JPM-Australian Gold Miners Updating sensitivities (again) as gold moves within a stones throw...-20251007

Key takeaways: 1) spot gold has risen another ~$200/oz since our update last week,and while valuations remain stretched on our US$3,750/oz LT price, scenarios at/just above spot have enough value support and keep us positive on the space, 2)while a substantial premium to historical exchange ratios, CMM’s increased bid for WA8 today still appears to be about shoring up longer term life of Mt Gibson,and may provide grade sweetening options, and 3) with gold quarterlies kicking off next week, pre-releases from RRL and BGL saw volumes broadly in line with JPMe. Our pecking order remains unchanged. We remain positive on NEM (OW;PT $137/sh) and EVN (OW; PT $11/sh), while NST screens at fair value in our view (N; PT $23/sh). In the mid caps, we prefer CMM just ahead of GMD, and we remain positive on RMS and RRL (both OW).

•Reviewing sensitivities at higher prices. Last week, we upgraded our LT gold price to $3,750/oz to broadly align with spot (link). Gold has added another ~$200/oz, and our valuation sensitivities run at $4,000/oz are close to reaching their use-by date. We highlight scenarios at $4,250/oz (Figure 2 ), yielding an average 12% upside on a blended basis. We run sensitivities across our entire coverage from $3,000/oz-$4,750/oz in our stock specific sections below.

•CMM tops up bid for WA8. CMM’s all scrip bid for Warriedar (WA8) announced in July already had a hefty premium vs the 18mth historical exchange ratio (~58%), but today CMM pushed the offer higher to 86% (Figure 3), taking WA8 investor’s share of the combined entity from ~4.5% to ~5.5%.At today’s close, WA8 was trading at a 5% discount to terms. Given its early stage (resource defined), we have not explicitly incorporated WA8’s Golden Range project into our CMM model, but note the company’s resolve in getting the deal done. The key prospect at Golden Range is the 1Moz of resources sitting below the historic Ricciardo pits, and while its average resource grade of 1.6g/t is ~double that of the Mt Gibson deposits, it is located ~100km from the Mt Gibson mill. Granted mining leases present options for CMM to accelerate delivery of higher grade ore to Mt Gibson, along with its developing underground resource.

•Pre-quarterlies starting to roll out - BGL and RRL broadly in line, rainfall radar, short interest. EVN kicks off quarterly reporting for the golds next Wednesday, but BGL and RRL pre-released selected metrics today. RRL production was in line and cash ~$46m/7% beat vs JPMe. BGL production was a 5% beat, with $26m ploughed back into pre-delivering 9.5koz into the hedgebook, a strategy we expect to continue in subsequent quarters with ~27% of our 3y forecast production hedged. As we flagged in our Rainfall Radar (link), we aren’t expecting too much impact from rainfall at assets under coverage, but note Kalgoorlie and Jundee recorded 10y highs in the month of August (albeit well below wet season peaks).