Since Warren Buffett and his investment company
Berkshire Hathaway (NYSE: BRK.A) joined
Barrick (TSX: ABX), investors and media have tended to change their minds about the world's oldest currency. In the past, the US star investor has made no secret of the fact that, in his opinion, the expense of gold mining and subsequent monitoring is, in a sense, insane. In the meantime, however, the oracle from Omaha seems to have come to the conclusion that there is a lot of money to be made as a producer at the current price level and that demand for the precious metal will remain stable in the future due to the measures taken by the central banks.
Gold supply will decline
The gold market is becoming increasingly important. While central banks around the world are working with politicians to maintain social peace through measures, the money supply has been increased significantly. A major advantage of gold, on the other hand, is that it cannot be printed, and in 2020 it will even reach the historic peak of production. Barrick's experts estimate that approximately 118 million ounces will be produced this year and
the annual production volume will drop to below 65 million ounces by 2029. The reserves of the largest producers have already decreased by about 34% since 2012.
Exploration provides for new supplies
Producers such as
B2Gold (TSX: BTO) and Barrick can achieve a high profit margin within the current gold price. The disadvantage is, however, that each ounce can only be sold once. For this reason, these companies must continuously ensure that the amount of reserves secures future sales.
In this context, exploration companies such as Blackrock Gold (TSXV: BRC) come into play. The company has properties in the state of Nevada and is exploring for gold deposits. As soon as a critical quantity of the precious metal can be proven, the interest of the large producers in a takeover increases.
Financially well positioned
Blackrock Gold has raised a total of approximately CAD 12 million in fresh money since June 2020 to explore the areas in Nevada.
One of the most prominent investors is Eric Sprott, a commodities expert who invested CAD 5 million. About 100 years ago, the state was already experiencing a gold and silver hype. Due to this history, companies can still make plans today. The region around the town of Tonopah is one of the most attractive silver areas in North America.
Successful drilling program raises expectations
Blackrock has made several interesting discoveries during the current drilling program. Drill hole TW20-001 intersected 965 g/t silver equivalent over 29 metres and another new vein with
a grade of 2,198 g/t silver equivalent over 3 metres was discovered. A total of 15,000 metres of drilling is planned in the Tonopah region to confirm 2.5 to 6.0 million tonnes of silver equivalent at a grade of 1,300 to 2,100 g/t.
Several million ounces of gold
Four target areas have already been identified on the Silver Cloud project, where
about 3,500 meters of drilling is planned to be completed starting in September with up to 14 holes. The company believes that the area has a potential of several million ounces of gold. With a market capitalization of approximately CAD 120 million, the company still has sufficient potential with further discoveries, making it more attractive to potential investors. Barrick has now achieved a market capitalization of CAD 68 billion and B2Gold of CAD 6.8 billion.
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