“Gold will be around… Gold will be money when the dollar and the euro and the yuan and the ringgit are mere memories.” — Richard Russell
Gold is valuable because it holds an objective, independent value separate from the rise and falls of the dollar. This is why gold is known as a safe-haven investment and generally accepted as a wise investment choice. However, not all gold investments are equal and the type and grade of gold deposits can greatly affect the strength of the investment. Understanding these different factors is vital in securing the best investment.
Lode to Placer
All gold originates from lode deposits. Lode deposits, put in the simplest terms, is gold contained within a rock. Lode deposits lead to placer deposits. Over the course of time, natural erosion takes place and the gold within the rock is eroded into gold dust. This dust is then transported to places such as creeks or rivers.
As the dust moves to these areas, they will begin to concentrate and form the gold nugget shape that many people may be familiar with. Gold from these placer deposits will typically be clean from most rock material and worn smooth.
From Gold Lodes to Loads of Gold
Sourcing gold from lode deposits is more expensive and resource heavy than sourcing gold from placer deposits. Since the rock in lode deposits is locked up in the rock it takes a lot of resources and personnel to be able to extract the gold effectively.
Placer deposits on the other hand, have been separated from the rock naturally. Since placer deposits are also located in areas above ground, such as creeks and rivers, they are easily accessible as well. Sourcing gold from placer deposits are also cheaper because the tools that are needed to extract the gold are simpler and less expensive.
It is easy to see why placer deposits were such a popular option in the past. However, in modern times, few placer deposits remain. Since placer deposits take thousands of years to become a reliable source of gold, once all the placer deposits have been mined out, they are no longer lucrative. Pursuing placer deposits in the current age is a wild goose chase and not recommended.
Lode deposits, however, are plentiful and still very lucrative in the mining industry. The top gold deposits in the world are now lode deposits and many small-cap companies are rising quickly in the industry through successful lode deposit operations.
Grade A Gold
When people think about the grade of gold, they often think about the carats of a gold piece. However, the grade of a gold mine takes on a different meaning that is equally, if not more, important.
The standards of high-grade and low-grade gold ore are set by the World Gold Council. The World Gold Council defines a high-grade gold mine as having a gold ore density between 8 and 10 g/t (grams per ton). Average mines will have between 4-7 g/t and low-grade gold mines have between 1-4 g/t.
It is important to understand that a lower amount of grams per ton will not always mean that a mine less viable. Open-pit mines can be very lucrative even at low-grades since they generally have lower operating costs. Thus, it is recommended to evaluate gold mines through cost per ounce rather than grams per ton.
The Bigger They Are, The Costlier They Are
The cost of operating the mine is another factor that should be considered when choosing which mine to invest in. Even the highest grade of gold mines may not be lucrative if the cost to run them is high.
However, as technology progresses, mining is becoming more streamlined and efficient. In the modern age, mining operations usually consist of smaller, targeted operations rather than the traditional large-scale mines.
This transition to smaller operations has greatly benefitted small-cap mining companies and investors because it provides a cheaper barrier of entry for both parties. Small-cap companies are able to run highly successful targeted operations and investors are able to get into the ground level with potentially highly lucrative mines.
Small-Caps, Big Hitters
“In investing, what is comfortable is rarely profitable.” – Robert Arnott
Investing in more established mining companies may seem like the “safe” thing to do, but it is almost never the more lucrative thing to do. Junior mining companies can grow in ways that are impossible for larger mining companies. There are many junior mining companies who have had successful operations or on the edge of discovering large mining yields.
Rio Silver currently has projects set in prime mining areas in Peru. Peru is geologically rich with gold and in 2018, it produced the 7th most gold in the world at 155.4 tons. San Marco Resources has planned drilling expeditions on the infamous Buck Property, a location in British Colombia, Canada that has yielded much gold in previous drilling expeditions. Midas Gold Corp has a project in the works called the Golden Meadows project. This project is located in the Central Idaho Porphyry (Gold) Belt, a gold rich area that has yielded over 8 million ounces of gold in the past.
Highly successful targeted operations from junior minor companies can skyrocket a company’s value. Given the advance in mining technology and the favorable climate for lode deposit mining, the timing to invest in junior mining companies has never been better.
There are many factors to consider when investing in gold mines, however, with proper research, gold mines will make a highly lucrative addition to any portfolio.