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4 best ASX mid-tier gold stocks to watch in H2 2023

Northern Star, Perseus Mining, De Grey, and Greatland Gold could constitute four of the best ASX gold stocks to watch in the second half of 2023.

gold Source: Bloomberg

Two catalysts are driving ASX gold shares in 2023.

The first is the Gold, which at US$1,910 per troy ounce remains close to record highs despite falling slightly over the past few weeks.

The second is merger activity. Rising inflation has significantly driven up capex and operating costs, while simultaneously both the titans and the juniors are incentivised to get gold out of the ground as fast as possible while the price holds up.

Newmont has entered into a definitive agreement to merge with Newcrest, creating the largest gold miner in the world. On a smaller scale, Pan American Silver has bought out Yamana Gold. Outside of gold, there’s BHP’s purchase of Oz Minerals, Glencore’s pursuit of Teck, Allkem and Livent’s merger, and even Albemarle’s continued attempts to buy out Liontown Resources.

For some investors with a reasonable risk appetite, ASX mid-tier gold shares could be starting to look attractive. However, it’s important to manage your risk — smaller gold mining companies are usually more volatile and can be riskier than the blue chips.

These four have all seen recent positive developments.

4 best ASX mid-tier gold shares

1. Northern Star Resources (ASX: NST)

Northern Star has entered into a binding asset sale agreement with Strickland Metals to buy the Millrose Gold project in Western Australia. NST is paying $61 million — $41 million in cash and 1.5 million Northern Star shares, which will be issued upon the deal’s completion and subject to 12 months in escrow. Northern is also paying $2 million as an initial good faith deposit.

Millrose has a mineral resource of 346,000oz of gold at a quality grade of 1.80 grams per tonne — and fortuitously, it’s located just 40km from Northern’s Jundee.

Northern Star MD Stuart Tonkin enthuses that ‘the acquisition of the Millrose Gold Project presents a very compelling development opportunity that is accretive to the Jundee life of asset plan as it should deliver us a sizeable low cost, high grade supplementary resource feed. This bolt-on acquisition, which also comes with significant brownfields exploration upside, will provide us with further confidence to plan organic and profitable growth for Jundee, which already is the lowest cost asset in our tier-1 portfolio.’

Northern Star shares are up 77% over the past year despite drifting since mid-April.

2. Perseus Mining (ASX: PRU)

Perseus Mining recently completed the acquisition of Orca Gold, simultaneously obtaining a 31% interest in Montage Gold Corp, equivalent to 33 million common shares. Montage owns three gold projects in West Africa, including the Koné Gold Project, which has an indicated gold resource of 4.27 million ounces, an after-tax net enterprise value of $746 million, and an after-tax internal rate of return of 35%.

The completion of the acquisition marks one of the final steps for Perseus in gaining ownership over Orca's assets, and in particular a 70% interest in the Block 14 Gold Project in Sudan. Cormack Securities analysts consider Block 14 to be one of the most promising undeveloped gold deposits in Africa, with an estimated annual production of 228,000 ounces of gold at a cost of $751 per ounce, and an expected ASIC of $321 million.

Block 14 currently holds a resource estimate of 3.3 million ounces of gold (indicated) and 700,000 ounces of gold (inferred), with a probable mineral reserve estimate of 2.9 million ounces of gold.

The company is also planning to resume preliminary site works at its 70%-owned Meyas Sand Gold Project in northern Sudan. Perseus had temporarily withdrawn its employees from the site in late April 2023, due to an escalation of armed conflict between the Sudanese Armed Forces and the Rapid Support Force militia group, primarily centred around Khartoum, Sudan's capital.

Perseus shares are up 337% over five years but have fallen by 25% year-to-date.

3. De Grey (ASX: DEG)

De Grey was recently forced to answer a media report suggesting that the company's Mallina Gold Project may hold an additional $3 billion worth of gold. The ASX miner responded that investors should disregard the report and wait for the definitive feasibility study scheduled to be released later in the year — though this has not stopped investor speculation.

In further positive news, its Hemi project’s mineral resource has grown by 1Moz to 9.5Moz, resulting in a 1.1 Moz increase in the Global Mallina Gold Project Resource to 11.7 Moz. The measured and indicated resources have also increased by 18% to 8.1 Moz, with the Hemi deposit contributing 6.9 Moz.

MD Glenn Jardine has highlighted that the increase in indicated resources has improved the overall ore reserve and de-risked the project, maximizing its debt carrying capacity. The DFS is progressing according to plan and is expected to be completed within the next quarter.

In addition, De Grey has closed a cornerstone investment of approximately AU$10 million in Novo Resources through the issuance of 35,223,670 common shares of Novo. This investment grants De Grey an undiluted 11.6% post-financing position, with Novo planning to use the funds to accelerate exploration activities at key projects including Nunyerry North, Balla Balla, and Belltopper.

De Grey shares are up 63% over the past year but have been declining since mid-April.

4. Greatland Gold (LON: GGP)

While not yet an ASX stock, Greatland is in the late stages of planning its ASX IPO for later this year — with media reports that it’s planning a potential equity capital raising of AU$50 million to AU$100 million.

There are several positive ongoing developments at the gold company. Greatland has transferred management of the Juri Joint Venture to partner Newcrest, freeing it up to focus more on its 100%-owned portfolio and its new responsibilities at the Rio Tinto Joint Venture.

This exploration farm-in and joint venture covers a highly prospective area close to flagship Havieron, with the project considered to have striking similarities to both Havieron and nearby legacy mine Telfer. Drilling has commenced under a two-stage farm-in agreement.

The Newmont-Newcrest merger also raises possible implications; Greatland has a 30% economic interest in Havieron, while Newcrest controls the remaining 70%. A definitive feasibility study is ongoing, with both parties expecting to use Telfer as the processing plant subject to a decision to mine.

Greatland Gold shares have fallen substantially from their record high of 37p in December 2020 to circa 7p today. However, the IPO alongside JVs with two majors could leave the gold stock oversold.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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