Southern Cross Gold Shares Drop 9% as Falling Gold Price Weighs on Victorian Explorer Despite High-Grade Hits

Shares of Southern Cross Gold Consolidated fell more than 9% on Friday, as a slide in gold prices to a two-month low weighed on gold exploration and mining stocks across the Australian market.

Southern Cross shares fell 90 Australian cents, or 9.07%, to A$9.02, after trading between A$8.93 and A$9.57. About 488,000 shares changed hands, and the decline cut the company's market value to about A$1.4 billion.

The company did not release any price-sensitive announcement on Friday, and the fall appeared to reflect broader weakness in the gold sector.

Gold slump hits the sector

Spot gold fell to around $4,025 an ounce on Friday, its lowest level in more than two months, as a jump in oil prices raised concerns about inflation and the prospect of further interest rate increases by the U.S. Federal Reserve.

Oil rose after deadly attacks in Saudi Arabia raised fears of a wider conflict in the Middle East. Higher interest rates tend to reduce the appeal of gold, which pays no yield.

The sell-off hit gold stocks across the board. Ora Banda Mining fell nearly 15%, and Alkane Resources dropped nearly 10%. The S&P/ASX 200 index fell 0.15% to 8,780.1, with materials stocks the biggest drag.

Exploration companies such as Southern Cross are often especially sensitive to swings in gold prices, because their valuations depend on the expected future value of deposits that have not yet been developed.

High-grade discoveries

Southern Cross is developing the Sunday Creek gold-antimony project in Victoria, which it fully owns. The project has attracted strong investor interest because of a series of very high-grade drilling results.

Earlier this month, the company reported new results from the Golden Dyke area of the project, including 2.7 meters at 178.6 grams per tonne of gold equivalent, which it described as the 13th-best result at Sunday Creek to date. Another hole returned 6.8 meters at 50.1 grams per tonne of gold equivalent.

"Infill is where a lot of high-grade systems get found out. Golden Dyke is doing the opposite," President and Chief Executive Michael Hudson said in announcing the results.

The company has drilled 288 holes totaling about 141 kilometers at Sunday Creek since late 2020, with results from 72 more holes pending. Its 200,000-meter drilling program and plant design studies are scheduled to run through the first quarter of 2027.

"Twelve rigs are turning, 72 holes are in the lab and the 200,000 m program runs through to Q1 2027," Hudson said.

Antimony angle

Sunday Creek also contains antimony, a critical mineral used in batteries, flame retardants and defense applications. China dominates global supply, and its export restrictions have made antimony a strategic priority for the United States and its allies.

Southern Cross has said antimony could account for a meaningful share of the project's value. The company recently welcomed a A$20 million election commitment for antimony processing in Victoria and a decision on a state antimony grant that it will share with another company.

However, antimony prices have cooled. Alkane Resources CEO Nic Earner, whose company also produces antimony in Victoria, said on Friday that he did not see reasons for the antimony market "to rebound strongly in the short to medium term."

Performance

Southern Cross shares are up about 8% over the past year, a more modest gain than many gold stocks, reflecting volatility in gold prices and the long timeline before production.

The company is listed on both the Australian Securities Exchange and the Toronto Stock Exchange.

What's next

Investors will watch for further drilling results from Sunday Creek, as well as progress on the company's development studies, which will help determine the size and economics of a potential mine.

The direction of gold prices, influenced by the Federal Reserve's policy meeting next week, will also remain a key factor for the stock.