NetworkNewsWire
Editorial Coverage: In times of financial crisis, there’s no
safer investment than gold.
Gold’s historic reputation as a safe haven asset will be a boon
for mining companies as the global economy witnesses the plunging
valuation of currency. Kingman Minerals Ltd. (TSX.V: KGS)
(KGS
Profile) has been preparing operations on a historic
mine site in Arizona, benefiting from the cost efficiencies of
revitalizing an already established exploration site. Coer
Mining Inc. (NYSE: CDE) has recently reopened operations
in Mexico as the country’s government relaxed pandemic
restrictions. Kinross Gold Corporation (NYSE: KGC)
is hoping to benefit not only from renewed investor interest in
gold but also from the mineral’s applications in medical testing.
Hecla Mining Company (NYSE: HL) has been expanding
from silver into gold and has renewed operations in Quebec as
precious metals mining was designated a vital economic activity.
Agnico Eagle Mines (NYSE: AEM) has also
recommenced work in Quebec after a shutdown that will affect many
mining companies’ output, but the company will still produce over a
million ounces of gold this year.
To view an infographic of this editorial, click here.
The Renewed Value of Gold
Gold has long been one of the most stable assets for investors,
a safety net in an arena of economic risk. With the world facing a
global health crisis in the form of COVID-19, and the prospect of a
deep and extended recession looming in its wake, the precious metal
is seeing renewed attention from investors. Bank of
America recently raised its 18-month gold-price target to
$3,000 an ounce, while others believe that gold is on the cusp of a
new decade long bull market that will push the price well past
$5,000 an
ounce. Little wonder there’s such strong interest in gold
companies such as Kingman
Minerals Ltd. (TSX.V: KGS).
While gold initially had a
small retracement at the onset of the current crisis, it was
just part of a pattern historically seen in every period of
economic turmoil—one from which gold always returns, and one that
has done nothing to undermine the asset’s worth as a safe
investment in a crisis. Gold has a number of advantages – it
holds its value better than stocks, is more liquid than bonds, and
as the original measure of wealth, it has retained its position of
value while other alternatives have risen and fallen. While it
doesn’t have the spectacular returns some stocks do during boom
times, it has always been a good hedge against a crisis and a
reliable option in times of trouble.
Gold’s sturdy staying power and vast upside potential has
sparked keen interest in Kingman Minerals, which intends to very
profitably extract new gold from old mining sites. Gold always has
intrinsic value, whether for use in jewelry, electronics, or as an
investment, and that value tends to climb relative to other
investments during financially difficult times. Even before the
COVID-19 crisis took full hold, commentators
were predicting that gold would beat the market this year, and
when gold rises in value, the mining companies typically see a
corresponding rise in demand.
National banks are frantically print money to cover the costs of
the COVID-19 crisis and in all likelihood will devalue those
currencies and any assets directly tied to them. If history is any
guide, the intrinsic value of gold should soar and only be impacted
to the upside during the devaluation process. This puts gold in an
incredibly advantageous position over the next few years and
presents a compelling opportunity.
Digging in the Right Place
That companies need to dig for gold in the right place might
sound like a statement of the obvious, but it’s actually a
complicated proposition. Profitable mining involves identifying
accessible, financially viable deposits within mining friendly
jurisdictions, and on sites that are accessible for the
transportation of equipment, staff, and the gold once it is
extracted. Kingman’s Mohave project checks all these boxes and
poses promising potential for the company.
Located in Mohave County, Arizona, the Mohave Project benefits
from being located in a mining friendly jurisdiction. This support
makes it easier for mining companies to work within the state.
Kingman has chosen ground for its work that is known to contain
valuable deposits and that is accessible enough to support a
new mining operation. Located 35 miles outside the town of Kingman,
from which the company takes its name, the Mohave site has direct
road access from Historic Route 66 and Antares Road. This will
allow supplies and resources to easily be brought onto the site as
mining operations are established and expanded.
Water supplies on site will keep down costs for this part of the
operation, while the proximity of a town ensures that there is
support for staff coming in. But perhaps the greatest asset of the
Mohave Project is one that might surprise the inexperienced
minerals sector enthusiast – the ground had already been mined.
Returning to Past Sites
Part of Kingman’s strategy is the return to an old mining claim
– the 167-hectare Rosebud Mine.
Discovered in the 1880s and mostly mined in the 1920s and 1930s,
the Rosebud Mine is a critical part of the Mohave Project. Previously
worked mines are increasingly being exploited by modern mining
companies as proven sites of minerals. Reactivating existing
sites with new mining techniques offers the potential for easy
picking and bigger profits.
Though the most accessible resources have usually been extracted
from these sites, the land still holds the promise of untapped
discovery. Modern mining techniques ensure that previously
difficult-to-extract lodes can be accessed safely and cost
effectively. This technique has been applied to extract newly
valuable battery minerals such as cobalt from old copper mines and
to revive abandoned precious metals sites. Kingman will be tapping
into wealth that previous generations of miners left behind.
Those previous generations are one of the great advantages of
renewed digging on old claims. Records from their work help to
direct new operations, providing evidence for metal deposits. At
the Rosebud Mine, records from the original digging era have been
combined with surveys from the 1980s to calculate the likely wealth
on the site – an estimated 664,000 ounces of gold and 2,600,000
ounces of silver.
Equipped with old records, Kingman has set about new sampling
work on the site. While old records are helpful, they can’t be
relied on for modern operations, so companies like Kingman test to
confirm the existence of predicted or previously recorded deposits.
Two rounds of underground reconnaissance and testing, combined with
historic data, will allow Kingman to provide new estimates of the
value of the site in the next few months.
The presence of historic mining workings makes it easier to
exploit deposits once they are confirmed. With workings that
stretch 2,500 feet underground, the Rosebud Mine’s historic
conditions allow for a significant decrease in the costs of mining
gold—increasing the potential profits of a valuable and
sought-after commodity.
Mining Across America
Another company that will be hoping to benefit from a gold boom
is Coer Mining Inc. (NYSE: CDE). With sites in
Canada, Mexico, and the U.S., Coer has an established mining
presence across North America. The focus of its operations is on
gold, with two operations dedicated to this and two more extracting
both gold and silver. A fifth site, in British Columbia, provides
zinc and lead alongside silver. While the current crisis has had an
impact on some of Coer’s operations, it has recently restarted mining at
its Palmarejo complex in Chihuahua, after the Mexican
government designated precious metals mining as an essential
activity.
Kinross Gold Corporation (NYSE: KGC) also
focuses on gold in extraction operations, which last year produced
precious metals equivalent to 2.5 million ounces of gold. While the
company has operations in Russia and West Africa, more than half of
its production takes place in the Americas. The company has
taken extensive
steps to tackle the challenge of COVID-19, to maintain the
safety of its workers as well as its business continuity. It has
also drawn attention to one of the more overlooked uses of gold in
the current crisis – that its plays a vital
part in virus testing kits. If these tests are widely used,
then the value of gold could further increase.
Idaho-based silver producer Hecla Mining Company (NYSE:
HL) has been expanding its gold
production and now looks set to benefit from the increased
focus on this metal. At the end of 2019, the company was already
seeing increased production
of both silver and gold, along with lower debt and growing cash
balances. Like many other companies, it has seen some disruption to
its work as governments responded to COVID-19. And like Coer, Hecla
is now benefiting from the vital role that mining plays in
maintaining the economy, as the government of Quebec allowed its Casa
Berardi operation to restart in mid-April. While many
businesses are still struggling to find their niche in lockdown,
the fundamental necessity of producing raw resources is leading to
a return to work in the mining sector, even in countries where
rigorous restrictions are in place.
A senior Canadian gold mining company, Agnico Eagle
Mines (NYSE: AEM) also has operations in Mexico and
Finland as well as exploration work underway in the U.S. and
Sweden. Its policy of not making forward gold sales gives
shareholders full exposure to gold prices, and it has provided a
cash dividend every year since 1983 through a strategy of low-risk,
high-quality operations. Like Hecla, it was quickly able to
recommence operations in Quebec after restrictions hit. The
company has been direct with investors in detailing the likely
impact of
COVID-19 on production, but it still expects to produce
1.63-1.73 million ounces of gold in 2020, and a widespread
reduction in production could elevate prices.
With a renewed interest in gold and companies making effective
use of old sites to cost-effectively extract the metal, the market
looks good even in a time of crisis.
For more information on Kingman Minerals, please visit Kingman Minerals
Ltd. (TSX.V: KGS).
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