Junior gold miners irked by bitcoin, cannabis
TORONTO On Tuesday morning, Chris Haldane, of Marathon Gold Corp., was looking at the price of gold and his stock price: Gold had climbed US$17 per ounce, but the company stock was barely moving.
“It just seems like the junior gold space has gone into a pause mode,” said Haldane, who handles investor relations for Marathon, and had just issued a press release touting positive drill results for its prospective gold camp in Newfoundland.
The likely culprit: cannabis, bitcoin and the many cryptocurrencies out there. Although no one could point to any formal studies, there was wide consensus on the trade show floor at the Prospectors and Developers’ Association Conference in downtown Toronto this week, that junior mining gold companies have lost some of their mojo this cycle as a result of the flood of speculative capital that’s pouring into cannabis and cryptocurrency stocks.
Nonetheless, gold has consistently traded above US$1,300 an ounce in 2018, a feat that never took hold in 2017, and yet many junior gold producers are still waiting for a bounce in their stock price.
Haldane said one of the most bothersome aspects of the situation is that no one — not the investors, not the companies — even understands how cryptocurrencies work.
“They’ve just moved on to something more speculative,” he said.
It doesn’t help that U.S. President Donald Trump earlier this week said he would put tariffs on aluminum and steel, leaving those in other metals worried that they could be next.
But bitcoin and cannabis seemed to raise the most ire for chasing away the speculators, who in the past were excited by the high-risk, high-reward game of precious metal exploration.
The cryptocurrency craze is evident from looking at companies such as Vancouver-based Hive Technologies Ltd., Its stock price soared more than 459 per cent between its first day of trading last September and the end of 2017. It has fallen dramatically since then, and is trading 56 per cent lower since the start of the year.
As Canada prepares to legalize marijuana, companies looking to claim a piece of the burgeoning industry have been attracting hordes of capital. For instance, stocks of Aphria Inc., Canopy Growth Corp. and Aurora Cannabis Inc., have surged 120 per cent, 189 per cent and 316 per cent, respectively over the past 12 months. Meanwhile, VanEck Vectors Gold Miners ETF, one of the largest gold mining companies’ funds, eked out a 0.44 per cent gain during that period.
It’s left gold producers feeling like a pall hangs over their sector. “The risk takers have gone somewhere else — they’ve gone into bitcoin or cannabis,” said John Green, chief financial officer of Unigold, who added that his comments reflected his personal view, and not the official views of his fledgling company.