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Will 2021 be a good year for gold?

February 10, 2021

Will 2021 be a good year for gold?

Gold is holding firmly to its 2020 gains in the new year, as forecasts from leading global financial institutions point to fresh highs for the precious metal in the coming twelve months.

Gold is holding firmly to its 2020 gains in the new year, as forecasts from leading global financial institutions point to fresh highs for the precious metal in the coming twelve months.

In the past year, the price of gold surged to set record highs and deliver the asset’s best annual performance in more than a decade – with bullion trading at an average price of US$1769.59 per ounce for the year.

Broker consensus is forecasting continued gold price strength, with forecasts of US$1,851 per ounce for 2021 and US$1,794 per ounce for 2022.

By Monday afternoon, 11 January, the LBMA gold price had reached US$1847.25 per ounce.

And according to Goldman Sachs, these gains will likely continue through 2021 to reach US$2300 per ounce as investors seek to protect themselves from rising inflation.

Continuing central bank demand, coupled with low interest rates, are expected to underpin positive performance in the coming year, according to the World Gold Council’s 2021 Outlook.

One country looking to capitalise on this trend is Indonesia, an often overlooked nation with a rich history of gold mining and an increasingly stable and supportive government for gold exploration.

In the past decade the country has surged up global ‘ease of doing business’ rankings from 129 out of 190 countries in 2011, to 73 today. And in the past year, the Indonesian government has bolstered its support for miners – committing to build a new smelter, and winding back red tape with the passing of the country’s new omnibus bill.

Indonesia’s soil was estimated to hold 2,600 metric tonnes of gold in 2019 (placing it fifth globally for mine reserves), while it regularly ranks within the top ten producing countries by volume. The country is also home to one of the largest goldmines in the world, Freeport McRoRan’s Grasberg open-pit mine in the Papua province

Grasberg is far from the only game in town however, with Australian-listed explorer Nusantara (ASX: NUS) also well-positioned to capitalise on these broader trends. The company had an exceptional year in 2020 despite the complications posed by a global pandemic, continuing to advance work on its Awak Mas gold project.

And while global research house Wood Mackenzie is warning gold grades have been in “inexorable decline”, halving in the past two decades (and showing no signs of slowing), exploration work completed in 2020 revealed the site holds 1.53 million ounces of gold at a grade of 1.33 grams per tonne.

The June 2020 Definitive Feasibility Study placed the project’s net present value at US$517 million post tax, marking a 240% increase on estimates outlined in the company’s 2018 Feasibility Study.

Nusantara is working alongside Indika Energy, the third largest coal miner in Indonesia with decades of experience mining in Indonesia, to advance the project

Indika are both a major project partner, and Nusantara’s largest shareholder with its 28% stake in the Company. Indika also owns a 25% stake in the Awak Mas project, with rights to increase its stake to 40% following an additional $US25 million investment.

Their input adds depth to the pool of expertise within Nusantara’s leadership team, spearheaded by Managing Director Neil Whitaker, a 40-year mining veteran who has led teams in Australia and Indonesia, including several senior executive roles with Anglo American, Western Mining Corporation, Clough Indonesia (Petrosea Tbk) and Newcrest Mining.

He is supported by recently-appointed Chief Financial Officer Matthew Doube, who brings 15 years of investment banking experience to the company, including seven years based in Asia. Mr Doube has advised on $20 billion of public market resources transactions and worked for companies including Adani, Standard Chartered Bank, and Macquarie Group.

To stay updated with the latest company news and announcements, please register your details on Nusantara’s investor centre.

 

Reach Markets have been engaged by NUS to assist with private investor management.

 

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