AIM-listed gold and nickel player Katoro Gold (LSE:KAT) says the climbing price of gold has had a positive impact on its well-received plans to exploit a South African gold resource.

The spot price of gold hit a seven-year peak of $1686.74/oz on 24 February, reaching record levels against the Euro and Canadian and Australian dollars.  

Global fears about the spread of coronavirus and its effect on global supply chains caused a growing flight to safety on Monday as Italian authorities enforced a quarantine around a worsening outbreak of Covid-19. The Dow saw a 1,000 point drop that day, while the FTSE 100 cratered nearly 4%.

Nicky Shiels, commodities analysts at Scotiabank, noted that Covid-19 represented a “black swan” or unforeseen event that could roil global markets for months to come, with gold prices “doing what they should given renewed global growth risks”. Prices have already “taken out our average forecast for 2020 ($1,600) and it’s likely the floors are shifting up,” Shiels added. 

The gold price has since edged backwards a little from its multi-year high to settle around the $1,650 mark. But with fears about the spread of coronavirus in Europe, we would suggest that jittery markets will support this price point in the near term. 

All of this means good news for gold producers, especially those who can point to near-term revenue. 

Katoro intend to reprocess an existing gold tailings resource rated at approximately 1.34Moz at a South African mine owned by Blyvoor. It and entered into a joint venture with the company on 30 January 2020.

Reprocessing of gold from tailings is a relatively new technological approach which examines and exploits mining materials previously thought of as waste. This process gained popularity in South Africa in the 1970s, using a technique known as flotation to recover pyrite uranium and gold. Given the vast amount of tailings (in the region of hundreds of millions of tonnes) produced from gold mining, more efficient scientific methods developed in recent years have been able to extract and recover metals that were not discovered in the original mining process. 

Katoro agreed to provide a loan worth £790,000 to the JV. £263,000 of this amount has already been advanced with the remaining £527,000 expected to be released in the near future. 

To fund the loan Katoro issued a convertible loan note to SI Capital for £397,000 and secured £400,000 from Sanderson Capital Partners. 

Katoro said in a 25 February market update that it had issued notice to Sanderson that it intended to draw down the additional £400,000 in full to fund ongoing work. 

Executive chairman Louis Coetzee noted that his team was “very pleased” with progress so far, saying that feasibility studies and plant design were progressing ahead of expectations. 

“The Board notes the strengthening gold price which further bolsters what we consider to be very robust project economics,” Katoro said.

Shares in the London-headquartered explorer have gained 325% in the last 12 months. On this latest news, the KAT share price has gained 3% to 2.7p. 

Author: Tom Rodgers

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