STRIKE GOLD
Fears of recession. Stock markets on the slide. Investors rushing to find a safe haven. Don’t panic – it’s the perfect time to...
FEARS of a global recession are growing. Stock markets are jittery and American bond prices are rising as big investors consider them a safer bet than shares in troubled times. The outlook for interest rates has changed too. At the start of the year, rates were expected to start rising around the world. Now they are widely expected to stay at record low levels.
Gold thrives in this kind of environment. It is the ultimate safehaven purchase, the asset that people buy when they are nervous about the future. The gold price has risen almost 20 per cent this year alone and now stands at more than $1,500 (£1,250) per troy ounce, a level not seen since May 2013.
A rising gold price is not just good news for investors who have been storing piles of bars and coins. It also benefits gold mining companies, many of which have been struggling for years, but are now beginning to find favour with the stock market again. THE change of heart could not have come at a better time for
Pure Gold Mining. Based in Vancouver, Canada, the company was listed in London in May and has just secured $90 million of funding from Sprott, a highly experienced Canadian group t hat finances small mining firms.
The cash is a ringing endorsement of Pure Gold’s mining project at Madsen Red Lake in Ontario. Construction has now started and Pure Gold expects to be in production by the end of next year, producing more than 100,000 ounces of gold annually by 2022.
The speed of production is unusual, but Madsen Red Lake is an existing mine that was mothballed when the previous owners fell into financial difficulties. Pure Gold bought the site at a bargain price and now looks set to reap the rewards.
Madsen Lake has several points in its favour. Ontario has been a mining state for the past 100 years, so locals understand it – there are plenty of skilled workers and supplies are easy to come by. The surrounding infrastructure is all there, and Madsen’s previous owners had already built a processing plant and mineshaft so Pure Gold will be upgrading the site rather than starting from scratch. Permits were also in place and the company has signed an agreement with local indigenous people so they are in favour of the Madsen project.
The rock is unusually rich too, yielding about 8 grams of gold per ton of rock, compared with 1 or 2 grams per ton in many mines.