Gold prices have risen by 10% in AUD terms and 7% in USD terms in FY18YTD. Funds flow has been predominantly into grass roots explorers evident in the surge of the ASX Small Resources (XSR) index which has risen by 36% FY18 YTD vs the ASX Gold Index (XGD) up just +14% FY18YTD. Equity valuations of the mid-tier producers continue to look stretched and we struggle to identify significant value. Emerging developers have recorded only incremental gains which presents an opportunity for investors looking for companies that screen cheaply with short timelines to production. Our key picks include Regis Resources (RRL) in the producers and Dacian Gold (DCN), Gascoyne Resources (GCY), Gold Road (GOR) and West African Resources (WAF) in the emerging developers. We also identify the next tier of potential development plays including Explaurum (EXU), Genesis Minerals (GMD) and Alice Queen Ltd (AQX) who look to make the transition into production. Catalyst Metals (CYL) is also attractive with a belt scale play in proximity to Kirkland Lake (KLA) Fosterville operations.
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