West Australia, The Paterson Region & lock down30 Mar 2020 11:46
I thought some may be interested to read a communication from Kees Dejkker mining annalist
Namibia has only 11 confirmed COVID-19 cases, all imported. Yet, we are in lockdown which will cost the country dearly. In my mind the economic consequences could lead to more deaths than the virus itself given the prospects of hunger and even less funding for the government medical care system. Mankind nowadays seems to think it should manage anything, instead of approaching this as something nature has thrown at us and which we need to cope with as part of evolution. Certain things in life we need to accept more philosophically. The cure can be worse than the disease. Anyway, it will raise gold’s allure as a safe haven.
I had a look at the Havierson JV prospect and, yes, it is all very impressive. It will however not be easy to prospect and mine being at a depth of 500 m below surface. It is not sure to me yet it will constitute a deposit that is bulk mineable by means of sublevel caving, which would make the grades very attractive. As it is now, there seem to be individual deposits parallel to sub-parallel to each other. With the expense of drilling, the awkward angle and deviation of holes, it will take some time to identify how continuous and regular their shapes will be.
I fully agree about the depletion of gold deposits. This is what I wrote today to another person:
Another aspect to consider is the prospect for “peak gold". China became the largest gold producer of the world, but its deposits are generally small and the country will have difficulties to sustain their contribution. In fact, it has already started dropping as far as I know. Globally, it is also becoming increasingly difficult to replace large gold producers through exploration. It all means that the supply/demand equation is also moving in our favour. Should the gold price rise dramatically, the first consequence is a drop in gold production as companies lower their cut-off grades. The impact of higher gold prices for additional supply of gold will only occur after a couple of years because it takes time to expand production.
For the reasons you set out and what I wrote in the paragraph above I hold physical gold. Yes, precious metal companies are more leveraged, but the experience in the gold bull market 2000-2013 showed net free cash flow of the industry not outperforming the gold price rise. On the contrary. On top of this I believe that in the early stages of a market recession there is a flight away from anything paper. Look at your pyramid, companies, also gold companies, sit higher than gold. Maybe some months later that people who fled into gold want to dabble by slowly diverting some of the money to gold companies that proved to have performed best.
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