Is $3000 gold possible? A look at the ‘for and against’, and Australian gold miner Alkane Resources

2020 has seen unprecedented levels of global economic disruption due to the COVID-19 (coronavirus) pandemic. This has seen share markets collapse and the gold price rise 15% in just a few months. Some say this is just the beginning of the gold bull run, with Bank of America now forecasting gold prices could reach US$3,000/oz, which is almost double the current price of US$1,721/oz.

Today we look at the arguments for and against US$3,000/oz gold.

Gold 1 year price chart – Gold = US$1,721

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The case for US$3,000/oz gold

  • COVID-19 has so far caused 2,994,958 confirmed cases and 206,997 deaths, and is severely disrupting the global economy. Some countries are now re-opening their economies; however the risk remains high of a second wave of infections. We may still be a long way away from herd immunity, successful treatments, and a successful vaccine.
  • Goldman Sachs recently stated: The downturn will be 4 times worse than the Global Financial Crisis (GFC). In the U.S., second-quarter activity likely dropped 35% while unemployment could hit 15%.
  • The IMF forecasts global GDP to be minus 3% in 2020, then recover to +5.2% in 2021, assuming pandemic fades in the second half of 2020.
  • The coronavirus health crisis may be followed by a coronavirus debt crisis. Global governments have responded to the COVID-19 with massive stimulus, and hence trillions of dollars in new money printing.
  • Bank of America (BoA) forecasts gold to hit US$3,000/oz by October 2021, in a report titled: “The Fed can’t print gold.” BoA states that with an official recession looming, monetary authorities are poised to buy record amounts of financial assets and double the sizes of their balance sheets.
  • Global gold supply is struggling to increase each year as it becomes harder and more costly to find and mine gold.
  • Gold performs best when rates are low, and right now we have historic low interest rates.
  • Historically gold has proved to be the best storage of wealth.

The case against US$3,000/oz gold

  • Lower jewelry demand in India and China may put downward pressure on the gold price. Gold jewelry represents the largest source of annual demand for gold. Though it has declined over recent decades, but it still accounts for around 50% of total demand.
  • A stronger US dollar may mean a lower USD gold price.
  • We may recover quickly from COVID-19, and stock market sentiment could improve, thereby lowering sentiment towards gold investment.

Viewpoint

I think BoA hit the nail on the head with their report title: “The Fed can’t print gold.” Gold’s scarcity and centuries long history as a preserver of wealth means investors will always seek gold as a safe haven. The global supply of new gold struggles to increase YoY, yet the supply of new fiat currencies such as the USD continues to flood the market, as printing presses work 24/7 to print new dollars.

Investor’s takeaway

Investors would be wise to have some gold in their portfolio, as a hedge against a collapse in paper money and the global economy. Physical gold is always the safest and purest way to play. Next can be the gold backed ETFs, followed by gold miner ETFs, and finally gold miners.

Smaller gold producers with exploration upside

For investors wanting to leverage their gold exposure, investing into gold producers and successful explorers can achieve this. One example that comes to mind would be Alkane Resources Ltd. (ASX: ALK). Alkane Resources has gold production at their Tomingley Gold Mine, successful gold exploration, and a 100% ownership of the Dubbo Rare Earth Project. They are very well funded to achieve success with cash, bullion and investments of A$91.7 million.

Alkane Resources Tomingley Gold Mine forecast to produce 30-35,000 oz Au at AISC A$1,250-$1,400 in FY 2020

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Alkane Resources has very significant exploration upside at their Kaiser-Boda target zone (part of the Northern Molong Porphyry Project)

Apart from a producing gold mine (Tomingley Gold Project) and their Tomingley corridor exploration projects; Alkane Resources has very significant exploration upside at the Kaiser-Boda target zone (within the Northern Molong Porphyry Project), which has been mapped over a north-south strike length of a massive 6km long and 1km wide.

Alkane Resources recently announced: “Further extensive porphyry Gold-Copper mineralisation at Boda“. What’s striking about this announcement was the long length of mineralisation, and it started near surface. For example, 965.7m grading 0.21g/t gold, 0.11% copper from 7.3m, and 153.0m grading 0.40g/t gold, 0.13% copper from 480m. In March 2020, Alkane Resources announced another very long drill result also at the Kaiser-Boda target zone. Drill hole KSDD007 resulted in 1,167m @ 0.55g/t Au, 0.25% Cu from 75m. Another was KSDD003, 507m @ 0.48g/t Au, 0.20% Cu from 211m.

Gold copper porphyry style deposits can be very large making them economic despite lower gold grades, due to efficiencies of scale and copper by-products credits.

Alkane Resources’ Managing Director, Nic Earner, stated:

“We’re delighted to confirm further extensive mineralisation at the Boda Prospect. Our drilling to date demonstrates broad, ore-grade mineralisation over at least a 300m north-south by 400m wide zone with over 800m depth, with the mineralisation open along strike and at depth, and a significant higher grade core with exceptional characteristics.”

A summary image of Alkane Resources extensive exploration projects and mine in Australia

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Closing remarks

There has probably never been a better time to buy gold or a quality gold miner. For investors wanting higher risk and reward the small gold producers, with growing production and exploration upside offer an exciting opportunity.

As financial and debt markets melt down, very few sectors will show positive returns, let alone a chance to double or triple. And remember gold is very rare, and as BoA says: “The Fed can’t print gold.”

And ‘yes’, US$3,000/oz gold by October 2021 is very possible.




A pivotal moment in TerraX’s advancement towards a potentially significant gold discovery

The talk right now within the gold sector is an expected rally of 22% in 2019, pushing the gold price per ounce to around $1,500. The next cycle could hit $1,900 by next year making gold buyers and gold miners excited. The globe has many historical gold mine sites and districts that it seems to be a worldwide trend to revisit theses mines.

TerraX Minerals Inc. (TSXV: TXR) is a junior gold exploration company focused on creating shareholder value through discovery. The Company has assembled a highly prospective district scale land position on the doorstep of the city of Yellowknife in the Northwest Territories. TerraX has been able to cost-effectively generate multiple new high-grade gold discoveries with a view to re-establishing Yellowknife as one of the premier gold mining districts in Canada.

The Yellowknife City Gold Project

The Company is focused on the Yellowknife City Gold Project, which encompasses 783 sq. km of contiguous land covering 70 km of strike length immediately north, south and east of the city of Yellowknife.

TerraX has three main tenement regions:

  • Northbelt
  • Eastbelt
  • Southbelt

The Yellowknife City gold project lies next to Con and Giant Mines that together produced 14.2 M oz @ 16 g/t Au average grade over 60 years. High grade gold districts are rare, so owning such large tenements near a proven gold district gives TerraX plenty of potential should they have drilling success.

TerraX tenements at Yellowknife

Drill results

Recent drill results serve to indicate the project’s potential as a world-class gold district which can easily be accessed from Yellowknife only 10 km away. Individual assay values from the margins of the historical sampling included 5.06 g/t Au, 2.74 g/t Au, 1.65 g/t Au, 0.99 g/t Au, and 0.96 g/t Au. The results reported here represent only 200 meters of strike along the 4 kilometer mineralized deformation zone.

Long section view and drill results of TerraX’s Northbelt

Latest news for TerraX

Effective until January 2024 and extendable to 2026, the Company has been issued a new land use permit enabling their exploration plan on all the land holdings of its Yellowknife City Gold (YCG) property. The new permit covers all of TerraX’s claims and leases, providing complete flexibility in planning and carrying out long term exploration plans.

President and CEO David Suda stated: “This new land use permit is much better than the two previous permits that TerraX has worked under as it allows the company to drill anywhere on its 783 square km property. We are also looking forward to results from the historical core assays from 5 holes ahead of our refined 2019 drill targeting which we will complete and announce in the coming weeks.”

TerraX has also confirmed that gold structures that hosted one of Canada’s highest grade past producing mines (The Giant Mine) extend onto TerraX’s target zone. The Company will continue to be opportunistic in selecting samples of the remaining core for analysis to further the advancement of targets and deliver results in the future.

CEO David Suda stated: “Results from historical core assays have led to a pivotal moment in TerraX’s advancement toward a potentially significant gold discovery. Assay results indicate that gold structures mined by Giant just south of TerraX property continue north for 4 km on our BDC target. The results underpin data which drove the BDC as a top target and provide significant technical insight for future drill targeting along the trend.”

Focusing on a historical mine district in Yellowknife may have paid off for TerraX Minerals. If the Company continues getting good test results there could be a potentially significant gold discovery. As an investor TerraX is worth keeping an eye on, not only because they are chasing historical gold in a proven gold region; but the prediction is out there for gold to reach $1,900 by next year.




Peters on how gold plus copper with a drilling advantage equals a Pacific Empire

Recently during PDAC 2019, Brad Peters, President, CEO and Director of Pacific Empire Minerals Corp. (TSXV: PEMC | OTCQB: PEMSF) shared Pacific Empire’s competitive advantage with InvestorIntel’s Tracy Weslosky.

Brad said: “Most importantly our competitive advantage is that we can drill. We drill early, we drill often, and we do it for roughly $25-35 a meter. It took us a few months to get into that range but now that we are there, we are comfortable with that and we base our 2019 exploration season around the achievements we made in terms of productivity and efficiency in 2018. What we will be doing in 2019 is focusing on our Babine Copper-Gold Porphyry District projects which are four projects in Bulkley region. Totaling just over 17,000 hectors and in that area, we have a 100 day drill program initially planned for 2019.”

Pacific Empire Minerals Corp. is an exploration company based in Vancouver, British Columbia, that employs a “hybrid prospect generator” business model and trades on the TSX Venture Exchange under the symbol PEMC and on the OTCQB Markets under the symbol PEMSF.

By integrating the project generator business model with low-cost reverse circulation drilling, the company intends to leverage its portfolio by identifying, and focusing on, the highest quality projects for partnerships and advancement.

To access the complete interview, click here