Your market questions answered: Liontown's discount, comparing gold stocks and CFDs

Mon 23 Oct 23, 2:06pm (AEDT)
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Key Points

  • Ramelius Resources has outperformed Regis Resources in terms of share price growth, costs and production growth
  • Liontown Resources considered short sellers when setting the price for its capital raise to ensure demand and avoid further share price depression
  • Pre-open share prices are volatile due to last-minute orders and limited time for market analysis

Welcome to our series of tackling the questions we receive from our Weekend Newsletter. If you have any questions – Feel free to reply to the Newsletter email. 

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How would you compare Ramelius Resources to Regis Resources? – Martin

For context – The latest Weekend Newsletter flagged how most large cap gold miners produce gold at slim margins with poor cash flows. The data suggests that a) cost inflation continues to be a major pain point for miners; b) gold prices must remain above current levels (otherwise what’s the point of mining gold) and; c) a lot’s priced in if gold miners are allowed to trade at current valuations with these kinds of margins and cash flows.

One of the easiest ways to compare miners is to compare key metrics side by side. The below production and earnings metrics refer to FY23.




Market Cap




All in Western Australia

All in Western Australia

Gold Production

240,996 oz

458,893 oz







FY24 Production

250-275,000 oz

415-455,000 oz




The other thing to consider is the company’s resource and ore reserves. Here's the latest:




Total Mineral Resources



Total Ore Reserves



Share price performance is another valuable indicator of the miner’s fundamental performance and market sentiment. Ramelius shares are up 82% year-to-date while Regis is down 20% year-to-date. Regis shares sold off sharply in late July following a disappointing FY24 guidance.

Let’s put this all together.

  • Ramelius has had a very strong year-to-date performance reflecting a sound operational performance and ability to meet analyst expectations

  • Regis has underperformed most gold stocks after the FY24 guidance

  • Ramelius expects slightly higher production at a substantially lower AISC in FY24 while Regis has guided to less production at higher costs

  • Ramelius has more growth optionality but Regis currently has a much larger production profile while its market cap is around 36% smaller than Ramelius

  • Ramelius says it has at least 3.3Moz in resource to convert at its Roe, Rebecca and Bartus projects. If successful, both companies will have a similar resource and reserves

Why did Liontown need to consider short sellers when setting a price for a capital raise? – Robert

Note: The question refers to a comment from the Australian which notes the need for a lower raise price to “appease hedge funds that need to close out their short selling positions.”

Liontown's capital raise was a balancing act for a few reasons:

  • Albemarle's recent withdrawal from its takeover bid left Liontown with a significant funding gap for the Kathleen Valley project

  • The capital raise was conducted on relatively short notice

  • Liontown was the 4th most shorted stock on the ASX with approximately 10% short interest

The Australian notes that "Liontown had been testing market appetite earlier in the week, first asking shareholders to buy stock at $2.50 per share, before winding the price back to $2.25 and then $2.00." This suggests that there was not enough demand at such price levels.

The decision to provide a greater discount would allow short sellers to cover their positions at a favourable price and decrease the likelihood of them shorting more shares (and further depressing the share price). Short covering (aka buying back shares) would also help appreciate the share price. This might explain why Liontown opened around $1.83 on Friday and rallied to a brief intraday high of $2.01.

The discount could also prop up demand for the raise, resulting in an oversubscribed raise and force those that missed out to buy on market.

How are pre-open share prices determined and why are they so volatile? – Russell

Pre-market prices are determined by the supply and demand of buyers and sellers before the market opens. The indicative open price is generally inaccurate as traders place, amend and withdraw orders. Most players tend to place pre-market orders at the very last minute as they don't want to reveal their trades. This is why the indicative open price and surplus volume will fluctuate right before open.

Here are some other factors to consider:

  • When was the announcement released: If the announcement was released at 8:00 am, the market would've had plenty of time to digest and analyse the news. Whereas if the announcement was released at 9:50 am, the market might not be able to price in what has happened. More broadly speaking, the later the news, the more volatile the share price.

  • How's the market looking: The broader market (e.g. ASX 200 or a weak overnight lead) could exacerbate the weakness (or strength) of the stock your looking at

Can you explain how CFDs work? – Michael

A contract for difference (CFD) is a financial contract that allows traders to speculate on the price movement of an underlying asset without actually owning the asset. CFDs are traded on margin, which means that traders only need to put up a small percentage of the full value of the trade. This can magnify profits, but it can also magnify losses.

Here are a few things you should know about trading CFDs:

  • Margin requirements: These are stock-specific. Most large caps require a 20% margin (i.e. A $10,000 position requires a $2,000 deposit) while microcaps require 60-100%.

  • Interest: Overnight holds will incur daily interest charges, which is typically small markup against the RBA cash rate

  • Shorting: Most large cap stocks will have borrow available. You might have to enquire about stocks for small to mid caps

  • Borrow is on a first come first serve basis: If there’s limited borrow (e.g. its a small cap with only xxx shares available to short), this distribution is determined on a first come first serve basis. To secure shorts, you can wake up extra early and place the order.

  • Dividends: With CFDs, you do not own the underlying assets, so you are not entitled to receive dividends. However, the CFD provider typically adjusts your profit and loss to reflect the dividend payment. If you are short, you will be charged the amount of the dividend

  • Capital raisings: CFD holders may be entitled to participate in rights issues, placements (unlikely) and SPPs, subject to the specific terms of their CFD contract.  

You can trade CFDs at various trading platforms including Plus500, eToro, CMC Markets, IG, FPMarkets and more.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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