Currency's Volatility Shines Spotlight on Gold

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Jun 04, 2020, 08:30 ET

NEW YORK, June 4, 2020 /PRNewswire/ -- In times of economic crisis, there's no safer investment than gold. Gold's historic reputation as a safe haven asset looks promising for mining companies as the global economy witnesses the volatile valuation of currency. Kingman Minerals Ltd. (CVE: KGS) has been preparing operations on a historic mine site in Arizona, benefiting from the cost efficiencies of revitalizing an already established exploration site. After a brief suspension of mining activities in order to evaluate operational risks associated with the COVID-19 pandemic, McEwan Mining (NYSE: MUX) recently announced it has restarted operations. Freeport-McMoRan (NYSE: FCX), a leading international mining company, boasts a strong portfolio of assets—including the Grasberg minerals district in Indonesia, home to one of the world's largest copper and gold deposits. Newmont Corporation (NYSE: NEM), with the industry's largest gold reserve base, recently announced its acceleration of operations at four of its sites. Despite the hindrances inflicted by the COVID-19 pandemic, Barrick Gold Corporation (NYSE: GOLD) reported a robust first quarter performance

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A Golden Future

Gold has long been one of the most reliable assets for investors, a safe haven in the storms of economic risk. With the world facing a global health crisis in the form of COVID-19, and the prospect of a deep and extended recession looming in its wake, investors are renewing their interest in the precious metal. Bank of America recently raised its 18-month gold-price target to $3,000 an ounce, while others believe that gold is on the cusp of a new decade long bull market that will push the price well past $5,000 an ounce. Little wonder there's such strong interest in gold companies such as Kingman Minerals Ltd. (CVE: KGS).

While gold initially had a small retracement at the onset of the current crisis, it was just part of a pattern historically seen in every period of economic turmoil—one from which gold always returns, and one that has done nothing to undermine the asset's worth as a safe investment in a crisis. Gold has many advantages – it holds its value better than stocks, is more liquid than bonds, and as the original measure of wealth, it has retained its position of value while other alternatives have risen and fallen. Though it lacks the blockbuster returns of some stocks during boom times, it has always been a good hedge against a crisis and a reliable option in times of trouble.

Gold's sturdy staying power and strong potential has sparked keen interest in Kingman Minerals, which intends to very profitably extract new gold from old mining sites. Gold always has intrinsic value, whether for use in jewelry, electronics, or as an investment, and that value tends to climb relative to other investments during financially difficult times. Even before the COVID-19 crisis took full hold, commentators were predicting that gold would beat the market this year, and when gold rises in value, the mining companies typically see a corresponding rise in demand.

As national banks frantically print money to cover the costs of the COVID-19 crisis, these currencies and any assets tied to them will likely suffer devaluation. If history is any guide, the intrinsic value of gold should soar and only be impacted positively during the devaluation process. These market conditions situate gold in an incredibly advantageous position over the next few years, presenting a compelling opportunity.

Location, Location, Location

Knowing where to dig is critically important when mining for gold—this concept may seem obvious, but it's actually a complicated proposition. Profitable mining involves identifying accessible, financially viable deposits within mining friendly jurisdictions, and on sites that are accessible for the transportation of equipment, staff, and the gold once it is extracted. Kingman's Mohave project, satisfying these requirements, poses promising potential for the company.

Located in Mohave County, Arizona, the Mohave Project benefits from being located in a mining friendly jurisdiction. This support makes it easier for mining companies to work within the state.

Kingman has chosen ground for its work that is known to contain valuable deposits and that is accessible enough to support a new mining operation. The Mohave site is located 35 miles outside the town of Kingman, from which the company takes its name, and it has direct road access from Historic Route 66 and Antares Road. This location allows an ease of access to bring supplies and resources onto the site as mining operations are established and expanded.

Water supplies on site will keep down costs for this part of the operation, while the proximity of a town ensures that there is support for staff coming in. But perhaps the greatest asset of the Mohave Project is one that might surprise those fresh on the minerals sector scene – the ground had already been mined.

The Importance of History

An important part of Kingman's strategy is the return to an old mining claim – the 167-hectare Rosebud Mine.

Discovered in the 1880s and mostly mined in the 1920s and 1930s, the Rosebud Mine is a critical part of the Mohave Project. Previously worked mines are increasingly being exploited by modern mining companies as proven sites of minerals. Reactivating existing sites with new mining techniques offers the potential for easy picking and bigger profits.

Though the most accessible resources have usually been extracted from these sites, the land still holds rich potential for discovery. Modern mining techniques ensure that previously difficult-to-extract lodes can be accessed safely and cost effectively. This technique has been applied to extract newly valuable battery minerals such as cobalt from old copper mines and to revive abandoned precious metals sites. Kingman will be tapping into wealth that previous generations of miners left behind.

Those previous generations are one of the great advantages of renewed digging on old claims. Records from their work help to direct new operations, providing evidence for metal deposits. At the Rosebud Mine, records from the original digging era have been combined with surveys from the 1980s to calculate the likely wealth on the site – an estimated 664,000 ounces of gold and 2,600,000 ounces of silver.

Equipped with old records, Kingman has set about new sampling work on the site. Old records—while helpful—can't be relied on for modern operations, so companies like Kingman test to confirm the existence of predicted or previously recorded deposits. Two rounds of underground reconnaissance and testing, combined with historic data, will allow Kingman to provide new estimates of the value of the site in the next few months.

The presence of historic mining workings makes it easier to exploit deposits once they are confirmed. With workings that stretch 2,500 feet underground, the Rosebud Mine's historic conditions allow for a significant decrease in the costs of mining gold—increasing the potential profits of a valuable and sought-after commodity.

Mining Industry's Bright Future

Another company that will be hoping to benefit from a gold boom is McEwan Mining (NYSE: MUX). With a seasoned board of directors and a management team structured for growth, McEwan has established a diversified portfolio of gold, silver, and copper producers located across North and South America. The company's goal is to create strong and profitable gold and silver production focused in the Americas, and the company is well positioned for the anticipated upswell in demand for gold.

Freeport-McMoRan (NYSE: FCX) is a global mining leader headquartered in Phoenix, Arizona. The company's assets are large, long-lived and geographically diverse with a strong record of proven and probable copper, gold, and molybdenum reserves. The current health crisis is highlighting the increasing importance of copper in reducing and neutralizing the transmission of bacteria, viruses, and other pathogens, and the company is the leading supplier of copper to the global economy.

Newmont Corporation (NYSE: NEM), the world's leading gold company and a producer of copper, silver, zinc and lead, has a diverse portfolio of assets, prospects, and talent anchored in favorable mining jurisdictions located in North America, South America, Australia, and Africa. Recognizing the adaptability and multitudinous uses of gold, copper, and silver, Newmont's mission is to create value and improve lives through sustainable and responsible mining.

Barrick Gold Corporation (NYSE: GOLD) added to its strong 2019 performance with consistent Q1 gold production and cost, despite economic challenges created by the global pandemic. While continuing to ensure safety for its people, communities and businesses, Barrick still saw a strong operational and financial quarter. Even without new discoveries, organic growth stemming from the company's existing asset base would be enough to sustain its recently released ten-year plan, company leaders announced.

As investors turn a fresh eye to gold and other precious metals in this current crisis, market leaders anticipate a bright future.

For more information about Kingman Minerals, please visit Kingman Minerals Ltd. (CVE: KGS).

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