Spot gold prices continue to surge to record levels, surging beyond US$2,900/oz. For the Australian gold producers, the environment is even more buoyant, with prices now treading above A$4,650/oz for the first time. All of the key gold producers in our coverage universe are generating strong free cash flow and rapidly building cash balances. By the end of June, we expect RMS, VAU, PNR and GGP to have increased gross cash to 20-30% of the respective market caps. Free cash flow generation at spot in the next six months is dominated by RMS, GGP, PNR, WGX and OBM. We retain or preference for stocks that can demonstrate strong organic growth, with GMD, CMM and CYL preferred on this metric. NST is preferred over EVN, while WGX and GGP offer the greatest value. We downgrade OBM to HOLD following a strong share price move.
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