On what was expected to be another disappointing day for the ASX, the index has instead made impressive gains in the opening hour of trade. Leading the charge is Resolute Mining Limited [ASX:RSG], up seven cents, or 5.94%, to $1.16 per share. The move comes on the back of a strengthening gold price as US markets begin to falter.
Forward gold prices looking strong
With gold spot price shooting up 1.5% to US$1,262.16 per ounce overnight, Aussie gold miners are some of the best performing companies on the ASX this morning.
Along with a strong gold price, Resolute announced this morning it has forward sold an additional 30,000 ounces of gold at an average price of $1,783 per ounce. with scheduled monthly deliveries of 5,000 ounces between July 2019 and December 2019.
According to Bloomberg, investors have been boosting holdings in bullion-backed exchange-traded funds as of late, as spot prices continue to rise.
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In an announce released this morning RSG stated the additional forwards sale is part of the company’s Australian dollar hedging, which intends to protect projected returns from the Ravenswood Gold Mine in Queensland during the staged development phase of the Ravenswood Expansion Project.
This development phase is set to see the Ravenwood project back to large scale operations, delivering a 14-year mine life.
Managing Director and CEO, Mr John Welborn, said in today’s announcement he was pleased to continue RSG’s success in maximising gold sales revenue through responsible hedging strategies.
‘We continue to actively manage our gold sales and undertake hedging to take advantage of gold price volatility, maximise revenues, and protect the Company’s balance sheet. A small increase in our Australian dollar hedging position at levels significantly above our budgeted gold price will further protect the Company’s revenue and cash flow generation in 2019.’
Resolute Mining’s share price to continue to strengthen
RSG, among other Aussie gold producers, have seen strong interest in their forward gold sales program. Today’s announcement sees Resolute’s forward sales increase from 55,000 ounces to 85,000 ounces sold at an average price of US$1,250.
St Barbara Limited [ASX:SBM] has shared similar success, last week announcing it has entered into an additional 50,000 ounces of forward gold contracts at a price of US$1,300 per ounce, close to Goldman Sachs forecasted spot price.
Saracen Mineral Holdings Limited [ASX:SAR] have made a strong start to their FY2019 exploration campaign. In a recent announcement the company outlined a strategy to increase production to 400,000 ounces per annum, committing $60 million to further exploration of FY2019.
With 2019 only weeks away, Australia’s gold producers could be set for a bumper year. As the yield curve of US bonds flattens, potentially signalling a downturn in the economy, investors will be looking for safer investment options as markets begin to look increasingly volatile.
For Money Morning
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