The ASX gold sector is nearing the end of the June Q against a backdrop of record AUD gold pricing. Gold prices have had a solid run, largely as a result of dovish US Federal Reserve Policy, geopolitical risk and ongoing US-China trade war tensions. ASX miners are running at a AISC of $1,083/oz (March Q) versus a gold price of $1,845/oz June quarter to date. Whilst a key positive is a +37 year-high AUD gold price, the recent ramp-up issues with GCY, production downgrades for DCN and production delays for GOR gives us cause for concern that the developers have lost their investment appeal. Smaller producers and explorers offer better value and upside against their fully valued mid-tier peer group, having been left behind in the recent surge of top-end valuations. Argonaut’s gold coverage universe trades at ~1.1x P/NAV and 9.5x FY19 EV/EBITDA. The mid-tiers continue to trade on premium metrics (1.2x P/NAV and12-14x EV/EBITDA) vs our NAV, despite little or no production growth forecasts in FY19-20.

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