Gold Punters: Check This Out — Aussie Gold Stocks that Make Money

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ASX Gold Stocks - Investing in Aussie Gold

Yesterday we tabled a strategy for today’s market.

It was ‘crisis’ investing along the lines of investment legend Jim Rogers.

I found a recent interview he did.

He noted the current opportunity in shares around airlines, transportation, travel, restaurants and hotels.

He said:

I mean these guys had been wiped out as far as the market’s concerned. If I weren’t so lazy, I could probably find some things right now.

The laziness inhibitor stems from the fact that this kind of play requires deep analysis of balance sheets and industry trends and all the factors that go into security analysis.

That’s not everyone’s cup of tea.

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I usually like to see some momentum in stocks before I enter.

Where does this usually come from?

News flow is one. But the most enduring is strong earnings.
Yep — companies that make lots of money are the best stocks to be on.

And who is making money right now?

Drenched in profits — and no let up in sight

We can find an obvious industry flourishing right here in Australia.

It’s the gold sector.

Yep! Aussie gold is still over $2,600 an ounce.

There are companies in Australia than can produce the yellow metal at $1,300 an ounce.

They’ve got 100% margins if they’re unhedged (meaning they can sell at the current ‘spot’ price).

Now, this is not ‘news’ to the market. A lot of this is built into the price of gold stocks.

But look a little deeper and you see the potential.

A couple of times last year in Profit Watch I mentioned a gold stock I thought worth punting on was Chalice Gold Mines Ltd [ASX:CHN].

You can see that article here.

I liked its Victorian gold exploration project mostly.

But the main dynamic is that speculative opportunities are ‘primed’ in a bull market. It can be gold, rare earths, lithium, or whatever.

A bull market makes it easier for the related companies to raise money.

That money means they can get on with the business of exploring — spending their capital — in the knowledge that the market will react positively if they need more, and show signs of success.

They’ll be a ready market from bigger, richer companies to buy any promising project too.

And often, a stock will have more than one project that can hit a winner.

Chalice, for example, had multiple projects under management. One was the Victorian play I mentioned above.

But they also had a nickel project out in WA. I never paid much attention to this one.

But shiver me timbers!

Chalice just hit the motherlode out there…

A 600% rise in a month

The stock went into a trading halt on 17 March, at 16 cents.

On 23 March, Chalice announced a significant hit in WA.

The stock soared to as high as 63 cents by 7 April, after the announcement.

On Wednesday this week, it announced more exciting drilling results and skyrocketed again.

Look at this play out on the chart…

COVID-19 be damned!

Source: Optuma

[Click to open in a new window]

The stock is up over 600% in a month — COVID-19 be damned!

It’s illustrative of the fact that there’s still good announcements like this out there in the market — but you won’t see (or invest in) them if you take your cue of mainstream headlines.

I’m pleased for Chalice. I met the Chairman back in 2017, Tim. He’s a good egg. It’s interesting to note that the stock still has their Victorian gold project in play too.

Could one stock be so blessed to hit two big ones?

With Australian gold prices so high, it’s no stretch to say explorers will be very active as long as government permits them to continue.

And high gold prices, in Aussie dollars anyway, are likely to outlast COVID-19, because the Aussie dollar is likely to remain weak for a long time yet.

Just today the Australian Financial Review says our LNG exports are likely to be off $20 billion in the next financial year.

Our other ‘export’ industries like tourism and education are being smashed. Oh, and the government is ramping up an enormous deficit.

It’s hard to get bullish on the Aussie dollar anytime soon.

You can’t rely on the general index to deliver a decent return this year.

That, to me, means finding individual stocks with exciting catalysts in front of them, preferably in the next quarter or two.

That way you find out fairly quickly if it’s worth sticking around.

The good news is exploration companies like Chalice are quite open about when and where they’re drilling.

You probably didn’t catch the move in Chalice. But there’s plenty more opportunities coming up.

Gold at $2,600 will make sure of that.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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