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Alberta

Record gold price forecasts boost prospects for junior mining companies

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CALGARY — For veteran geologist Roger Moss, this year’s runup in gold prices to seven-year highs over US$1,750 per ounce could not have come at a better time.

The president and CEO — and only full-time employee — of two-year-old Labrador Gold Corp. had been focused on prospecting in Labrador until early this year when news emerged of a potentially significant gold discovery near Gander, N.L.

Toronto-based LabGold switched gears quickly and snapped up mineral claims covering 66 square kilometres just to the north of the find. It proposed the Kingsway Gold Project, then went to the market with a $3.5-million equity financing offer in May.

Unexpectedly strong investor interest led to raising the proposed financing to $5 million, and then again to $5.3 million, more than enough for this summer’s exploratory drilling program.

“The gold price is definitely part of it,” said Moss, 56, who has been prospecting in Canada and overseas for more than 30 years.

“I think initially the majors were making a lot of money at those prices and then some of the intermediate gold miners have done well and I think, finally, the interest is trickling down to the smaller cap junior companies like ours.”

(As a side note, the privately held holder of the Newfoundland discovery, New Found Gold, has since filed a preliminary prospectus for an initial public offering that would raise $15 million to $25 million.)

Gold prices went from an all-time high of almost US$1,900 per ounce in 2011 to under US$1,100 at the end of 2015, then slipped into a holding pattern for years before gradually strengthening through most of 2019. 

The increase in the gold price from around US$1,550 per ounce six months ago is largely because of the economic disruption and uncertainty caused by the COVID-19 pandemic, said Christopher Louney, a commodity strategist with RBC Capital Markets.

In its most recent forecast, RBC said gold could reach a record-setting average price of US$2,012 per ounce in the first quarter of 2021 under its high-price scenario.

“Our argument is that it’s possible to get there and achieve those levels; it just will take a significant economic impact, from a potential second (pandemic) wave, for example,” Louney said in an interview.

The analysts consider their base price forecast, where the average first-quarter 2021 price averages US$1,739, to be slightly more likely to occur.

Louney cautioned that markets have largely factored in the current “easy” monetary policies that have reduced interest rates to extremely low levels and polished gold’s traditional appeal as a hedge against inflation and a lower U.S. dollar value.

In a recent report, Goldman Sachs said it expects gold prices to follow a similar path to that in the aftermath of the financial crisis of 2008-09 — jumping initially as rates fall, directionless for about six months after, then rising with higher inflation and remaining high for several years before falling.

It also predicts gold prices will reach US$2,000 per ounce by this time next year as demand rises with the lifting of pandemic lockdowns and a weaker American dollar.

Higher gold prices are good news for miners but they won’t necessarily lead immediately to more projects in Canada, said Kevin Chan, national mining leader for PwC Canada.

“Companies are still using a relatively conservative gold price assumption,” he said. “A lot of them are still planning and looking at their future development projects using lower gold prices, somewhere between $1,200 and $1,300.”

He said gold miners have learned from the last boom to avoid taking on big debt and risks to build production.

Gold companies have had an advantage this year over other parts of the economy because most mines in Canada have been able to stay open most of the time despite pandemic lockdowns, Chan said.

Merger and acquisition activity has been up, mainly among mid-sized and junior companies, and conservative attitudes are reflected in companies striking share-swap or zero-premium deals, he said.

He expects companies to create more joint ventures to share risk and provide synergistic cost savings, a trend illustrated by the Nevada gold mine partnership struck by giants Barrick Gold Corp. and Newmont Corp. last year.

Acquisition is still the main way miners plan to execute on growth, but technology is next up, said Katherine Wetmore, a partner with KPMG Canada, citing its recent mining survey.

“Ore bodies are becoming more difficult to access. The reserves are depleting,” she said.

“So companies have to look to more creative ways to be more targeted with exploration activities or reduce costs.”

In a June research paper, Wood Mackenzie said the global gold mining industry will need to invest about US$37 billion to create 44 new mines or mine restarts over the next five years to maintain 2019 levels of production and replace depleted mine reserves.

Miners wishing to benefit from current elevated prices may have to consider joint ventures and phased approaches to build larger mines, it said, but smaller projects will have the advantage of lower initial capital outlay and faster timelines to production.

After decades of watching fickle investor interest in mining, LabGold’s Moss is enjoying his sector’s recent success in attracting well-heeled admirers.

“Small companies have been struggling for quite a few years and it’s quite refreshing to see that people are now coming back to the junior mining market,” he said.

“I think in the last few years funds have been diverted to the marijuana stocks and Bitcoin and a lot of that now is coming back to the junior miners, especially in gold.”

This report by The Canadian Press was first published June 28, 2020.

Companies in this story: (TSX-V:LAB, TSX:ABX)

Dan Healing, The Canadian Press

Alberta

Alberta RCMP Officer attacked with own baton

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From Cold Lake RCMP

Cold Lake RCMP officer recovering after aggravated assault

A 44-year-old male is in custody in Cold Lake following yesterday’s violent attack on the RCMP officer trying to effect his arrest.

At 5:30 p.m., Cold Lake RCMP located a stolen vehicle in the Walmart parking lot and the responding officer made an effort to deal with the vehicle and arrest the male who was believed to be responsible.  The male allegedly assaulted the RCMP member by punching the member in the head.  The RCMP member’s baton was taken by the male and the member was struck in the head numerous times with the baton.

The male fled on foot with the RCMP baton. The male smashed the window of a different, occupied vehicle in an unsuccessful attempt to steal it.  He then threatened another driver with a knife and the baton and fled southbound on Highway 28 in the newly stolen Trailblazer.

Cold Lake RCMP initiated a pursuit and managed to cause the stolen Trailblazer to become disabled.  The male was arrested on scene without further incident.  The RCMP baton was recovered in the vehicle.

The RCMP member has been treated at the hospital for non life-threatening, but serious injuries and is recovering at home.

The male remains in police custody and will be facing charges as this investigation continues. An update will be provided when available.

“I want to thank the community members who came forward to assist our RCMP member and to provide valuable witness evidence in relation to this terrible incident” says Sergeant Ryan Howrish of the Cold Lake RCMP.  “An incident like this highlights the unpredictable and dangerous situations we face on a daily basis.”

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Alberta

Fast Action, And Fair So Far

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Fast Action, And Fair So Far

All over the world, one of the first political acts after coronavirus declared itself was to shut down all sports events. Now, with the same coronavirus persisting, and in some cases expanding, its dismal influence, many of the same elected individuals are rushing to open those events as widely and as often as possible.

It’s obvious that presidents, commissioners and other leaders in the athletic world are doing their best to keep up with this mad charge to activity that features millionaires on local, national and international television. The majority agrees it is neither wise nor important to wait for fans to fill the seats before starting or replacing seasons in all major-league sports.

North America’s four most-watched pro sports – soon to be recognized as five, including soccer — have already declared preferred, possible or potential starting dates: officials in every case are ensuring that large or small COVID-19 outbreaks could force further adjustments and, of course, ultimate elimination of their entire project.

At this moment, baseball is dealing with the sad fact that many teams are dealing with fierce emergencies. A lot of programs have been shut down and there have been stated suspicions that some facilities will not be suitable for the 30 home games designated in a stormy agreement finally set by players and owners last week.

Like everyone else, the Toronto Blue Jays have standard concerns about staff and players contracting the virus, but finding a place for home games may turn out to be more urgent. Permission has been granted to train in Toronto for the scheduled 60-game season but some cautious souls still suggest it is more likely that the young Jays will be required to nest this season in nearby Buffalo or distant Dunedin, Fla. American infection numbers indicate the problem of bringing players across the border into Canada could become politically and medically improbable by the scheduled July 22 season opener.

Here in Alberta, the saga of the Blue Jays, as well as the fascinating basketball Raptors who will be competing by the end of July, fades in a dull colour by comparison with the Calgary Flames and Edmonton Oilers who open their official training camps on Monday.

A Stanley Cup playoff run could extend to as many as 33 games for survivors in the best-of-seven final, which will be staged entirely at spectacular Rogers Place. Only because of Alberta’s relative success in tamping down the coronavirus did the NHL finally designate Edmonton as a “hub city” after making it obvious from the beginning of all this talk that Las Vegas and Toronto (the other hub) were the favoured communities.

Almost from Day 1 after the NHL declared it would somehow present the 2020 Stanley Cup to a legitimate playoff champion, commissioner Gary Bettman insisted that safety was the “biggest issue and most serious concern” for all. Granting that some insiders were less than thrilled at the decision to involve so many teams in a one-series-loss-and-you’re-out scenario, he still believes the proper move was to involve teams that had not been officially eliminated when the season wrapped up on March 16.

“The competitive balance in our league is so extraordinary,” he said, “that we had to make sure it was for all to get a chance to win.”

Admittedly, the plan took effect in a massive hurry. Now, there is league-wide concern that one of the eight outsiders admitted to the playoffs might somehow win the Cup and wind up with a high draft choice – perhaps Number One. If that case, weaker teams who lose out can be expected to yell: “Not fair.!”

A Small, Important Opening

 

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july, 2020

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