Gold’s renaissance in recent weeks amid growing concerns of an “unchecked inflation” cannot be overlooked.
US inflation data for the month of October showed a headline rate of 6.2%, the highest in over three decades. This inspired another series of sharp movements in bullion, which was also helped by 10-year Treasury yields falling to a record low at one point.
Following its latest rally, gold is now trading near its highest in nearly 6 months, as soaring inflation combined with a market-wide perception that the Federal Reserve will refrain from hiking interest rates continues to fuel safe-haven demand.
Looking ahead, there’s optimism that rising price levels could offer further support for the precious metal.
In their latest outlook report, Swiss investment bank UBS sees risks of further strength in CPI in early 2022, which could stoke even stronger demand for gold.
Furthermore, recent hawkish comments by Fed officials have caused a flattening of the US yield curve, which UBS analysts believe will only add to gold’s shine.
And while UBS still expects the pace of inflation to moderate, this process may take longer than some had anticipated. As such, it has raised its end-of-March target price to $1,800/oz, up from $1,700/oz, and its year-end 2022 target to $1,650/oz (from $1,600/oz).
“We also acknowledge the risks are skewed to the upside in the short run, and temporary price moves above $1,900/oz shouldn’t be ruled out,” the bank added.
However, should the Fed become dovish and introduce another round of quantitative easing measures, or it allows inflation to overshoot by delaying the tapering timeline, then this would once again support investment demand for gold.
In such an upside scenario, UBS has given a June 2022 target of $1,950-2,050/oz.
In a recent Bloomberg interview, Nicky Shiels, head of metals strategy at MKS (Switzerland) SA, said inflation — which she believes is “not transitory” — has injected some bullish momentum into gold.
Although it remains to be seen whether this year’s inflation can be regarded as a transitory phenomenon, the bond market has been favoring one side of the debate.
A key measure of bond market expectations for inflation over the coming decade recently rose to its highest since 2006, which is keeping Treasury yields in check. This is important as historically Fed officials tend to monitor signals in the bond market when deciding what to do with interest rates.
“The market saw this as evidence that the pickup in inflation will not be as transitory as the Fed had hoped,” John Briggs, bond market strategist at NatWest Markets, told The New York Times.
Meanwhile, across the Atlantic, Bank of England Governor Andrew Bailey told the House of Commons Treasury Committee on Monday that he was “very uneasy about the inflation outlook”, having surprised investors by keeping interest rates untouched when most were anticipating a rate hike.
In the near term, analysts feel there’s more upside for gold as markets gear up for the Fed’s December monetary meeting, with more inflation and employment data coming into play.
“Inflation is a big one for me. If we see inflation expectations outperforming the move in yields. That’s what I’m looking for at that year-end rally. And it is in the cards. I am very bullish at this point,” DailyFX analyst Warren Venketas said in a recent interview with Kitco.
“There is a very strong case for the year-end gold rally,” Venketas added. “That second-round impact of the price increases will last into the second half of 2022. Inflation is here to stay for the next six months or so.”
For as long as the inflation worries stick around, gold will receive a healthy boost in value. So too will gold mining companies, in particular those holding advanced-stage projects in low-risk jurisdictions.
In the gold mining state of Nevada, Getchell Gold Corp. (CSE: GTCH) (OTCQB: GGLDF) is completing a Phase 1 4,000-meter drill program on its flagship Fondaway Canyon gold project, on its way towards a major resource update.
The program was designed to verify the company’s new geological model through sufficient infill drilling, thus allowing it to upgrade the project resource beyond the current 1.1 million oz estimate. Getchell is also continuing to step out from known gold intercepts to expand the geological model.
“The near-term objective is to continue to expand and define the gold mineralization at Fondaway and maximize the inherent value upon which we will be starting from next year,” Getchell’s president Mike Sieb stated in a news release dated Oct. 20.
Fondaway Canyon Overview
Acquired by Getchell early in 2020, Fondaway Canyon is an advanced-stage, past-producing gold project comprising 171 unpatented lode claims located in Churchill County, Nevada.
The property has been the subject of multiple exploration campaigns dating back to the late 1980s and early 90s, with nearly 50,000 meters of drilling completed. It covers 12 known veins, including five mineralized areas — Colorado, Halfmoon, Paperweight, Silica Ridge and Hamburger Hill.
The latest technical report on Fondaway Canyon (2017) gave an estimate of 409,000 oz indicated gold resources grading 6.18 g/t Au and 660,000 oz inferred grading 6.4 g/t Au — for a combined 1.1 million oz.
Up to 80% of these ounces are within Colorado, Paperweight and Halfmoon, with the remainder found in parallel veins or splays off the main veins.
Mineralization at Fondaway Canyon is contained in a series of steeply dipping en-echelon quartz-sulfide shears outcropping at surface and extending laterally over 1,200 meters, with drill-proven depth extensions to greater than 400 meters.
Drilling in late 2020 by Getchell successfully demonstrated that the mineralization is thick and broad, including sizable high-grade gold shear structures that are key contributing characteristics at the Fondaway project.
Six holes totaling nearly 2,000 meters were drilled as part of that program, five of which intersected significant gold intercepts within the Central Area, considered to be the “nexus for the gold-mineralizing system” observed at Fondaway.
The target area represents a 1,000 x 700m highly mineralized NE-SW extensional zone within the central portion of the 3.5 km long Fondaway Canyon gold-mineralized corridor (see below).
To follow up on these excellent results, Getchell is executing a drill program that’s twice the size this year, designed to conduct infill and step-out drilling to further delineate and expand on the mineralization discovered in 2020.
New Geological Model
In an exclusive interview with AOTH last month, Getchell president Mike Sieb recalled how last year’s drilling was “the culmination of a lot of desktop work” wherein a detailed analysis of the historical drill data revealed that the mineralized system was larger than previously thought.
“In the sea of [~735] drill holes we inherited, a significant portion of that drilling was focused on certain historic occurrences and deposits,” said Sieb, who went on to explain how the company came up with its new geological model for the Fondaway Canyon project:
“In 2002 and 2017, they started to test a little deeper so for example the Central Area encompassing an approximately 1 km x 1 km area, there was a handful of these drill holes that if you aligned them with the geology you could actually draw a line from one dot to another dot, across half a kilometer, and they lined up.
“Of course, that’s only two points, but when you start to take into account the entire picture and those disparate intercepts that didn’t quite align with the historical thought process, and you drew new lines, you thought aha! If you redesign the geological model they all potentially line up.”
And that’s the inspiration behind Getchells’ new 3D model.
“We picked the intervening areas between these widely spaced dots and said ‘there’s absolutely no drilling here, this is where we think the mineralization should be,’” Sieb told AOTH over the phone.
The 2020 drill program they came up with was designed to test the “more expansive mineralization” thesis with a set of widely spaced holes.
2021 Drill Results
This year, Getchell has gone ahead with an even bigger drill program at Fondaway to confirm its new geological model, with the ultimate goal of elevating the project’s resource estimate.
“We’ve been proving the continuity amongst the drilling as well as continuing to expand upon our discoveries in 2020, so every drill hole is adding to the picture and that was the objective in 2021 — to truly understand and interpret the orientation of the geological as well as the mineralization model,” Sieb said during our interview.
A key finding is a better understanding of the three new zones discovered during the 2020 drill program.
The Juniper zone looks to be a high-grade, thick swath of near-surface mineralization that is open in most directions. The Colorado SW and North Fork zones run directly underneath the canyon floor and down-dip gently for about 800 meters. So far they remain open on strike and at depth.
“Some of the furthest holes on that trend, the mineralization does not appear to be weakening,” says Sieb. “That’s a key attribute, as we drill we haven’t determined the extent of it yet.”
The 2021 program once again focuses on the Central Area, following up on the discovery of the Colorado SW, Juniper and North Fork gold zones. Six holes for a total of 2,600 meters have been completed so far.
By late October, Getchell had already reported assays for three holes, each returning highly remarkable gold intercepts.
These were highlighted by FC21-08, which intersected the Colorado SW zone for over 200 meters, with mineralized intervals that included 4.2 g/t Au over 27.5m, 2.8 g/t Au over 24.5m, 1.4 g/t over 30.7m and 1.3 g/t Au over 16.8m.
It also pierced the Juniper zone, returning 4.7 g/t Au over 25.9m, including 11.4 g/t Au over 5.5m, within 100 meters of surface.
FC21-08 is the most northwesterly of those drilled in the area, meaning the zone remains open to the NW.
FC21-09, which tracked along the upper limits of the North Fork zone, also reported several mineralized intervals, including 1.3 g/t Au over 13.1m and 4.1 g/t Au over 5.4m. A broad section of gold mineralization grading 1.2 g/t Au over 32.6m was found at a higher elevation than projected.
Best Gold Intercept
More drill results came in this week, this time for FC21-10, which tested the North Fork zone up-dip from FC21-09.
FC21-10 intersected the North Fork mineralization over 82.2m that included quite a few notable drill intercepts, highlighted by 3.0 g/t Au over 41.6m that included 47.0 g/t Au over 1.5m. This was the highest-grade gold intercept in the 40+ year drilling history of the project.
The hole also intersected North Fork up-dip from last year’s FCG20-04, which graded 2.5 g/t Au over 58.0m.
These results further prove that Getchell is sitting on a very large mineralized system; the North Fork zone remains open in most directions, and therefore certainly warrants follow-up. More drilling is planned next year to delineate the mineralized body.
“The latest results are a prime example of why the gold mineralizing system at the Fondaway Canyon gold project is so compelling,” Sieb was quoted in a Nov. 17 news release.
“The project is host to an enviable setting comprised of very high-grade gold-bearing structures that are themselves hosted within broader and thicker zones of mineralization. The grades and thicknesses that have become apparent at Fondaway Canyon rival many of our peers in a world-class gold district,” he added.
Assays are still pending from two remaining holes, all drilled at extremely promising targets.
FC21-11 targeted the Colorado SW and Juniper zones with a down-dip step-out of FC21-08’s impressive gold intercepts.
FC21-12 is a down-dip step-out of last year’s FC21-05, which had substantive intercept grading 1.8 g/t Au over 90m, including a higher-grade core of 3 g/t Au over 35m.
Another hole, FC21-13, is currently being drilled into the Colorado SW zone, where Getchell is hoping to confirm the continuity of the mineralization to surface.
Drilling there will continue as long as weather conditions allow, at which point the crew will move out of the canyon and mobilize to the pediment area, another exciting drill target.
“This planned last drill hole [of 2021] testing the Pediment target zone is going to be quite telling.” Sieb said during our phone call, adding that the pediment area “is completely untested” apart from the two holes in 2002 that hit Carlin-style mineralization, referring to the disseminated gold common in Nevada. “It’s potentially a whole new target area.”
Having solidified the mineralization model that is expected to allow Getchell to undertake a new resource estimate, next year the company is moving forward with “a more aggressive, bigger and better program,” according to Sieb. Two drills are expected to be turning 24/7 “to really attack the area”.
“Fondaway Canyon really warrants a major drill program and a major usage of funds to continue to expand and basically tell the world how good the project is,” he said.
While there are plenty of gold properties being developed globally, none has really caught our attention like Getchell’s Fondaway Canyon did. In just over a year, the company has redesigned the project’s geological model and gone on to steadily verify it.
The exploration results, too, have been highly encouraging, continuing to show that the mineralized system at Fondaway may be far bigger than expected. As a testament to Getchell’s drilling success, consider this: the company has only drilled 13 holes since acquiring the property in early 2020, yet every hole but one has come up with the goods.
That’s impressive. It shows a very strong aptitude for drill targeting especially considering that the company started out with a database of over 700 historical drill holes from which they had to “separate the wheat from the chaff.”
More results from the 2021 program are still to come, but by the looks of things now, it’s very likely those won’t disappoint either. In your author’s opinion these will allow Getchell to significantly upgrade the resource base at Fondaway beyond its current 1.1Moz total.
As president Mike Sieb said during our interview: “At the end of this year it’s not just ourselves that’ll know where this project is going, everybody will. There’s going to be more eyes on the project and the company, and that’s going to be beneficial to ourselves and our shareholders.”
And with the way the gold market is seemingly headed, it’s a good time to be a Getchell shareholder.
Shares Outstanding 83.9m
Market cap Cdn$54.5m
Richard (Rick) Mills
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