With the price of gold continuing to rise, it may be advantageous for investors to turn their attention to Western Australian gold stocks.
Not only is Australia the second largest gold-producing country, but the region is an increasingly sought-after jurisdiction for mining companies.
Read on for a breakdown of how and why to invest in Western Australian gold-mining stocks, as well as information on some of the top ASX-listed gold companies to consider investing in.
How and why to invest in Western Australian gold stocks
As mentioned, Australia currently holds the title of second largest gold producer across the globe, and as a result it’s no surprise that gold mines in Australia are expected to set a record before 2020 is over — a projected AU$25 billion is expected to come from gold production.
Investors may want to take advantage of these statistics as they illuminate how Australia not only rivals, but also surpasses, its gold-producing counterparts such as the United States and Canada.
According to Kevin McElligott, managing director of Australia at Franco-Nevada (TSX:FNV,NYSE:FNV), even though North America often takes centre stage in the global market, gold accounts for 12 percent of Australia’s exports, which is significantly higher than the 2 percent represented in Canada.
As gold exploration continues to expand in the country, there is a sense of security within the space, as it seems very likely that production of the yellow metal will continue its upward trajectory.
In terms of Western Australia specifically, gold is the region’s fourth largest commodity, behind only iron ore, crude oil and liquefied natural gas.
Mining of the precious metal has begun to boom again in the area, thanks largely to the exploration of the Pilbara region, whose popularity has been on the rise in recent years.
Just last year, the spotlight intensified on the region when it was named the second best mining jurisdiction in the world by the Fraser Institute. Overall, Western Australia represents almost 70 percent of the country’s total gold output.
In terms of how to invest in Western Australian gold stocks, McElligot told the Investing News Network (INN) that time and risk are two key tools in being a successful investor within the gold-mining industry.
“Time and risk are the key words. First decide how much time you want to invest. Time to educate yourself and research individual projects,” he noted via email.
“If you want to focus on the Australian gold sector, there is no local equivalent to the North American gold royalty and streaming companies. So you need to invest some time and select individual projects. Most companies have one project that drives their value and performance.”
McElligot also explained to INN that once market participants have invested time in finding companies that match their value and portfolio needs, the next step is to evaluate the level of risk they are willing to take when it comes to purchasing stock from a particular gold miner.
“Lower risk would be a steady, low-cost producer. Higher risk is exploration-/development-stage projects, or high-cost operators. Make these time and risk decisions upfront, before looking at any individual projects,” he stated. “Otherwise the company story may lead you somewhere you don’t want to be. I prefer to buy on fundamentals and past performance, with any ‘story’ being a bonus.”
Top Western Australian gold stocks year-to-date
Below we’ve outlined the five Western Australian gold stocks that have had the largest gains share price year-to-date. Data for this article was gathered using TradingView’s stock screener on January 29, 2020, and all companies had market caps over AU$50 million at that time.
1. Spectrum Metals (ASX:SPX)
Year-to-date gain: 20 percent; current share price: AU$0.09
Investing its exploration heavily within the region of Western Australia, Spectrum Metals’ primary goal is to discover, develop and explore gold mines in the area. The miner’s largest assets are Penny West and First Hit — both gold projects that are located in the state.
A maiden resource estimate has revealed 799,000 tonnes at 13.8 grams per tonne gold for 355,500 ounces of gold at the Penny West project. As for the First Hit project, the company has noted that it holds a pre-mining reserve of 76,000 ounces at 13.4 grams per tonne gold.
Most recently, the miner reported an update on exploration at Penny West, stating that although drilling is in the early stages, it has discovered a 41 gram per tonne gold intersection at Magenta at depth.
2. Magnetic Resources (ASX:MAU)
Year-to-date gain: 20 percent; current share price: AU$0.60
Magnetic Resources is an exploration company with a focus on gold in Western Australia. Gold assets held by the miner include Mount Jumbo, Kowtah, Hawks Nest, Mertondale and Christmas Well.
In its latest annual report, the miner announced that it had unearthed 70 ounces of large gold nuggets at its Mertondale target. The company added that one of the largest nuggets contained over 20 ounces of the yellow metal. These nuggets are reported to occur at shallow depths of 0 to 2 metres and are likely to be discovered — impressively by handheld devices — in underlying bedrock.
During the final quarter of 2019, Magnetic reported operational highlights such as three individual thick silicified porphyry horizons in close proximity to the Wallaby, Jupiter and Sunrise Dam mines, as well as the uncovering of both high-grade and thicker shallow intersections across 1.3 kilometres at the Lady Julie project.
3. Saracen Mineral Holdings (ASX:SAR)
Year-to-date gain: 19.64 percent; current share price: AU$3.96
Saracen Mineral Holdings has set a goal of 400,000 ounces of gold to be produced from its two yellow metal assets — Carosue Dam and Thunderbox. The miner feels it is on the path to obtaining that gold output due to the fact that recent highlights from the assets include strong cash flow, no debt, growing production and a steady incline of reserves.
Both projects are nestled in close to the large and popular Kalgoorlie mine, which has been consistently producing substantial amounts of the precious metal for gold miners exploring Western Australia.
Towards the end of January, the company released its operational results from the final quarter of 2019, reporting record quarterly gold production of 120,127 ounces at an all-in sustaining cost of AU$1,098 per ounce. Additionally, the company revealed a record fourth quarter at its Thunderbox asset, stating that it produced 46,594 ounces.
On the financial side, the miner’s gold sales in Q4 were 117,575 ounces at an average sale price of AU$2,034 per ounce, which generated revenue of AU$239 million.
4. Silver Lake Resources (ASX:SLR)
Year-to-date gain: 18.66 percent; current share price: AU$1.59
Silver Lake Resources produces gold throughout Western Australia, in particular the Eastern Goldfields district. The miner’s flagship asset is the Mount Monger gold camp just southeast of Kalgoorlie. Mount Monger contains the Daisy, Aldiss and Mount Belches mining centres, along with the Randalls gold-processing facility.
Between the assets, total reserves as of the end of June 2019 were 39,345 tonnes at a grade of 4.2 grams per tonne gold and a total of 5,291 ounces of the yellow metal.
The gold producer recently released its operational results for Q4 2019, reporting record quarterly production of 68,519 ounces of gold and 691 tonnes of copper, with sales of 66,074 ounces of gold at an average sale price of AU$2,028 per ounce and an all-in sustaining cost of AU$1,192 per ounce. The company also sold 694 tonnes of copper
5. Northern Star Resources (ASX:NST)
Year-to-date gain: 10.43 percent; current share price: AU$12.49
Since the acquisition of the high-grade, low-cost Western Australia Paulsens mine in 2010, Northern Star Resources has become a constant within the state.
In the last few years, Northern Star has transformed from producing 100,000 ounces of gold per year in its early stages to operating three concentrated centres with projected annual production in the 2020 fiscal year of 800,000 to 900,000 ounces at AU$1,200 to AU$1,300 per ounce.
Additionally, Northern Star has made several strides to grow its resource base and increase its assets by investing heavily in near-mine and in-mine exploration.
In addition to its Australian operations, late last year the company acquired the prolific Pogo gold mine in Alaska, which will see Northern Star expand its reach into the highly prospective Tintina mineral belt.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Nicole Rashotte, currently hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.