What do you think is a good percentage of gold to hold in an investment portfolio?

Hi @rija - I'm sorry but that is a question that can't be answered, as in, how long is a piece of string? It depends on so many things at an individual level, including what you are trying to achieve by holding gold, and the type of gold exposure you choose, i.e. physical gold, ETFs/ETPs or gold producing companies.

You could hold gold because:

a. You're super bearish and think everything is going to go to sh!t and gold may be one of the only things that is likely to hold its value;

b. you're just bullish on the continuing rising gold price over time and want some of that;

c. you believe that in the shorter term gold is more likely to rise than to fall so you want to trade on that; or

d. you are just trying to create a more balanced portfolio across asset classes for risk mitigation and portfolio construction purposes.

...for example.

So perhaps a licensed financial planner could answer that question once they know your personal circumstances, and what you are trying to achieve, but in my case, while I'm a gold bull, my required exposure to gold changes regularly. I always want exposure, but some times more than others.

Sorry I can't answer your question.

@rija one of the things i have learned moving from "professional" investment to retail, is there is no one right answer for everybody. there are too many variables when it comes to individual risk/return, objectives tolerances etc. i have read boilerplate ie generic strategy that has said around 2% weight in gold but unfortunately, you are on your own, or you could use an advisor who has much more info than i have about you, but that up to you. you can see i am at 5% and regard that as full.

I think that you definitely are better off holding shares in an M&A target @skaex than someone who needs to make an acquisition, particularly when gold prices are at all-time highs and nothing is likely to be sold cheaply in that environment, however I long ago gave up investing on the basis of likely or probable M&A activity, because I realised that if it doesn't happen, I'm probably holding a company that is not one of my very best ideas as a standalone company.

De Grey Mining (DEG) has a market cap now of around $3.5 Billion, making them one of Australia's largest gold companies, despite them still being a developer, not a producer, so it is unlikely that anyone smaller than De Grey are going to be able to raise the funds to buy De Grey. It's not impossible, just unlikely. Regis (RRL) for instance, would really struggle, because with the benefit of hindsight, the market consensus at the time (and since) was that Regis overpaid for the 30% of Tropicana that they bought off IGO a few years back - and that was around $900 million, from memory, and DEG would be more than 4 times that - as a premium would have to be paid to get that deal over the line. My view is that Northern Star Resources (NST) is the only Australian HQ'd gold producer capable of raising that sort of cash - NST's market cap is over $20 Billion today.

Evolution Mining (EVN) is the next largest of the Aussie gold producers (after NST) - and EVN's market cap is a little over $10 Billion, but Jake Klein has clearly stated that he is NOT looking to buy ANYTHING with the gold price this high - see here: https://strawman.com/forums/topic/4503#post-30461 - which is a very sensible strategy in my view.

So - the companies who are most likely to pay up for M&A at the top of the market in my opinion are the ones whose management have a track record of doing it previously (overpaying) or who are desperate to buy growth - companies like Vault Minerals (VAU), run by Luke Tonkin who overpaid for a few different asets at Silver Lake Resources, or Regis Resources (RRL). However, all of the decent Australian gold projects are currently owned by companies whose share prices are reflecting that - there are no bargains in my view, at this point in time, just a few that have some serious growth in the future which might not yet be fully priced in.

Something else to look at are strategic stakes. One example is Spartan Resources (SPR), who used to be known as Gascoyne Resources; Spartan's share price has more than tripled over the past year from under 50 cps to now over $1.50/share, and they've got a number of companies around them who would love to own their assets, but perhaps not at these levels. The most important thing to note however is that Ramelius Resources (RMS) own 17.94% of Spartan, and any company that owns 10.1% or more of any ASX-listed company can block all other companies from fully taking over that company - they call it a "blocking stake" because it blocks all other suitors from taking over the company without the owner of the blocking stake agreeing to it. It is possible, but not likely, in my opinion, that RMS would make a bid for SPR, and my reasoning is that RMS have a track record of good M&A discipline, i.e. not overpaying, and SPR look expensive up here at over $1.50/share.

De Grey (DEG) has Gold Road Resources (GOR) on their own register with 17.85% of DEG, so GOR have a blocking stake in DEG, however GOR aren't necessarily going to takeover DEG, as GOR's m/cap is only $2 Billion, so DEG is almost twice as expensive as GOR is. Also, GOR has been happy in the past to be minority shareholders or part-owners of businesses; Gold Road's only current producing gold mine is Gruyere in WA, which is 50% owned and 100% operated by Gold Fields Ltd (who are not listed on the ASX), so GOR only own half of Gruyere and are not the mine operators there.

Something else to consider is that the companies that need to buy growth, are themselves currently priced at a discount to their peers, as Regis (RRL) is, because M&A is expected from them at some point in the absence of significant exploration success, and they're either going to have to go overseas where assets are less expensive, or pay up (at over the odds prices) for something here in Australia, and the market would very likely react negatively to both of those scenarios.

So my strategy is to stay invested in the best gold producers here in Australia who have plenty of organic growth without any requirement for M&A, but who have track records of smart, strategic M&A in prior years, i.e. buying good assets at either cheap or reasonable prices. The best M&A is done at or near the bottom of the cycle, not up here, and the best M&A is often done by companies who don't NEED to do it, but are doing it because there's an opportunity. That is RMS' strategy - they will buy good assets at reasonable prices, but if somebody comes over the top and offers a higher price, as Westgold (WGX) did with Karora recently, RMS are happy to walk away, because they do not NEED to buy, they just do it when it makes commercial AND strategic sense, at a good price, not an expensive price. Karora were TSX-listed (Canadian stock-exchange listed) so they were cheaper than Aussie gold companies are, but the price WGX paid for them was more than RMS were prepared to pay.

In summary, I think positioning yourself in the best M&A targets is a strategy that is more likely to work when companies look oversold @skaex - but will work less well when the market is booming and assets are either fully priced or overpriced. Everything that is an obvious M&A target (like Spartan) already has a significant M&A premium in the share price, making them look expensive to likely suitors - remembering that any takeover would have to be pitched at an even higher price to account for a control premium over and above the current market price.

So, no, I see no opportunities in that respect, because of where we are in the cycle and the prices of those likely M&A targets already being so high.

Hope that helps.

At the right price, the following companies will likely get taken over at some point, because of what they own, and where they own it:

1. Magnetic Resources (MAU), good grades, but no gold mill, and there are gold mills around them who could process their ore. Problem is that their MD dropped the names of two companies that were interested (in their dataroom) during this year's D&D (Diggers & Dealers conference in Kalgoorlie) which told the market that the company was definitely for sale, and scared off those two potential buyers, at least for now, because they clearly can't rely on any sort of confidentiality from MAU's MD, so MAU may still be in the sin-bin.
2. Spartan (SPR), as already discussed, if they either get cheaper, or find significantly more gold.
3. M2M, Mt Malcolm Mines, who are very, very broke, so could be bought up for pocket change if the alternative was to go into VA, but while they are finding good grades, they don't appear to be consistently high grades across a large enough area yet to make them a worthwhile M&A target. Well positioned in terms of Genesis' Leonora mill (formerly known as Gwalia) being so close to their tenements. Not something I would want to own, because one possible scenario is they run out of money and funding options and go into VA, and then somebody like GMD (Genesis Minerals) buys their assets directly from their administrators, so in that scenario shareholders in M2M lose 100%.
4. Patronus Resources Limited (PTN, formerly Kin Mining NL) are also in that same area, and still actively drilling - as they do actually have some money to drill, unlike M2M, however the most likely buyer of PTN would again be GMD, and GMD have already bought the two assets from PTN (when they were still known as Kin Mining) that they wanted, so, in my view, PTN would have to find substantially more gold before GMD would once again become interested in them.
5. De Grey (DEG), but only by a larger global gold producer, and I'm not sure if there are any who want to take on DEG before they have built themselves a mill because at this stage there's substantial development risk associated with DEG who are out finalising their own funding package to build their mill and associated infrastructure - which will likely cost billions.

There would be others, and perhaps other Strawman members can add a few ideas, but they all have to make sense at the time and be at the right price, and I'm thinking that time isn't now.

Additional: Meeka Metals (MEK) who are firing up an old gold mill again near Meekathara in WA could also be an M&A target at some point.

That's exactly what I have in mind, @Bear77: identifying a good asset at a reasonable price that has the potential to become an M&A target. I have never considered this strategy before, but I note that some of the more mature producers, including RRL, are in need of new assets.

While the price of gold is indeed high today, I believe that with the increasing US debt and the inflow of significant capital into BTC and other store-of-value alternatives, the price of gold will continue to rise.

I appreciate your insights; they are always valuable. I knew I asked the right person.

No worries @skaex - just on Meeka Metals (MEK), who I mentioned on Thursday - they released their September quarter cashflow report and activities report on Tuesday (29th Oct) and their SP shot up +11.69% from their 7.7 cps close on Monday to close at 8.6 cps on Tuesday; they then provided a Murchison GP (gold project) update on Wednesday - see here: Murchison Development Update (30th Oct) and their SP rose another tenth of a cent to 8.7 cps. Then on Thursday they called a Trading-Halt.PDF before trading had commenced to organise a CR to take advantage of this new level of popularity amongst gold company investors:

They achieved a 12 month high share price of 9.25 cps intraday on Wednesday before they closed at 8.7 cps, as shown above (right, top). They didn't trade on Thursday or Friday due to being in that trading halt which they called for at 9:19am (AEST) on Thursday.

The Money of Mine (MoM) crew were talking about lithium companies (MinRes, Liontown and Pilbara Minerals) for 48 minutes in their Thursday podcast - and then they discussed this Meeka Metals (MEK) capital raise, for which they appear to have all the details as well as the rationale behind it, coming hot on the heels of MEK's CR in September (first week of), so only 8 weeks ago.

Yes it's clearly opportunistic, due to their recent share price spike up, but if the proceeds are used for what the MoM crew think it will be used for, it's a good deal for MEK shareholders, both current and future / prospective shareholders.

If interested, the following link will take you directly to that section of the poddy where they discuss Meeka Metals: MoM: Meeka launch surprise raising (on Thursday 31st October 2024).

I did hold MEK for a trade in July/August, but sold out too early clearly. Still, a profit is still a profit, even when it is a smaller profit than it might otherwise have been. I almost bought back in after that September raise, but went with a much larger company instead. Apparently they are raising at around 7 cps this time, so a discount to their last traded price, but still above where they were trading up until October 21st - being less than two weeks ago.

You know what they say; best to strike while the iron is hot, and Meeka are certainly hot right now.

Additional: At the end there, I meant "strike while the iron is hot" in relation to raising capital, not buying their shares, to be clear. I don't hold them.

Monday 4th November 2024:

Yep, Meeka Metals (MEK) have raised $35m at 7 cps, which, when added to the $28m cash they already had, means they are fully funded through to gold production at Murchison (near Meekathara in mid-WA) with zero debt and zero hedging, a sweet spot to be in for sure.

See Here: Strongly-Supported-Institutional-Placement.PDF

And of course the share price dropped down to close bang-on that 7 cps CR price:

Still, as I said, that 7 cps level is still above where they were trading 2 weeks ago (up until 21st Oct).

Who's next? I reckon that Yandal Resources (YRL) are going to call a trading halt either tomorrow morning or very soon, as they definitely need to raise capital, and why wouldn't they, after this stellar recent SP rise?

So, MEK was the Aussie gold sector's worst performer today (down -19.54% to 7 cps) due to that CR (priced @ 7 cps), while YRL was the sector's best performer today, rising another +22.58% to close at 38 cps, and they've had a few outstanding trading days recently:

That's 6 days (including today) that YRL have had greater than 10% SP rises, and one of those was a +115% SP rise on the 21st. Their share price has risen by more than +3% on 11 of the past 15 days (including today). Since October 9th, when they closed at 8.4 cps, their SP has risen +352.38% to today's 38 cps close - and they did trade as high as 39 cps earlier today (their new year high).

And they need to raise - see below:

Source: Yandal Resources' September (2024) Quarterly Activities/Appendix 5B Cash Flow Report released on 31-Oct-2024

They had less than 2 quarters of funding remaining at 30th September, based on their $2m per quarter cash burn rate, remembering that they are explorers and wanna-be developers, not producers, so they don't have any income other than what they can raise from shareholders and lenders.

And, as shown above, they have indicated that they intend to raise capital within 6 months, more likely sooner than later I would suggest.

On that basis, and the fact that they are only spending $2m/quarter, so they don't exactly have a massive drilling campaign ongoing, I wouldn't be going anywhere near YRL.

MEK however is a totally different kettle of sardines; MEK are substantially derisked now, and are debt free and have zero hedging so are fully exposed to a rising gold price at a time when they're bringing an old mill back into production.

05-Nov-2024: So YRL have NOT called for that CR trading halt today - which was probably a good move considering it's a rather negative day across the gold sector - but I still expect them to soon - especially if their recent monumental share price rise loses momentum and they actually start to fall - they're up 1 cent today in a sea of red across most of the sector - so they're doing OK today.

However SBM, they didn't wait:

St Barbara (SBM) the Worst performer today in the Aussie Gold sector (-20.65% already this morning) after calling a halt to raise $110 million at 38 cps, which includes a $100m placement and a $10m SPP. Always a bad sign when your share price drops below the SPP price on the day you announce it, but that's how these smaller goldies tend to roll - wait for some SP strength and then raise capital. The smarter management teams anyway. The really dumb ones wait until the lights are about to be switched off permanently and then they raise capital at rediculously low prices causing massive dilution to their pissed-off shareholders, except for the ones putting in the fresh capital at the rediculously low levels.

I have discussed SBM's issues here recently - and said that Simberi (in PNG) is where they should be focused because they are pushing sh!t uphill over in Nova Scotia with their Atlantic assets along Moose River, so while I no longer hold SBM - since the middle of last year - it's positive for their shareholders that they are raising this $100 to $110 million "to accelerate development of Simberi Sulphides Expansion" including a new ball mill (A$58m), upgraded wharf (A$33m), and A$23m for a new run-of-mine (ROM) pad to accommodate sulphide ore feed and blending plus the construction of a permanent facility to locate the sizer (already acquired in FY25 under Pre-Construction Growth Capital) for crushing of the ore and the transfer conveyor onto the existing conveyor system which feeds the radial stacker onto an apron feeder and into the SAG mill. Building the new ROM pad and permanent sizer facility and conveyance early aligns with the construction of the new life of mine haul road which replaces the overland rope conveyor (haul road already planned for early construction under Pre-Construction Growth Capital) and ensures switchover to sulphides ore can commence on early schedule.

Source: Institutional-Placement-and-SPP-to-Accelerate-Simberi.PDF [today: 05-Nov-2024]

This is a project that Bob Vassie was keen to do some years ago back when he was running SBM, before he retired from front-line management and became the non-executive Chairman of Ramelius Resources (RMS, which I do hold) but at that time they still needed to do more drilling to prove up the investment case for "Simberi Sulphide". Well, they have certainly dragged their feet on that since he left and SBM went through a few different managers who all seemed to act like rabbits caught in spotlights, and now they've lost all of their decent assets (sold to GMD last year) and all they have left to spend money on is Simberi and the Atlantic assets in Nova Scotia, and, as I said recently, money spent in Nova Scotia is money wasted because of where their assets are located, so Simberi is their only sensible option, and it's positive that they have finally decided to do what I've been wanting them to do for a number of years, albeit now that I have no direct interest in the company.

It will be sad to see that rope conveyor replaced with a haul road however. I have some sentimental attachment to that, even though I've never visited Simberi Island in PNG. I have however worked on similar conveyors between South32's (S32's) Boddington Bauxite mine and their Worsley Alumina Refinery in WA for almost a decade, so that's why I probably like that rope conveyor. My brother has worked on a number of other steel rope-driven conveyors around Australia, including in the Hunter Valley. But that one on Simberi Island is a unique one because of the terrain it goes through.

I thought gold was having a bad day today (Tues 5th/Oct) but it seems all of the sectors are having a bad day and gold isn't one of the worst:

That's the mid-day snapshot anyway. NST and EVN have turned positive after I typed up that previous post about SBM's CR. Sentiment around St Barbara (SBM) hasn't improved over the past couple of hours however, now down -25% today to 34.5 cps (closed at $0.46 yesterday) - just bad timing I reckon, plus perhaps people are realising that buying these smaller developers (and explorers) up on drilling results is perhaps a little naive when they have to spend millions to process the ore, even when they already have a mill, which in SBM's case at Simberi requires over $100m worth of upgrades before it can process the sulphide ore that comprises the vast majority of what's left for them to mine there on Simberi Island. There is gold there, no doubt, but they needed to spend a fair chunk of money first before they can realise any value from that gold, so in that respect perhaps it's a bit of a reality check for the punters.

It is strange how much gold companies can get bid up on high grade drilling results without, it seems, much regard for how they are going to extract that gold from under the ground and process it economically to enable them to actually make some money from it, and/or how long all that is going to take.

That's probably why I tend to gravitate more towards the larger multi-mine producers these days - like NST and EVN - who are in the minority of Aussie goldies that are in the green today - who are still finding more gold, rather than those more speculative players at the smaller end who carry so much more execution risk.

Question for you Bear.

I believe you traded in and out of MEK previously. With this raise completed and MEK stating fully funded through to revenue would you reconsider taking a position? Or has MEK served its purpose for you?

No - I think MEK is looking decent right now @thetjs - I believe they have decent people there, decent management, and they've made some smart moves already that have improved their future outlook, including repaying their debt and being able to get out of the associated offtake agreement that would have seen a proportion of their gold having to be sold at 20% of the spot price - a rather diabolical deal for them, but very profitable for their lender, however they managed to negotiate a pay-out clause that allowed them to raise capital and extinguish all of that debt and those assocated agreements at any time, leaving them debt free and hedge free, which is exactly what they've just done.

And I believe they are going to have a decent mill there at Murchison once the refurb is completed. So having exited Bellevue a few months ago, on the basis that their management just can't be trusted to do what they say they're going to do, I reckon Meeka look like a much better proposition - as an emerging gold producer, albeit a lot smaller company, with lower gold grades than Bellevue, but a management team I feel I can trust to continue making smart decisions that are in the best interests of their shareholders and increase the company's future value.

And they are in a good area from the point of view of other companies - like RMS and WGX - keeping an eye on them as a possible future acquisition.

So, yes, once this US election is out of the way, I will probably re-establish a position in MEK, assuming I have some cash left. I've got cash now, but that's there to deploy if any face-slapping opportunities arise over the next few days, so if the next few days are relatively calm, and I don't deploy that cash, or all of it, then MEK will be back on my shopping list, depending on where they are trading at the time. Current levels are fine. I don't know if I'll be in them for a good time or a long time, or both, but I'll likely be getting back in at some point in the next few weeks.

BTW, gold did end up being the worst performing sector today after all, both because some gold companies went further south and also because there was a partial recovery during the arvo in some of the other sectors.

@thetjs - Additionally - here's the MoM crew's take on the recent positive sentiment shift for junior gold companies on the ASX - from their poddie today (Tues 5th Nov) - Junior goldies sentiment shift [Money of Mine podcast excerpt] - MEK are mentioned. It's interesting - most of these small goldies couldn't get arrested a few months ago, and now a few of them are flying. Actually the entire podcast is worth watching (except for their ads):

We Check Out These Small Cap Bolters Money of Mine [Tues 5-Nov-2024, Melbourne Cup Day]

Chapters:

0:00:00 Intro

0:02:40 Small caps we've got our eye on

0:23:55 Junior goldies sentiment shift

0:30:45 Matty's big M&A predictions

Cheers Bear. Appreciate the response and insight.

I have a small IRL position with MEK that I increased after the TH lift earlier in the week. Each announcement from the team at the moment seems to be nicely building on the last one.

Add in the chance of the gold price sitting where it is long enough for them to get into production it could (always the key word) be a great little earner.

Yet to listen to this one as yet but aiming to before the week is out.

Hi @thetjs - I'm also back on the Meeka (MEK) train, having bought 400,000 of them at between 6.6 and 6.7 cps today, some this morning at 6.7 and some this afternoon at 6.6 cents, so I've got around $26 K to $27 K of them, based on them being at one of those two prices when they close today. Picking them up at below that recent 7 cps CR price is a good level in my opinion.

They are well positioned, and their management have skin in the game.

Source: Building an Unhedged, Zero Debt Gold Producer Presentation.PDF [04-Nov-2024]

However, it pays to set realistic expectations. They are guiding for first ore to be processed in Q1 of FY26, so that would be around July or August next year (2025) according to this:

Source: Strongly-Supported-Institutional-Placement-[MEK-04-Nov-2024].PDF

...So gold production should be around 8 to 9 months away, and that seems like a realistic timetable based on their considerable progress to date.

There are also a number of catalysts that may drive the price higher in the meantime, such as all of the stuff that is happening next month (December 2024) as detailed above, however their SP may drift down on no news in the first half of calendar 2025 through until the plant commissioning and the Andy Well depth extension drilling planned for June. Remember the Lassonde curve. On that basis, I don't know whether I'll be holding Meeka right through the next 12 months. I may trade them, but for now I'm back in. Good entry level for where they are at, and plenty of newsflow next month to get the market more interested.

Yes that 8 to 9 months will come quickly I feel. I’ll be holding through that period. The idea of trading in and out over that timeframe gives me hives at the thought of mistiming both the exit and re-entry.

Will consider an increase in the holding at some point in November pending some further thinking and whether the price continues to sit at this level.

My main thought at the moment is really where the gold price is going to go over the next 5 years. Some of the forecasts are interesting.