This week, my Gold X Indicator signaled a four-alarm “Buy” alert on Maple Gold Mines Ltd. (TSX-V: MGM; OTCQB: MGMLF). So, I told my Gold & Silver Trader subscribers to scoop it up.
I’m so glad they did. That stock blasted off on Thursday, as Maple announced it signed a “transformational” deal with Agnico-Eagle Gold Mines (NYSE: AEM).
Agnico Eagle is investing in Maple Gold, and the two companies are entering a joint venture which will combine Maple Gold’s Douay project with Agnico Eagle’s neighboring Joutel project. Agnico Eagle has committed to spending a big chunk of money drilling the new combined project as well.
That’s good news for Maple Gold — a transformational deal for the company — and great news for Gold & Silver Trader subscribers. But the REALLY INTERESTING thing is what it is telling us about the big gold miners.
And that is — they are hungry, oh so very hungry, for new gold deposits.
I’ll get to just why in a minute. First, I want to show you my new, exclusive video interview with Maple Gold’s President and CEO, Matthew Hornor. He explains not only his new deal with Agnico, but why this may be just a taste of things to come.
You can watch that video by clicking here.
As Mr. Hornor explains, a lot of the big miners might be kicking themselves right now for not doing a deal with Maple Gold Mines first. But their second-best choice would be to buy out Maple Gold and become Agnico’s partner in the joint venture.
Wait! Can other big miners do that? Sure they can! Though Mr. Hornor says he’ll put up a fight if they try because he wants to unlock the true value in his company.
Why would the senior miners do that? A picture is worth a thousand words.
Here’s a chart from S&P Global Market Intelligence. It shows major gold producers’ years of reserves — that is, how many years of gold they have left to mine if they keep mining at the same rate. The blue line was those reserves in 2008. The yellow line was those reserves in 2017.
As you can see, the yellow lines tend to be shorter than the blue lines.
Why are reserves going down? Gold is a non-renewable resource, remember. It doesn’t grow on trees. All the rich, easy-to-mine deposits have been mined already — at least, all that we can find. And it’s been more than three years since there was a new major gold discovery.
And it takes MANY years to discover, develop and build a mine. So, senior gold miners are looking at how their reserves are dwindling. Are they panicking? Likely not yet. But you can bet they are feeling hungry for new discoveries.
7 Fascinating Facts About Gold Reserves
Here are seven fascinating facts about the looming crisis in the gold industry:
- Due to underinvestment in exploration across the industry — and no major new discoveries in the last three years — the average mine life across the gold mining sector has dropped from 20 years to closer to 10 years.
- S&P Global Market Intelligence says the 20 top gold producers spent an average of $51.3 billion on acquisitions over the past decade. But in the same period, they spent less than a third, just $18.2 billion, on exploration.
- Even though gold prices are going up, S&P reports that, at this time, global miner exploration budgets are down another 29% this year.
- The average cost to find an ounce of gold was $62 between 2009 and 2018, more than double the cost for the previous decade.
- The average mine grade at gold mines has fallen from over 10 grams a ton in the early 1970s to around 1.46 grams a ton last year, according to Metals Focus, a precious-metals consulting firm. That means you have to move a heck of a lot more rock to get the same amount of gold.
- Mark Bristow, CEO of Barrick Gold (NYSE: GOLD) recently said that: “The prospect of a serious reserve crisis is looming.”
- Earlier this year, Mr. Bristow said, “We are definitely past peak gold.” At the same time, he estimated that new metal added to miners’ reserves since 2000 replaces only half of the gold they mined in that period.
So, NOW you can see why the senior miners are so hungry for new deposits. You can see why they’ll scoop up small companies like Maple Gold.
As individual investors, if we’re smart, we’ll get into small companies with huge potential ahead of the senior producers. If you can do that, the sky’s the limit on profit potential.
Sure, not all of them will work out. Mining is a risky business, and exploration doubly so. But the payoff in this big precious metals bull market could be extraordinary.
That’s driving what we’re doing in Gold & Silver Trader, anyway. And my Gold X Indicator is signaling “Buy” on one prospective winner after another.
If you want more of my insights on what could be the next small precious metals company to make a big deal, consider signing up for my presentation next week, on the 15th at the New Orleans Investment Conference.
The best part is the conference is virtual, so you don’t even have to travel to New Orleans to attend. But you must reserve your slot ahead of time. Click Here to get your “virtual seat.”
All the best,