The gold price is on the move. At $1,185 per ounce it now trades at a four month high, having recorded a 7.3% gain in the past 30 days. The large cap gold mining stocks are enjoying their biggest rally since the start of 2015 including notable gains in Randgold Resources (RRS) and Fresnillo (FRES).

Yet there is one stock in particular that’s caught our attention in the wake of the gold price strength. Shares in junior explorer/developer Amara Mining (AMA:AIM) have woken from a long slumber, helped by director dealings sending a positive signal to the market. There has also been increased confidence from the company that it will be able to reduce upfront capital costs to build its 6.8 million ounce Yaoure mine in Cote d’Ivoire.

AMA - Comparison Line Chart (Rebased to first)

Amara’s chief executive officer John McGloin has bought shares in the West African-focused business three times over the past three weeks. A spokesperson says the investments are a ‘show of confidence in the company and its assets’, adding that since joining the miner in 2012 McGloin has spent half of everything he’s earned on buying Amara stock.

A number of large African miners are presently reviewing data on Yaoure with a view to potentially becoming a joint venture partner. Amara admits it would struggle to raise the necessary cash to build the mine on its own, hence why it is seeking assistance. It hopes to have a partner in place by the time the bankable feasibility study commences in the first or second quarter of 2016.

Such an event could have a positive impact on Amara’s share price which has been weighed down this year on market fears over how it would finance construction of Yaoure. Bringing in a partner would lower Amara’s own financing requirements and add some credibility to the project.

Yaoure’s pre-feasibility study estimates it will cost $447 million to build, considerably higher than the company’s £57.8 million ($89.5 million) present market value. The miner reckons it can shave $100 million off this amount by optimising the mine plan. Also using a mining contractor or renting fleet could help bring the overall capital expenditure down to between $250 million and $300 million, it says.

GOLDBLN - Comparison Line Chart (Rebased to first)

Panmure Gordon analyst Kieron Hodgson attributes the latest upwards movement in the gold price to a number of reasons including:

  • US economic data consistently missing expectations
  • The Fed may have missed its chance to raise US interest rates
  • Dollar weakness benefiting commodity prices
  • Renewed interested in gold-backed exchange-traded funds
  • Seasonal uptick in demand, particularly from India
  • Geopolitical concerns

RRS - Comparison Line Chart (Rebased to first)

Issue Date: 15 Oct 2015