The gold spot price soared to a high of US$1,600 after the assassination of Iranian Commander Major General Qassim Suleimani and Iran’s retaliation on US bases in Iraq, which sent investors flocking to the safehaven asset.
These tensions have since de-escalated, and phase one of the US–China trade deal was also signed not long after. Despite geopolitical tensions cooling off, the gold price has held steady at the US$1550 level, while the gold spot price in Australian dollars is near record all-time highs.
It will be interesting to see how gold producers have leveraged the higher gold price as we approach quarterly reports and reporting season in February. ASX gold shares are currently trading higher than their standard valuations, however, if the miners report positive quarterly reports and half-year updates, this could easily re-rate their valuation.
Which top-tier ASX gold miners should you be watching?
Evolution Mining Ltd (ASX: EVN) provided an operations update that one of its mine sites has experienced an unanticipated loss of ore tonnes in areas that were planned to be mined over the remainder of FY20.
This will negatively impact its Mt Carlton site, which will see a significant increase in all-in sustaining cost (AISC) from its original guidance of A$800–850/oz to A$1,150–1,225/oz, and a lower production range from an original guidance of 95,000–105,00oz to 70,000–75,000oz. As a result, the group’s production will be at the bottom end of its guidance of around 725,000 ounces while its AISC guidance will remain unchanged between A$940–990/oz.
It is disappointing to see that one of the lowest cost producers has experienced operational challenges during a period that represents a significant earnings opportunity. However, Evolution still maintains its position as a very low cost producer and despite its challenges it should still be able to meet its FY20 guidance.
Evolution shares are currently trading for $3.78, down 1.56%. I believe that this could be a buying opportunity at today’s prices.
The Saracen Mineral Holdings Limited (ASX: SAR) share price is up more than 15% this year following the significant acquisition of the Super Pit, one of Australia’s largest and most successful gold mines. The company raised approximately A$796 million for the acquisition, which bolsters Saracen’s production capabilities to compete with the larger players.
As a result of the Super Pit acquisition, Saracen upgraded its FY20 guidance from 360,000koz to 650,000koz while its pro-forma AISC is anticipated to increase from A$1,050/oz to A$1,220/oz. I believe this acquisition will be the next leg up for the Saracen share price, however, investors should wait and see its production figures and costs in next week’s quarterly update.
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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.