Tales from the Covid Bunker: Day 17

End of the World Jukebox (Coarse language warning!) - Thanks to a friend on Whatsapp for this blunt suggestion! Stay safe y'all.

Featured Image: Stockpiles of Au-Ag tailings at Vangold's 'Il Pinguico' project in Mexico.


G’day there! Welcome back!

After yesterday’s floppy attempt at writing and extended nap, I’m back in game!

Big challenges with the corona virus’ closure of the world. Gold is likely to have a very strong week, but, be very difficult to source! The ‘London Bullion Market Association’ (LBMA) have discussed using charter flights to meet deliveries, a significant cost on transport that will eat into profits of suppliers and mean only major players (who can afford to charter a jet) are likely to have access to bullion in the near future.

Banks, governments and mass buyers are likely to get first bite at the limited supply apple. I would imagine deals have already been made, in principle, for what is being delivered, so purchasing from a private position is going to be tough. This further widens the gap between private retail and commercial investors, which has already put strains on Canadian exchanges as retail investors drop out and give up fighting the tide of huge market makers simply fixing their own prices and movements. Killing off the retail investor crowd further means we’ll lose significant volume and movement.

What does this mean for junior miners? Good things. If you can’t own the gold, own the people making gold… An investment into a junior with proven, compliant grams in the ground and a clear path to development is the next best thing to owning physical gold (in theory). Look at low cost and easy access regions, as they’ll be first to reap the reward of an increased price on their production.

Existing producers with secure delivery routes into banking hubs (like Hummingbird Resources, who have compliant resources in Liberia as well as production in Mali and deliveries into London) have a clear runway to profit from ramping up to meet demand. Matsa in Australia, Victoria gold and Anaconda in Canada are all in my current stock basket.

The most accessible kind of deposit is a tailings pile, broken up chunks at surface that you can just scoop into a mill. Imagine how much ‘low-grade’ material we’ve mined worldwide and dumped all over the place. The UK is covered in historic mine dumps (most are now landfill or children’s play parks!), Germany has huge dumps around the Freiburg Silver district and a new relaxed regional mining code…

As prices & demand increase, these once ‘low-grade’ waste dumps begin to gain economic value again and those holding them should consider bringing in the excavators for cashflow. A great example right now are Vangold, who are sat on >100k tons of gold-silver tailings at Il Pinguico and are within cherry spitting distance of existing smelters and mills.

I keep saying it… If you’re still buying in this dip… Think about how much a company’s resource is going to cost to get into. Can they just drive up with a digger and fill up a truck? Or will they still need months of helicopter access and drilling to define anything compliant?

There are still big long-term gains to be made for junior remote explorers with discovery (potentially much bigger rewards!), but for near-term positivity and less need to dilute, those who have realistic potential for production will make up the bulk of my portfolio.

Sunday Musings:

The first casualties in any conflict or emergency are the poor and the environment. This is riging true now as a vast % of Brits are finding they won't qualify for state aid duing the downturn and the USA has ceased environmental protection laws. Rather than encourage production, I think this is simply likely to lead to a huge outpouring of stored waste and cost-cutting from heartless companies so, keep informed and keep calling out anything you see that isn't morally right, regardless of Trump's lunacy. Don't invest in companies who are going to abuse this regulatory break, despite being able to easily afford alternatives. CBC Article Here.

Stay safe amigos and keep up the chatter, I’m slow at replying to emails, but I’ll get back to all of you I promise!

Liam
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