Friday May 01, 2020
As every new day passes, with the world economy at a virtual standstill because of the COVID-19 pandemic, investors are starting to realize that they need to hold some gold and that in turn will be positive for the mining sector, according to one mining executive.
In a recent interview with Kitco News, Hugh Agro, president and CEO of Revival Gold, said that it is difficult to be negative on the precious metals space as governments and central banks flood financial markets with capital.
“Gold is not just for the difficult times. It’s for every time,” he said. “You’re in gold for the long run, not because you want to see a crisis or you expect a crisis, but because governments can’t manage their currencies.”
In an environment of higher gold prices, Agro said that he expects the mining sector to continue to attract capital as retail investors look for exposure and leverage to the yellow metal. He added that the mining sector, and especially junior explorers, remain an attractive option to the physical metal.
“Not everyone can be a Ray Dalio or Jeffrey Gundlach and buy millions of dollars’ worth of gold and have exposure to the gold price going up,” Argo said. “But you might have the money to invest in undervalued mining companies.”
Agro added that right now, all the attention is focused on major producers, as companies are expected to report significant increases in cash flow in their first-quarter earnings. Senior benefited in the first quarter from a substantial rise in the gold prices, coupled with lower input costs.
However, improved margins among senior miners will benefit junior explorers. “Senior gold companies are making, 50%-60% margins on what they’re producing, and now they’re looking for ounces of gold to replace that production. I expect capital will trickle down to the juniors and the explorers very quickly.”
As to what companies investors should be looking at, Agro said that it’s not just about weathering the current economic crisis but what is the growth potential when the global economy is back on the road to recovery.
He added that investors should also look at the major players backing junior explorers. Companies with big players in the mining sector, supporting them, will have easier access to capital if the global shutdown lasts longer than expected.
Agro said that he is confident Revival gold has a big enough war chest to wait out the economic crisis. He added that the company is also in a good position to grow and leverage its Beartrack gold project in Idaho. He said that the property has an updated resource of 3 million ounces.
Amid the COVID-19 pandemic, Agro said that the company is currently working on a preliminary economic assessment to evaluate the costs of starting a heap leach project and have some production on the property.
Agro added that they should have that study done by the end of the year.
As to what investors should do in the current environment, Agro said that now is the time to build a diversified mining portfolio with a mix of senior producers, and juniors. He added that the key is to have a healthy pipeline for future growth.
“It’s not a matter of if, but a matter of when senior producers start buying junior projects to support their production,” he said.
By Neils Christensen
_______________