ASX Live Coverage Summary – July 4, 2023
Introduction
Welcome to our live coverage of the ASX for Friday, July 4. We are testing a new format designed to keep you updated with a high frequency of posts leading up to the market’s opening and throughout the day. Please refresh for the latest news and feel free to share your feedback on how to improve this experience.
RBC Capital Markets’ Gold Forecasts
In the early hours, analyst Alex Barkley from RBC Capital Markets provided insights into the fourth quarter and FY26 predictions for key gold mining companies:
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Northern Star (NST): Expectations for Q4 have diminished due to a downgrade in Q3. Production at the KCGM site underperformed (431koz vs. 550koz guidance), which may affect FY26 outputs. Current estimates of 1,802koz (RBC) and 1,835koz (consensus) significantly miss the previous target of 2.0Moz, with rising costs and capex also falling short of expectations.
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Evolution Mining (EVN): Expected to meet guidance in FY25, but foresees flat production in FY26. A significant reduction in reserve grade at Red Lake has not altered production forecasts much. Despite strong stock performance, its limited upside makes Northern Star a more appealing option for long-term growth.
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Ramelius Resources (RMS): Projected production in FY25 stands at 300koz, nearing the guidance peak, but a decline to 212koz in FY26 is anticipated. Rising construction costs could limit its growth potential, although existing guidance aligns with performance expectations.
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Regis Resources (RRL): Modest forecasts ahead, with FY26 production estimated at 365koz (below consensus of 375koz). The company shows sound value for FY26, marked by a 3.2x EV/EBITDA multiple and a notable 21% free cash flow yield.
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Westgold Resources (WGX): While FY25 guidance has already been downgraded, any further underperformance is factored into current prices. The FY26 outlook remains strong due to consistent production growth.
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Vault Minerals (VAU): Preliminary results indicate slight misses in FY25 sales goals. Conservative FY26 projections suggest downside risks; however, as hedges expire, a notable EBITDA increase is anticipated by FY27, prompting an upgrade to Outperform.
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Gold Road Resources (GOR): A 18% rise in Q2 production is noted, alongside upcoming performance tied to a proposed acquisition.
- Bellevue Gold (BGL): Although potential misses in Q4 guidance loom, significant improvements in free cash flow have been observed, reducing risks for FY26 and FY27 outlooks.
Market Sentiment and Insights
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Q4 Strength & FY26 Focus: Typically, miners experience robust performance in Q4, with a particular focus now shifting to FY26 guidance after a steady FY25.
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Performance Context: Gold prices in AUD rose by approximately 45% in FY25, with producer performance up by only 10%. Notably, successful companies with less hedged positions led gains.
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FY26 Outlook: Mid-tier miners, owing to less hedged growth plans, are anticipated to yield strong earnings, with WGX and BGL singled out for potential value growth.
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Upgrades & Downgrades: VAU has been positively upgraded due to prior operational concerns being addressed. In contrast, SX2 has been downgraded owing to stellar stock performance.
- Preference from Analysts: Analysts recommend unhedged stocks such as RRL over large-caps for better momentum. Certain mid-tier firms offer better value and a more favourable risk/reward ratio.
Global Market Drivers
European markets closed mostly lower due to renewed tariffs concerns:
- The House recently passed a substantial US$3.4 trillion fiscal package, cutting taxes and reversing portions of Biden’s clean energy initiatives.
- Trump’s upcoming reciprocal tariffs, effective August 1, have led global trading partners to secure trade agreements urgently.
- Trump outlined tariff levels for 12 countries, sending ‘take it or leave it’ proposals on Monday, escalating trade tensions.
Conclusion
In summary, while the ASX 200 futures are steady, European markets reflect a resurgence of caution among investors due to trade concerns. Today’s updates will allow for continuous monitoring of key developments in the gold sector and broader market influences.
For newcomers, catch up on the most recent updates through today’s Morning Wrap. Additionally, ensure to refresh for the latest information as the day progresses.
