A third straight week of price gains for the yellow metal was a welcome news for gold stocks, as analysts started to talk of $1,600 an ounce.
Nils Christensen wrote on the admittedly usually bullish Kitco site: “It is now a fight to the bottom in interest rates and the European Central Bank is packing a monetary policy bazooka that could push gold prices above $1,600 an ounce, according to analysts.”
It follows talk of “a significant and impactful policy package in September” from a senior European banker, and against a backdrop of worrying economic news. Analysts at JP Morgan were among those recommending portfolio exposure to gold mining stocks - and specifically junior gold miners - as the best way to benefit from rising spot prices.
One junior gold stock that will be well positioned to take advantage should investors continue to look at the traditional safe haven metal is Canada’s Pure Gold Mining (TSX-V: PGM), which has just started work on its planned Madsen mine in Ontario’s Red Lake mining district. After securing a $90 million construction package from Sprott Resource Lending, it expects to start pouring gold from the million ounce property late next year, and the financing package allows it to take quick advantage of any improvements in the gold price. Things have already moved fast: Pure Gold originally used $1,275 per ounce as its base price for the mine’s finances.
Another junior mining company with promising prospects in Canada is Rockridge Resources (TSX-V: ROCK), after it completed the first resource estimate for its flagship Knife Lake project in Saskatchewan this week. The project is a veritable panacea of valuable metals, with impressive concentrations gold, silver and copper. Knife Lake was estimated to contain 70 million pounds of copper, 456,000 ounces of silver and 11,951 ounces of gold. Rockridge acquired the Knife Lake project from Eagle Plains Resources through an option agreement in November 2018. The contiguous claims total 852 sq. km and are located 50 km northwest of Sandy Bay, Saskatchewan.
The rising price environment is looking positive for the larger gold miners too: This week Australia’s Newcrest Mining (ASX: NCM) posted a 22.2% increase in annual profit, which was a admittedly primarily buoyed by robust gold and copper sales volumes from its flagship Cadia mine in New South Wales. Australia’s biggest listed gold miner posted an underlying profit of $561 million for the full year ended June 30, compared with $459 million a year earlier.
For those value investors trying to pick a particularly worthwhile mining company, on indicator of the best junior mining stocks can be the big investors who support them. Seeking Alpha published a list of insider support for mining stocks recently that highlighted, among others, Brazilian gold miner Jaguar Mining (OTC:JAGGF). The company, which owns three gold mining complexes in Brazil reported a hefty negative cash flow in May but has since been backed by, among others Eric Sprott and Tovqueville Asset Management as it raised $25m in a non-brokered private placement. Sprott, of course, is also a major backer of Pure Gold Mining among many other interesting junior mining stocks.
For those that fancy a completely different punt, however, pink diamonds look set to receive a significant price boost. Mining giant Rio Tinto is closing the Argyle mine in Australia which is famous for its rare pink hues, and as a consequence every stone producer and auction house is scrambling to corner the undersupplied market that is set to emerge.