MARKETS SPECTATOR: Goading the golden bull

A turnaround in production coupled with a falling Aussie dollar has encouraged Ramelius Resources' bullish outlook.

You would expect the managing director of gold miner Ramelius Resources, Ian Gordon, to be a gold bull. 

Gordon believes the gold price will fall no further than $US1350 an ounce. At that price, he says, “substantial physical buying” begins. He expects the price of gold to be above $US1500 an ounce for the next 18 months. If the Australian dollar falls then it will boost revenue for Australian gold miners such as Ramelius as their sales are in the US currency.

Gold’s spot price is $US1402.73, according to Bloomberg data. Gold futures for August delivery gained 0.1 per cent to $US1398.50 an ounce on the Comex in New York. 

Perhaps Gordon’s optimism about the gold price perhaps has been heightened by Ramelius’ better mining results. The company’s Mount Magnet gold mine once upon a time was loss-making, but now it is profitable, said Gordon.

The grade of ore being mined at Mount Magnet, 600 kilometres north-east of Perth, rose 20 per cent in May from the three months to March 31, Gordon told Markets Spectator. That means 20 per cent more gold production and a resulting revenue increase.

The amount of gold ore that needs to be mined per month for Mount Magnet to break even is 5400 ounces. In May a record 6230 ounces of gold was mined. The mine’s total cost of production of $1350 per ounce will decrease as more gold is produced, as mine and processing costs are fixed, says Gordon.

Ramelius’ Western Queen South gold project, close to Mount Magnet, will add 21,000 ounces of gold in the 12 months to June 30, 2014. The mine has higher grade gold ore and lower production costs than Mountt Magnet, says Gordon. 

The company’s Coogee mine near Kalgoorlie has production costs of $980 an ounce. The mine will begin producing gold in July this year. The Vivien gold project has costs of less than $1000 an ounce. Gold has been mined at that site for 12 months.

Ramelius shares yesterday rose 1 cent, or 6.5 per cent, to 16.5. The stock has dropped 70 per cent in the last 12 months compared with the S&P/ASX200 index which has gained 19 per cent gain during the same period.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles