Argonaut has revised its near and long-term gold price forecasts. Gold as a defensive investment remains a key theme. We take the view that market jitters related to the Chinese Coronavirus (COVID-19) outbreak and its impact to global GDP, dovish monetary policy and uncertainty leading into a US Presidential election, will all serve to underpin a risk-off environment beneficial to gold prices. We believe that despite the recent large M&A deals, the Australian “G-5” (the core group of five +300kozpa mid-tier gold producers – NST, SAR, SBM, RRL and EVN) will continue to backfill mine-life inorganically via the acquisition of nearby satellite deposits. Investor preference continues to favour premium producers in the G5 such as NST and SAR thanks to their diversified assets, high free cash generation, predictable production and value add M&A. We see this premium accelerating further in the current gold macro. We believe single asset producers will have to work hard to win confidence over their multi-asset rivals. With high equity prices, we see a market ripe for scrip-based M&A deals for quality satellite assets in companies such as Apollo Consolidated (AOP), Bellevue Gold (BGL) and Genesis Minerals (GMD).
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