Current Live World Spot Prices
Last update: Sat 28th May 2022 06:59 (Melbourne)
Gold: $2,589.02 AUD     $1,854.00 USD Silver: $30.89 AUD     $22.12 USD

Minor Players in the Gold Mining Sector Now Represent Hope

In April 2020, came under new management, articles published before this time, such as the below, may not reflect the views or opinions of the current team.

Despite the near disaster occurring in several markets to the present moment, along with all the panic among gold investors, there is still great news. This well appreciated good news has been born from the bad financial situation itself. Giants in the mining industry are suffering and making entire armies of investors flee. They are in debt and selling plenty of assets, like mines and associated operations.

A few years ago, these same huge mining companies wanted to suppress the existent minor competition and bought any possible lucrative mine in sight. Now, they are selling them back in a move to get liquidity to pay the increasing debts. Many investors may be in the edge of desperation but this represents a good sign inside the gold ore business.

With way fewer mines and projects, big mining companies will have fewer costs and the capacity to focus on a few huge projects and mines. In resume, a huge cut of costs plus a better performance in the big already installed mines or promising explorations can lead to a relevant hike in profits.

But there is a more important insight for this situation. Small companies with talented crews and teams now have the chance to enter the game. Many of these small companies are now buying mines from the big players. By this way, now there are more valuable companies in the industry, with way fewer costs and plenty of production capacity, oriented to do more with less outlay.

There is a trend going on right now where small companies are leaving more satisfied investors than the big miners. With blinding greed, the veteran and powerful enterprises in the mining sector bought with no conscience the potential ore deposits and left behind no opportunity to the minor companies.

Even with the on-going bearish gold market, some companies had great gains in the last 18 months. Smart investors should watch closely but with haste these minor companies in the sector. Time will run out for this kind of investment opportunity. A selective group of these companies are making a huge profit despite the actual gold prices falling.

The decreasing gold prices may be eclipsing this good aspect inside the industry. Investors should see through this “crappy” performance from the precious metal price and study briefly the capacity of the several companies delivering great outputs. Some experts are considering this trend as a market bifurcation, where the mining sector must be divided in order to understand the dramatic differences on performance and gains.

Now the fact of being a “mining company” does not ensure anything to the investor. With the proper research, anyone can gain if the stock history is either great or terrible. And some of the small companies are performing really great against all the odds.

It is worth to remember that the product of big companies swallowing the small ones was rewarded by the markets. Commodities went up fast and higher every day. Enterprises were “fat”. They had more assets like mines than they could really handle. They still had those assets, but the selling process is hot right now.

Giants in the sector, like Barrick Gold, are selling billions in assets right now. Many companies have written off many of their relevant projects for their own safety. Debt is increasing but gold prices not. An example of one of these sales can be the Cowal mine deal for US$ 550,000,000, bought recently by Evolution Mining.

A perfect example of the mentioned small companies doing it great thanks to these bifurcation trend is Klondex Mines. This mining company was struggling and thanks to the big players’ difficulties, they have more chance to perform well. And they are doing it. Recently, Klondex bought a new producing mine from Newmont Mining.

Now the plan is everybody will focus on a few big projects, developing maximum capacity and efficiency, instead of being astray with tons of unfinished projects. This leaves the smaller miners to collect more gold from mining sites considered less profitable to the big players.

Leave a Reply

Your email address will not be published.