by Hannah Howes
Gold investment demand fell early this year, largely attributed to outflows in gold-backed ETFs as growing expectations of higher interest rates influenced investor attitude, according to the most recent World Gold Council (WGC) report (Gold outlook for 2021 positive, despite uncertainty – World Gold Council (miningweekly.com). When analysing this trend more closely, it has been noted that investment demand actually saw positive growth in the retail market with ETF outflows negatively impacting the overall picture. The WGC market intelligence manager Krishan Gopaul notes that the “The overall picture of investment falling in the quarter really hides two different stories – we see the ETF outflows but there is still the more positive growth story on the bar and coin side”.There has also been an increase in consumer demand which has been further enhanced by low gold prices, one of the major buyers of such commodities being China and other emerging markets. The catalysed global economic recovery, bolstered by swift vaccination efforts, has also boosted consumer confidence in the technology sector raising demand by 11% year on year.
The cyclical elements of gold demand have been heightened by the 10% decrease in gold price in the first quarter, in combination with the global economic recovery in response to positive Covid-19 outlooks. Senior Market Analyst Louise Street at WGC has observed that “having seen investors take shelter in gold from the initial impacts of Covid-19, the first quarter saw a sell-off in the gold price as confidence in economic recovery grew and US interest rates rose sharply,”adding that, notwithstanding this, gold holds a strong position in the most well-balanced portfolios. This is particularly so given the repeatedly reported fears of inflation. In previous years where records show inflation rates of over 3%, the price of gold increased 15% on average (https://www.gold.org/goldhub/research/outlook-2021). When looking ahead to the next few less-tumultuous years, Louise sees “reasons to be optimistic about the gold market”due to the resilience of the markets main drivers, low interest rates and increasing yields.
History ready to repeat itself?
The only certain thing to come from the past year is uncertainty in abundance. That said, when it comes to gold mining, we can remain confident in the fact that the Victoria goldfields, southern Australia, continues to stand as a reputable and reliable source of precious metals. This follows decades of mining in the region, in the wake of a glimmering spotlight launched by the 19thcentury gold rush. Testament to this fact is the nugget of gold rested assertively on my mantel, panned by myself during a trip to the Sovereign Hill attraction at the Ballarat Gold Mine.
AIM listed ECR Minerals (AIM: ECR) is a company on the brink of a gold fest from current drilling in the territory, focused on delivering the next multi-million ounce gold resource. ECR outright owns the Bailieston and Creswick projects located in Central Victoria, Australia, and with an operational HQ at Bendigo, is able to process and fast track core samples and assay results.
As well as holding financial interests in the Avoca, Moormbool and Timor projects, following the sale of those licenses to TSX-V listed Fosterville South Exploration Ltd for up to £1.3 million. Further retaining a 25% interest in the Danglay epithermal gold project located in Northern Philippines and a net smelter royalty agreement from the sale of the SLM gold project in Argentina.
The Dimocks Main Shale, a geological feature believed to be have great gold potential, is home to Creswick and extends some 15km from the aforementioned mining centre of Ballarat.
Drill sites for the current programme are 2.2km south from those used in the previous drill programme in 2019, individual samples of which returned assays as high as 80.97 g/t gold over one metre. A study by pre-eminent consulting geochemist Dr Dennis Arne, whose experience includes extensive consultancy at the exceedingly successful Fosterville gold mine in Central Victoria, emphasized the significant gold exploration potential at Creswick, and ‘nuggety gold mineralisation’.
Also located in the sought-after central Victoria region, Bailieston is not far from the renowned Fosterville mine owned by Kirkland Lake Gold. Bailieston is base to ongoing drilling in the HR3 area, undertaken using ECR’s own diamond drill rig, with prospects also including Cherry Tree, Red Moon and Yellow Moon. Assay results have been announced for four holes in the HR3 area, with a further four holes awaiting final geological interpretation. What has been reported is that BH3DD005 holes 6 and 7 indicate the hypothesized central anticline does exist and represents a favourable target for gold mineralisation. Quality samples have been recorded from drilling by ECR at the Blue Moon prospect in 2019, including a 17.8g/t sample from a 2 metre interval. Making Blue Moon a noteworthy new discovery.
Through previously selling three Victoria licences (Avoca, Moormbool and Timor gold exploration projects) for cash and royalties to TSX-V listed Fosterville South Exploration Ltd, and a number of warrant exercises, the company is fully funded to continue drilling at its 100% owned Creswick and Bailieston projects through to into 2022. This strong cash position has given the company desirable footing moving forward, enabling them to push for the launch of further drilling programmes across existing property and acquire new opportunities.
In the recent Proactive Investors interview, ECR Minerals CEO Craig Brown spoke to Andrew Scott, highlighting the recent news of application for three new licenses in north-east Queensland, Australia. These permits are to cover a total of 900sq km of highly prospective ground within the Lolworth Range. Historical mining in the region totals 24.4mil ounces, equivalent to $48 billion worth of gold. Despite this, the area is relatively unexplored, offering “huge potential” according to Craig. As well as emphasising that he expects the gold price to only gain strength, with the precious metal being the hedge against inflation concerns.
Despite the recent retreat in share price, dropping from 4.25p in January, to 1.89p in May 2021, ECR’s strong cash position attributed to the aforementioned license sales and warrant exercises puts the company in an enviable industry spot. This, in combination with the fact the company owns a diamond drilling rig, currently operational at Bailieston while a contractor’s rig is active at Creswick, means ECR Minerals is set for a prosperous 2021/22 as demand for gold remains bullish. Making the current share price a bargain investment.