The corona pandemic has produced few winners in relation to the overall economy. In addition to online entertainment and e-commerce, mining companies with a focus on precious metals can also benefit from the measures taken by central banks and politicians. In comparison to the financial crisis in 2008/09, the current measures are around four times as extensive to bridge the near standstill of the global economy. Due to the massive increase in the money supply, not only are shares of future themes in demand, but the demand for gold is causing the price per troy ounce to rise to over USD 1,700.00. Many opportunities are opening up.
Africa's next takeover target
Osino Resources (TSXV: OSI) is an exploration company focused on projects in Namibia. The company is led by CEO Heye Daun, who has developed a gold company in Namibia in the past until its takeover by B2Gold. This
experience is worth a lot, because Daun now knows what is needed to repeat this success with Osino Resources. The company has already made numerous discoveries in past drilling programs and the challenge is now to prove that resources of over a million ounces can be found in the ground to attract the attention of potential buyers.
The high gold price of over $1,700.00 USD per troy ounce will also affect the purchase price in transactions. In 2010, when gold was also in high demand by investors, the average price paid for acquisitions was USD 141.99 per ounce in the ground. At a share price of CAD 1.00, Osino Resources is currently valued at CAD 85.6 million.
Investors should therefore not only keep an eye on the gold price, but also on the development of the quantity of reserves - Daun has the rest under control.
Global value chains
B2Gold (TSX: BTO) is one of the larger international gold producers with a market value of over CAD 7.2 billion. The company operates in Africa, Asia and Central America, exploring and developing its own projects and then bringing them to production.
Lucrative takeovers are not unusual for B2Gold and in this context, the operational presence of exploration companies can be very tempting for a further acquisition.
The high price of gold flushes high margins into the coffers and with this background a higher production volume is all the more profitable.
However, gold does not grow back and for this reason, everything that has already been mined must be discovered or acquired elsewhere to ensure that production can continue in the future.
Reserves are shrinking
One of the largest mining companies is
Barrick Gold (TSX: ABX) with a market capitalization of over CAD 58 billion. The company is also diversified and has operations in Africa, North and South America and Asia. The average duration of reserve extraction by producers is around ten years. In light of the fact that conditions and
high standards of quality have increased the time from discovery to production from ten years in 2000 to around 30 years today, further shortages on the supply side are to be expected.
In 2020, the world's largest gold producers are expected to produce a total of around 118 million ounces. At the same time, experts assume that the peak has been reached and that the volume will almost halve to around 62 million ounces by 2029.
The gold reserves of the largest producers have decreased by more than 26% since 2012 and are now below the quantity of 2007. It is therefore not surprising that the Bank of America considers a gold price of up to USD 3,000.00 per troy ounce possible as early as 2021.
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