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EDITORIAL

Juniors back in

market spotlight

by Dominic Piper

rom wondering how they would keep activity going at the beginning of the period,
FAustralia’s junior gold explorers closed out the June quarter with the most prolific
market performance in recent memory.
At the start of the period, every explorer on the ASX was issuing cautions about the impact COVID-19 and the subsequent
lockdown would likely have on their projects. However, with state and federal governments declaring exploration an “essential
industry” early on during the pandemic, fears were quickly alleviated.
Instead, Australian gold explorers found themselves, for the first time in nearly a decade, in the middle of a market frenzy.
Only a year ago the sector was bemoaning the dearth of exploration plays and market support for juniors. No junior, no matter
how impressive their drill results, could seemingly win investor interest. Instead, shareholders remained wedded to the high
performing gold producers who continued to deliver multiple returns on the back of ever-widening operating margins.
This year however, investors are rushing to gold exploration stocks at a frenetic pace, providing juniors with the fillip they’ve
been craving for over years as they watched the established gold producers move from strength to strength.
Undoubtedly, the global economic uncertainty created by the coronavirus pandemic has added to gold’s lustre. With
governments preparing further economic stimulus policies, investors are flooding back to gold as a safe haven. This has
pushed the gold price beyond $US1,700/oz in recent weeks, a 25% increase on 12 months previously.
Gold mining stocks have been understandable beneficiaries of spot gold’s movement but until recently that hadn’t filtered
down to juniors.
So, why the change in sentiment?
The quality of the exploration is a key driver for the interest. Led by Bellevue Gold Ltd and De Grey Mining Ltd, the West
Australian gold sector has enjoyed some remarkable exploration results.
These stories would find investor support in any part of the cycle but the market is now beginning to hunt for replica stories
capable of growing in the same way as Bellevue (up 275% since March) and De Grey (up more than 2,000% since mid-
December).
Companies such as Musgrave Minerals Ltd and Rox Resources Ltd have reaped the rewards of this mood, posting major
price gains on the back of a string of high-grade results on their respective WA projects.
These are not “director’s specials”, these appear to be genuine exploration successes, albeit still in their infancy.
Behind them is a growing group of eager explorers, intent on catching the market’s gold wave while they can and therein lie
the danger signs that the trend could turn into a bubble.
While grades continue to impress, not every project can have the potential of a Bellevue, Hemi or even Cue. Investors,
however, struggle to be so discerning and by supporting almost every new gold play on the ASX, they are sowing the seeds
of an inevitable crash.
Behind those with existing projects, there is an army of explorers who are desperately switching out of base metals, battery
minerals and other commodities and into gold.
There is a distinct rush to secure a gold project, any gold project, preferably in WA. On June 29 alone there were 20
company announcements concerning gold projects. Of these, four related to new project acquisitions and a further five
reported maiden exploration programmes on newly acquired projects. Whether any of these can be translated into success
is anybody’s guess but, as every commodity-related exploration trend has shown in the past, there will be more failures than
successes.
The gold exploration sector is rightly basking in the warmth of the market’s light at the moment but how many junior explorers
have the technical capacity, imagination and luck to make the most of it in the field is still up for question.

dominic@paydirt.com.au @Paydirt_Media @paydirtmedia @PaydirtMediaAustralia

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