For all time gold has acted as a source of value, maintaining its purchasing power over time. That is why gold is often considered a “haven” asset. The hype around gold is because it is a highly liquid and scarce resource with minimal credit risk.
As 2020 showed during the pandemic, markets hate uncertainty. This is why investors store or redistribute wealth into gold, not just as a means of diversification, but as an investment strategy to hedge against inflation or uncertainty.
Today I will focus on gold mining companies. Today, there are more than 2,000 gold mining companies registered and publicly traded.
Global gold production has grown by 1.9% year-on-year over the last decade (2011–2021). It is important to keep in mind that production levels are becoming increasingly limited, and new gold discoveries are rare in their own right. The annual growth rate is expected to increase to 2.5% year on year by 2029. It is difficult to estimate the price impact. When deciding which gold companies to invest in, consider these basic principles::
1. Effective management
2. Production cost
3. Resources and reserves
4. Field exploration and project development
5. Hedging activities
We found 6 companies that meet some or all of these basic principles.
This is currently one of our pivotal stories for 2021. Given that the decline in gold grades led to lower production in 2019 and 2020, it is not surprising that the enterprise value of this gold producer has plummeted.
As a 30-year-old gold producer located in Western Australia’s world-class goldfields, the Plutonic gold mine, formerly owned by Northern Star and Barrick Gold, has significant growth opportunities. With interim CEO Tamara Brown restructuring the strategy last year, Superior Gold is back on track.
It already has a significant infrastructure with 450 km of underground developments, 2 mills, gas and other related facilities, and above-ground infrastructure. The restoration cost of the infrastructure is more than $ 2 billion. To achieve the potential return on this site, Superior Gold has developed a well-defined low-cost organic growth strategy.
It all comes down to “getting back to basics” with regards to the mine’s geology and investing in mining assets to expand operations. The first step on the list was to make a geological model. This was not the case before, so it could be argued that they were drilling blindly.
As a result, during 2020, Superior Gold achieved a steady improvement in operational efficiency: quarterly production increased by 16%, the number of mill brands increased by 25%, and the quality of wastewater treatment facilities increased by 47% compared to Q1 / 21 to Q2 / 20. These achievements were driven by investments in the right places.
The introduction of the latest technologies, in particular 3D modeling, allowed mining teams to truly use the historical geological data accumulated over 30 years. This allowed them to update their models to improve mining planning and drilling targeting while improving forecasts at production wastewater treatment plants. Already, the average grade of target slaughter increased from 3.0 g / t to 3.5 g / t, published in the Superior Gold report for Q1 / 21.
Their investment strategy is focused not only on new businesses. Resources were allocated to upgrade the existing underground fleet by adding 2 new trucks, as well as completing the construction of a new tailings dump and upgrading the runway to ensure future production growth. They have two large feed mills, which also give them the ability to extract ore from mines within a 200–250 km radius, as well as process their own ore. Moving forward is all about generating cash.
Troilus Gold is a junior mining company based in Quebec, Canada, which is considered one of the most attractive mining jurisdictions in the world. They occupy a strategic land position of 142,000 hectares and plan to resume production at the Troilus mine.
The Troilus Gold project is one of the largest undeveloped gold deposits in Canada with promising expansion potential. The company is implementing a drilling program that includes 4 drilling rigs, performing an average of 10,000 m of drilling operations per month as part of Zone J exploration.
O3 Mining, a company of the Osisko Group, is a gold researcher and developer that owns a 100% stake in all of its more than 137,000-hectare facilities in Quebec, Canada. The team, led by President and CEO Jose Visquerra, has more than 240 years of international experience in the mining industry combined with expertise in exploration, construction, and field development. They strive to provide long-term value to shareholders.
O3 Mining’s asset portfolio in Quebec contains 2.4 million ounces of M & A resources and another 1.5 million ounces of inferred resources. They have 2 large drilling programs in their flagship Marban project and their Alpha project, which give the company many advantages in exploration.
The strategy for moving forward is to increase the production of low-grade gold by open-pit mining, along with deeper exploration in search of high-quality formations. Given the high potential for mergers and acquisitions and much more planned for 2021, O3 production is definitely worth keeping an eye on.
Brazil is one of the top 10 largest mining countries in the world. Global gold producers Kinross Gold, Yamana Gold, AngloGold Ashanti, and Equinox Gold operate in the country, and M&A activity is growing. Cabral Gold is the youngest public gold story on this list. Cabral Gold was also ranked as the 2nd best performing mining stock in the TSX Venture 50 annual ranking for 2021, thanks to a 1.047% increase in market capitalization and a 492% increase in the share price during 2020.
Cabral Gold’s market opportunity lies in the fact that there are high-potential hard rock gold deposits in its area. The oxide coating has a great potential for quick and cheap operation in the short term, especially since they are located near the surface. With more than 100 people working on the site, as well as dedicated geologists, the opportunity for further gold discoveries is very real. Cabral’s management team participated in 5 gold discoveries in Brazil.
Tesoro Resources is an Australian gold researcher with assets located in Chile. Founded in 2017 by a team of mine builders, they focus on developing high-quality gold assets that have the potential to become district-wide mining projects. What initially attracted investors to Tesoro Resources was the opportunity to earn up to 80% in the El Zorro Gold project.
The company is well-funded, which allows it to overcome market downturns. Managing Director Zeff Reeves assured that El Zorro’s growth over the next 12–18 months is very well planned.
For the coming year, Tesoro Resources plans to increase its drilling program in Turner by more than 30 km to expand and delineate the entire mineralized system at this location. Further research and development are currently underway in Turner and the El Zorro area to help develop the business towards manufacturing. The combination of project scale, class, operating costs, and capital investment provides Tesoro with resources for a solid year ahead.
Gold explorer Rupert Resources is targeting large, valuable deposits in a Tier 1 jurisdiction. Located in Finland, 50 km from Europe’s largest gold mine (the Kittila mine, owned by Agnico Eagle), the company aims to discover several million ounces of gold in close proximity to its 100% owned and authorized Pakhtavaara mine in Northern Finland.
Finland is one of the world’s most advanced low-risk mining jurisdictions, which provides Rupert Resources with the opportunity to develop a low-cost, high-quality, high-efficiency, low-emission gold mine. This is due to the proximity to infrastructure and renewable energy sources.
Ikari’s discovery is just over a year old and has attracted a lot of market attention due to its excellent drilling results. Rupert’s Resources continues to demonstrate Ikkari’s potential and is moving towards the first resource, which is set to be released in the summer of 2021. Preliminary test results indicate extremely favorable metallurgy, suggesting that Ikari is one of the major new discoveries of this cycle.
Windfall Geotek Inc. develops platforms for the mining sector. The company offers CARDS (computer-aided resource detection system), a platform to identify a statistical probability of target identification within known areas of interest to analyze digital data sets of georeferenced historical exploration data, including geological, geochemical, geophysical, structural, and digital elevation data.
Windfall Geotek aims to advance its class-leading AI technology for the strategic discovery of new mineral and hydrocarbon resources, and for the discovery of water sources & aquifers for drought-stricken regions, and to locate landmines and related threats in conflict zones around the world. Through our advanced technologies and strategic investments, Windfall Geotek intends to sustainably lead the transformation of the increasingly important geologic exploration sector.
Windfall Geotek company is known for using Artificial Intelligence (AI) with an extensive portfolio of gold, copper, and zinc properties in Quebec. They can count on a multidisciplinary team that includes professionals in geophysics, geology, Artificial Intelligence, and mathematics. The Company’s objective is to develop a new royalty stream by significantly enhancing and participating in the exploration success rate of mining.