Economic conditions are abysmal, national economies are in poor shape, but the investing community doesn’t seem to have taken this onboard, yet
Since rising above US$1,827.6 per ounce in early-September, gold fell to a low of US$1,726.1 per ounce at the end of the month. This led many investors to speculate that the bull market for gold was over but if that’s the case, why is gold now rising again?
Well, we are all feeling the effects of the continued rise in the price of goods, fuel and energy, known as inflation.
Large national debts taken on during the COVID-19 Pandemic now need to be reduced and part of any Government’s strategy is going to involve the de-valuing of its currency, though inflation. UK inflation is at a 9-year high, Eurozone inflation is at a 13-year high, US inflation is at a 13-year high, Brent crude is at a 13-year high and natural gas is at a 13-year high.
Economic conditions are abysmal, national economies are in poor shape, but the investing community doesn’t seem to have taken this onboard, yet.
The inflation issue isn’t going to go away anytime soon, and we are now potentially heading into an age of inflation, where paper currencies will continue to lose their value and economic conditions will continue worsen. As this situation deteriorates investor’s fears area likely to drive them towards gold in order to protect their own personal wealth.
Added to this, a cold winter in the Northern Hemisphere could send, already high-energy prices, rocketing, further fuelling inflation worries for investors and driving them to safe harbour investments, the most important of which is gold.
Not all signs are positive for gold though, the market has been pricing in an interest rate hike for December of next year, but recent CPI data and hawkish minutes from US Fed, indicated it is now eyeing an interest rate hike earlier in 2022. The rise in interest rates, could potentially act a near-term brake on gold demand but in all likelihood any rise is going to be fairly small and probably insignificant, compared to the high-levels of inflation we likely to be facing.
Renowned and seasoned natural resource investor, Rick Rule, recently pointed out that gold currently accounts for less than 0.5% of all investment and saving assets made in the US, which compares to 1.5% for the 30-year average. If precious metals return to this average in the next 3-5 years, demand for gold would increase by 200% from the current level.
Ultimately, given the economic headwinds we are facing, investors are likely to be more cautious in the short-term, and cautious investors hedge and diversify, and an important part of any hedge or diversification strategy should be gold, gold ETF’s or gold equities.
Here are some of the equities that we believe are well positioned to take advantage of any further rise in the gold price.
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() is an exploration company advancing the 100% owned Dixie Gold Project, located in the Red Lake District in Ontario, Canada. The 4.2km long gold target at Dixie is located along the 18km long LP Fault, where drilling over the past 3-years has defined multiple large high-grade gold discoveries, located in the near surface environment.
The company is currently in the process of completing its fully funded C$45mln Phase 2 exploration programme, which will continue into late-2022.
Great Bear’s eagerly anticipated maiden NI 43-101 compliant initial mineral resource for the Dixie project is due to be published in Q1 2022.
This resource estimate will be based on the 300,000 meters of drilling completed to date, with ongoing drilling likely to be included in a further resource estimate update in due course.
The maiden resource estimate will be followed by a preliminary economic assessment in 2022 that will give us our first indication of the projects potential economics.
Pure Gold Mining
Also located in the Red Lake District of Ontario Canada is Pure Gold Mining Inc’s PureGold Mine.
Having declared commercial production in August 2021, PureGold is Canada’s newest high-grade gold producer.
The PureGold Mine has a high-grade NI 43-101 compliant mineral reserve estimate of 1mln ounces, at a grade of 9.0 g/t Au, and mineral resource estimate of 2.1mln ounces in the indicated category at grade of 8.9 g/t gold and 0.5mln ounces in the inferred category at grade of 7.7 g/t.
Pure Gold is implementing a phased approach to growth and is targeting an increase in production levels to over 200,000 ounces of gold per year through a series of expansions, extending known deposits at depth, and growing new discoveries on its 47 square kilometre land package.
The PureGold Mine is situated within a 7 kilometre long gold system, and is open along strike and at depth. A single drill intercept on Pure Gold’s property at 2 kilometre depth encountered the same mineralization and grades as the main deposit, demonstrating the potential for expansion at depth.
Pure Gold is aiming to begin underground drilling at the high-grade “8 Zone” shortly, which could further expand the scale of defined gold mineralisation.
8 Zone is geologically similar to the high-grade zone at the Red Lake Mine Complex, located just a few kilometres away.
The discovery of the high-grade zone helped launch Goldcorp to a US$45bn valuation by the early-2000’s. Drilling at 8 Zone has returned some very high-grade gold intercepts, including: 4.3 metres at a grade of 466.0 g/t gold, 5.5 metres at a grade of 342.4 g/t gold and 8.2 metres at a grade of 120 g/t gold.
Hummingbird Resources
Hummingbird Resources Plc. operates the Yanfolila Gold Mine, located in Mali.
During the first half of the year the company produced 46,809 ounces of gold from Yanfolila, generating US$87mln in revenue at an AISC of US$1,437/oz Au.
Hummingbird is maintaining its 2021 production guidance for the year of 100,000 - 110,000 oz of gold, at an AISC of US$1,250 - 1,350 per oz of gold sold.
Exploration at Yanfolila continues with 32,500 meters drilled in the first half of the year and results are expected to continue to be published in the coming months.
At Hummingbird’s development project, Kouroussa, located in Guinea, the mining licences were awarded in May and the results of an economic study was recently announced.
This study returned a post-tax NPV10 of US$210mln with an IRR of 71%, based on a gold price of US$1,750 per ounce.
Over the seven year mine life, the operation is expected to produce around 800,000 ounces of gold, with an initial capex of US$115mln and an AISC between US$900 and US$1,000 per oz Au.
Importantly, Hummingbird has now repaid all the debt raised to build Yanfolila and is fully funded to commence production at Kouroussa, from internal cash-flows and a financing package of up to US$100 million from Coris Bank.
Project construction is expected to commence in Q421, with first gold pour anticipated during Q223.
Mako Mining
Mako Mining Corp operates the high-grade San Albino Gold Mine, located in Nueva Segovia, Nicaragua.
The mine commenced commercial production in July this year, and during its first operational quarter it has produced 8,239 ounces of gold.
Next year the company is planning to double the plant’s capacity from 500tpd to 1,000tpd and add ounces into the mine plan from near mine exploration along strike and at depth at the San Albino Mine and at the southern part of Las Conchitas area.
The company is also planning to test multiple regional targets that are being permitted for drilling for the first time ever.
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(, ) Mining Inc is currently completing a 20,000 metre programme of resources expansion drilling at its Johnson Tract Polymetallic Project, located in Southcentral Alaska.
The Johnson Tract Project currently has a NI 43-101 complaint mineral resources estimate of 0.75mln ounces in the indicated category at a very high-grade of 10.93 g/t gold equivalent (eq.) and 0.13mln ounces in the inferred category (7.16 g/t eq.), which comes from the JT VMS Deposit.
The current drill programme is also testing several of the nine regional targets for expansion, including: the DC Prospect, Milkbone Prospect, Kona Prospect and Easy Creek (EC) Prospect.
The first hole at the DC Prospect drilled by HighGold returned, 6.4 metres at a grade of 578 g/t Au, 2,203 g/t Ag (DDH DC21-010).
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(, ) is an exploration company with an unprecedented land position, covering an area 4,200 square kilometres, which is 40% of the emerging White Gold District in Yukon, Canada.
To date the company has defined NI 43-101 complaint mineral resource estimates of 1.14mln ounces of gold in the indicated category at a grade of 2.28 g/t Au and 0.402mln ounces of gold in the inferred category (1.39 g/t Au) at the company's flagship Golden Saddle and Arc deposits.
The company has also established a resource estimate of 0.230mln ounces of gold in the inferred category (1.65 g/t Au) at the VG Deposit, which is only located 11 kilometres north of the Golden Saddle and Arc.
The company is currently targets at Ryan’s Surprise, Ulli’s Ridge and Minneapolis Creek. These targets are situated on a 6.5 kilometres long x 1.0 metre wide north-south trend of anomalous gold and arsenic in soils, located 2 kilometres west of the company’s flagship Golden Saddle and Arc deposits. An update of the mineral resource estimate for the VG deposit is also underway.
Golden Minerals
(, , ) is operating the Rodeo Gold-Silver Mine, located in Durango State, Mexico.
The company has just completed its first full quarter of production at Rodeo (Q321) producing 4,942 gold equivalent ounces.
This strong operational result led the company to reaffirm its 2021 annual production guidance of between 12,000-14,000 oz gold and 25,000-30,000 oz silver.
Golden Minerals expects the cash flow it generates from Rodeo to play an important role in its business' growth by contributing to funding the initial start-up of silver-lead-zinc operations at its Velardea Project, which would be a significantly larger operation.
TOCVAN Ventures
TOCVAN Ventures Corp. has just completed its Phase 2, 3,500-metre, drill programme at the low-sulphidation Pilar Gold-Silver Project, located in Sonora, Mexico.
This programme has identified large intersections of gold mineralisation, containing higher-grade zones, within three areas in the northwest section of the project. Results, include:
- 29.0 metres at a grade of 0.71 g/t Au and 2 g/t Ag (0.73 AuEq) from surface and 24.4 metres at a grade of 0.56 g/t Au from 67.1 metres (JES-21-38)
- 35.1 metres at a grade of 0.66 g/t Au and 6 g/t Ag (0.72 g/t AuEq) from 97.6 metres, including 13.7 metres at a grade of 1.7 g/t Au from 119 metres and 3.1 metres at a grade of 6.8 g/t Au and 7 g/t Ag from 119 metres
- 39.7 metres at a grade of 0.96 g/t Au and 2 g/t Ag from 39.7 metres, including 12.2 metres at a grade of 3.0 g/t Au and 6 g/t Ag from 39.7 metres and 1.5 metres at a grade of 14.6 g/t Au and 11 g/t Ag from 48.8 metres
TOCVAN plans to commence a trenching programme this month to define surface mineralization and provide material for initial bulk sampling.
Immediately following trenching, a Phase III drill programme will commence.
Sonoro Gold
(, ) is advancing the Cerro Caliche gold project, located in Sonora State, Mexico, towards production.
The company recently completed a preliminary economic assessment on the project, which returned a post-tax NPV5 of US$41.5mln with an IRR of 32.4%, based on a gold price of US$1,750 per ounce.
Over the seven-year mine life, the operation is expected to produce 325,000 ounces of gold equivalent, with an initial capex of US$32.2mln and an AISC of US$1,351 per oz. AuEq.
Sonoro is now preparing to resume drilling this autumn to test several expansion targets that could further extend the potential life of the proposed future mining operation.
Arizona Silver Exploration
Arizona Silver Exploration Inc has just completed drilling at its Philadelphia Gold Project, located in Mohave County, Arizona.
This programme defined high gold grades in the Perry Vein that had been historically overlooked by previous explorers. Results include:
- 3.05 metres at a grade of 16.9g/t Au and 51.2g/t Ag from 28.96 metres (PRC21-82)
- 9.15 metres at a grade of 7.82g/t Au and 21.0g/t Ag from 60.98 metres (PRC21-79)
- 6.10 metres at a grade of 6.9g/t Au and 44.55g/t Ag from 108.23 metres (PRC21-80)
Significantly, this high-grade mineralisation remains open at depth.
Since receiving these exciting results, Arizona Silver has increased the size of the Philadelphia project by staking an additional 10 lode mining claims and leasing a further two patented claims.
Drilling is scheduled to recommence at the project in November-December of this year.
Westward Gold
() is currently compiling the results of a 69 square kilometre hyperspectral imaging survey at its Toiyabe Project, located in Lander County, Nevada, USA, to assist in target generation for its inaugural drill programme, slated for the first half of 2022.
Toiyabe is an advanced exploration property, that had a historic resource estimate of 173,562 ounces of gold at a grade of 1.2 g/t Au.
The company is also completing a 17-kilometer Induced Polarization survey at the Turquoise Canyon Project, also located in Lander County.
This survey will aid in the identification of exploration targets at Turquoise Canyon, which has not been drill tested to date.