knows it has got it now, given the royalty has a net present value around the $15-$20 million mark, based on various assumptions.
The royalty is two per cent on revenues up to $5 million and 1 per cent beyond that, for as long as Bowden produces.
The suggested NPV makes for interesting reading when stacked up against Royalco’s current market capitalisation of $21 million (42 cents a share), remembering on the way through that Royalco is holding some $15 million in cash accumulated from its ''live'' royalties elsewhere.
On the expectation that the Bowdens royalty generates some $2 million a year, Royalco’s ability to continue to pumpoput dividends (4 cents a share fully franked annually) while also exploring for copper/gold at various overseas locations is now more guaranteed than it was.

Metminco Ltd:
The West Australians spruik their wines as loudly as their mines, so Metminco's Phil Wing caused a stir when he told a bunch of them he might bring along a few bottles of decent South American stuff for Diggers & Dealer next year.
His Latin loyalties are understandable, given the Peruvian Government last month declared Metminco's Los Calatos copper venture a "project of national significance," allowing the ASX and AIM listed company to gain surface access rights to government-held land without going to auction as normally required.
The decision also demonstrated that after the initial panic following the presidential election victory of the supposedly anti-mining Ollanta Humala, Peru is doing what it can to show it is pretty much business as usual.
That has yet to be fully reflected in Metminco’s share price which got beaten up when Humala won the day, falling to as low as 23 cents a share from the 40 cent-plus mark. It last traded at 29.5 cents.
Metminco is banking on a strong news flow in the months ahead to get the full recovery in its share price, if not more.
Metminco is already sitting on something like 4.7 million tonnes of copper metal at Los Calatos but the expectation is that the current drilling program will demonstrate that it is much bigger.
While Los Calatos is obviously the jewel of Metminco's portfolio, Wing is also excited about the potential of Metminco’s gold and copper prospects in neighbouring Chile.
In fact it is one of those Chilean copper/gold projects that just might give Metminco its first production. Just recently Metminco commissioned a drilling program at the Mollacas, Vallecillo and Camaron projects in Chile.

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