Insatiable Gold Demand Set To Continue – ECR On The Cusp Of ‘Great’ Ness.
With the US Fed signalling a more relaxed approach to inflation in its end of month policy meeting, gold rebounded sharply after falling from August highs of $2,075oz as markets interpreted Fed Chairman Jerome Powell’s comments to mean that low interest rates are here for years to come.
Ole Hansen, head of commodity strategy at Saxo Bank believes that the Fed’s shift to let inflation and employment run higher will keep interest rates low for years to come, thereby lifting the appeal of non-interest-bearing gold.“There’s still room for bullion to set new all-time highs, although that may take time,” Hansen commented. “Powell’s speech did not threaten the bullish narrative for gold and silver.”
“Low interest rates for longer, a weaker dollar, massive amounts of stimulus and the increased demand for inflation hedges are likely to continue to drive demand for both metals,” he added.
Peter Hug, division head for precious metals at Kitco News is of the view that conditions have not changed for gold and silver.
Speaking to Kitco News on following the Fed meeting, Hug said conditions are positive for gold due to the amount of fiscal support provided by banks.
“The macro picture has not changed. Every central bank in the world has got their foot on the pedal, and I don’t think they’re going to take their foot off the pedal probably until the end of 2021.”
Old Gold projects resurfacing
The ever present strength in gold is sustaining huge levels of investor interest in junior gold explorers. As mining geologists take fees for their work in shares as well as cash, droves of canny investors are now following geologists on social media to try to get the early inside line to any upcoming projects, even to the point of investing into the company owning /operating the project as soon as a new appointment is announced. A successful drilling campaign can of course have a transformational effect the valuations of small cap explorers with quality projects, meaning that professional fees can potentially multiply in value.
The outlook for gold being what it is, many dormant mining projects are being re-examined and feasibility studies revisited. The latest tools, survey techniques and digital / desktop assets available to mining engineers have proved transformative in the search for precious metals within existing dormant assets and mines around the world. And as many projects have some infrastruture already in place, opportunities to ‘fast track’ such developments are ever present.
Mining Giants Lined Up for Fast Tracking
The major mining companies around the world today all started somewhere. Many will have started life as microcap exporation companies, developing assets into production, and using the proceeds to fund other projects. In some cases, the fuding will have come from existing shareholders. With others a farm-in agreement will be reached with another mining company to share or bear the developments costs, which sees the partner ‘earn-in’, usually at an increasing level of project ownership as the money is spent.
The current ‘pedal to the metal’ approach to monetary easing is providing a perfect backdrop for project developments of this nature, and has created fertile hunting ground for the world’s leading mining companies seeking lucrative farm-in opportunities. Equally, the project potential may see active investors support the board and go it alone.
AIM listed ECR Minerals (AIM: ECR) is a company on the cusp of a series of game changing deals. The company 100% owns Bailieston and Creswick projects in Central Victoria, Australia, and also has financial interests in the Avoca, Moormbool and Timor projects following the sale of those licenses to TSX-V listed Fosterville South Exploration Ltd. In addition ECR owns a 25% interest in the Danglay epithermal gold project in the north of the Philippines and a net smelter royalty agreement from the sale of the SLM gold project in Argentina.
Creswick is situated within the Dimocks Main Shale, a geological feature considered to be highly prospective for gold, and which extends some 15km from the mining centre of Ballarat. ECR’s exploration licenses cover approximately 7km of this region. Following drilling results in 2019, a highest grade duplicate result of 80.97 g/t gold came from a 1 metre interval that originally assayed 44.63 g/t, confirming the original findings. A study by pre-eminent consulting geochemist Dr Dennis Arne, whose experience includes extensive consultancy at the highly successful Fosterville gold mine in Central Victoria, underlined the significant gold exploration potential at Creswick, and ‘nuggety gold mineralisation’.
Bailieston is also at the centre of the current gold exploration boom in Victoria, close to the world-class Fosterville mine owned by Kirkland Lake Gold. Mining giant Newmont has a license application in for ground immediately to the north of ECR’s Black Cat prospect, plus an open cut gold mine was operated at Bailieston by Perseverance Corporation in the 1990’s. Quality samples have been logged from drilling by ECR at the Blue Moon prospect in 2019, including a 17.8g/t sample from a 2 metre interval, confirming Blue Moon as a new gold discovery. The Bailieston license areas also include a raft of other prospects, namely HR3, Cherry Tree, Red Moon and Yellow Moon.
Mining Major Joint Ventures and Drilling
Having previously sold three Victoria licences (Avoca, Moormbool and Timor gold exploration projects) for upfront cash and royalties to TSX-V listed Fosterville South Exploration Ltd, along with a raft of warrant exercises, ECR is now fully funded to continue drilling at its 100% owned Creswick and Bailieston projects through to the end of 2021.
In a recent ShareTalk podcast here, ECR CEO Craig Brown provided some background on the most recent developments. He confirmed that several earlier offers to partner in the projects had been rejected, and that mining majors were interested in Creswick and the highly prospective Dimocks Main Shale gold trend that runs through Creswick from the Ballarat gold mine. Citing some of the most recent gold asset sales in the region, Brown stated that both Creswick and Bailieston projects were superior in quality to many in the region, and that value could be realised in a Greatland Gold type asset sale and free carry deal structure.
Progress and site visits are being hampered somewhat by the COVID lockdown – any teams flying in from other states are subject to a 14 day quarantine. But as regards the immediate future of both Creswick and Baileston, one thing is abundantly clear. ECR will commence drilling at one or both projects in the coming weeks, and given the ultra-bullish long term outlook for gold, mining majors seeking a JV will be keen to strike a deal sooner rather than later.
Currently valued at just GB£12m, many investors believe ECR is on the cusp of ‘Great’ Ness – a transformational Greatland Gold esque deal. Despite the lockdown restrictions, the insatiable demand for gold looks set to continue for the next 18 months – near perfect conditions for junior gold miners with superior quality assets.