Nearly a month of straight gains for gold came to an end on Friday, as fresh coronavirus fears pummeled markets across the investing spectrum.
After nearing $1,700 at the start of the week, the precious metal experienced a surprising sell-off, even as global equities continued to fall, amid reports of the flu-like illness spreading to more countries.
More than US$7 trillion in value has been wiped from global stock markets since the rout began. Deutsche Bank showed it’s been the fastest correction in history, with the S&P 500 losing 13% in just six days.
Gold normally does well during stock market corrections. However at the close of trading Friday, gold had slid to $1,585.50, a drop of about 4% on the week.
Analysts quoted by Kitco blamed the dip on investors being forced to sell their gold holdings to cover margin. Many are moving into cash to meet margin calls elsewhere. Also, the sell-off was exacerbated by too many traders holding long positions, ie. bets that gold prices will increase in the long term.
However the bad news for gold, a temporary blip imo, needs to be weighed against several good news stories we noticed earlier in the week.
Tuesday marked 25 consecutive days of inflows into gold ETFs, which amassed a record 2,624.7 tonnes, or 84.3 million ounces. However even at those numbers, the highest in dollar-value terms since 2012, gold remains a small percentage of investment portfolios, meaning the yellow metal has more room to run.
Among reasons to be optimistic, are the increasing likelihood of the coronavirus causing a global recession, which would support gold prices, the fact that gold has not yet reached historic peaks compared to other commodities, like copper and oil, and further evidence of “peak gold”.
Concerning the latter, Reuters notes that with gold prices at their highest in seven years, gold miners have been shoveling higher earnings into dividends, to appease long-suffering shareholders, rather than plowing them into exploration.
The lack of spending on new projects to boost dwindling gold reserves is a theme we at AOTH have written on extensively. Consulting firm Wood Mackenzie states that paltry spending on exploration has reduced the average of a gold mine to 11 years, compared to 16 years in 2012.
Gold output peaked in 2018 at 3,503 tonnes, and in 2019 it fell to 3,463t – the first annual decline in 10 years. We believe it will continue to drop further, owing to all the reasons we’ve been writing about: the depletion of the major producers’ reserves, the lack of new discoveries to replace them, higher production costs from lower grades, labor disruptions, protests, etc.
Falling supply against steady demand for gold should keep prices rocking, especially while economic growth looks shaky amid the flu epidemic/ pandemic, trade tensions continue, and central banks keep to their dovish, low-interest-rate monetary policies.
Nevada is a jurisdiction that every gold investor needs to keep an eye on when the topic of peak gold or depleting reserves comes up.
With 160 years of gold mining that dates back to the Comstock Lode discovery in 1859, Nevada has been, and still is, one of the best jurisdictions to find gold.
In the Fraser Institute’s latest survey, Nevada was ranked number 1, as the most attractive jurisdiction for mining investment.
NV Gold (TSX-V:NVX, US:NVGLF) plans to capitalize on under-explored gold properties in Nevada, with:
Compiled in the 1970s and 80s by USMX, which explored Nevada and built a wealth of information, and AngloGold Ashanti in the 1990s and 2000s, the two databases facilitate a “Nevada 2.0” thinking about the multiple layers of opportunity that remain buried in Nevada. The goal is to systematically evaluate and execute focused exploration programs with two to three drill programs per year.
Here we highlight two of NV Gold’s most promising projects, Slumber and Sandy.
The Slumber property runs through the Bilk Creek Mountains and continues north into Oregon. These deposits, along with the Sleeper, Sulphur-Hycroft, Goldbanks, Blue Mountain, Sandman, and other precious metals deposits located along fault-fracture zones of the Northern Nevada Rift, define an important epithermal province in northwestern Nevada.
The target is volcanic-rock-hosted epithermal gold and silver mineralization. The hope is to find a bonanza-type vein gold deposit. Epithermal veins can stretch hundreds of meters deep and are usually narrow and high-grade. In conjunction with these veins, are large alteration “haloes” of mineralization made by circulating hydrothermal fluids.
The property has “close-ology” in its favor. It is about 33 km west of the Sleeper bonanza epithermal vein gold deposit. The Sleeper mine (operated by Amax Gold) produced 1.6 million ounces of gold and 2.3Moz of silver, between 1986 and 1996.
Seeing the potential for a drill program, NV Gold set about gravity and ground magnetics to assess structure and alteration that is obscured by widespread alluvial cover up to 100 meters thick.
The upshot of those surveys was the discovery of a large, hidden gold structure that was the target of NV Gold’s first drill program of 2019. The 1,091m reverse circulation (RC) drill program completed in September; assay results were published on Oct. 28.
According to the news release, four of seven holes hit mineralization, opening up the possibility of a promising gold system. The fact that the results turned out to be relatively low grade, meant the market didn’t react.
However, what needs to be understood is that these holes were drilled “blind.” One of the holes, SL-02, cut significantly long intercepts of 27.4m and 39.6m. The latter included a higher-grade 0.45 g/t gold and 1.6 g/t silver, for 22.8m beginning at 53.4m downhole – which could be indicative of mineralization at depth. Hole SL-01’s best intercept was 6.1m grading 0.20 g/t Au and 1.7 g/t Ag.
“We believe that this project deserves a larger drill program to find the root of the hydrothermal system,” NV Gold’s CEO Peter Ball told AOTH. “With these initial long intersections, we believe that there may be the gold source close below. We didn’t know where it was because we were drilling blind in 2019, we’re not drilling blind a second time in the Spring of 2020.”
Toward that end, NV Gold recently announced plans to head back to Slumber, to do a CSAMT geophysical survey, and a follow-up drill program based on results from the CSAMT survey.
CSAMT is a ground geophysical survey used in epithermal systems such as Slumber to identify areas of silicification that develop around the structural ‘plumbing’ of the hot spring, places where mineralized veins might be found. CSAMT combined with audiomagnetotellurics is useful for mapping resistivity to around the 1,000-meter depth range. The prospective boiling zone, where high-grade mineralization can occur within an epithermal system, is commonly at depths ranging from 300-500 m below paleo-surface.
“Our initial drill program at Slumber in the fall of 2019 identified what we believe to be a promising gold system,” said Dr. Quinton Hennigh, in the Feb. 18 news release.
“Gold mineralization encountered over significant lengths in two holes (SL-02 and SL-01), nearly 450 meters apart, suggests the presence of a large gold-bearing hydrothermal system in the sub-surface. Based on proven success of the use of the CSAMT technology at other epithermal projects, we think this will help us vector in on potential mineralized structures at depth.”
NV Gold is waiting for the ground to dry out before the first CMAT surveys can begin, likely at the end of March.
Last September NV Gold expanded its portfolio by staking and acquiring the Sandy gold project. The first of many prospects contained in the USMX database, Sandy, located in Lyon County, shows alteration closely associated with iron oxides.
Originally explored in 1993-94, Sandy has seen geological mapping, chip and soil sampling, and 17 holes were drilled in the altered zones and vein systems.
According to Dr. Marcus Johnston, NVX’s VP Exploration, the mineralization is consistent with other low-to-intermediate sulfidation deposits and historic mines, including the nearby Como gold-silver mine, in production between 1900 and 1940, the Hercules deposit which has a resource, and most exciting, the Comstock Lode – site of the first major silver discovery in the United States.
On Feb. 26 NVX announced a CAD$750,000 private placement to fund its spring exploration programs in Nevada. According to Ball, the priority is Slumber, followed by Sandy. He states:
“Sandy was acquired in the fall of 2019 for staking costs only from our database, contains multiple historical holes intersecting >1 g/t gold, and is located in a newly active exploration camp, noting recent extensive staking was completed in the same valley by a newly listed gold focused development company. With a robust gold market, a tight share structure, and no debt, we are excited to have a busy exploration season ahead of us.”
At Ahead of the Herd, we love gold juniors that have a focused exploration strategy in place. A lot of exploration companies hone in on a prospect and spend the summer poking holes in the ground. Then wait for results. Not NV Gold – they conduct their summer activities a little different. The objective is to drill two or three projects per year – they are focused on drilling the best targets, on each project, one after the other…bang bang.
We like the fact that NV Gold is being smart with how it sinks exploration dollars into the ground, by hitting the best targets with drill holes that will, at the very least, act as a kind of smell test for going further. And might perhaps lead to a major discovery hole.
With all that is going on in the world, the gold space is looking very positive, and NV Gold is, imho, one of the industry’s most experienced and results-driven gold juniors. We expect a slew of new deals from NVX as spring exploration heats up in Nevada.
NV Gold Corp
Shares Outstanding 46,419,217m
Market cap Cdn$4,641,921m
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