Gold­corp dips a toe in blockchain wa­ters

Agree­ment and small de­posit with Mint launches bul­lion-backed dig­i­tal trades

Regina Leader-Post - - YOU - GABRIEL FRIEDMAN Fi­nan­cial Post gfried­man@post­

Cana­dian gold min­ing com­pa­nies have moaned for months that cryp­tocur­ren­cies and blockchain com­pa­nies are lur­ing in­vestors who would oth­er­wise put their money into pre­cious me­tals.

Now, Van­cou­ver-based Gold­corp Inc., one of the world’s largest gold pro­duc­ers, is dab­bling in its own blockchain in­vest­ment, al­beit in a mi­nor way: This week, it sent 3,000 ounces of gold — worth about US$4 mil­lion — from mines in north­west­ern On­tario to the Royal Cana­dian Mint in Ot­tawa, where it will be used to back a new dig­i­tal trad­ing cur­rency.

“Gold is mostly mined in the ground and put back in a vault,” said Dave Stephens, Gold­corp’s vice-pres­i­dent of cor­po­rate de­vel­op­ment and mar­ket­ing. “This makes it eas­ier and more ac­ces­si­ble for in­vestors to di­rectly own gold.”

New York-based Trade Wind Mar­kets Inc. will op­er­ate the trad­ing plat­form, called Vault Chain, which es­sen­tially dig­i­tizes gold. It uses blockchain — the same tech­nol­ogy be­hind Bit­coin and other cryp­tocur­ren­cies — which uses a dis­trib­uted ledger to record all trans­ac­tions.

Through an agree­ment with the Royal Cana­dian Mint, ev­ery trade on Vault Chain will be backed oneto-one by phys­i­cal gold bul­lion in stor­age at its vault. The sys­tem went live last week and, the­o­ret­i­cally, any gold pro­ducer can use it to sell gold.

So far, the sys­tem only has Gold­corp’s 3,000-ounce de­posit.

To put that de­posit in per­spec­tive, 3,000 ounces of gold rep­re­sents 1.4 per cent of the 209,000 ounces of gold Gold­corp pro­duced from its Red Lake mines com­plex in 2017, and an even smaller 0.12 per cent of its es­ti­mated to­tal gold pro­duc­tion last year of 2.6 mil­lion ounces. Put an­other way, $4 mil­lion rep­re­sents 0.6 per cent of the com­pany’s $658 mil­lion in net earn­ings last year.

“It just so hap­pens that we ship once a week (from Red Lake) and that was one of the ship­ments,” Stephens said about the de­posit.

But he added that if the trad­ing plat­form takes off, it pro­vides Gold­corp with new buy­ers be­yond the banks that cur­rently pur­chase all its gold.

Trade Wind was one of the fi­nal­ists in Gold­corp’s #Dis­rupt­Min­ing event in 2017, an an­nual com­pe­ti­tion it hosts to show­case new tech­nolo­gies in the min­ing sec­tor.

Al­though Trade Wind did not win the event, it sub­se­quently re­ceived in­vest­ments from Toron­to­based global in­vest­ment man­ager Sprott Inc., as well as IEX, a stock ex­change fea­tured in Michael Lewis’ 2014 book, Flash Boys.

Gold­corp also owns five per cent of Trade Wind, Stephens said.

Matthew Trudeau, pres­i­dent of Trade Wind, said he hopes to cre­ate a sys­tem where gold can be used as col­lat­eral in lend­ing trans­ac­tions, and one that will im­prove the prove­nance and trace­abil­ity of gold.

“The ex­cit­ing thing is we’re tak­ing an in­ef­fi­cient man­ual mar­ket,” he said, “and mov­ing it to a tech­nol­ogy driven mar­ket where all the par­tic­i­pants can meet and trans­act elec­tron­i­cally — ver­sus us­ing tele­phones, emails and in­stant mes­sages.”

Even­tu­ally, Trudeau added, the com­pany could cre­ate sim­i­lar sys­tems for other pre­cious me­tals and work with cen­tral banks in other coun­tries.

The plat­form dif­fers in at least one key way from Bit­coin and some other cryp­tocur­ren­cies: The blockchain, or the ledger that records the trans­ac­tions, is pri­vate, and only peo­ple who have iden­ti­fied them­selves can use it. Some cryp­tocur­ren­cies al­low two peo­ple who do not know each other to con­duct a trans­ac­tion.

Stephens said the com­bi­na­tion of gold and blockchain could have po­ten­tially far reach­ing con­se­quences. The “holy grail” is to cre­ate a crypto coin with a sta­ble value, he said, and back­ing a coin with phys­i­cal gold bul­lion may pro­vide that sta­bil­ity.

He wouldn’t com­mit to how much gold his com­pany will even­tu­ally sell on the plat­form.

“I don’t think there’s an up­per limit,” Stephens said. “In the­ory, this could go global and we could put all of our gold on this plat­form.”

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