Who would have thought that a report on a Covid-19 vaccine from Russia would bring a breather to the gold rally? Within 24 hours, the price of the precious metal slipped through the USD 2,000.00 and USD 1,900.00 markers, recording a loss in value of around USD 150.00 per troy ounce. Currently the price is trading at USD 1,880.00 and the correction is the largest since March 2020, when the panic about the spread of the Corona virus was at its highest. Gold's rise has already begun in May 2019 at below USD 1,300.00 and the current trend may offer an excellent entry opportunity.
Gold is running out
Barrick (TSX: ABX) is one of the largest gold producers in the world and has mines around the globe. The company has benefited considerably from the price increase of gold since last year, as it has significantly increased the margins for the precious metal. Efforts are therefore being made to increase production or run at maximum capacity in order to generate high profits.
Each gram of gold can be mined and sold only once and this fact is a challenge for the company as well as for the other producers.
The industry expects gold production to peak in 2020. Around 118 million ounces of fresh gold will reach the market and from then on, the quantity will go down. In 2029, only about 65 million ounces of gold are expected to reach the market.
The reserves of the largest producers have already decreased by more than 34% since 2012. In addition, it takes longer and longer for a new discovery to go into production. In 2000, the development time was only ten years. Experts now expect that it can take up to 30 years before a new discovery receives all the necessary permits for mining and meets the necessary requirements. To save time, producers usually acquire other companies in the supply chain.
Focus on the Golden Triangle
Scottie Resources (TSXV: SCOT) is focused on the exploration of its own projects in British Columbia.
The company owns, among other projects, a mine that has produced gold in the past. Scottie's properties are located in the so-called 'Golden Triangle', a region known for its precious metal deposits. The company has already attracted the attention of Canadian commodity investor Eric Sprott, who joined the company at the beginning of the year and has since held almost 10% of the shares.
Scottie's strategy is to define the amount of gold already proven and add new discoveries. With this in mind, the company will seek to increase the value of the company through drilling programs.
Typically, explorers of this type are acquired by larger neighbors or a large producer uses a take-over to enter a new region. Meanwhile, CEO Brad Rourke is busy making the bride pretty.
Expanding the Yukon deposits
Triumph Gold (TSXV: TIG) is focused on the exploration and development of its own properties in Yukon, Canada. The company has a proven track record of numerous discoveries and is working to expand the data on the amount of the deposits through additional drilling programs.
As the largest shareholder, producer Newmont (TSX: NGT) is already on board and it stands to reason that a take-over bid for Triumph Gold's shareholders will be made once a critical quantity of gold has been proven.
Triumph Gold's Freegold Mountain Project was acquired in 2006 and since then 20 zones of mineralization have been discovered. A particular advantage of this 200 square kilometre area is that it has a year-round passable road, which ensures access. This logistical advantage does not increase the cost of drilling and the teams have a road access to the project. Further news from the company on the planned drilling program is expected in the coming months.
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