Mining Companies Need To Focus On Building Assets - Revival Gold
(Kitco News) - The mining sector continues to face a dearth of investor interest, but gold mining companies need to focus on what is within their control, according to one junior explorer executive.
Hugh Agro, president and CEO of Revival Gold
In a recent interview with Kitco News, Hugh Agro, president and CEO of Revival Gold (TSX.V: RVG) said that companies need to build out new deposits and focus on critical market fundamentals and eventually investors will come back into the marketplace.
He explained that the mining sector is at a critical juncture as the supply of quality gold projects start to decline and major gold producers see a drop in production. He added that the expected imbalance in supply and demand will eventually drive gold prices and mining shares higher.
“There is a deficit in projects to feed the growing appetite for metals production,” he said. “At current rates of discovery we are generating about 10 million ounces of gold a year, but at current rates of production, we are consuming about 110 million ounces of gold. There is a big disconnect in the industry.”
In the current market environment, Agro said that junior explorers could be the biggest beneficiaries as major producers need to find projects to add to their dwindling production.
“I can tell you these big guys are nervous about their survivability,” he said. “Without new deposits to replace reserves, the industry is going to struggle.”
Agro added that he sees two scenarios that will eventually drive gold prices higher in the long-term.
“The price of metals is going to go up, so companies spend more money on discovery or the price of metals is going to go up, so the deposits that are out of the money become economical,” he said. “It’s investable.”
Instead of focusing on the current price of gold, Agro said that his company is focused on building out the reserves of its Beartrack property, a brownfield project in Idaho.
The mine produced 600,000 ounces of gold between 1994 and 2000 and was eventually closed because of low gold prices.
Agro explained that technological advances made in the last 18 years and a greater understanding of the geology in the area is helping the company expand the property’s resource. In an updated report in July, the company identified 1.2 million ounces of indicated gold and 800,000 ounces of inferred gold resources.
“We are just going to keep our nose to the grindstone and one day these general investors are going to realize that the gold in their iPhones and other electronics they buy on Amazon has to come from somewhere,” he said. “They will come back in droves as they have done in earlier cycles.”
The one upside Agro said he sees in the current market environment is that now is an excellent time for miners to build value.
“When everyone else is running for the exit and asset prices are trading cheaply, that is when you want to build a growth company in gold,” he said.