It’s quarterly reporting time and the gold producers are shining. So they should be given the leg up they are receiving from a bumper Aussie dollar gold price, and the easing labour and materials inflation pressures.

The Aussie dollar gold price averaged $2994/oz in CY2023 and was last at $3623/oz, or $630/oz higher than that CY2023 average. It is bumper stuff, although it has to be said the share price performance of the lead gold producers has not matched gold’s price strength.

That reflects some uncertainty on gold’s ability to hold at current prices or indeed, go higher still as global interest rates begin to unwind. But it’s not as if global geopolitical uncertainty and the US election have gone away as supportive influences in addition to unwinding interest rates.

All in all then it is a good time to be a gold producer and a good time to be thinking about becoming one, with the latter grouping of near-term developers clearly underperforming the established producers in recent times.

The longer gold holds at near-record or record price levels, the more the discount applied to the near-term producers can be expected to narrow. The reality is though there are not too many developers with 100,000ozpa-plus projects on the ASX, certainly not ones with an ore grade to inspire greater confidence.

But as would be expected in the high gold price environment, they are starting to come through – such is the attraction on getting into production with potential $1500-$2000oz-type margins on offer, assuming the current Aussie gold price holds.

There’s less than 10 that can put their hand up as likely near-term future producers at a level and cost to attract investors. One of them is today’s interest, Rox Resources (ASX:RXL) and  its historic high-grade Youanmi project in WA’s Murchison region.

Youanmi was a producer up until 1997, which funnily enough is when the gold price collapsed to less than $A400/oz in response to the then Federal treasurer Peter Costello ticking off the sale of two-thirds of the nation’s gold reserves held by the Reserve Bank.

“Gold no longer plays a significant role in the international financial system,” Costello said. Sacre bleu!

Back to the present and the 805% gold price improvement since, leaving Costello’s preferred German bonds in its wake.

Rox this week released a pre-feasibility study into bringing Youanmi back to life as a 103,000oz producer over an initial life of 7.7 years, with all-in sustaining costs using Glencore’s Albion process to deal with refractory ore estimated at $A1677/oz.

Using a conservative gold price assumption of $A3100/oz, or more than $A500/oz below the spot price, the NPV (pre-tax) was estimated at $486 million and the IRR at 42% on a pre-production capital cost of $245m.

It is interesting stuff for a company trading on Thursday at 13.2c for a market cap of $54 million. Canaccord has a 51c price target on the stock.

“Given the lack of WA gold development assets outside established producers, it is pleasing to see Rox deliver a low-cost, high-margin study. With average life of mine production of 103,000oz pa, the project has sufficient scale, in our view,” Canaccord said in its review of the PFS.

Uranium:

Looking at the recent share price performance of the ASX-listed uranium stocks, a punter could be forgiven for thinking that prices for the nuclear fuel were suffering some sort of meltdown.

It’s actually a case of yes they have, and no they haven’t.

The spot price took a 16% price hit in the June half, falling from an average in January of $US100.25/lb to $US84.25/lb in June, robbing the ASX uranium sector of the investor buoyancy witnessed in the back half of 2023 when prices took off from the low $US50/lb levels.

But the reality is that investor sentiment should be as strong as it was in the back half of 2023 because the long-term, or contract price, for uranium has actually continued to advance.

The contract price is much more reflective of the underlying demand from the power utilities and is by far the biggest component of the overall market.

From $US56/lb in June last year, the contract price got to $US72/lb in January this year, and it has since risen by more than 10% to an average of $79.50/lb in June to match the spot price pretty much.

Before last year’s take-off in both spot and contract prices, $US60/lb was considered necessary to incentivise new production to meet the growing demand in response to the broad acceptance that more nuclear power is needed to ensure zero emissions targets are met.

Now that both spot and contract prices are going through a consolidation phase of around $US80-$US90/lb, the long-promised uranium/nuclear power renaissance is clearly underway.

Still, equity investor sentiment has soured to the sector recently because of a too-strong a focus on spot rather than contract prices.

The greenfield developers and the explorers have been particularly hard hit, with Petra Capital putting their year-to-date falls at 5% and 28%, respectively.

It could be then that value has returned to the sector, remembering the price that really counts – the contract price – has left the miserable price of the last 16 years behind as nuclear power takes up its role in the greenhouse battle.

Petra’s preferred ASX exposure against the backdrop is in the near-term developers through to the explorers.

It said it continues to see the near-term production potential for Lotus (ASX:LOT). It has a 59c price target on the stock compared with Thursday’s market price of 27.5c

Amongst the larger greenfields projects it prefers Bannerman (ASX:BMN), trading at $2.73/PT$5.22. Given new uranium frontiers will be required, Aura (ASX:AEE), trading at 13c with a PT of 45c) also gets a guernsey.

Amongst the explorers (no price targets) it likes DevEx’s (ASX:DEV) dominant ground position in the high-grade Alligator River province in the Northern Territory and Global Uranium and Enrichment’s (ASX:GUE) for its US project.