The Kalamazoo Resources Ltd (ASX: KZR) share price is flying higher today on the back of an acquisition from Northern Star Resources Ltd (ASX: NST).

Yesterday, Northern Star announced its decision to divest the Mt Olympus Project, comprising most of the Ashburton Project in Western Australia, to Kalamazoo.

While Northern Star shares jumped 4% on the news, Kalamazoo shares were stuck in a trading halt and only resumed trading this morning. At the time of writing, the Kalamazoo share price has rocketed 42% to 69 cents.

Kalamazoo is a gold and base metals explorer. Its focus is on identifying commercial mineral deposits to explore at its Victorian gold projects and Western Australian gold-base metals projects.

What’s the deal?

Kalamazoo has acquired the Ashburton Gold Project, which is located on the southern edge of the Pilbara Craton in Western Australia.

The project produced 350,000 ounces of gold between 1998 and 2004. It currently holds a JORC Code (2012) resource estimate of 20.8 million tonnes at 2.5 grams per tonne gold for a contained 1.65 million ounces.

Under the terms of the agreement, Kalamazoo will pay Northern Star deferred contingent cash consideration of $17.5 million. This consists of:

• $5 million on mining of the first 250,000 tonnes of ore;
• A 2% net smelter royalty (NSR) on the first 250,000 ounces of gold produced, with a 0.75% NSR on any subsequent gold produced from the tenements; and
• The same NSRs on any other metals produced from the tenements.

Kalamazoo views the acquisition as an important addition to its Pilbara gold assets. And in a similar investment strategy to the acquisition of its flagship Castlemaine Gold Project in Victoria, the deal structure enables the company to invest funds directly “into the ground”.

The company believes the project has significant regional greenfields and brownfields exploration potential; a large drilling, geological, geochemical, and geophysical database; and numerous walk-up drilling targets.

The exploration team will be led by Kalamazoo director Paul Adams, who was previously the managing director of Spectrum Metals. Exploration focus will include an immediate review of the exploration datasets, field reconnaissance of identified prospect areas, and target generation.

Management commentary

Commenting on the deal, Kalamazoo chair and chief executive Luke Reinehr said:

“This is a tremendous outcome for our shareholders and an outstanding addition to our prospective portfolio of gold projects in the Pilbara. Kalamazoo is in the unique position of having major assets and tenure in two of the most highly rated gold exploration provinces in the world today – the Victorian Goldfields and the Pilbara.”

Meanwhile, Northern Star executive chair Bill Beament said:

“The Ashburton project no longer fits in Northern Star’s portfolio but still has strong potential on both the exploration and production fronts. The royalty structure also enables Northern Star to retain an exposure to the project.”

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why Austal, James Hardie, Northern Star, & Ramelius are storming higher
• A $73m boost sends the Austal share price to the top of the ASX 200 today
• 5 things to watch on the ASX 200 on Monday
• 5 ASX shares that would’ve made you a fortune in 5 years

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Gold price is on the rise!

The S&P/ASX 200 Index (INDEXASX: XJO) is having a pretty flat day so far. At the time of writing, the ASX 200 is flat after ‘sine-curving’ up and then back down this morning. But that’s not what has caught my eye in early morning trade.

Instead, it’s a very special metal of the yellow variety that has me choking my coffee this morning.

Yes, gold is on the move this week and are creeping towards all-time highs. In early trading this morning, gold hit US$1,760 an ounce for the first time since 2012. It has since pulled back slightly but is still sitting around US$1,750 an ounce at the time of writing.

Why is gold suddenly in demand?

This may seem to have come out of the blue, but gold had actually been in its own mini bull market for a while now. Since dropping below US$1,200 an ounce back in September 2018, gold has been steadily climbing since. According to macrotrends.com, the commodity rose nearly 19% in 2019 and are up another 13.5% in 2020 so far.  There was a moderate dip during the ‘rush to cash’ we saw during the March market sell-off, but this was quickly bought up and gold has resumed surging. We’re now just below the all-time high of U$1,896.50 that we saw back in 2012.

I think gold is in demand right now for several reasons. Many investors (particularly our friends over in the United States) are very worried about inflation. The US government has been ploughing an unprecedented amount of cash into financial markets over the last few months in order to shore up markets in the face of the coronavirus pandemic. This is keeping the markets afloat right now, but printing money usually leads to long term inflation if history is anything to go by. And gold is traditionally viewed as a good asset to hold during inflationary periods.

Low-interest rates are also a factor. Almost every advanced economy around the world right now has interest rates at 0% or very close to it (our own cash rate is currently 0.25%). Low-interest rates make using cash and debt instruments very unattractive s investments. Why bother buying a government bond when it yields you less than 1%?

That leaves property and shares as likely the only real assets worth holding right now. And if you’re worried about having all of your money in these ‘risky’ assets, gold is the only real alternative.

Foolish takeaway

Whilst some investors like to diversify their wealth with gold, I think it’s not really a path that most ASX investors should follow. Warren Buffett likes to say that gold has no real use or ability to generate wealth – it’s simply worth what someone else is willing to pay for it at any one time. That’s why he sticks with good-quality shares, and that’s why I think most ASX investors should follow his example.

Take heed, though. A rising gold price could indicate that investors are seeing trouble for the share market on the horizon. So just make sure you’re prepped for anything in this market!

More reading

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• Renewed US-China trade war puts these ASX 200 stocks in the firing line
• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Afterpay Ltd (ASX: APT) share price dropped from $40.50 on February 19 to just $8.90 on 23 March in the early phase of the coronavirus pandemic. That’s a whopping decrease of 78%.

Since then the Afterpay share price has been on an amazing uphill climb. At the time of writing it is trading at $57.94. That’s an increase since late March of 550%!

A positive recent business update in mid-April has definitely helped to push the Afterpay share price higher.

Afterpay has proved many critics wrong. It has continued to deliver explosive underlying sales growth despite subdued economic times.

Is it too late to buy shares in Afterpay? Or is there still a long-term opportunity for investors right now?

What other factors are driving the Afterpay share price higher?

A very positive update for its US operations in late May also helped push its share price higher. Almost 9 million US consumers have now joined its platform since its launch over 2 years ago.

In addition, WeChat owner Tencent Holdings recently become a significant shareholder in Afterpay. The popularity of the WeChat app in Asia is massive. This could potentially be an important stepping stone for Afterpay in entering the Asian market in the future.

The buy-now, pay-later (BNPL) provider continues to make significant investments to scale the business into a world-class global platform. This has included a number of recent senior management hires, and Afterpay is investing heavily in marketing. It also has brought on board a growing number of global brands such as Samsung and Foot Locker.

Afterpay also recently launched a partnership with Apple that will enable its platform to be integrated with Apple Pay. This will further simplify the process of using Afterpay and could assist in increasing adoption and usage, particularly in the US market.

Competition growing, but Afterpay’s scale advantage is still significant

Afterpay is still growing strongly in its home market of Australia and New Zealand (ANZ). However, it is now starting to face growing competition from other BNPL providers such as Zip Co Ltd (ASX: Z1P) and Openpay Group Ltd (ASX: OPY).

Despite this, Afterpay’s size and scale superiority provide a distinct advantage in winning major deals.

Afterpay is still 6 times bigger than its nearest rival Zip Co, and more than 60 times bigger than Openpay. The BPNL provider has a current market capitalization $15.5 billion, compared to only $2.34 billion for Zip Co and to only $269 million for much small rival Openpay.

Is it too late to buy Afterpay shares?

With the Afterpay share price now reaching over $55, it is now looking a bit pricey. Well factored into Afterpay’s current share price are expectations for very strong growth to continue over the next few years. However, I believe that Afterpay is relatively well-positioned to achieve this goal.

Afterpay is expanding rapidly into the massive US market and could possibly expand into mainland Europe and Asia in the future.

Further expansion globally in the BPNL sector led by Afterpay, is also likely to see further investment injected into this sector globally over the next few years.

More reading

• Zip Co share price higher despite insiders selling almost $48 million shares
• Is the Afterpay share price a boom or a bubble?
• How to try and beat the market with ASX shares
• Afterpay and 2 more ASX 200 shares to watch this week
• These 5 ASX shares were last week’s top performers

Phil Harpur owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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