What Brexit Means For Gold Exploration
Lots of important news in the resource space this week. With the tossing of tougher U.S. frack rules being one of the biggest developments in the shale patch for a long while.
Elsewhere, the South American nation of Colombia signed a long-awaited peace accord. Which could open up some of the world’s top terrain for exploration and development in copper, gold and beyond.
But one piece of news overshadowed all yesterday. The revelation that the United Kingdom appears to have voted in favour of “Brexiting” the European Union.
Early polls suggesting a win for the “leave” side had some marked effects. Including a plunge in stocks — and one of the biggest increases in recent memory for gold.
In the wake of the news, bullion leapt as much as $80 per ounce. Touching $1,340 — the highest level the metal has seen in 27 months.
And that’s an exciting reminder that this market is very much alive.
Events like Brexit seem to be reminding the world that hedges like gold still have a place in today’s uncertain financial landscape. A pleasant change from six months ago, when the usual bear-market stories about “the end of the age of gold” were being trotted out in the mainstream media.
Of course, the downturn that’s prevailed in gold over the last three years has turned out to be a big opportunity for long-sighted investors. Gold itself has provided nearly 30% gains for anyone who bought as recently as mid-January. And many gold stocks have doubled, tripled or more in just a few months.
In fact, owners of gold stocks were probably the only people happy to be in the market as trading opened after the Brexit vote. With most other categories of equities showing losses of Black Friday proportions yesterday.
And that standout performance from gold producers, developers, and explorers won’t go unnoticed.
The thing is, such an attention-grabbing day for gold couldn’t come at a better time. On my trip through Asia the last two weeks, I was amazed to see just how bullish sentiment has become in the sector — with a number of major investors in that part of the world telling me they believe $2,000 bullion is possible by the end of this year.
That could be hope, hype, or hard truth. But the very fact that big money managers are talking about gold in such tones shows that something in this market has shifted — in a major way.
I believe this is going to usher in a particularly welcome period for gold exploration. After all, there haven’t been any major gold discoveries pulled off for five years now. And just this week Newmont Mining CEO Gary Goldberg predicted that the lack of a strong pipeline of development projects will cause a 7% drop in gold supply by 2021.
If gold does take continued strength on Brexit and other global uncertainties, that lack of future supply is going to be an issue coming squarely into focus. And — like we saw during the last gold boom of 2006 to 2008 — gold exploration properties will suddenly be a hot commodity.
In such an event, it will be interesting to see who emerges well-positioned. After all, the last few years of downturn in gold have offered a nearly unprecedented opportunity to pick up unwanted exploration projects for a song and a few shares.
That’s going to work out very well for keen-eyed buyers who grabbed the right ground. I’m looking forward to seeing what big projects emerge from the woodwork if this week’s spurt turns into a protracted gusher.
On that front, I had a great swing through the field at our gold and silver projects in Myanmar the last couple weeks. As I mentioned before leaving, drilling is continuing at the silver play — I can’t say much right now, but hope to have more news for you on that front soon.
The really exciting part of the trip was — you guessed it — our gold project. The aptly named City of Gold project that I discussed a few months ago after my associates and I had just done our intial due diligence visits.
At that time, we noted that this virgin area to modern exploration has artisanal mine workings covering a ridge that runs an impressive distance — nearly five kilometers along strike. At the time, one of the visitors in our party commented that it was similar to the famed Serra Pelada mining district in Brazil.
Only no one in the West has ever heard of this place.
Here’s the incredible thing. On my visit last week, we found that the five-km ridge we initially scouted isn’t even the main show in this area.
In fact, just to the north lies an even larger hill — which is absolutely beehived with small-scale production. For the time being I’ll hold off on discussing the dimensions here, and our back-of-the-envelope calculations on the resource potential — as the numbers sound simply ludicrous. To be continued once these suspicions are confirmed by more fieldwork.
I’ve often wondered what the world’s great mining districts — Kolar, Teniente, California — would have looked like centuries ago in their original form. And this part of Myanmar, where mineral exploration is quite literally a century behind the modern world, could offer just such a look into the original face of a major mining district.
Between that project and this week’s action in the gold market, I’m happier than ever my parents talked me into university — and I picked up geology and exploration. Even in the down times, there’s no more exciting career in the world. And in the good times, well, where else would you rather be?
Have a great weekend — especially those of you long the world’s suddenly most-popular commodity. Let’s see what next week brings.