Will 2021 be a golden year for gold investors?

With global equity markets looking frothy, the COVID-19 pandemic still raging on, and reserve banks continuing to print record amounts of money; gold looks to be a good place to park some of 2020’s profits in 2021. Gold usually does well in times of turbulence and can be a good hedge against a weaker US dollar and inflation. Also gold performs best when rates are low and right now we have historic low US interest rates.

Gold 25 year price graph – Gold is currently USD 1,923/oz but is forecast to go higher in 2021

Source: Trading Economics

Several of the large US investment banks are bullish on gold. As a reminder, last year Bank of America made their forecast for gold to hit US$3,000/oz by October 2021. Goldman Sachs forecast gold prices to climb to an average $2,300 an ounce in 2021.

If the above forecasts are anywhere near being correct then the gold miners should have an excellent year in 2021. Against this we may see equities struggle in 2021 after recently reaching an all time high which saw the S&P 500 gain 16.26% in 2020 (18.4% if dividends of 2.14% are included).

Will 2021 be a golden year? 

One of the best ways to make money in gold is to pick the quality and improving gold junior stocks in a year when gold prices are moving higher.

Below is a brief summary of the gold miners we are following at InvestorIntel.

  • Angkor Resources Corp. (TSXV: ANK) is a leading Canadian gold, base metals, oil and gas explorer in Cambodia. Angkor works as a project generator as they control a very large land package. To date Angkor and partners have been having some success as I discussed recently here.
  • Eclipse Gold Mining Corporation (TSXV: EGLD) is exploring the district-scale Hercules gold property within Nevada’s Walker Lane trend, 1 hour from Reno in Nevada, USA. The property appears to have all the characteristics of a large, low-sulphidation epithermal gold system.
  • Euro Sun Mining Inc. (TSX: ESM) is focused on the exploration and development of its 100%-owned Rovina Valley gold and copper project located in west-central Romania, which hosts the second largest gold deposit in Europe.
  • Freeman Gold Corp. (CSE: FMAN) is focused on the development of its 100% owned Lemhi Gold property in Idaho, USA. Recent drilling appears to have been successful with visible gold observed in 17 of the 26 logged holes to date.
  • Granada Gold Mine Inc. (TSXV: GGM) is continuing to develop the Granada Gold Property near Rouyn-Noranda, Quebec, adjacent to the famous Cadillac gold trend. Successfully drilling the past years means Granada is looking to soon upgrade their resource (M&I 762,000 ounces of gold @ 1.06 g/t Au, plus Inferred 455,000 ounces of gold @ 2.04 g/t Au). Granada is considering doing a very low CapEx starter pit for a rolling start to production. You can read more on that here.
  • Quebec Precious Metals Corporation (TSXV: QPM | OTCQB: CJCFF) is a gold explorer with a large land position in the highly-prospective Eeyou Istchee James Bay territory, Quebec, Canada. The Company reported some excellent drill results last year including 80 m at 1.10 g/t Au at La Pointe Extension and 42 m at 1.31 g/t Au.
  • Signature Resources Ltd. (TSXV: SGU | OTCQB: SGGTF) is an explorer at their Lingman Lake gold property which covers 12,148 hectares in northwestern Ontario, Canada. They do have a historical resource (not NI 43-101 compliant) of 234,684 oz of gold (1,063,904 tonnes grading 6.86 g/t). You can read more about Signature Resources here.
  • Treasury Metals Inc. (TSX: TML | OTCQX: TSRMF) owns the Goliath Gold Project and Goldlund Gold Project located in Northwestern Ontario, Canada. Treasury plans on the initial development of an open pit gold mine with subsequent underground operations.
  • Troilus Gold Corp. (TSX: TLG | OTCQB: CHXMF) is focused on the mineral expansion and potential mine re-start of the former gold and copper Troilus Mine, located within the Frotêt-Evans Greenstone Belt in Quebec, Canada. The Troilus Property encompasses 107,326 hectare and is largely unexplored. The Troilus Project now has an Indicated Resource of 4.96m ounces of contained AuEq @ 0.87g/t AuEq and an Inferred Resource of 3.15m ounces of contained AuEq @ 0.84g/t AuEq. The August 2020 PEA was very impressive, with a 22 year mine life, 220,000-246,000 gold ounces produced pa, resulting in a post-tax NPV5% of US$576m (22% IRR), based on a gold price of US$1,475/Oz. Initial CapEx was estimated to be US$333m and AISCs of US$1,051/Oz Au.
  • West Red Lake Gold Mines Inc. (CSE: RLG | OTCQB: RLGMF) is focused on gold exploration and development in the prolific Red Lake Gold District of northwest Ontario, Canada. West Red Lake has a 3,100 hectare property with a 12 km strike length that contains three former gold mines. In total they have NI 43-101 reported 1.087 million inferred ounces of high grade gold (7.57 gpt) open at depth.

During January I will be writing several in depth articles covering the gold sector and several of the above gold stocks.

Stay tuned and wishing you a healthy and prosperous 2021.




Meredith on West Red Lake Gold’s new high grade gold drill results

InvestorIntel’s Tracy Weslosky speaks with Tom Meredith, Executive Chairman of West Red Lake Gold Mines Inc. (CSE: RLG | OTCQB: RLGMF), about their recently announced drill results which has expanded gold mineralization at the NT Zone on the Rowan Mine property in the prolific Red Lake Gold District.

In an InvestorIntel interview that can also be viewed on our InvestorIntel YouTube channel, Tracy and Tom discussed West Red Lake Gold’s drill results with several high grade gold intercepts including 5.91 gpt gold over 6 meters.

“We are in Red Lake which is one of Canada’s best-known gold mining districts,” Tom said. “It was the foundation of Goldcorp which created tremendous amount of value for its shareholders and we are about 20 km away from that significant deposit.” Commenting on the gold market, Tom said, “The central banks around the world are printing money. What that does is that it enhances the value of gold.”

To watch the full interview, click here

To learn more about West Red Lake Gold Mines Inc., click here

Disclaimer: West Red Lake Gold Mines Inc. is an advertorial member of InvestorIntel Corp.




CEO of QPM on extending its high-grade Sakami gold project

Normand Champigny, CEO and Director of Quebec Precious Metals Corporation (TSXV: QPM | OTCQB: CJCFF) (QPM), spoke with InvestorIntel’s Tracy Weslosky about QPM’s recent geophysical survey results from the La Pointe area of QPM’s 100% owned Sakami Gold Project which shows “that this keeps extending further to southwest.”

Normand went on to say that the fundamentals are there for gold prices to go up since “production worldwide is declining, and it is getting tougher to mine gold. The economic situation is not good right now, people are looking at gold as an investment opportunity, and jewelry demand for gold does not stop.” For those reasons, “we will see steady increase over time of the gold price.”

Quebec Precious Metals recently changed its TSXV symbol to QPM.

To watch the complete interview, click here

Disclaimer: Quebec Precious Metals Corporation is an advertorial member of InvestorIntel Corp.




As gold hits new highs and money printing smashes all past records, what’s next for the gold sector

2020 has been a great year so far for gold and for gold investors. Gold is up 28% the past 1 year and most gold companies are up more than 50%. So the big question now is, can the gold rally continue?

We can see from the chart below that the gold rally really accelerated starting in early 2020 as COVID-19 started to become an issue. This is partly because of gold’s tradition as a safe haven but also as a hedge against inflation as the global money printing presses were ramped up as governments attempted to support the economy in the face of a severe global pandemic and associated lockdowns.

As a result US$33.7 billion of money flow into gold ETFs so far in 2020 has surpassed the previous all time yearly high of US$24 billion in 2016; and we are only half way through 2020!

The gold price is up 28% over the past 1 year

Gold demand grew slightly in Q1 2020 driven by the large pickup in demand from gold ETFs. This shows that both retail and institutional investors have been flocking to gold. Somewhat surprisingly central bank gold purchases decreased slightly in Q1, 2020. Demand for gold jewelry reduced as expected due to lockdowns. As global economies reopen I would expect there to be some pent up demand from the jewelry segment.

Gold demand grew slightly in Q1 2020 led by demand from gold ETFs

Source

Gold supply is a constant struggle as each year existing mine reserves decrease. In the past decade lower budgets for exploration has meant less gold has been discovered, particularly large gold discoveries. The pipeline is increasingly short of large, high-quality gold reserves needed to replace ageing major gold mines.

S&P Global Market Intelligence reports major gold discoveries are on the decline

Source

The IMF recently released a report “A crisis like no other, an uncertain recovery.” The report stated:

Global growth is projected at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.”

Globally government money printing continues at a record pace, led by the USA. For example in April 2020 it was estimated that spending for COVID-19 will nearly quadruple the 2020 US budget deficit to a record US$3.8 trillion, or 18.7% of US economic output. By the end of May 2020 the Fed’s balance sheet increased to over US$7 trillion, of which over 40% of this has been added in 2020 alone.

By a way of comparison QE1 during the GFC resulted in a US$458 billion increase in money supply. It is frightening to think where we will be by end of 2020, as we have literally printed our way out of trouble.

The verdict

In late April we published “Is $3000 gold possible?” At that time there was ~3 million COVID-19 cases globally and 206,997 deaths. Fast forward to today and we are now about to reach 11 million cases and are at 524,036 deaths. The last 1 million new cases have been added in only one week. If we continue to add at 1 million per week, we will add another 26 million new COVID-19 cases in H2 2020 alone. From a COVID-19 perspective the case for holding gold is only getting stronger.

A combination of strong gold demand particularly from gold ETFs, building pent up jewelry demand, and struggling gold supply suggests the outlook for gold in H2 2020 continues to look strong.

Gold does well in uncertain times and we certainly have that. We have an out of control global pandemic, a brewing trade war between the US and China with relations deteriorating by the day, strained relations between China and multiple countries, record levels of unemployment, a -4.9% global 2020 GDP projection, unprecedented money printing, and an enormous amount of fear and uncertainty.

I think gold will continue to do well until we get the above issues resolved. Gold miners that can make good discoveries and grow their resources will continue to have a stellar 2020. As for US$3,000/oz gold by October 2021, it is very possible and the idea is supported by the Bank of America and many others.

Gold miners on our radar at InvestorIntel include:




Harte Gold – The good and the bad news with this great potential high-grade gold producer

Investors patience has definitely been tested with the slow ramp and high AISCs of gold production from January 2019 until now, and again recently with the COVID-19 mine closure since the end of March 2020.

Harte Gold Corp. (TSX: HRT) is a relatively new gold producer with its primary focus on its 100% owned Sugar Zone property 24 km north of White River, Ontario, Canada. Exploration on the Sugar Zone property includes 83,850 hectares encompassing a significant greenstone belt with a 35 kilometre strike length.

The property has huge exploration upside with ~90% yet to be explored. The 10% explored has already found 1.67 million gold ounces in the Indicated and Inferred categories. Harte Gold’s Sugar Zone property has a M&I Resource estimate of 1.1 Moz contained Au @ 8.1 g/t, and Inferred Resource of 558 koz contained Au @ 5.8 g/t.

Gold production began in January 2019 but there has been some ramp up problems resulting in lower production and higher costs, which helps explain the current low stock price.

The Good news

The good news for Harte Gold right now is the high gold prices, especially when converted to CAD. In fact gold is currently trading at USD 1,728, which equates to CAD 2,410. The CAD gold price is up 41.09% over the past one year.

USD gold price (now US$1,728) and CAD gold price (now $2,410) 1 year price chart

The other good news is that Harte’s gold production (prior to the COVID-19 stoppage) was trending higher. Gold production for the three months ended March 31, 2020 (“Q1”) totaled 8,597 ounces, the highest quarterly production result to-date. Q1 production was 7% higher than Q4, 2019, and 42% higher than Q3 2019. Once back into full production the mine should be on track for a minimum run rate of 35,000 ounces pa, which should ramp steadily towards a 60,000 ounces pa run rate in 2021.

Combine rising gold production, reducing AISC’s and we should start to see some profits later in 2020 or early 2021, assuming gold prices hold, and the mine reopens soon. As economies of scale kick in 2021 should be a significantly better year for Harte Gold.

Other good news was the December 2019 discovery of high grade gold that showed initial sampling returned grades of up to 247 g/t. This potential new high grade gold zone (the TT8 Discovery) is approximately 17 km southeast of the Sugar Zone Mine in an area previously mapped by OGS geologists as granite and not known to host gold mineralization. The TT8 Discovery is believed to be an extension of an existing known greenstone belt to the east. The Company reported that “17 chip samples across a 40 metre strike extent have returned gold values from 11.1 g/t to 247.0 g/t Au.”

Q1 2020 performance – Increased gold production, reduced costs, improved grades

The bad news

The bad news for investors is that the stock price has fallen over the past year as the company has struggled to yet meet previous Feasibility Study targets for production and costs. AISCs in Q1 were still too high at USD 1,951/oz, despite falling 20% YoY (and 4% QoQ). Production whilst improving is well below the previous 60,000 ounces pa target.

The other bad news is the mine had to close due to COVID-19 at the end of March 2020. This will mean Q2 production will be negatively impacted. Harte Gold has stated:

“The Company is in constant review of the situation and will make a decision on restart in due course. Detailed planning is underway that will allow the Company to mobilize and resume operations in an efficient manner once the decision to restart is made. Higher grade stope material expected later this year should have a positive impact on gold production. Further guidance will be provided once detailed planning is complete.”

Wrap up

Investors patience has definitely been tested with the slow ramp and high AISCs of gold production from January 2019 until now, and again recently with the COVID-19 mine closure since the end of March 2020. The May 2020 announcement that BNP Paribas has agreed to defer debt payments removes any short-term liquidity concerns.

Despite a very testing start the fact remains the Sugar Mine and property has enormous potential. Grades are improving and get higher as they go deeper, with the average grade of the M&I Resource at 8.1 g/t, compared to the Q1 2020 mined grades of 5.5 g/t. Put another way, grades should steadily improve another 47% only to reach the average 8.1 g/t level. Combine this increased grade over the next few years with growing production to meet the mill’s capacity of 60,000 ounces pa, then AISCs should have dropped very significantly towards the forecast AISC of US$845 in the April 2019 Feasibility Study. The December 2019 new high-grade gold discovery reminds investors again of the huge exploration potential across the vast 83,850 hectares Sugar Zone Property.

It appears that investors will still need some more patience in 2020; however with an experienced new management and operations team Q1 2020 has shown they are slowly turning things around. Q2 results will be poor due to the COVID-19 shutdown, but H2 2020, and 2021 should see great improvements.




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

Source

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

Source

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

Source

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.




TerraX’s David Suda on the sentiment shift towards gold companies

“The competitive advantage is very simple. It is a 780 plus square kilometer land package in a very safe and desirable jurisdiction, which is Canada. It is proximal to Yellowknife, which has tremendous infrastructure for a northern community…We actually encompass two historic producers that achieved final production of just over 14 million ounces at very high grades.” States Dave Suda, President & CEO of TerraX Minerals Inc. (TSXV: TXR), in an interview with InvestorIntel Corp. CEO Tracy Weslosky.

Tracy Weslosky: Dave, gold, let us talk about gold in general because you have one of the largest 6 exploration plays in Canada for gold, gold and gold. Can you tell us what you think is going to happen in the market this fall?

Dave Suda: I think this is a question that has been asked a lot lately. The fact that it has been asked about lately makes me think that there is definitely a sentiment shift happening in the commodity space in general and certainly with regards to gold. I am not a macroeconomist. I have always kept it fairly simple. My view is that the U.S. dollar is probably the single biggest factor in the gold price itself. I do not control that so I cannot purport to say that gold is going to $1,400.00 tomorrow or if it is in a year or two years. Certainly all my indicators are that we are seeing a sentiment shift, not only towards the commodity itself. In addition to that we are seeing a sentiment shift towards the gold companies, which relative to the commodity have been undervalued in our opinion.

Tracy Weslosky: We are seeing a lot of indicators and of course the Elliott Wave enthusiasts are telling us to expect a bump here this fall. We are big supporters and have been supporters of TerraX for quite some time. For those InvestorIntel audience members not familiar with TerraX, can you give us a quick overview on the competitive advantage of TerraX? 

Dave Suda: The competitive advantage is very simple. It is a 780 plus square kilometer land package in a very safe and desirable jurisdiction, which is Canada. It is proximal to Yellowknife, which has tremendous infrastructure for a northern community.

Tracy Weslosky: The infrastructure is one of the competitive advantages. As well you have had producing mines in this property. Is that correct?

Dave Suda: Yes and that is another great point that you bring up and obviously a huge selling feature of our asset. We actually encompass two historic producers that achieved final production of just over 14 million ounces at very high grades. 

Tracy Weslosky: We have taken a look at your background Dave. I have to say you have a significant professional background and network. Can I ask why someone with your experience would elect to take this kind of position as CEO of an exploration play? 

Dave Suda: There are certainly a number of factors when one decides to change careers in midlife, arguably past midlife for myself. I would say the first and overarching factor was the quality of this project and the team that has worked on this project. It was an opportunity that my extensive background and network allowed me to assess properly and rationally. After having really vetted the idea we elected to move our family from Toronto to Vancouver and start a new life here and commit to this project because the project itself is just that good and the people that brought me to the project have that much sway. I truly believe in this project…to access the complete interview, click here

Disclaimer: TerraX Minerals Inc. is an advertorial member of InvestorIntel Corp.