Listed gold miners shrug off gold price dive
LionGold, CNMC bank on robust demand for physical gold
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LionGold, CNMC bank on robust demand for physical gold
Andrea Soh
01 May 2013
Their share prices may have dipped in the wake of the recent plunge in gold prices, but Singapore-listed gold miners say the gold rout will not affect them much.
Both also remain bullish on the gold price, due to the strong demand for physical gold.
The counters for LionGold and CNMC Goldmine Holdings tumbled 7.9 per cent and 19.4 per cent respectively, following the largest gold price fall in 30 years to US$1,355.80 an ounce.
Since then, a voracious appetite for the cheaper gold coins and jewellery in countries ranging from the United States to China and Dubai has supported a partial recovery in the gold price. It gained 4.2 per cent last week, its best weekly performance since January 2012, and now trades at about US$1,470 an ounce.
The share prices of LionGold and CNMC have also similarly recovered to $1.145 and 33 cents, respectively.
Mainboard-listed LionGold said its project plans are unaffected by the lower gold prices.
“As an acquirer of gold assets, the even sharper fall in junior miners’ valuations improves opportunities for LionGold,” said group CEO Nicholas Ng.
LionGold, whose business involves taking over undervalued junior mining firms and moving them into production, has a cash cost of between US$800 and US$1,000 an ounce.
The firm aims to produce 200,000 ounces of gold in 2014. Its subsidiary, Castlemaine Goldfields, produced 27,512 ounces of gold at its Ballarat Mine last year, in its first full year of production. LionGold’s other mines are not yet in production.
Catalist board-listed CNMC, which started production at its new gold extraction facilities in January, also does not expect to be badly affected.
“It will have an effect on our profitability, but it’s not going to affect us a lot by virtue of the fact that once we reach economies of scale, our cash cost per ounce is estimated to be between US$450 and US$550 per ounce,” said its CEO Chris Lim.
The relatively low cost is due to CNMC’s “heap leach” production method and the project being an open pit mine, he added.
Extracting gold through heap leaching involves piling up the crushed ores and sprinkling the extracting chemical solution on top, a process which causes the gold minerals to leach to the bottom for collection and further processing.
CNMC hopes to achieve the necessary scale of production to lower its production costs by this year, said Mr Lim.
“We’re in the works of it already. The weather’s getting very good after the monsoon period,” he said. “Everything’s been put into place, and we’re constructing an additional leaching pad to ramp up production.”
SIAS Research analyst Liu Jinshu reckoned that the ability to ramp up its production would affect CNMC more than gold prices.
“Their planned volume expansion should help to offset lower gold prices,” he said. “The key is their execution.”