Has gold lost its shine for investors?

Today I want to look at a small, but intriguing exploration play. But first let’s address the price of gold, as in, what’s going on?

In recent weeks, gold has traded in a range, more or less around the high (USD) $1,700s per ounce. The metal has had a tough time even breaking $1,800 lately.

Many things contribute to gold currently being stuck in neutral. The U.S. dollar has been remarkably strong against other currencies, so that alone helps keep a lid on the gold price. And the Federal Reserve has raised interest rates, which makes bonds more attractive and adds opportunity cost to holding a stash of gold metal.

Meanwhile, modern economic and academic culture holds gold in disdain, based on several generations of people learning in school that gold is an outdated form of wealth protection, let alone a way to grow wealth over time.

The point is, some things are out of our control. The price of gold is what it is. Markets do what they do. The culture is fixed and it’s not as if you or I can change things.

Meanwhile, many gold mining junior companies – explorers and early stage developers – are badly beaten down in the markets. They are way oversold and there’s opportunity to be had in this situation.

Right now, across the gold and mining investment space, there’s no particular excitement for the gold juniors, especially the explorers and early-stage developers, outside of an occasional hot press release about drilling results, and even then we usually see a slight uptick followed by a sell-side downdraft.

In essence, gold is in a holding pattern in terms of price, while the junior sector is just treading water in the case of most companies. There’s little new money moving in, that’s for sure.

So it can all seem pretty grim. But it also sets up opportunities for immense profit downstream if you are in a position and mindset to buy, hold and wait for the wheels of fate to turn.

I like to focus on a few investment basics. That is, I look for companies with solid assets, great technical teams and superb management. These companies hold mineral claims in safe jurisdictions. They don’t do “vaporware,” meaning that they hold real minerals in the rocks. You can see a current resource, or anticipate a worthy and solid report coming down the line. And people running the show know what they’re doing.

Sooner or later, the upside will arrive and some of these plays have the opportunity to become attractive to far more than just the current crowd of gold and mining die-hards.

One company like this, which I’ve watched for a while, is Romios Gold Resources Inc. (TSXV: RG | OTCQB: RMIOF). Currently trading at around US 3 cents per share (about 4 cents Canadian) Romios Gold’s market cap is about $7 million (U.S.). It’s small, but despite this, Romios holds a collection of assets that ought to prompt gold investors to take a serious look.

Romios holds claims in the Golden Triangle of British Columbia, in much the same geology and along many of the same trends as such names as Brucejack, Eskay and Galore. Field work reveals excellent gold potential, along with copper mineralization in likely porphyry structures.

Romios also holds claims in Ontario, near the massive Musselwhite gold project. Romios has much the same geology underfoot as the past and presently working mines, again with excellent gold upside potential.

In addition, Romios holds mining claims in Nevada, in hard-rock areas in the west of the state. That is, it’s not Carlin-style gold, with all the problematic issues that come with exploration and production of that kind of rock. Instead, Romios works in classic mining country, and has already identified mineralized zones with visible gold within extensive vein systems.

Each of these locales – B.C., Ontario and Nevada – have their own geological story to tell. And at this stage I won’t belabor the points or write extensive geological descriptions. Those details can be found on the company’s website, along with recent press releases.

Meanwhile, from public documents and discussions with management I know that Romios has been gathering field data over the past year, and especially over this summer. Some press releases to date from Nevada have been remarkable in terms of gold and copper.

Like many junior miners, Romios holds a larger inventory of mineralized claims than its bank accounts can afford to explore, let alone develop. Then again, that’s what joint ventures and similar kinds of deals are made for. There’s no reason to think that Romios will continue to work alone, and solely on its own account. More likely, we’ll see some dealmaking. And those deals will begin to shine light on what the company has in the barn, so to speak.

Indeed, the old term “barn find” is apropos for Romios. To use an analogy, I’m reminded of the stories you occasionally hear about someone who discovers a collection of classic old cars sitting under canvas tarps in some old barn out in the middle of the countryside. There’s definite potential for a Wow-factor here as you pull back the tarps.

With Romios that wow-factor pertains. The company holds an impressive inventory of assets with strong potential upside. At this point the real question is how long, and what level of investment will it require to bring one or more of these assets to the attention of a marketplace that’s currently bored, if not downright demoralized.

As the summer field season finishes up, and we move into the fall, I suspect it will be worth watching for more news from Romios.

Adding ounces in the heart of the new Yukon Gold Rush

If you follow the gold exploration space, then no doubt you’ve seen situations in which a small, low market cap company announced a “bonanza-grade” drill hole. That is, the drill team pulls out a long stretch of highly mineralized core from a target zone, and the story takes off.

Out goes the press release. The CEO’s telephone begins to ring. Chat boards light up. There’s headline coverage in the trade press. And of course, the share price moves.

A company with small or modest recognition and market cap quickly becomes a well-known name, if not the talk of the town. It’s all good, right?

Well, today I have a company that is definitely not doing that. In fact, this company doing kind of the opposite of the “bonanza” story. But in its own way, this exploration play is registering massive new gold ounces, and it’s definitely on the way to becoming the talk of the town.

The name is Banyan Gold Corp. (TSXV: BYN | OTCQB: BYAGF), run by CEO Tara Christie, a seriously good explorationist and gold finder, and one of the very few women to run an exploration play in all of the junior space.

Banyan controls a sizeable land package in the Yukon. And in a storied mining jurisdiction like that, location-location-location matters. And yes, Banyan has… location.

Banyan’s acreage is in the same geological stretch as a long list of other solid mining names, to include Victoria Gold Corp. (TSX: VGCX) and its brand-new Eagle gold mine, as well as Alexco Resource Corp. (NYSE American: AXU | TSX: AXU), with its well-endowed silver-lead-zinc play in the century-old mining district at Keno Hill.

The company works right in the heart of the new, 2020s-era Yukon Gold Rush. And in this case, the company’s claims are well-endowed with gold. It’s on the low-grade side, which is worth saying upfront. In general, the gold numbers are about a gram or two per tonne, if not fractions of a gram. But don’t sniff at it and turn the page, because there’s mathematical magic to grades like that.

When you have a lot of tonnes, those small, gram-sized numbers begin to add up; so far to over 4 million ounces of resource, grading .6 grams per tonne, and more yet to come.

While many other gold prospects have complex geology, full of faults, folds, intrusions and more, Banyan is different. It controls geology that is fairly consistent, and mostly undeformed by structural issues from uplift, mountain building and the like.

Source: Company presentation

Overall, Banyan’s rocks beautifully lend themselves to proving up a large volume of resource with very recoverable grades of gold.

Meanwhile, Banyan’s project is mining-friendly, and I mean in a way that many big miners love to see. In essence, the geology consists of long stretches of “meta-seds,” best described as a large expanse of ancient seafloor sediments that were infused by gold-bearing fluids over a long period of time. I’ll spare you the chemistry, but the gold is there; I’ve been there and seen it.

With these kinds of meta-sed rocks, there’s not much in the way of faulting or folding. Not much in terms of intrusions. What you see is what you get, which is kilometer-scale, continuous masses of gold bearing rock with very predictable lithology.

Right now, the exploration trick is to drill the heck out of it. Be systematic. Drill, then step-out; drill again and step-out again. With each hole, drill down and confirm the presence of gold in predictable, recoverable amounts. And then process the data towards the next resource upgrade. It’s much like assembly-line exploration and resource definition.

During a recent visit, Banyan had six rigs under contract, with an analysis team assigned to each one. The teams process core and samples all day, 24/7. Grind it out. And this becomes the data with which to revise upwards that 4-million-ounce number, to what has every indication – in my view – to be 6 million, 8 million, or even more ounces.

The idea, per management, is to grow the deposit and resource into what’s called a “Tier 1” asset, the kind that big names like Newmont and Barrick like to buy. Tier 1 is what adds large new resources to a company’s books, and which moves the needle.

For access to the Banyan project, there’s an existing, all-season road straight to the site. The cost is zero for that. And it makes moving people, fuel, supplies, equipment, etc. a low-cost logistical issue.

In terms of power, the locale is directly adjacent to an existing electric line; indeed, one of the company’s deposits has been helpfully labeled “Powerline.”

And just to add to the convenience of getting there, Banyan even has a gold deposit named “Airstrip.” I’m sure I don’t have to explain that one, right?

When it comes to eventual mining, it’s a workmanlike hole in the ground, supported by the road, power line and airstrip.

The mining model is to remove and haul consistent levels of ore to the crusher and then leach pits, where well-understood chemistry and engineering can recover gold at a cost which, per comparable projects, tallies in the range of $800 to $1,000 per ounce.

As for life of mine, just do the math. With over 4 million ounces currently advertised, it’s a 20-year play at, say, 200,000 ounces per year. Higher resource numbers, and increased throughput will, of course, play out differently in terms of overall scale and economics.

The point is, Banyan has already established itself as a serious deposit and growing play. Right now, the resource is more than worthwhile. It’s well mapped, and looking ahead the current, aggressive drill program leaves little doubt that we’ll see a remarkable – and remarkably fast – growth in numbers as 2022 unfolds and we move to 2023.

At current market cap of US$80 million, Banyan offers very mineable gold in the ground at about $20 per ounce.

Great company, great geology, great gold resource and strong upside.

Tungsten – the other critical metal and a way to play it

One key theme at the PDAC convention this year – Canada’s annual mining convention, sponsored by the Prospectors and Developers Association of Canada – was the idea of so-called “critical metals.”

These metals are – as the adjective implies – “critical” to making modern industrial society work. Without them, things wind down. The world as we know it kind of stops.

For example, at PDAC much discussion focused on rare earths metals which occupy an entire line of their own on the Periodic Chart. And there was much other discussion of related battery metals, essential to… well… batteries.

And PDAC offered ideas for critical “fuel” metals like uranium. And of course, basic electric metals like good old copper. Plus, an array of other elements deep in the guts of chemistry.

Now in this note, I have one more critical metal for you, and by now you know the routine.

Like the above-noted rare earths, battery metals, uranium, copper and more, this particular metal is essential for all manner of important things across entire industries and sectors. Indeed, absent this element a whole lot of things just won’t happen (examples below).

And no surprise, these days most of the supply of this important metal comes from China, which produces about 80% of what the world uses.

Once again, sad to say, we have another example of how the West has outsourced so much of its supply chains and industrial security to third parties. And in the current global correlation of forces, more and more policymakers have come to regret the folly of these ways.

On the upside, I’ll explain in a moment how investors can get an angle on this situation. But first, let’s lay some groundwork.

The critical metal we’ll discuss here is super-hard, very dense and has a high melting point. For these reasons alone, it’s widely used to make drill bits, ranging from what you might have in your garage tool kit, all the way to massive cutting and grinding devices used for oil wells and hard rock mineral drilling.

Plus, you’ll find this metal in a vast array of industrial cutting tools, abrasives, tools and dies for stamping, surgical instruments, high strength steel, high-temp lubricants, strong ferro-magnets, nuclear reactor components, rocket nozzles, armor-piercing ammunition, many forms of electronics, and even in fishing hooks.

All this, and for well over a century the metal was essential to making old fashioned incandescent light bulbs – in fact, General Electric once held a patent on its use for just that purpose.

Have you figured it out yet? It’s tungsten.

And the bottom line is that tungsten is “critical” (there’s that word again!) to modern industry. You’ll find tungsten everywhere from mines, mills and factory floors; to oil refineries and chemical plants; to electronics, space exploration, military applications and more.

As I mentioned earlier, if there’s no tungsten the world winds down pretty fast.

For now, we’ll skip the deep history and just note again that the key global supplier is China. ‘Nuff said on that, right?

Other suppliers to global markets include Russia, Vietnam, Democratic Republic of the Congo, and small amounts from Portugal and Austria. Again, you can likely discern that there’s supply risk here.

So, is there any tungsten in North America, you may wonder? Well, yes! And I visited a truly remarkable site on a recent trip up to the Yukon.

I’m pleased to report that there’s a superb tungsten deposit in Canada, straddling the border of Yukon and Northwest Territories. It’s called MacTung, located at the very top of a high mountain, running along a glacial-carved ridge.

MacTung Tungsten Deposit, Yukon/Northwest Territories, Canada. BWK photo.


As the photo indicates, it’s remote and rugged; definitely helicopter country.

Discovered in the 1960s, MacTung was assessed by a variety of players through the 1970s, 80s, 90s and even 2000s. It has been well surveyed and mapped, including varieties of geophysics; and drilled to the point of establishing a solid resource. (I won’t lay any numbers on you just now because it all must be refreshed to current reporting standards.)

Not long ago the project was in the hands of a company called North American Tungsten, which filed for bankruptcy in 2015. Then title passed to the Government of Canada.

This year a company called Fireweed Metals Corp. (TSXV: FWZ; OTCQB: FWEDF) bought the MacTung claims from the government – interesting story; too long to discuss here. But it’s a Fireweed play now.

If you follow such things, Fireweed Metals used to be called Fireweed Zinc, and in fact the company just changed its name in the past couple of weeks. The pertinent geography in all this is that Fireweed controls a massive zinc resource directly adjacent to MacTung, in an area called MacMillen Pass (hence the “Mac” references).

I first visited Fireweed’s zinc project in 2016, when the company was beginning to scope out the zinc resource, including significant lead and silver as well.

Per a 2018 report the company boasts an indicated resource of 1.6 billion pounds of zinc, 620 million pounds of lead and over 7 million ounces of silver. The inferred resource is far larger, awaiting more drilling to prove it up. Or in other words, the published numbers will doubtless increase via an upcoming resource update, along with the current summer exploration program that’s underway.

Meanwhile, and quite serendipitously, Fireweed’s zinc claims are directly adjacent to MacTung, which makes for a strong co-development synergy. Consider how the same road, power line, logistic system and much more could work in terms of building out two exceptional mineral plays, versus just a single asset.

It’s early in the development game, of course. But at the same time, we live in a world where people up and down the line are discussing renewed mineral development in the West – certainly in Canada – as an element of economic security. Hey, they are even discussing “critical” metals!

All this while Fireweed has a solid reputation for technical excellence in the arena of exploration and working up its resource. Management is superb, with a well-regarded team that can raise money, deal with local issues, and obtain government permits.

To sum up, it’s fair to say that across that northern sky of Yukon and Northwest Territories, the stars are beginning to align for major new mineral development plays. Now, with an existing resource of zinc-lead-silver, and recently coming to control a key deposit of tungsten, Fireweed Metals is a name to watch and possibly own.

Fresh From Toronto: Three Mexican Beauties

Don’t know the reason, stayed here all season
Nothing to show but this brand new tattoo
But it’s a real beauty, a Mexican cutie
How it got here, I haven’t a clue…” —
Jimmy Buffet, Margaritaville

No, I wasn’t down on the beach in Mexico with Jimmy Buffet, nor did I get a new tattoo. But I did spend four days in Toronto at PDAC – the largest mining conference in the world, sponsored by the Prospectors & Developers Association of Canada.

This was the first PDAC conference in over two years, since March 2020. After that (I’m sure you recall!), much of the world shut down for Covid. But now it’s all getting back on track and this year’s event was one for the record books. For example, there were lots of people – so many that the Toronto Police were outside for crowd control.

Much happened in Toronto this past week, but I’ll skip the vignettes and nail down on the main point.

After a period of not being able to travel, visit sites, keep up to date with things, etc., at PDAC I reconnected with three great Mexican mining plays, and each one is a “real beauty” per the Buffet approach.

One is an up-and-running producer that mines ore and makes money. One is a prospect generator that’s doing quite well in the search for copper, silver and gold. And the third is a promising silver explorer, working in classic silver country.

Here’s a summary:

The producer is Avino Silver & Gold Mines Ltd. (NYSE American: ASM | TSX: ASM) (Avino). The company works near Durango, in a silver district that dates back to the mid-1500s (yes, almost 500 years!). Spanish conquistadores found silver, and successors mined the area for several centuries. The silver made Durango quite a wealthy venue for a time.

Since 1968, Avino has been taking the old Spanish and Mexican mines even deeper, into richer and richer ore bodies. I visited the site a while back, and in one excursion to the 800-foot level, I saw a massive face of near-pure sphalerite (ZnS) – zinc sulfide. This is just some of what comes out of the lifts, other ores bearing lead, silver and gold.

Like many companies, Avino was forced to slow down during Covid, but it’s now firing back up to a hot pace. It sells high-quality metal concentrates into a strong market – one key buyer is Korean giant Samsung. Now, Avino is on a growth track, and whatever happens with the rest of the stock market – crashing lately, you may have noticed – this “beauty” is positioned to move ahead and do well through the turmoil and out into the other side.

The next “beauty” is Riverside Resources Inc. (TSXV: RRI | OTCQB: RVSDF), a company that has been working in the northern state of Sonora for 20 and more years. Over time, Riverside has accumulated a large portfolio of mineral claims. Its business model is to team up with third parties to spend what management likes to call “other people’s money” on exploration and early-stage development.

Right now, the strong suit for Riverside is its relationship with mining giant BHP. That is, BHP is funding a major effort by Riverside to identify large-scale copper plays in Mexico. In this regard, BHP pays the overhead while Riverside works through its list of exploration prospects to match geologic potential to what BHP wants to see.

There’s serious upside from the fact that Riverside has already identified a good number of copper deposits that may suit BHP, as well as other deposits that are not exactly a BHP-match, yet still hold great upside for other development by other companies down the line.

In a world of future high demand and fading supply for critical minerals, Riverside is positioned to shine.

The final “beauty” on the list is a silver exploration play called Minaurum Gold, Inc. (TSXV: MGG | OTCQX: MMRGF). And yes, the name says gold but the exploration focus is definitely silver.

Minaurum works around the town of Alamos, in southern Sonora. This too is an old silver district from Spanish days, when miners pulled native silver – elemental “wire silver” – out of massive veins near the surface. In fact, there was a Spanish mint there for quite a while, which coined silver currency for use across old Mexico and the Spanish empire.

Old-style mining could only go so deep, though. And today we know that there’s a massive complex of mineralized rock remaining to be explored. It all lies beneath a vast, ancient, caldera-collapse volcano, with extensive “ring dikes” spreading outwards in all directions.

I’ve visited the site, and while it’s quite rugged it is also a promising exploration locale. Minaurum has released strong drilling results to date, with more to come. And again, in a world of monetary turmoil and looming shortages of critical metals – silver among them – this “beauty” deserves a good, hard look.

That’s all for now. Best wishes to everyone as we all navigate the current market and monetary rough seas.

Byron W. King

Uranium and Rumors of Wars

“You will hear of wars and rumors of wars, but see to it that you are not alarmed. Such things must happen, but the end is still to come.”  Matthew 24:6.

Recently, rumors about uranium have moved markets. When it comes to rumors, Matthew 24:6 speaks for itself. But let’s also look to Bloomberg News, which is not quite the Bible but is still considered reliable:

“The Biden administration is pushing lawmakers to support a $4.3 billion plan to buy enriched uranium directly from domestic producers to wean the U.S. off Russian imports of the nuclear-reactor fuel. … Shares of uranium companies surged.”

Which prompts me to wonder, were you one of those uranium share buyers, dear reader?

After all, the idea of stock trading is to buy the rumor. And definitely, this talk of a massive U.S. government uranium buy is a very good rumor.

But the other half of that old market aphorism about buying rumors is to sell the news. So, what’s the “news” about U.S. uranium? I’ll tell you a few things about that in just a moment.

Meanwhile, you may be wondering how long to hold and remain in the uranium play.

Should you sit tight, or even buy more uranium shares in the expectation of more gains? Or should you, perhaps, take some of the upside off the table sooner versus later? Because after all, there are risks in holding and waiting. Again, we’ll dig into this below.

First, it’s about time that something big happened in the U.S. nuclear space. If for no other reason this rumor of a future government buy is upbeat because over the past three decades, so little has happened with U.S. nuclear, aside from a long and seemingly inexorable rundown.

Indeed, the past decade has been immensely frustrating to investors who trade the uranium space in the U.S. or any other country. We’ve seen numerous false starts, trips, stumbles, range-bound trading and even serious downward, capital-killing moves.

But now, along comes the Biden administration and drops a hint of supposed multibillions flowing into the sector. Which prompts an immediate question, what is there to buy out there? Again, hang on for a moment.

Answering that query requires understanding some history. And the quick rundown is that from the 1940s to the 1970s, the U.S. pioneered much of the world’s nuclear science and technology – with the assistance of foreign scientists and allies, to be sure.

The World War II-era Manhattan Project speaks for itself, along with its programmatic successor the Atomic Energy Commission (AEC). And of course, the Soviet Union had its own, parallel massive program throughout the Cold War.

By the 1980s the U.S. had built a vast nuclear complex, ranging from uranium mines and mills through the entire processing cycle. The U.S. enriched uranium fuel for nuclear power production, as well as super-enriched the metal for bomb-grade materials.

Equally important, by the 1980s the U.S. had a sizeable workforce within the nuclear space, well up into several hundred thousand people. These ranged from miners in the field to processors, and technicians, to top-level scientists and engineers inside the labs, processing plants and other industrial landscape.

Also, and just as important, in the 1980s the U.S. could boast of an entire educational pipeline that trained people in skilled trades related to nuclear, up to the most advanced academic research.

The short version of what happened is that almost all of those people, and most of the training pipeline, long ago atrophied and fell apart. Today, the U.S. labor force, from mines to laboratories is a pale shadow of what it used to be.

With this setup, let’s now focus on where the U.S. nuclear industry stands. That is, just what kind of bang for the buck (pardon the phrase) will the U.S. government get for dropping well over $4 billion onto the country’s nuclear space?

The first question is how much uranium does the U.S. produce right now? And the answer is, just about none. Okay, slightly more than z-e-r-o. In fact, in 2021 the amount of uranium mined in the U.S. was 10 tonnes, or 21,000 pounds per the U.S. Department of Energy (DOE).

In the context of global mining, in which well over 50,000 tonnes have been produced per year, worldwide, over the past two decades, U.S. output of primary uranium ore in 2021 was negligible, if not statistical noise.

And yes, perhaps that 2021 number – 10 tonnes – shocks you. It is so small that it’s negligible. But consider year 2020, when the U.S. output number was even smaller; so small that the DOE didn’t even publish it. Rumor has it that the U.S. produced all of 6 tonnes of uranium in 2020.

Meanwhile, it’s worth examining the U.S. mining workforce in the uranium space. And fortunately, DOE tracks those numbers as well.

In 2021 the U.S. had 32 people working in uranium mining, and 52 workers in processing. Total of 84. Yes, seriously. Those are DOE numbers, not typos.

Looking at the industry with a wider aperture, from exploration to mining, processing and environmental reclamation, total U.S. employment in primary uranium currently totals around 200.

Think about it. That’s 200 people in uranium, out of a vast U.S. population of about 350 million. Another way of saying it is that the U.S. has almost no skilled workforce for uranium production.

The next question that may pop into one’s head is how does the U.S. keep its fleet of power plants running – civilian and military – if the country produces so little uranium? Easy, the U.S. imports nuclear fuel from Kazakhstan, Canada, Namibia, Australia and many other countries, including… yes… Russia.

And along those lines, Russia has a very robust uranium sector, ranging from mines and mills to processing and enriching. No, there’s no shortage of uranium-related facilities or workforce in Russia.

Which gets us back to those rumors of the U.S. government dropping $4.3 billion into the U.S. uranium sector.

Obviously, that kind of government money will move the needle for the overall industry.

With the prospect of $4.3 billion dangling out there, we may see mines hiring miners, mills hiring new workers, processors hiring people, solid demand for engineers and scientists (from where/what schools, one might ask?).

We’ll also see demand for all manner of new equipment with which to do the work, because much of the legacy U.S. nuclear complex is old and in bad shape, if not closed and idled.

But really, don’t kid yourself. This proposed – rumored – whack of new government money will not solve the nation’s nuclear problem. There are some things you just cannot buy with money, and creating an instant workforce in the nuclear sector is one of them.

Doubtless, many nuclear-related companies will benefit from an infusion of federal funds. Think of Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR), Fission Uranium Corp. (TSX: FCU | OTCQX: FCUUF), Ur-Energy Inc. (NYSE American: URG | TSX: URE), Uranium Energy Corp. (NYSE American: UEC) and more.

Canada’s Cameco Corp. (TSX: CCO | NYSE: CCJ) will likely benefit as well, along with the Global X Uranium ETF, an exchange traded fund focused on the uranium sector.

And there are downstream firms that will benefit over time. These include Centrus Energy, a Maryland-based firm that is building an enrichment facility in Ohio, and ConverDyn, a joint venture between Honeywell International Inc. and General Atomics that provides uranium conversion services.

So, we’ll wait and see what happens here. Federal money? Well, it’s nice and will create some great trades. But to build a new U.S. nuclear sector will take a generation, plus… a serious plan written by serious people.

Inflationary Thoughts, and What to Do as Things Unfold

Like many people (perhaps like you, dear reader), I’m a creature of habit.

For example, when I buy something in a store I always ask for a receipt. Or I hit the button for a receipt if it’s one of those self-serve dispensers, like with fuel pumps at a gas station. Then I fold the receipt and drop it into the left pocket of my trousers. See? Habit.

Later, I empty my pockets, take the receipts, and stuff them into an envelope on my desk. The idea is that I’ll sort them later for taxes. Except I hardly ever do that last part. Staying organized for taxes is not a habit, I guess.

At any rate, this short, personal confession is my way of introducing a quick discussion about inflation, currently over 8.5% per no less than the U.S. Government. And it’s likely even more than that number because I believe that government bureaucrats badly misperceive and understate reality.

So, here’s what happened. The other day I was cleaning my desk and found a stash of gasoline receipts from about a year ago. Back then it cost about $35 to $40 to fill the fuel tank of my car.

Lately, though, it costs me about $70 to $75 to fill my gas tank. That’s about 80% more than a year ago.

Same car. Same fuel tank. My driving habits are about the same. Same roads. Same trips to the store, errands, etc. Same everything, except that it costs me much more to fill the tank.

There’s a reason for this, of course. A year ago, the price of oil was nestled in the range of $65 per barrel. Today it’s north of $110. Do the math, right? The price of oil controls the price of motor fuel. Oil up, gasoline up; cause and effect.

Meanwhile, rising prices for energy – oil, gasoline, diesel – explain a big whack of why the rate of inflation is high and increasing, not just at the fuel pumps but at the grocery store and pretty much everywhere else.

Inflation is up because the global supply of energy is tight, which is certainly the case for oil, and also the scenario for much else in the arena of fuels.

And energy demand is up due to a global recovery from Covid. More people want more and more energy. And due to the massive levels of government spending over the past couple years, there’s money out there to chase it.

In other words, demand/people/money are chasing – or more precisely, “cornering” – a relatively static supply of oil, hence higher prices to clear the market.

All this, while higher costs for energy flow through to everything.

Higher energy costs affect what you pay to drive your car, and what it costs farmers and processors to produce food and other goods, and what it costs manufacturers and shippers to create and move everything, and eventually deliver it to stores where people buy it all.

In this regard, inflation is now truly structural. That is, inflation is built into the entire economic system. It’s deeply rooted in the fundamentals of energy availability, and how much energy costs its end-users.

Now, consider a follow-on point to what we just discussed. That is, absent a lot of additional energy miraculously showing up and hitting the system (hint: very unlikely) the whole situation will remain bad, if not get worse.

However bad you think it is now – high prices at the gas pump or supermarket – it’s about to hurt even more. There’s no relief in sight, unless you’re one of those well-insulated people who want to see a major global recession to, as the saying goes, “destroy demand.”

The takeaway here is that inflation is structural. So stand by for more of it. Stand by for higher prices. Stand by for your dollars to buy less and less, while your quality of living declines.

And okay, one more takeaway, with an upbeat angle. Looking ahead, hard assets – real things like metals and energy resources – will not only hold their value through the coming storm, but preserve and create wealth for the holders.

On that last point, invest accordingly.

That’s all for now…  Thank you for subscribing and reading.

How to Play the Coming Market Cleanup – Including Five Names To Watch

Broad markets are down this week in a wide, deep selloff. Or for optimists out there it’s a general cleanup across the spectrum, punishing the overly ambitious. Gold is down too, as I’ll discuss below.

Here’s what’s going on, and towards the end I’ll list five “mine and minerals” ideas on how to play it all.

First, and obviously, markets have declined based on negative sentiment. And why? After all, is there any good news out there? Consider:

  • War in Ukraine, rapidly emerging as a new, generational East-West struggle.
  • Structural, built-in inflation across every economy in the world.
  • High oil and natural gas prices, with production and supply issues worldwide that have translated into shortages.
  • The nat-gas shortages have led to a lack of fertilizer which – rolled in with high oil/diesel prices – foretells of eventual, widespread food scarcity.
  • All of the above, while the global cargo ship economy remains mired in clogged ports, amplified by Covid shutdowns in China.
  • And people have finally caught onto the racket of those high flying, profitless tech companies with business plans that lose money, seemingly forever.

I could go on, but you get the picture. It’s a mess out there and getting messier. Not exactly the foundation of a booming global economy as 2022 unfolds.

So yes, people feel negative, sell out, and go to cash. They de-risk, so to speak.

Which brings us to gold, which is sliding. And here’s the quandary: Why sell gold into a de-risking market? Gold ought to represent long-term security in a time of risk, right?

The sell-side argument is that interest rates are rising, and rising rates raise the carry cost for holding gold. That is, physical gold is “just metal” and doesn’t pay a dividend. So, every ounce in the vault is a missed opportunity to generate cash. And the imputed loss on gold (i.e., versus holding cash) is greater when interest rates are high.

It’s not difficult to understand the argument, but I don’t buy it. Because look at the situation from a different angle.

Per the U.S. government’s own statistics, inflation is running in the 8.5% range – and the true number might be twice that if you follow what is called “shadow statistics.” In that respect, holding cash also has a cost, namely that 8.5% inflation rate (or more) per year of vanishing purchasing power.

Here’s the investor choice: hold cash and generate minor amounts of interest in an environment of rising inflation. Or hold gold and protect the wealth basis against declining purchasing power over time.

Indeed, the Fed threatens the world with small interest rate increases of 0.25% or even 0.5%. Okay, but that’s insignificant when compared with the 8.5% (or more) declining value of cash.

So, why have people sold gold down in recent days? Well, sometimes you don’t sell what you want to sell. You sell what you have to sell. Like if you need fast cash.

You sell gold because it’s liquid and always catches a bid. That’s not necessarily the case with many other investment ideas.

During market sell-downs the price of gold often drops early, such as when overstretched people need cash to cover margin calls. But after that early tumble, gold tends to be among the first plays to recover on the other side of the selloff and cleanup.

Along with the declining price of gold, metal miners often head down too. Good companies drop in value for no good reason. The list is long and includes names that hold great assets with serious ore in the ground, coupled with excellent geologic work, facilities, workforce and management teams.

There’s no saying how long the current selloff will last. Will the market find a bottom and then head back up? Or will more downside yet unfurl? Nobody really knows, and things can change in a matter of hours.

But along these lines, I have five names for you, companies in the gold and related metals space that have tumbled in recent days into bargain-hunt land:

One great up-and-running metal miner is Avino Silver & Gold Mines Ltd. (NYSE American: ASM | TSX: ASM). This company has operated near Durango, Mexico since 1968. The ore body is a deep-running series of veins that were first discovered in 1548 by Spanish explorers/conquistadores. There’s a full package of mineshafts, mills and processing facilities. Much of the operation was closed during Covid, but it’s all getting back into production. Ore grades are excellent, with continuing discovery as mining progresses. Plus, an offtake agreement with Samsung for all the metals.

And here are a couple of names for companies well-along in the exploration side, with superb results to date and great prospects ahead:

Take a look at American Pacific Mining Corp. (CSE: USGD | OTCQX: USGDF). This company controls a major copper exploration play in Madison, Montana and is partnered-up with giant Rio Tinto to explore a skarn-porphyry, mineral-bearing body. Progress – meaning mineralization uncovered – has been excellent over the past 18 months, with numerous unreleased drill results still to come. Meanwhile, Am-Pac holds 100% of two other outstanding, high-grade, near-surface gold plays in hard-rock mining country in Nevada.

And look at Group Ten Metals, Inc. (TSXV: PGE | OTCQB: PGEZF). This is another company that works in the nickel-platinum belt of Montana, adjacent to property controlled by Sibanye-Stillwater. Group Ten controls a vast land package and has had remarkable success identifying high-grade zones of copper-nickel, along with platinum group metals, gold, silver and even chrome. Indeed, it’s a “battery metals” play from numerous angles.

For early-stage gold exploration, look at TRU Precious Metals Corp. (TSXV: TRU | OTCQB: TRUIF). The company works in Newfoundland, in a highly prospective gold-copper belt. Its neighbors include two well-known names, Marathon Gold and Newfound Gold Corp., and TRU is directly on the geologic trend that connects these other two plays. Early sampling, mapping and geophysics are promising, with drill results offering strong promise.

And finally, another early-stage explorer, Romios Gold Resources Inc. (TSXV: RG | OTCQB: RMIOF). This is what geologists call a “hip pocket” play, an intriguing collection of historically explored and mined projects across Canada and in Nevada. Right now, the focus is on two high-grade works that were picked in the olden days, but abandoned to the mists of time due to low-priced gold. Modern geophysics and drilling reveal significant new mineralized zones. Romios is a small-cap play, but with the ability to move on news from the drill deck.

That’s all for now…  Thank you for reading.

Russia Deploys the Gold Weapon

If you follow war news from Ukraine, no doubt you’ve seen gruesome images of wrecked tanks, burnt trucks, demolished personnel carriers and more.  

Whether it’s Russian or Ukrainian equipment, almost everything you see is based on old Soviet-era designs such as T-72/64 tanks, or boxy BMP armored vehicles, etc. And when a rocket or shell hits those things the internal fuel and ammunition cooks off, and the machines burn like a torch. Bad design, obviously. 

But there’s another Russian weapon that was also recently deployed, and it appears to be working very well. You won’t find this system on the battlefield, though. In fact, this Russian device is an economic weapon, and it may prove to be one of the most impactful implements of war in the modern age.  

That is, the government of Russia recently pegged that country’s currency – the ruble – to gold. And right now, Russia’s central bank will buy gold at 5,000 rubles per gram through June 28. (After that, we’ll see.) 

Here’s why this is important. Russia has just established a state-supported bid for gold. In essence, Russia has recreated a new global gold standard with a well-defined floor beneath the price. This is big. It moves the gold price, and I mean upwards. Why? 

On the day that Russia set the bid at 5,000 rubles, the dollar-ruble exchange rate translated to gold at about $1,550 per ounce, or well below the London daily quote. No big deal, right? Well, not just then, not at that time. 

But something else happened. Within days of the Russian announcement of rubles for gold, the Russian currency strengthened firmly against the dollar.  

Today, about two weeks after the initial announcement, those same 5,000 rubles per gram translate to a gold price of about $1,925. Which is about what the London quote is.  

In other words, Russia’s hard fix of rubles for gold has equilibrated with the dollar-ruble valuation. Meaning what? 

Well, look at it this way: Russia has just undermined the ability of “paper” gold traders to sell the metal down too far, lest the spread open and arbitrageurs swoop in. 

Got that? With a Russian price floor beneath gold, there’s high risk to downside trading.  

Very clever. Russia has not gone out and simply bought gold contracts with the intent to corner the market, eventually present them for delivery, demand physical gold and basically “break the bank” in a strict sense. Nope. No brute force, like rolling a tank into town. And more than likely, if Russia had done that then the gold exchanges would have found some way to dishonor the underlying contracts and blame it all on “sanctions” or such. “No gold for you, Ivan!” 

In this instance though, Russia has been quite subtle, offering to buy gold at prix fixe. And in this manner, Russia has created a new economic playing field across the world. It’s currently embryonic, but there’s no denying that it’s a parallel platform to the dollar-dominated regime that has lasted since World War II.  

We now have a new scenario, though; a gold-backed floor price in which even the world’s most aggressive gold traders and market makers cannot sell the metal down, lest they fall into their own trading trap.  

But at this point it’s fair to ask, what makes this Russian ploy work? How will it be effective? 

In the introductory phase, the success (or not) of Russia’s gold gambit hinges on the country’s exports of natural gas. That is, Russia has told all buyers that it will sell its gas to “unfriendly countries” only for rubles.  

In essence, this segregates buyers. Everything is based on their political stand regarding Russia’s Ukraine military operation. More practically for the nations of Europe, Russia will accept no dollars or euros for gas, just rubles (or gold of course). And suddenly, literally within a matter of days, many gas buying nations must come up with a whole lot of rubles. 

Looking ahead (and recall that June 28 date above), it’s more than likely that Russia will announce sale of oil in rubles, which matters when that news comes from one of the world’s top three oil producers. And then there are Russia’s exports of minerals, agricultural products and pretty much everything else.  

If you add up Russia’s exports of gas, oil, minerals, ag and other things – weapons come to mind – the overall value is in the range of half a trillion dollars per year. Now translate all that into rubles, and it’s a lot of currency exchange banking.  

Or translate that cumulative dollar-total of Russian exports into gold at 5,000 rubles per gram, it makes for a lot of gold.  

Right now, across the world people, companies and nations that hold dollar reserves are still mentally processing this new state of monetary affairs. And there’s much to process, considering the general lack of appreciation towards gold in modern Western monetary thinking. Plenty of disdain, actually.  

So, we’ll see. And recall that old saying, “Wisdom may come late, but it seldom never comes.” Meaning that sooner or later, people will figure out that if they want Russian gas, oil, minerals, food and much else, they will have to fork over the rubles. And many dollar-holders will then lighten up and sell bucks to buy rubles, as well as buy physical gold. 

One way or the other, we will witness the dollar weaken, perhaps a little bit and slowly, or maybe a lot and fast. While the ruble will likely strengthen, which means that the dollar-ruble exchange rate will tighten.  

At the end of the day, the dollar-price for gold will rise, and along with that the valuations of many gold mining companies will move upside. Heck, we may even see a meltup in the price of gold, and an investor panic into gold miners across the entire sector, from juniors to established biggies.  

Here’s the takeaway. Russia’s central bank will pay 5,000 rubles per gram of gold, and this sets a hard, new price floor. The dollar-ruble rate has tightened, and Russia has now created a new gold standard for the world, backed by its natural gas if not its oil, minerals, agriculture and other exports, all under cover and protection of Russia’s well-known nuclear weapons complex.  

It’s worth noting that Russia has been planning this move for many years (with China in concert, more than likely). All of this didn’t just sort of happen. But here we are, and it’s not the time or place to recriminate. 

Predictions: Gold-backed rubles will strengthen. While ongoing inflation trends in dollars will weaken the U.S. currency. All this while few people in the West truly understand the basic idea that “gold is money.” 

A new, worldwide economic education process is about to begin. Time to brush off those century-old books about the “gold standard.”  

And however crummy those Soviet tanks and armored vehicles might be in the midst of modern war, the price of gold and gold miners is on the way up.   

That’s all for now…  Thank you for reading. 

Best wishes…   

Byron W. King  

Maple Gold Set to Soar

Maple Gold Mines Ltd. (TSXV: MGM | OTCQB: MGMLF) is an exploration junior in southwest Quebec:

I’ve followed this company for about five years, including two trips to site, pre-Covid. And now I can report that the story has not merely “gotten better,” to coin a phrase, but is on the verge of a strong breakout.

Maple holds a large and – as I’ll discuss in a moment – impressive land package. Currently, Maple has two projects under exploration, both in well-known gold-bearing formations north of Val d’Or.

When I first looked at Maple, it held a large land package around a site called Douay, in the heart of the west-east trending Casa Berardi fault zone, a prolific gold producer. Then about a year ago it added an adjacent project to its book, called Joutel, a past gold producer.

Also, when I first encountered Maple a few years ago, the problem was one that’s common to many small companies with limited treasury. It held more geology than it could afford to explore.

The good news is that Douay holds great promise. Other companies in the past have mapped the area, performed different levels of geophysics, drilled exploration holes and even sunk shafts into bedrock. So, this is not terra incognita by any means.

In fact, based on the geology to date, one useful analogy to Douay’s gold-bearing rocks is a mine to the south called Canadian Malartic, presently Canada’s largest gold mine. Another analogy is also a legendary name in mining, called Detour Lake.

Still, for all the blue sky promise of Douay there’s nothing geologically easy about figuring it out. First, the Douay region is post-glacial, meaning mostly flat and boggy courtesy of several episodes of glaciation that ground down the surface over Pleistocene Time. Today we’re left with vast vistas of unconsolidated, till holding, lakes and supporting and scrub vegetation which hides everything underneath.

On the upbeat side, this flatland surface expression masks relatively shallow bedrock with quite a bit of evident structure, meaning faults and associated fractures. Another way to say it is that there are precious few surface outcrops of real bedrock, but it’s also not a long reach to drill through the muck and into the hard rock targets down below, to obtain real data.

In this kind of environment, surface mapping isn’t all that helpful. Serious exploration must work from geophysics to identify possible targets. Meanwhile, the wetland nature of the area lends itself to winter drilling when it’s easier to service rigs via ice roads.

In my last visit to Douay in mid-2019, the exploration team had worked up solid geophysical models and drilled a series of targeted holes. This led to a creditable subsurface model supported by downhole data.

Meanwhile, back then, Maple management was shopping around for a partnership with a larger player to fund the next phase of effort.

But then in early 2020 came Covid. Across the exploration industry, wise heads counseled to throttle back and preserve the treasury. Nobody knew what might happen, of course. The safe bet was to hunker down.

Except that’s not what Maple management did. In the first few months of 2020 they maintained their winter drill program until forced to shut down by Canadian federal and Quebec provincial authorities. (And this drilling effort resulted in zero Covid cases by the way.)

When results came in, Maple released news of significant gold mineralization in terms of large-scale and bulk tonnage, coupled with several promising higher-grade zones. Maple’s geological model showed long stretches of west-east strike length mineralization, much of it wide open to depth. There’s always that “lucky” hole, right?

To make a long story short, by late 2020 Maple began working with Agnico Eagle Mines Limited (NYSE: AEM | TSX: AEM). Agnico put $6.2 million (CDN) into the company for a 19.9% stake and cooperated at the technical level to analyze results. Then in early 2021 Maple announced a joint venture that folded-in Agnico’s adjacent, past-producing Joutel gold property.

In essence, the combined Douay-Joutel area has geologic potential to become a significant mining camp in its own right.

Over the course of 2021 Maple staff reinterpreted over 250,000 meters of historical drilling and mining data from the Douay-Joutel properties, revised the overall subsurface model and fitted the new layers of data into known geophysics.

Also based on 2021 efforts, Maple announced numerous drill hits into additional gold-bearing bodies, plus additional drilling that indicates possible connectivity between target zones. Plus, there are indications of “feeder” zones at depth which offer significant, high-grade gold upside to the overall project. Then to add to the luster, there may even be a copper-bearing porphyry connected to the entire system.

Which brings us to the present. To support ongoing efforts, Agnico has committed to spend $18 million (CDN) over four years. This kind of bank permits numerous, ambitious holes in terms of spacing for resource definition, as well as depth to find those feeder zones and porphyry rocks.

All this while Maple has raised funds along the way. The company holds about $24 million (CDN) on tap and is set up for another drilling season in 2022.

Maple’s last resource estimate was in 2019, with 422,000 ounces of gold equivalent indicated, and 2.35 million ounces equivalent inferred.

But Maple is about to announce – any week now – a revised resource estimate that will, one would think, be significantly larger based on drilling and other new modeling over the larger land package.

Management’s goal here is to take the current, not-quite 3 million ounces of gold and move that needle upwards in significant steps towards the 5-million-ounce level, if not higher.

With all these developments, there’s clear, near-term upside for Maple Gold. The company’s current market cap is in the $90 million range (USD), and just the upcoming resource update alone should serve to move that number. Meanwhile, there’s ongoing progress in the field, with continuous news flow from past and current drilling.

Note that in a generally “down” gold market over the past year or so (pre-Ukraine War to be sure), Maple managed to hold up and even move higher. And now you know why, and also why there’s more room for a higher share price as 2022 unfolds.

That’s all for now…  Thank you for reading.

Byron W. King

Russia’s War, Supply Chain Turmoil and What It Means to You

What a week! Last Thursday, Russia invaded Ukraine. Then this week global supply chains went crazy, with skyrocketing price moves and a global-scale sense of worry about where it all leads.

I won’t dwell on war news, meaning stories and imagery from front lines. It’s tragic and painful to witness, and no doubt you follow events.

But definitely, it’s worth discussing the economic impacts of the war. In particular, consider the almost immediate commercial isolation of Russia that’s now taking shape with a wide array of sanctions on Russia’s government, her banks, businesses and people.

This is an entirely new page for the world economy. And what’s happening is not as easy as just saying, “Russia is bad so let’s punish her.” Sad to say, though, that’s where much thinking across the world is focused. Do something. Make it fast. Think about it later.

Another way to say it is that Russia is a major, global-scale source of key energy and industrial resources. These range from products straight from the well like crude oil and natural gas, to refined hydrocarbons like gasoline, diesel and chemicals. Plus, Russia produces a vast array of industrially critical elements, again ranging from ores and concentrates to highly refined and processed alloys.

For example, as Russian sanctions kicked into play over the past few days the price of oil pulled up into a strong climb, with Brent Crude hitting $114 per barrel at one point. This reflects market uncertainty over future access to Russian exports. Meanwhile, one sees stories of tanker-loads of Russian oil going “no bid” because traders are uncertain about the legality of even making an offer. It’ll sort out, more or less. But for now, it’s a serious mess.

Other important commodities with a Russia-trade angle are also rising in price. Wheat futures are soaring to two-decade highs, according to market tracking services. And lumber futures are up sharply as well, reflecting concern over diminishing Russian supply.

Other materials rising in price include aerospace-grade aluminum, now at record levels according to a market follower with whom I spoke earlier. Meanwhile, a significant fraction of the world’s aerospace grade titanium – about 60% by some calculations – comes from Russia.

Or consider spot prices for other widely used, critical industrial elements like copper, nickel and uranium. All have a strong Russia supply angle, and all are at 10-year highs, per trading data.

You get the picture, right? Literally, overnight, anti-Russia sanctions have created uncertainty over future supplies of key energy resources and metals.

Meanwhile, share prices for important Russian producers have collapsed. Consider just two key companies in the Russian investment space, gas producer Gazprom (OTC: OGZPY) and metals producer Norilsk Nickel (OTC: NILSY). Both companies’ share prices have tumbled in recent days, as you can see here:

Is there an investment angle? Well, the possibilities are many and depend on your risk tolerance.

For the truly bold, the collapse of Russian share prices creates a contrarian setup. If you are aggressive, and perhaps a bit crazy, feel free to wade into the selloff and buy shares of Norilsk and Gazprom. Of course, we don’t yet know what will happen as events unfold, so the “buy low” idea could also lead to even more losses, of not a complete wipeout. You’ve been warned.

Or frame it this way: Russia now has a very significant level of what’s called “war risk” in everything that has to do with its investment climate. Perhaps there’s an upside in the not-too-distant future, but for now the entire space is a very dangerous place to be for most investors.

The safer investment idea is to focus on U.S. and Canadian names that work in the resource space that’s affected by Russian sanctions. Of course, there are many names out there ranging from small exploration plays to large and mighty companies.

For example, let’s look at nickel. Large nickel producers include Brazilian play Vale (NYSE: VALE), as well as Swiss-based Glencore (OTC: GLNCY) and Australia’s BHP Group Ltd. (NYSE: BHP). These names have global operations and everything you would want in a major player. If customers need nickel and cannot obtain it from Russia and Norilsk, they can buy it from these other guys.

On the much smaller, exploration side, though, my strongest play is a Canadian junior operating in Montana, called Group Ten Metals Inc. (TSXV: PGE | OTCQB: PGEZF). This company is relatively early stage in its efforts, but with significant progress on the books. The play is focused within the well-regarded Stillwater District, where the company holds a massive land package. Exploration has already revealed extensive mineralization in copper, nickel, platinum, palladium, rhodium, gold, silver and even chrome. It’s a superb asset (I’ve visited the site and seen the mineralization), with strong technical and management talent.

It’s also worth noting that Group Ten holds lands directly adjacent to Sibanye-Stillwater, Ltd. (NYSE: SBSW), currently producing minerals in the region. This situation makes it more likely that Group Ten can eventually obtain necessary mining permits and move towards development and production.

To sum up, we can’t do anything about the tragic war in Ukraine. Meanwhile, the anti-Russia sanctions are a massive, international phenomenon, again out of our hands. But already these dynamics have set up severe supply chain issues, all based on just a few days of history being made. And more disruptions are, no doubt, in the pipeline as events unfold and politics play out.

Finally, looking ahead the world is not simply on a glide path to a new version of the Cold War. No, Western nations are on the path to a “Commodity War” scenario, firmly embedded inside the looming political, economic and perhaps military confrontations. In this sense, holding real assets – including ores in the ground – is critical to your investment future.

On that note, I rest my case.

That’s all for now… Thank you for reading.

Best wishes…

Byron W. King