Record Gold Intercept Sends MTC Share Price Soaring 45% (ASX:MTC)

Record Gold Intercept Sends MTC Share Price Soaring 45% (ASX:MTC)

The MetalsTech Ltd [ASX:MTC] share price is up more than 40% after ‘record’ drilling results at MTC’s Sturec gold mine.

MTC share price was up as much as 81% in early trade before retracing to exchange hands for 27.2 cents per share, up 45%.

Today’s jump means the gold and lithium explorer is now up more than 85% in one week.

Over the last 12 months, the MTC share price is also up 70%, outperforming the ASX 200 benchmark.

ASX MTC - MTC Share Price ChartSource: Tradingview.com

Record gold intercept at MTC’s Sturec Gold Mine

MetalsTech today reported it hit visible gold in nine out of 16 drill holes, with bonanza hits in 11 out of 16 holes.

Some highlights include a ‘record bonanza’ result of 1m @ 584g/t Au and 333g/t Ag from 41m downhole in the last hole (UGA-16).

As a whole, the UGA-16 hole intersected 70m @ 9.23 g/t Au and 7.8 g/t Ag from 40m.

According to MetalsTech, its Sturec gold mine in Slovakia possesses a current JORC resource of Current JORC (2012) Resource of 21.2Mt @ 1.50 g/t Au and 11.6 g/t Ag, containing 1.026Moz of gold and 7.94Moz of silver on an open cut scenario with a further 388kt @ 3.45 g/t Au and 21.6 g/t Ag containing 43koz of gold and 270koz of silver on an underground basis.

For reference, the World Gold Council defines a high-quality underground mine as having a gold ore density between 8 and 10 g/t. In contrast, a low-quality underground mine has a gold ore density of 1 to 4 g/t.

Additionally, while open-pit mines tend to have a lower grade, they can be considered economical due to the lower average operating costs.

Metals TechSource: MetalsTech

MetalsTech’s cash position

As stated in Money Morning, MTC reported a net loss from operating activities of $471,000 for the quarter ended 31 March 2021.

Year-to-date (nine months), MetalsTech posted a net operating loss of $1.77 million.

The only cash inflows MTC recorded year-to-date (nine months) was the $3.3 million worth of equity issue proceeds, bringing the explorer’s cash and cash equivalents to $936,000 at the end of the period.

However, MetalsTech is set to boost its cash position, having entered a binding agreement last week with Lithium Royalty Corp (LRC) relating to MTC’s portfolio of lithium assets.

The deal includes LRC making a $6 million cash payment to MetalsTech for a 3% gross revenue royalty over MTC’s Cancet, Adina, and Sirmac-Clapier lithium assets.

Outlook for gold and MTC Share Price

As our Editorial Director Greg Canavan explained in The Insider previously, real US interest rates are the primary determinant of gold prices — that is, the nominal rate of interest minus inflation.

As Greg wrote:

With the recent pick-up in inflation readings, and the fact that nominal long-term bond yields haven’t increased by as much, real yields have been falling into negative territory again.

The more negative they go, the higher the gold price will rise.’

This has been reflected by the following chart from Bloomberg:

Tale of Two QuartersSource: Bloomberg

Gold has been one of the best-performing commodities in May as investors flocked to bullion as a hedge against inflation.

Despite the US Federal Reserve anticipating transitory inflation, the market is pricing in more persistent inflationary pressures.

This is highlighted in the following chart, also from Bloomberg:

Price PressuresSource: Bloomberg

So MetalTech’s significant share price jump today reflects a market more disposed to gold amid inflation worries.

As Diego Parrilla, who runs the Quadriga Igneo fund, recently pointed out:

We have entered a new paradigm that will be dominated by deeply negative real interest rates, high inflation, and low nominal rates — an extremely supportive environment for gold.’

But while gold stocks are re-entering a supportive environment, MetalsTech still has a while to go before it can capitalise.

As MTC’s announcement noted, the explorer still needs to update the mineral resource for its Sturec mine, complete underground mining and scoping studies, and finish a series of metallurgical test work based on fresh drill core composites.

MetalsTech is also completing the construction of a second drill chamber site, expecting to commence Phase II drilling in mid-June 2021.

If gold stocks like MTC are suddenly on your radar, then I recommend reading our free report, which covers the easiest way to invest in gold in Australia.

Regards,

Lachlann Tierney,

For The Daily Reckoning Australia

PS: Discover what is probably the easiest way to start investing in gold in Australia. In fact, it’s as easy as buying a book on Amazon! Click here to read the FREE report.